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The Private Sector and Youth Skills and Employment Programs

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The Private Sector and Youth Skills and Employment Programs 101565 The Private Sector and Youth Skills and Employment Programs i 9385_S4YE_Report_FTCVR.indd 1 10/1/15 10:11 AM The Private Sector and Youth Skills and Employment Programs in Low- and Middle-Income Countries Peter Glick, Crystal Huang, Nelly Mejia RAND Corporation C O R P O R A T I O N 9385_S4YE_Report.indd 1 10/2/15 8:20 AM 9385_S4YE_Report.indd 2 10/2/15 8:20 AM Table of Contents Summary ............................................................................................................................................. v Acknowledgments ............................................................................................................................ xiii Abbreviations ..................................................................................................................................... xiv Chapter 1 Introduction ............................................................................................... 1 Chapter 2 Active Labor Market Interventions for Youth and Characteristics of Private Sector Participation .................................. 6 2.1 Types of Programs for Youth Employment .................................................................... 6 2.2 Public Sector Intervention in Youth Skills and Employment ...................................... 7 2.2.1 Market Failures ........................................................................................................................................ 7 2.2.2 Government Failures ............................................................................................................................. 10 2.3 Patterns of Private Sector Involvement in Youth Training and Employment Programs ................................................................................................................................. 12 2.3.1 Public-Private Partnerships and Intersectoral Partnerships ........................................................ 12 2.3.2 Types of PPPs and Motivations for Participation by Firm Type ................................................... 13 2.3.3 What Factors Limit Firms’ Involvement in Programs? .................................................................... 18 2.4 Summary ................................................................................................................................. 21 Chapter 3 Private Sector Involvement Viewed from the Youth Employment Inventory ..................................................................................................... 22 Chapter 4 Programs and Evidence .......................................................................... 26 4.1 Types of Evidence ................................................................................................................. 26 9385_S4YE_Report.indd 3 10/2/15 8:20 AM 4.2 Skills Training ......................................................................................................................... 28 4.2.1 Description and Modalities of Private Sector Participation .......................................................... 28 4.2.2 General Evidence of the Effectiveness of Skills Training Programs ............................................ 30 4.2.3 Evidence on Effectiveness of Private Sector Participation in Skills Development ................... 33 4.2.4 Incentives to Employers to Increase Training for Youth Employees .......................................... 34 4.2.5 Willingness and Ability of Employers to Participate in Training Initiatives ................................ 35 4.2.6 Should Training Be Subsidized for All Firms? ................................................................................... 38 4.2.7 Effectiveness of National and Sector-Level Public-Private Partnerships for Skills Development ............................................................................................................................................ 38 4.2.8 Incorporating Informal Sector Firms and Training into Certification Systems ......................... 41 4.2.9 Involvement of Multinational Firms in Skills Development ........................................................... 42 4.2.10 Managing Private Training and Promoting Competition ............................................................ 43 4.3 Entrepreneurship Promotion ............................................................................................ 44 4.3.1 Description and Modalities of Private Sector Participation .......................................................... 44 4.3.2 General Evidence on the Effectiveness of Programs to Promote Youth Entrepreneurship .................................................................................................................................... 45 4.3.3 Evidence on Effectiveness of Private Sector Participation in Entrepreneurship Development ............................................................................................................................................ 48 4.3.4 Promotion of Youth Entrepreneurship in Value Chains ................................................................ 49 4.4 Employment Services........................................................................................................... 51 4.4.1 Description and Modalities of Private Sector Participation .......................................................... 51 4.4.2 General Evidence on the Effectiveness of Employment Services for Youth ............................ 53 4.4.3 Evidence on Effectiveness of Private Sector Participation in Employment Services .............. 54 4.5 Wage and Employment Subsidies .................................................................................... 56 4.5.1 Description and Modalities of Private Sector Participation .......................................................... 56 4.5.2 Evidence on the Effectiveness of Wage Subsidies for Youth Employment .............................. 57 4.5.3 Evidence on Effectiveness of Private Sector Participation in Wage Subsidy Programs ......... 58 Chapter 5 Additional Aspects of Public-Private Partnerships for Youth Skills and Employment .......................................................... 60 5.1 Factors Constraining the Success of PPPs ..................................................................... 61 5.2 Factors Contributing to the Success of PPPs ................................................................. 63 Chapter 6 Summary and Conclusions .................................................................... 65 6.1 Summary and Key Lessons Learned ................................................................................ 65 6.2 Agenda for Future Research .............................................................................................. 67 6.3 Implications for Program Design and Policy .................................................................. 70 6.3.1 Implications for Program Design ........................................................................................................ 70 6.3.2 Implications for Actions by Governments, International Donors and Lending Agencies, and Businesses ................................................................................................ 72 Appendix A Categorizing Programs and Firms in the Youth Employment Index ............................................................................................................ 75 References ......................................................................................................................................... 77 iv 9385_S4YE_Report.indd 4 10/2/15 8:20 AM Summary Public interventions to improve youth labor market outcomes are motivated primarily by the presence of market failures as well as equity concerns. Market failures occur when the labor market and the market for skills provision do not, on their own, yield economically efficient employment outcomes. For example, because a firm’s investment in training its workers may end up benefiting other firms if the workers leave, firms on their own tend to underinvest in training from a societal perspective. Another source of market failure is imperfect information, in which employers lack adequate information on the skills of potential employees, hindering efficient matching of workers to firms, or in which both youth and firms lack knowledge of the benefits to skills training or what kinds of training would be most useful. There may also be imperfections in capital markets, such that firms or workers cannot borrow to make profitable investments in training or to start a new business. Many of these problems are especially severe for youth; for example, youth lack work experience that could signal their skills to employers, and also lack collateral that would enable them to borrow to start an enterprise. Governments also have equity objectives that markets alone will not achieve and may even work against, requiring intervention. For example, disadvantaged youth require more training to achieve job skills than other youth, and more than firms find it profitable to provide. Active Labor Market Programs (ALMPs) are designed to overcome these market failures, but often suffer in turn from “government failure.” ALMPs on the labor supply side include programs to improve skills, including traditional vocational and technical training (TVET), “soft” skills, internships, and other kinds of training; and programs to promote entrepreneurship, that is, to help youth to start their own
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