A LABOR MARKET ASSESSMENT UPDATE: OPPORTUNITIES FOR SALVADORAN YOUTH USAID BRIDGES TO EMPLOYMENT

November 2018 This document was prepared for review by the United States Agency for International Development. It was produced by DAI Global LLC under contract number AID-519-TO-15-00001 The following assessment was conducted in 2018 as a follow-up to USAID Bridges to Employment's 2016 Labor Market Assessment. Designed to guide and inform the project's interventions, the assessment provides a comparison with the principal findings from 2016, identifying both consistent and evolving needs and challen- ges of employers in El Salvador.

Table of Contents I. Executive Summary

USAID Bridges to Employment is a five-year, United States Agency for International Development (USAID) -funded project implemented by DAI Global, LLC (DAI) and its subcontractors Plan International and JBS Interna- tional, Inc. dedicated to increasing and improving the employment of youth from El Salvador’s 15 highest-crime municipalities. The project’s guiding vision positions Salvadoran youth as valued, sought-after members of the national workforce, capable of critically evaluating their training and employment options and proactively pursuing job opportunities in high-growth sectors that are receptive to skilled recruits. The development hypothesis of USAID Bridges to Employment is that when vulnerable youth have access to a high-quality, holistic, and market-re- levant package of services and support that utilize and maximize their strengths, they are more likely to improve their employability, income, and/or employment situation. To maximize the impact of the project, in 2016 USAID Bridges to Employment conducted a series of assessments, including a Policy Assessment, Labor Market Assessment, Workforce Development Service Provider Assessment and Participatory Youth Assessment, to establish an evidence base that will be used to guide the project’s design and implementation. The 2016 USAID Bridges to Employment Labor Market Assessment identified 1) industry hiring needs, 2) educa- tion and training needs, 3) challenges faced by companies in employing youth, and 4) economic sectors with high growth potential. This assessment, as well as those listed above, informed the project’s interventions, building the capacity of youth to meet the specific hiring demands of the manufacturing (e.g. plastics and textiles), information technology (IT), tourism, and agroindustry sectors. To ensure the project’s interventions continued to be aligned with employer demands, qualitative and quantitative data on labor demand was collected again in 2018, surveying employers from each of the prioritized sectors and gathering feedback from key stakeholders from the workforce development system to identify 1) current training and hiring demands, 2) employers’ perceptions of youth, 3) entry-level job opportunities, and 4) opportunities for youth employment. The following report details the findings of the updated Labor Market Assessment, which are summarized below:

1) Gender bias: Responses from the survey participants revealed that in 2017, 56% of new hires were men, compared to 44% women, reflecting a gender gap. The gap between hired men and women remained consistent throughout all surveyed sectors and across municipalities. 2) Most jobs are in the capital: A total of 41% of the jobs created in 2017 were in the municipality of San Salvador, followed by the municipalities of Colón, San Miguel and Soyapango. Given that San Salvador,

1 Colón, Soyapango, Santa Tecla, Ciudad Delgado and Mejicanos are considered part of what is called "Gran San Salvador," the data reveals that 77% of the jobs generated in 2017 were concentrated in the greater capital area. 3) Sectors with the most entry-level job opportunities: Manufacturing and IT were the sectors that hired more young people between 16 and 29 years old (56.1% of the young employees were hired by the manufacturing industry and 22.7% by IT). However, when observing the averages of new jobs created for young people, Agroindustry and Renewable Energy were the industries with the highest average of emplo- yment generation for young people with entry-level positions suited specifically for youth. 4) Positions expected to be in high demand: According to the Labor Market Assessment findings, in the coming years, there will be more employment opportunities for vulnerable youth in sales, production, ope- rations, and administrative positions. Particularly, sales will be demanded mostly in Commerce/Tourism (e.g. Sales advisors); support in general production will be mostly demanded in Manufacturing (e.g. Indus- trial clothing machine operators, technical operators of plastic film extrusion, plastic injection machines, extrusion equipment, and blow molding of plastic containers); operations will be requested in Renewable Energy and Agroindustry (e.g. Warehouse managers, drivers, installation of equipment, and maintenance of industrial equipment); and administrative positions mostly in IT (e.g. Assistants, call centers operators). 5) Security remains one of the most important topics of concern when hiring youth: Businesses have expressed security concerns about an applicant’s place of residency in two ways: first, that a person living in an area dominated by a rival gang to the territory in which the business is located will have difficulties traveling back and forward from home to their place of work and/or secondly, that a person living in a high-risk area may be involved or know someone involved in criminal activities. Yet, only three out of every 10 businesses or 30% of surveyed companies stated that they offer transportation to employees as part of their benefits, out of which only 9.1% offer company transportation to their employees and 10% provide a financial assistance or a stipend to cover transportation costs. Businesses that provide this benefit to employees frequently pay for taxi service whenever employees must stay extra time at work. 6) Common private sector perceptions of youth: Approximately one half of respondents in the assess- ment considered that youth aged 16-29 often resign at a higher rate than older employees. Furthermore, private sector respondents expressed their perception that hiring youth poses important challenges, regardless of the sector involved. Respondents expressed challenges in finding responsible candidates, and 33% believe young people do not value the work opportunities given. Inexperience was also pointed out as a main challenge businesses consider when hiring youth. A common perception expressed was that hiring employees aged 25 and older is preferred based on the assumption that people in this age range will demonstrate more commitment, responsibility and lower turnover, given that they must meet family responsibilities. 7) Education level required by sector: The level of education required by businesses for new entry-level positions across sectors is most commonly a high school diploma (53.6%), whether technical or general high school. Only 18.1% of surveyed businesses mentioned that the new positions will require a university degree; 19% said the minimum requirement will be basic education, and 9.3% mentioned they will require at least a two-year technical degree. Statistically significant differences were found in the educational requi- rements of the Renewable Energy sector: 60% of companies said their new hires will be required to have a university degree. 8) Life skills is a key factor while recruiting youth: Although a series of businesses do demand a higher academic level, 97% of businesses have expressed that interpersonal skills are important to their recruit- ment processes, with an emphasis on reading, writing and numeracy skills; teamwork; communication; proactivity; verbal and written expression; reliability; cooperation; responsibility; deadline achievement; problem-solving; creativity; self-learning; English; learning skills and IT.

