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HUMAN DEVELOPMENT PERSPECTIVES Public Disclosure Authorized The Right Skills for the Job? Rethinking Training Policies for Workers Public Disclosure Authorized Public Disclosure Authorized Rita Almeida, Jere Behrman, David Robalino Editors Public Disclosure Authorized The Right Skills for the Job? The Right Skills for the Job? Rethinking Training Policies for Workers Rita Almeida, Jere Behrman, and David Robalino Editors © 2012 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 15 14 13 12 This work is a product of the staff of The World Bank with external contributions. Note that The World Bank does not necessarily own each component of the content included in the work. The World Bank therefore does not warrant that the use of the content contained in the work will not infringe on the rights of third parties. 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Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution—Please cite the work as follows: Almeida, Rita, Jere Behrman, and David Robalino, eds. 2012. The Right Skills for the Job?: Rethinking Training Policies for Workers. Washington, DC: World Bank. DOI: 10.1596/978-0-8213-8714-6. License: Creative Commons Attribution CC BY 3.0 Translations—If you create a translation of this work, please add the following disclaimer along with the attribution: This translation was not created by The World Bank and should not be considered an offi cial World Bank translation. The World Bank shall not be liable for any content or error in this translation. All queries on rights and licenses should be addressed to the Offi ce of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: [email protected]. ISBN (paper): 978-0-8213-8714-6 ISBN (electronic): 978-0-8213-8715-3 DOI: 10.1596/978-0-8213-8714-6 Library of Congress Cataloging-in-Publication Data The right skills for the job? : rethinking training policies for workers / Rita Almeida ... [et al.], editors. p. cm. -- (Human development perspectives) Includes bibliographical references. ISBN 978-0-8213-8714-6 (alk. paper) -- ISBN 978-0-8213-8715-3 1. Occupational training. 2. Employees--Training of. 3. Vocational education. 4. Manpower policy. I. Almeida, Rita. II. World Bank. HD5715.R54 2012 658.3’124--dc23 2012011906 Cover painting: “Best Way” (2007) by Louis Epee Mbounja, Cameroon; World Bank Art Collection. Cover design: Naylor Design. Contents Foreword xi Acknowledgments xiii Abbreviations xv Introduction 1 Market Failures, OJT, and Training-Related ALMPs 3 Government Failures and TVET 4 An Agenda for Research and Policy Analysis 6 Notes 6 References 8 Chapter 1: Overview 11 David Robalino and Rita Almeida Introduction 11 Linking Market and Government Failures to the Design of Training-Related Interventions 15 Implications for Training Programs 19 Open Methodological and Policy Questions: Building a Research and Operational Agenda 34 Notes 39 References 44 v vi|Contents Chapter 2: Policy Framework: The Economic Rationale for Skills Development Policies 49 David Robalino, Rita Almeida, and Jere Behrman Why Do Markets Fail in the Provision of Training and How Can Policies Help? 50 Why Do Governments Also Fail in the Provision of Training? 58 Conclusion 62 Notes 64 References 65 Chapter 3: Pre-Employment Technical and Vocational Education and Training: Fostering Relevance, Eff ectiveness, and Effi ciency 67 Jee-Peng Tan and Yoo-Jeung Joy Nam Introduction 67 Participation in Pre-Employment TVET 69 Labor Market Outcomes of TVET Programs 71 Skills Demand and Skills Acquisition through Pre-Employment TVET 76 Policy Challenges in Pre-Employment TVET 78 Conclusion 93 Notes 94 References 97 Annex: Detailed Data Sources for Table 3.1 103 Chapter 4: Employer-Provided Training: Patterns and Incentives for Building Skills for Higher Productivity 105 Rita Almeida and Yoonyoung Cho On-the-Job Training: What We Know and Where We Are 108 Promoting On-the-Job Training 116 Conclusion 126 Notes 128 References 130 Contents|vii Chapter 5: Training Programs for the Unemployed, Low-Income, and Low-Skilled Workers 133 Jochen Kluve, Friederike Rother, and María Laura Sánchez Puerta A Typology of Target Populations for Training Programs 134 Training-Related Active Labor Market Policies around the World 