2 Policy Opportunities and Recommendations

The Salvadoran labor market has a distinct difference in the proportion of men versus women hired by busi- nesses. The findings showed that 56% of employees were men compared to 44% women, reflecting a gender gap. This indicates an opportunity to make a purposeful effort to train and place more women in jobs in both traditional and male-dominated industries, as well as raise awareness of business, providing assistance in implementing policy changes.

As most high-growth sectors do not require high levels of education, there is an opportunity for companies to incorporate a more inclusive approach to hiring, focusing job requirements on skills and competencies of candidates, rather than their education and previous experience.

Of the surveyed businesses, 58.3% confirmed that they offer internships. Among large-sized companies, approximately nine in every 10 offer internships, while half of small- and medium-sized companies do. The responses revealed statistically significant differences by sector: 100% of business in the Renewable Energy sector offer internships, compared to 62% of businesses in the IT sector, 55% of both Manufacturing and Agroindustry businesses, and 54% of businesses in the Tourism sector. Of the businesses offering interns- hips, half of them mention that they offer paid internships; four in every 10 offer unpaid internships, and one in every 10 offers per diem as compensation for internship work. If there were more companies offering paid internship opportunities and private sector alliances with professional training centers, this would con- tribute to closing the experience gap for youth who have completed technical and life skills training while providing businesses with skilled candidates.

As the assessment pointed out, youth with key soft or life skills are more valued and sought after than those without these skills. As such, there is an opportunity for training centers and other educational institutions to focus on developing these skills in their students, helping to improve their chances of employment.

Surveyed participants also expressed the need to incorporate specialized vocational and technical training into high school education and other training programs in order to equip youth with the skills demanded by the labor market.

II. Background

USAID Bridges to Employment aims to improve the alignment between El Salvador’s labor market supply and demand by increasing the employment opportunities of vulnerable youth from El Salvador’s 15 highest-crime municipalities prioritized in Plan El Salvador Seguro and providing them with the skills and competencies demanded by the labor market. The project’s guiding vision positions Salvadoran youth as valued, sought-after members of the national workforce, capable of critically evaluating their training and employment options and proactively pursuing job opportunities in high-growth sectors that are receptive to skilled recruits.

In 2016, USAID Bridges to Employment conducted a Labor Market Assessment that identified education and training skills gaps, as well as private sector needs from a business perspective in specific sectors and select municipalities of El Salvador.

3 This assessment helped the project identify sectors on which to focus as well as the gaps in the private sector workforce that youth may help close with support from the project. The assessment focused on identifying the following elements from a private sector perspective:

- Industry hiring needs (profiles of entry-level positions) - Education and training needs (life and technical skills) - Challenges faced by businesses in employing youth - Other constraints faced by businesses

The Method of Reflections developed by Hidalgo and Hausmann was used to select 16 potential high-growth sectors for the assessment, based mainly on foreign trade data and the Ministry of Economy´s (MINEC) Produc- tive Transformation Policy.

While the country’s economic situation and labor market demands are constantly changing and evolving, the 2016 assessment focused on the needs and challenges of businesses of all sizes, providing a basis of comparison in the follow-on assessment.

Considering that the economic situation and business dynamics are constantly evolving, and, given USAID Brid- ges to Employment’s goal of training youth to meet private sector hiring needs, a follow-up assessment was required not just to validate the findings of the initial assessment but also to monitor current and future demands of the workforce. In addition, this update will help identify desired skills and competencies of youth employees, which will help guide workforce development service providers in establishing course offerings in the future. III. Assessment Objectives General objective The general objective of this document is to confirm, from a private sector perspective, the validity of the hiring needs identified in the 2016 labor market assessment mentioned above, as well as the education and training requirements that businesses have for their employees. In addition, this update will help identify the constraints businesses face in hiring youth as well as the challenges youth face when pursuing a career path within the priva- te sector.

In addition, specific objectives include conducting a quantitative assessment with a target group of businesses across the economic sectors of Manufacturing, Commerce/Tourism, Information Technology (IT), Agroindustry, and Renewable Energy, to gather their perceptions and feedback on:

I. Identify current hiring demands in the sectors listed above: a Number and age of employees by business. b Labor market dynamics regarding the hiring of youth (aged 16-29) by small-, medium- and large-sized companies. i. Positions held by youth in surveyed businesses. ii. Potential career paths for youth. iii. Average monthly income of youth employees. c. Perceptions of business representatives regarding labor market demand and supply at both the national level and the municipal level where the business operates. d. Employers’ perceptions of changes in labor market demand over the past three years.

4 II. Capture employers’ attitudes toward hiring youth (aged 16-29). a. Job opportunities available to youth (aged 16-29). i. The main driving factors/advantages of hiring youth. ii. The main obstacles/disadvantages for hiring youth. b. Key hiring requirements of employers. i. Minimum level of formal education, as well as technical skills. ii. Life skills valued by employers. iii. Ranking of skills by businesses in order of priority. iv. Existence of training programs in place for youth employees. v. How employers assess youth job readiness; to what extent training meets the needs of employers, and recommendations of business leaders on how to strengthen the capacity of the youth workforce. c. Ways to motivate businesses to provide greater job opportunities to youth. III. Describe the conditions and opportunities available for vulnerable youth. a. Variables that promote or constrain youth employment in each geographic zone surveyed. b. Which institutions support young entrepreneurs. IV. Validate the principle findings of the first assessment and build a baseline for future assessments. a. Baseline for project monitoring. b. Follow-up methodology and monitoring instruments.

IV. Assessment Design Assessment phases

This assessment followed two phases, which were conducted simultaneously:

A. Quantitative Assessment: utilizing surveys to gather information on employer perceptions.

B. Qualitative Assessment: gathering information from key individuals through face-to-face interviews. The information provided a broader view of labor market demand and employment opportunities for youth in El Salvador.

The assessment relied on two main sources of information: business leaders for the quantitative phase and key stakeholders for the qualitative phase.

Private sector representatives: this was the main target group identified under the assessment, which was inclu- ded under the quantitative sample. Company owners, decision-makers, general managers, and/or human resour- ces managers were key informants for this group.

Key stakeholders: this qualitative sample included representatives of civil society organizations and educational institutions that work with youth or provide trainings to youth, as well as representatives of trade associations from the various business sectors. The purpose of this sample was obtaining relevant information about the skills and competencies required for youth by the labor market.

5 Quantitative phase

Sampling frame

The starting point, as in the first assessment, was the latest DIGESTYC business registry. A businesses database was created to identify businesses that could be invited to participate in the study, segmenting the database by geographic location (municipalities under assessment), International Standard Industrial Classification of all Eco- nomic Activities (ISIC code); and enterprise size (based on the number of employees).

The process used to build the sampling database was the following:

i. Review the data source used in the first assessment. ii. Request an updated DIGESTYC’s business registry database. iii. Export DIGESTYC’s database to Microsoft Access and create new tables to show only businesses mat ching ISIC codes of sectors under assessment, specific geographic zones, and identifying businesses that have over 10 employees in order to classify them as either small-, medium- or large-sized companies. iv. Revise the filtered database to confirm address, telephone, and ISIC code information per business. v. Assign a sequential identification number to all entries in order to select a random sample. vi. Transform the final database into an Excel format to maintain a master database while fieldwork was being conducted.

The sampling frame included 1,739 registered businesses, which represent 20% of the 8,530 businesses registe- red in the DIGESTYC registry.

Sampling methodology

The sample selection process followed a quota-based, multi-stage sampling approach (by type of activity, geogra- phic zone, and business size) and systematic random selection of businesses. The sampling process required changes throughout the process, which will be further described in the Limitations section of this assessment.

Sample size

The sample size was 290 surveys. Considering a sampling frame of 1,739 businesses, this represents a 95% confi- dence level with a 5.25% margin of error.

Sample distribution

Three segmentation variables were used: municipality, sector of business operations, and company size. Due to limitations regarding the business registry, the quotas established in the original assessment required changes in the final sample (please refer to explanation in the Limitations section).

6 Data collection methodology

USAID Bridges to Employment sent a signed letter to businesses in order to introduce the study. Then, in a follow-up call, businesses were contacted by phone in order to request or confirm their participation in the assessment. Meetings with the individuals who agreed to be part of the survey were set up, and finally, the data was collected through face-to-face surveys.

A team of eight surveyors was trained to conduct the fieldwork. The data was captured using electronic tablets via the “SurveyToGo” digital platform. Two supervisors oversaw the distribution of the workload among surve- yors and reviewed 100% of the surveys conducted.

Final sample Final sample Original quota Original quota distribution distribution Municipality Sector Frequency % Frequency % Frequency % Frequency %

Ahuachapán 12 4% 12 4% Agroindustry 6 2% 11 4%

Ciudad Arce 12 4% 6 2% Manufacturing 112 39% 130 44%

Ciudad Delgado 15 5% 10 3% IT 128 44% 92 32%

Colón 17 6% 13 5% Commerce/Tourism 38 13% 50 17%

Mejicanos 17 6% 17 6% Renewable Energy 6 2% 7 2%

San Miguel 29 10% 29 10% Total 290 100% 290 99% Company size San Salvador 87 30% 102 35% Frequency % Frequency % Santa Ana 29 10% 33 11% Large-sized Santa Tecla 41 14% 38 13% Companies 38 13% 47 16% Medium-sized Soyapango 20 7% 19 7% Companies 50 17% 45 16% Small-sized Zacatecoluca 12 4% 11 4% Companies 202 70% 198 68%

Total 290 100% 290 100% Total 290 100% 290 100%

Data collection period

The sample data was collected from March through May 2018.

Data processing

The collected data was transferred from the server directly as an SPSS file for cleaning and processing. During the review, 20 surveys did not pass the final filter as the surveyed businesses could not be classified into any of the prioritized sectors or the quality of the data did not fit the required standards.

7 Qualitative phase

During the qualitative phase, the research team conducted in-depth, face-to-face interviews with key stakehol- ders to complement the data collected under the quantitative phase, making it possible to gain a broader pers- pective of El Salvador’s current labor market and understand employment opportunities for youth.

For the design of the qualitative phase, the following parameters were taken into consideration:

A. Building the sampling frame: A list of 15 potential interviewees was determined jointly with USAID Bridges to Employ ment. Once the list was finalized, the research team set up meetings to complete the 15 required interviews. A few key stakeholders who were unable to participate in this assess ment were replaced with others with the same qualifications.

B. Data collection instrument: USAID Bridges to Employment provided a semi-structured interview guide that was used to capture the data. This guide enabled a standardized data collection process.

C. Interviewers: Two experienced interviewers were trained on the use of the approved interview guide and were assigned to conduct in-depth interviews.

D. Methodology: After establishing initial contact, the interviews were set up. Each interview lasted between 45 minutes and one hour.