143 Addressing Market Failures in the Provision of Training 146 Toward a Blueprint for Training-Related ALMPs 161 Conclusion 164 Notes 165 References 166 Boxes 1.1 Defi ning Job-Relevant Skills and Acknowledging the Boundaries of Job Training Policies 13 1.2 Recent Developments in International Skills Assessments 35 1.3 Identifying Market Failures through Impact Evaluations: Spotlight on Turkey 37 2.1 Looking at the Hospitality and Construction Sectors in Cambodia: Skills Gaps and Mismatches for University Graduates 55 2.2 Challenges in National Training Funds to Promote Job-Relevant Skills 58 3.1 Employers’ Views on the Role of Pre- Employment Vocational Training in England and Poland 79 3.2 Demand-Led Pre-Employment TVET for Economic Growth in Singapore 83 3.3 Private Sector–Led Pre-Employment TVET for Construction Workers in India 87 4.1 Germany: An Institutional Arrangement for Contractibility 117 4.2 The Republic of Korea: A Training Consortium for Small and Medium Enterprises 121 viii|Contents 4.3 Kenya: Training Vouchers for Small and Medium Enterprises 123 4.4 Mexico: Building in Monitoring and Evaluation Systems 125 5.1 Benefi ts and Costs of the Jóvenes Training Programs for Unskilled Youths in Latin America 148 5.2 Benin Support Project for the Development of On-the-Job Vocational Training 150 5.3 Training and Public Works in Argentina and El Salvador 153 5.4 Promoting Self-Employment Training in the Middle East and North Africa 156 5.5 Training and Retraining for Displaced Workers in Romania 157 5.6 The New Deal for Young People in the United Kingdom 159 Figures 1.1 Demand for Different Types of Skills in the United States, 1960–2002 12 1.2 Reasons for Market Failures 15 2.1 Degree of Competition in a Skills Market and the Poaching Externality 52 B2.1.1 Vocational Training Skills Gap 55 B2.1.2 Foreign Language Profi ciency and Behavioral Skills Gaps 56 2.2 The Main Actors in the Provision of Skills 60 3.1 Share of TVET Enrollments at the Upper Secondary Level, by Region and in Relation to Per Capita GDP 70 3.2 Employment and Earnings among Graduates of TVET and Academic Programs, OECD Countries, 2007 72 3.3 Training Programs and the Building of Job- Relevant Skills 78 B3.1.1 Employability Skills Prioritized by English and Polish Employers, 2008 and 2009, Respectively 79 B3.2.1 Evolution of EDB’s Skills Development Schemes, 1972–93 84 Contents|ix 4.1 Training Incidence, Economic Development, and Human Capital 113 4.2 Reasons for Not Investing in OJT in Central America 115 5.1 Level of Education of the Labor Force by GDP per Capita 140 5.2 Decompositions and Projections of the Labor Force by Level of Education 138 5.3 Unemployment Risks for Formal and Informal Sector Workers in Brazil 142 5.4 Regional Breakdown of Evaluations of Training Programs for Low-Skilled and Unskilled Workers 145 5.5 An Integrated Training System for Unemployed, Low-Income, and Low-Skilled Workers 162 Tables 2.1 The Training Market: Market Failures and Suggested Policy Interventions 50 2.2 The Training Market: Government Failures and Policy Recommendations 59 3.1 Returns to TVET and Other Labor Market Outcomes in Selected Developing Countries 73 4.1 Effects of OJT on Wages and Productivity: Evidence from Selected Countries 110 4.2 Summary of Market Failures in OJT and the Corresponding Policies 127 5.1 Unemployment Rates by Level of Education, Regional Aggregates 140 5.2 Suggested Policy Interventions by Target Group and Training Market Failures 144 5.3 Incidence of Evaluations of Training Programs by Target Group 144 B5.1.1 Impact and Cost-Benefi t Analysis of the Jóvenes Programs in Latin America 148 Foreword As the world’s economies struggle to create more and better jobs for all, skills development and training policies are at the center of the response. Workers are trying to acquire the right skills to become employable and well remunerated. Firms, in turn, are seeking workers with specifi c types of skills that—even in many countries with high unemployment—they are unable to fi nd. The problems are particularly acute in developing countries. First, many workers in these countries have very low levels of education and lack the basic cognitive skills to succeed in the labor market.

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