E. Field work: Data collection took place between March and May 2018.

F. Sample composition: Interviews were conducted with representatives of the following organizations, listed below by sector:

8

Assessment limitations

One of the critical points for the assessment design is the sampling frame, which is essential not only because it defines the businesses that will be part of the study but also because it is the starting point for the methodo- logy the research will follow.

The sampling frame requires an initial base, which is the assessment universe, from which segmenting quotas or samples are determined. In this case, the samples were defined by business sector, company size, and distribu- tion throughout the 15 selected geographic areas (municipalities).

As an official source of economic activities and information within the country, the DIGESTYC business registry served as the starting point to establish a sampling frame. By using this business registry, this follow-up assess- ment was using the same parameters applied in the 2016 baseline.

Notwithstanding the above, the business registry is the first constraint for this assessment since the directory most recently published data from 2011-2012, which was used as the basis for the sampling frame. Although the information therein is the most complete information available, it limits the sample, since all businesses establi- shed after 2012 are inevitably left out of the sampling frame. Furthermore, there are no records of the jobs created by these businesses. Lacking complete and updated business records to use as a basis for comparison, the extent of changes between the segmentation quotas defined for this assessment and the actual segmenta- tion in the economy cannot be accurately established for the current national reality.

In spite of the limitations of the business registry, this source was considered to be the most complete and official. Since the baseline assessment used these same parameters, the skewing effect when comparing data is minimal.

A systematic random sampling process was initially established to select businesses included in the sampling frame. However, two problems were encountered when the fieldwork was initiated, as described below:

a) A slow response from businesses to confirm their participation in this assessment. This is due to two factors: (1) in many instances the recipients of the call, receptionists, secretaries and assistants, would not transfer the call to the intended interviewee, and (2) a general lack of trust due to the illicit groups afflicting the country, in which businesses are a target for extortion requiring “payment in exchange of protection.”

b) The outdated economic records also presented another issue: cases with outdated contact information slowed the process of contacting businesses and created the need to find other

9 sources of information (phone books, websites, or social media) to contact the businesses randomly selected for the sample.

These issues created a delay in the work plan related to field activities, and thus surveys during the first days were limited to one or two a day. This situation required a change in the approach and methodology.

The new approach that was adopted consisted of sending teams to the field for them to contact businesses directly, as opposed to cold-calling them. The team scouted municipalities and directly contacted some business. The research team would present a letter asking for cooperation, would ask to speak with a manager (and they were mainly referred to human resources), reintroduce the purpose of the assessment, and set up a meeting to conduct an interview.

This change in methodology proved to be more effective: the assistants who initially limited access to managers now expressed their interest in cooperating, mainly because face-to-face contact with field staff built more trust that led to a positive response from the potential interviewees. Notwithstanding the advantages of this altered methodology, this process transformed the systematic random sampling initially established in the assessment design. As a result, the sampling approach changed from probabilistic sampling to non-probabilistic sampling (i.e., not all elements in the sampling frame had equal probabilities of being chosen).

The change to non-probabilistic sampling was not an error in itself; as it is a valid type of sampling method widely used in research. However, for the statistical analysis of data, the original probabilistic sampling method was more relevant because it provided more certainty in terms of statistical significance when comparing results of segmentation variables used in the assessment. It is not possible to determine the level of bias, if any, from the change in methodology and thus, it becomes a Type B sampling error or non-sampling error. All research has an implicit possibility of non-sampling errors. In terms of the assessment results, the change in sam- pling methodology had little impact. But when comparing the results to the baseline, the differences between both results may have increased, given that this same limitation was also present in the 2016 research.

To mitigate potential impacts from the non-probabilistic sampling in both assessments, the research team con- ducted a more exhaustive analysis on the segmentation variables in those cases showing significant differences in the findings of both assessments, and the variance in both findings. This was done to understand if the diffe- rences were real or if they were the result of changes in the sampling method used in both assessments.

Another limitation was that in the analysis by municipality, the samples in certain questions were too small to obtain reliable findings, both in T-test for continuous variables (for example, the number of employees), as well as Chi-Square for nominal variables (for example, whether there are training programs in place, or not). When the sample sizes by municipality were very small, and therefore not considered representative, such results were omitted from the analysis to avoid reaching erroneous conclusions. V. Quantitative Assessment Findings Overview of surveyed businesses A characteristic of El Salvador is that most businesses are concentrated in the capital city of the country, San Salvador, or in the country’s second and third largest cities, Santa Ana and San Miguel. This is reflected in the concentration seen in the sample (Figure 1) where along with San Salvador, San Miguel and Santa Ana, businesses are also present in Santa Tecla, Soyapango and Mejicanos, municipalities geographically located on the outskirts of San Salvador.

10 To understand the dynamics of why businesses are clus- tered in the metropolitan area, the small size of the country (less than twenty-one thousand square kilome- ters) should be considered, as the short distances allow many people to commute every day from the country’s interior to be able to work in the capital city. As an example, it takes a worker less than 50 minutes to travel from Santa Ana (one of the municipalities inclu- ded in the sample and the second largest city in the country) to San Salvador using public transportation.

Regarding business size (Table 1), San Salvador has the highest proportion of large-sized companies in the sample, followed by San Miguel and Soyapango, the final due to its location, as part of the department of San Salvador.

Company size Municipality Small Medium Large San Salvador 31.3% 46.7% 40.4% Santa Tecla 14.6% 13.3% 6.4% Santa Ana 13.6% 8.9% 4.3% San Miguel 9.1% 8.9% 14.9% Soyapango 5.6% 2.2% 14.9% Mejicanos 8.6% 0% 0% Colón 2.5% 6.7% 10.6% Ahuachapán 4.5% 6.7% 0% Zacatecoluca 5.6% 0% 0% Ciudad Delgado 3% 4.4% 4.3% Ciudad Arce 1.5% 2.2% 4.3% Base 198 45 47

According to geographic location, the largest proportion of businesses across almost all sectors is concentrated in the cities of San Salvador, Santa Tecla, Santa Ana, and San Miguel. Renewable Energy businesses, the newest sector in the country, are concentrated in the capital’s metropolitan area.

11 Table 2. Concentration by municipality and economic sector

Sector Municipality Renewable Agroindustry Manufacturing IT Tourism Energy San Salvador 18.2% 30% 40.2% 36% 85.7% Santa Tecla 27.3% 13.1% 14.1% 10% 0%

Santa Ana 18.2% 9.2% 14.1% 12% 0% San Miguel 9.1% 7.7% 8.7% 20% 0% Soyapango 0% 12.3% 1.1% 2% 14.3% Mejicanos 0% 6.9% 5.4% 6% 0% Colón 18.2% 5.4% 2.2% 4% 0% Ahuachapán 0% 5.4% 5.4% 0% 0% Zacatecoluca 0% 2.3% 5.4% 6% 0% Ciudad Delgado 9.1% 6.2% 0% 2% 0% Ciudad Arce 0% 1.5% 3.3% 2% 0% Base 11 130 92 50 7

Table 3 shows the concentration of businesses by municipality and economic sector.

Table 3. Business concentration by sector and municipality

Sector

Municipality Renewable Base Agroindustry Manufacturing IT Tourism Energy

San Salvador 102 2% 38.2% 36.3% 17.6% 5.9%

Santa Tecla 38 7.9% 44.7% 34.2% 13.2% 0%

Santa Ana 33 6.1% 36.4% 39.4% 18.2% 0%

San Miguel 29 3.4% 34.5% 27.6% 34.5% 0%

Soyapango 19 0% 84.2% 5.3% 5.3% 5.3%

Mejicanos 17 0% 52.9% 29.4% 17.6% 0%

Colón 13 15.4% 53.8% 15.4% 15.4% 0%

Ahuachapán 12 0% 58.3% 41.7% 0% 0%

Zacatecoluca 11 0% 27.3% 45.5% 27.3% 0%

Ciudad Delgado 10 10% 80% 0% 10% 0%

Ciudad Arce 6 0% 33.3% 50% 16.7% 0%

Total 290 3.8% 44.8% 31.7% 17.2% 2.4%

12 Only 40% of manufacturing businesses reported export sales in 2017, and only 10.4% of them stated that exports account for more than 50% of their sales. Only 27.6% of small-sized companies reported export sales, while 42.9% of medium-sized companies and 71.4% of 4% large-sized companies did.

Among service providers, 33.9% export their services. However, only 4.8% stated that exports account for 60% more than 50% of their total sales.

0% 20% 40% 60% 80% In the sample, 62.0% of businesses have one branch location; 27.2% have two branches; 4.1% have 6 to 10 branches, and 6.2% have more than 10 branch locations.

Most businesses (70.7%) exclusively operate in one municipality; 22.8% have a presence in 2 to 5 municipalities, and 6.5% of businesses have locations in more than 5 municipalities. Employment across sectors The businesses surveyed created a total of 26,323 jobs in 2017. Of the jobs created, most of them (41%) were in the municipality of San Salvador followed by the municipalities of Colón, San Miguel, and Soyapango. Conside- ring that San Salvador, Colón, Soyapango, Santa Tecla, Ciudad Delgado and Mejicanos are part of what is known as “Gran San Salvador,” approximately 77% of the jobs created in 2017 were concentrated in the San Salvador metropolitan area.

Businesses hired an average of 91 employees in 2017, and there are statistically significant differences in the proportion of men and women hired by employers. Out of the reported new hires, 56% were men compared to 44% women. This proportion of male versus female hires remains largely consistent across all surveyed muni- cipalities.

Examining employment data by sector, it was found that the largest proportion of employees hired in 2017 within the sample are in the Manufacturing (53%) and IT (38%) sectors. This is consistent with the sample distri- bution, given that IT and Manufacturing sectors are the two sectors most widely represented in the sample.

13 However, an analysis of the size of the workforce by business reveals that the average number of employees working in Manufacturing, IT, and Agroindustry businesses is similar. Although the Renewable Energy sector creates a small percentage of jobs overall, it creates a much higher number of jobs per business than those crea- ted in the Tourism sector.

Table 4. Average number of employees by business by sector

Average by Sector business

IT 107

Manufacturing 106

Agroindustry 100

Renewable Energy 40

Tourism 25

Total 91

Out of all of the surveyed businesses, 77.9% stated they had created new jobs for youth aged 16-29, with no statistically significant differences between the various sectors assessed. However, companies across almost all sectors hired less than 10 youth aged 16 to 29 years old in 2017.

14 Table 5. Proportion of new employees (youth aged 16-29) by sector in 2017

Sector Employees Renewable Total Agroindustry Manufacturing IT Tourism Energy None 22.1% 18.2% 20% 22.8% 26% 28.6%

Less than 10 54.5% 36.4% 50.8% 54.3% 68% 57.1%

10 to 25 13.8% 27.3% 16.2% 15.2% 4% 0%

26 to 50 4.5% 0% 6.9% 3.3% 2% 0%

51 to 75 1.4% 0% 1.5% 2.2% 0% 0%

76 to 100 1.4% 0% 1.5% 2.2% 0% 0%

101 to 150 1% 9.1% 0.8% 0% 0% 14.3%

151 to 200 1% 9.1% 1.5% 0% 0% 0%

201 to 250 0.3% 0% 0.8% 0% 0% 0%

Base 290 11 130 92 50 7

In 2017, surveyed businesses reported creating a total of 3,423 jobs for youth aged 16-29, with an average of 11.8 jobs for youth per business.

Table 6. Number of new employees aged 16-29 in 2017

Sector

Renewable Total Agroindustry Manufacturing IT Tourism Energy

Mean Sum Mean Sum Mean Sum Mean Sum Mean Sum Mean Sum

How many new young male employees aged 16 to 29 did 6.6 1,927 19.7 217 8.4 1,092 4.3 391 1.7 87 20 140 you have in 2017? How many new young female employees aged 16 to 29 did 5.2 1,496 16.9 186 6.4 827 4.2 387 1.9 95 0.1 1 you have in 2017? How many new employees aged 16 to 29 did you have in 2017? 11.8 3,423 36.6 403 14.8 1,919 8.5 778 3.6 182 20.1 141 (Total)

Manufacturing and IT were the sectors in which more youth were hired, with 1,919 youth or 56.1% of new employees aged 16-29 in Manufacturing and 778 youth or 22.7% in IT. Of the total number of new jobs for young people, 56.3% hired men and 43.7% women, confirming once again, more employment opportunities for men.

15 Comparing findings from the 2016 Labor Market Assessment and the current update, there are significant diffe- rences between the availability of new jobs for youth, showing a significant reduction in job opportunities for youth. A total of 9,601 new employees aged 16-29 were hired in 2015 compared to only 3,423 in 2017, which reflects a 64% decrease in job opportunities for youth in a couple of years. However, a detailed analysis should consider the differences between the two studies in terms of sample distri- bution by size of company. Note in Table 7 the existence of statistically significant differences between the two samples. The number of large-sized companies in the 2016 research almost doubled the number in the 2018 sample, which affects the results because large-sized companies have a higher hiring capacity compared to sma- ll-sized companies. Table 6. Sample size in 2016 and 2018 assessments

Business size 2016 Sample 2018 Sample Total

Small-sized 97 198 295 companies

Medium-sized 30 45 75 companies

Large-sized 78 47 125 companies Total 205 290 495

Table 8 shows the influence of the large-sized companies segment on 2016 results. Although the baseline and the 2018 assessment address the same themes and questions in the survey, it is important to keep in mind that these samples are not equivalent.

Table 8. Comparison of new youth hires between the 2016 and 2018 assessments

Assessments

2016 2018 T-test Company size How many new employees aged 16-29 How many new employees aged 16-29 did you have in 2015? did you have in 2017? Mean Standard Sum Mean Standard Sum T Sig deviation deviation Small-sized company 5 6 443 4 10 759 0.983 0.33

Medium-sized 14 16 391 10 13 435 1.194 0.24 company Large-sized company 117 245 8,767 47 60 2,229 2.346 0.2

Total 49 160 9,601 12 30 3,423 3.207 0.02

With the analysis of the statistical differences between both assessments, it can be asserted that although there is a reduction in youth job opportunities with large-sized firms, some of this difference could be the result of the difference between the sample distributions by type of companies in both assessments. Number of jobs by business area According to the businesses surveyed, the largest number of employees (a total of 15,440) are working in the area of operations, with an average of 53 employees working in operations per business. The average figure is consistent across all economic sectors. Yet, businesses in the Manufacturing sector have a higher average – of 72.3 employees per business working in the area of operations. Survey results showed that businesses consistently hired more men than women (6 versus 4) for positions in operations. 16 Table 9. Number of employees working by business area in each sector

Sector Renewable Total Agroindustry Manufacturing IT Tourism Energy

Mean Sum Mean Sum Mean Sum Mean Sum Mean Sum Mean Sum How many employees do you have working 53.2 15,440 50.6 557 72.3 9,398 45.8 4,210 19.0 952 46.1 323 in operations? How many employees do you 18.6 5,398 35.2 387 18.1 2,356 25.5 2,349 5.9 296 1.4 10 have working in sales? How many employees do you 17.6 5,094 14.4 158 14.4 1,876 29.6 2,723 5.7 284 7.6 53 have working in administration?

The second highest number of existing jobs are in sales; surveyed businesses reported a total of 5,398 emplo- yees in sales jobs. The IT sector has the largest number of employees hired for sales positions. It is important to point out that Agroindustry, with a total of 387 employees in the sample, has the largest percentage of its workforce employed in sales, compared to the other sectors. With a minimum difference, not statistically signifi- cant, the sales area appears to be gender-balanced: 51% of employees are female versus 49% male.

The surveyed companies had 5,094 jobs In the administrative area, with the highest average in the IT sector, with approximately 29.6 employees per company, followed by Manufacturing and Agroindustry sectors with an average of 14.4 employees working in administration in each. There are more men than women (53% vs. 47%) employed in the area of administration.

When inquiring with businesses about subcontracted or outsourced personnel, representatives of all outsource personnel, with an average of 34%. The survey responses identified a total of 1,235 subcontracted jobs in 2017. The highest percentage of outsourced personnel is found in the Renewable Energy sector, with 42% of the wor- kforce outsourced and an average of 21 subcontracted employees per business. For every 10 subcontractors that are hired, 7 are male and 3 are female.

17 Employee turnover and position elimination Out of the surveyed businesses, seven in every 10 replaced employees in 2017, with the IT sector showing the highest turnover rate. Approximately one half of the businesses surveyed have replaced between 1 and 10% of their employees, with an overall employee replacement rate of 8% among all businesses surveyed. Notwithstan- ding the replacements made, the trend among businesses (for 56% of the surveyed businesses) is that 50% of their employees remain in their position for more than five years.

In regards to the elimination of certain positions, there are statistically significant differences between the current assessment and the baseline. In this assessment, the average percentage of eliminated positions in 2017 was 3%, much lower than the 10% found in the 2016 baseline assessment. The manufacturing sector shows the highest average of eliminated positions (4%), while the rest do not exceed 2%. Medium-sized companies had the highest average of closed positions (6%), followed by large-sized companies (4%).

Approximately one half of respondents (46.2%) think that youth aged 16-29 resign at a higher rate than older employees. Compared with the 2016 assessment, and always keeping in mind that the samples under compari- son are not equivalent, the beliefs of business leaders have shifted from 2016 to 2018. In 2016, 71.8% of surveyed businesses believed that youth resigned or left their jobs at a higher rate than older employees, while in the 2018 assessment just 46.20% (or 5.6% fewer respondents) held this belief.

Among businesses, 58% mention that most of their employees live in municipalities where the business is loca- ted, and 60% state they have hired personnel that live outside of where the business is located. This is particular- ly true in the Renewable Energy sector where eight in every 10 employees live outside the municipality where the business operates.

Table 7. Municipality where the employee is originally from (row) versus municipality where the business is located (column)

Ciudad San Municipality of origin Total Ahuachapán Colón Santa Tecla Ciudad Arce Zacatecoluca San Miguel Soyapango Mejicanos Santa Ana Delgado Salvador Soyapango 39.1% 0% 12.5% 30.4% 0% 0% 0% 33.3% 71.4% 7.1% 25% 0% Apopa 23% 0% 0% 17.4% 0% 0% 0% 66.7% 35.1% 14.3% 37.5% 0% Mejicanos 20.7% 0% 0% 8.7% 0% 0% 0% 33.3% 37.7% 14.3% 12.5% 0% San Martín 16.7% 0% 12.5% 4.3% 0% 0% 0% 16.7% 22.1% 42.9% 37.5% 0% Ilopango 16.1% 0% 0% 4.3% 0% 0% 0% 0% 24.7% 50% 12.5% 0% San Salvador 13.2% 0% 25% 34.8% 66.7% 0% 0% 16.7% 0% 42.9% 50% 0% Santa Tecla 13.2% 0% 25% 0% 66.7% 0% 0% 0% 20.8% 21.4% 0% 0% Santa Ana 12.6% 20% 12.5% 34.8% 100% 0% 0% 0% 9.1% 0% 0% 22.2% Colón 10.3% 0% 0% 34.8% 33.3% 0% 5.3% 0% 10.4% 0% 0% 0% San Marcos 9.2% 0% 12.5% 13% 0% 0% 5.3% 16.7% 9.1% 14.3% 12.5% 0% Sonsonate 8% 20% 25% 8.7% 0% 0% 0% 0% 7.8% 0% 25% 11.1% Quezaltepeque 7.5% 0% 25% 8.7% 33.3% 0% 0% 33.3% 6.5% 0% 12.5% 0% La Libertad 7.5% 0% 0% 8.7% 0% 0% 0% 0% 11.7% 7.1% 0% 11.1% Cuscatancingo 6.3% 0% 0% 4.3% 0% 0% 0% 16.7% 7.8% 7.1% 25% 0% Ciudad Delgado 6.3% 0% 0% 0% 0% 0% 0% 0% 13% 7.1% 0% 0% Chalchuapa 5.7% 60% 0% 0% 0% 0% 0% 0% 0% 0% 0% 77.8% Base 174 5 8 23 3 2 19 6 77 14 8 9

18 Only 3 out of 10 companies, or 30% of the businesses, stated that they offer transportation as a benefit to their employees. Of those, 9.1% offer company transportation to their employees, and 10% give financial assistance or a stipend to cover transportation costs. Businesses that provide this benefit to their employees frequently pay for taxi services whenever their employees must stay extra time at work.

Similar to the 2016 findings, citizen security remains one of the most important topics of concern when hiring youth. The main concern is where the job applicant lives and the crime or danger level of the area. This concern must be understood in two ways: first, that a person living in a high-risk area may be involved in criminal activi- ties, and/or secondly, that a person living in an area dominated by a rival gang from the one found where the business is located could cause a safety risk to the potential hire, the business and its staff.

The survey identified that security (and the costs associated with it) are a key concern for more than half (58.3%) of businesses when hiring new employees. Expected job opportunities

More than one half of the businesses surveyed (56.6%) expect to increase the size of their workforce during the next 12 months. This is similar to the percentage from the 2016 assessment.

Of the businesses anticipating growth in the next year, over one half (56.1%) anticipate an increase of up to five positions in the next year. Another 22.5% state that they plan to add 6-10 positions to their workforce, and 23.1% expect to add more than 10 new positions in the following year.

In total, businesses project the creation of 1,646 new positions, of which 79.9% will be permanent positions. There are significant differences between the average growth projections in the various sectors. The Manufactu- ring sector shows the highest increase in jobs (1,009 positions), with an average of 12 new positions projected per business. Renewable Energy, although it projects only 145 new positions, shows the highest average growth per business. However, this sector, with fewer jobs in general, often requires engineering degrees.

19 Table 8. Employment growth projection by sector

Sector

Renewable Total Agroindustry Manufacturing IT Tourism Energy

Mean Sum Mean Sum Mean Sum Mean Sum Mean Sum Mean Sum

How many jobs do you expect to 10 1,646 8 56 12.3 1,009 7.1 335 4.4 101 29 145 create? How many of those will be permanent 8 1,315 7.3 51 10.5 861 6.3 295 4.2 97 2.2 11 positions?

The positions with the highest expected level of growth are sales, operations, and production. There are statisti- cally significant differences between the different sectors. Agroindustry is the sector in which more companies anticipate growth in the area of operations (57%). Of companies surveyed in the Tourism sector, 43% project the highest growth to be in sales (e.g. Sales advisors). Companies in Agroindustry and Renewable Energy estima- te that the greatest growth will be in the area of operations (e.g. warehouse managers, drivers, and general maintenance, especially refrigeration equipment maintenance for the agroindustry and maintenance of industrial equipment). In addition, 57% of surveyed manufacturing companies expect to grow more in the production area (e.g. technical operators of plastic film extrusion, plastic injection machines, extrusion equipment, and blow mol- ding of plastic containers, industrial clothing machine operators). Except for IT, in which 23% of surveyed com- panies estimate growth in the area of administration, businesses in the other sectors expect low to no growth in this area.

Table 9. Percentage of expected job growth by business area and sector

Sector New jobs area of growth Renewable Total Agroindustry Manufacturing IT Tourism Energy

Sales 35% 29% 34% 36% 43% 20%

Operations 33% 57% 32% 32% 26% 60%

Production 23% 29% 38% 9% 4% 0% (Manufacturing)

Administration 15% 14% 12% 23% 9% 20%

Large-sized companies expect the highest levels of job growth to be in the sales department (42%). Medium-si- zed companies expect job growth to be in operations (39%), and small-sized companies expect it in sales (37%) and operations (31%).

20 Table 13. Growth percentage by type of job and size of the company

A total of 1,052 new jobs are expected to be created in these four areas (404 jobs or 38.4% of the total in sales, 316 jobs or 30% in operations, 280 jobs or 26.6% in production and 52 jobs or 4.9% in administration). The manufacturing sector will create the largest percentage of new jobs (71.9%) with a total of 757 jobs to be crea- ted in these four areas. Table 9. Percentage of expected job growth by business area and sector Sector

New jobs area Renewable of growth Total Agroindustry Manufacturing IT Tourism Energy Mean Sum Mean Sum Mean Sum Mean Sum Mean Sum Mean Sum

Sales 7 404 6 22 11 287 4 54 5 32 3 9

Operations 8 316 7 13 9 283 3 12 8 8

Production 5 280 7 14 6 161 4 74 3 30 1 1 (Manufacturing) Administration 2 52 2 2 3 26 2 20 2 3 1 1

Total 5.5 1,052 5.5 51 7.23 757 3.25 160 4.5 73 1.25 11

With the exception of the Renewable Energy sector, the most common level of education required for these new positions in all sectors is a high school degree (53.6%), whether technical or general high school. Only 18.1% of the new positions will require a university degree, and only 9.3% will require a two-year technical degree. In the Renewable Energy sector, however, 60% of new hires are required to have a university degree.

Table 11. Minimum education required for new hires by sector Sector Academic level required for new hires Renewable Total Agroindustry Manufacturing IT Tourism Energy High school (technical) 29.4% 33.3% 25.4% 36.5% 29.0% 0%

High school (general) 24.2% 22.2% 28.8% 15.3% 32.3% 20%

Basic 19.0% 33.3% 27.1% 5.9% 22.6% 0%

Higher (University) 18.1% 0% 15.3% 25.9% 6.5% 60%

Higher (Technical) 9.3% 11.1% 3.4% 16.5% 9.7% 20%

21 Statistically significant differences were found in the minimum level of education required by work area. Unlike others areas, 40% of the surveyed companies expressed that they require personnel working in the area of administration to have completed university education. For operations, 29.6% of the surveyed companies repor- ted that the minimum level of education they would require would be basic or ninth-grade education. For 39.5% of companies, this same requirement must be met for personnel working in the area of production. For posi- tions in sales, 60.3% of the surveyed companies require secondary education or high school completion, whe- ther technical or general high school.

Table 12. Minimum level of education required for new hires by work area

Area Minimum academic level by business area Total Administration Operations Production Sales Secondary education / High 26.9% 28% 25.9% 21.1% 31.0% school (technical) Secondary education / High 26.9% 24% 18.5% 36.8% 29.3% school (general) Basic education (up to 9th 21.7% 0% 29.6% 39.5% 12.1% grade) Higher education (University 18.3% 40% 14.8% 2.6% 22.4% degree) Higher education (Technical 6.3% 8% 11.1% 0% 5.2% degree)

Personnel selection

There is a statistically significant difference between the levels of difficulty businesses express they face when hiring non-specialized personnel versus specialized personnel. Businesses report the least difficulty in finding non-specialized personnel, with 47.6% considering it easy/very easy to hire non-specialized personnel while 22.8% find it difficult to hire non-specialized personnel.

Survey responses reveal the opposite when hiring specialized personnel. A total of 68.3% of businesses state that it is difficult/very difficult to recruit specialized personnel compared to 15.5% that consider it easy/very easy to hire this type of personnel.

22 As shown in Tables 13 and 14, the challenge in recruiting specialized employees versus non-specialized emplo- yees is a consistent finding from the 2016 assessment. As in the baseline assessment, the challenge in recruiting specialized personnel does not present statistically significant differences by sector, enterprise size, or municipa- lity. Table 13. Level of difficulty in hiring non-specialized employees by sector, enterprise size, and municipality

Very Easy Easy Neither easy nor Difficult Very Difficult difficult Agroindustry 9.1% 36.4% 18.2% 36.4% 0% Manufacturing 4.6% 39.2% 32.3% 21.5% 2.3% IT 9.8% 41.3% 29.3% 18.5% 1.1% Sector Tourism 8.% 44% 28% 18% 2% Renewable 0% 42.9% 14.3% 28.6% 14.3% Energy Small-sized 9.1% 41.4% 26.3% 20.2% 3% companies Medium-sized 4.4% 33.3% 42.2% 20% 0% Enterprise size companies Large-sized 0% 44.7% 31.9% 23.4% 0% companies Ahuachapán 8.3% 50% 16.7% 25% 0% Colón 0% 30.8% 30.8% 38.5% 0% Santa Tecla 13.2% 34.2% 31.6% 18.4% 2.6% Ciudad Arce 0% 50% 33.3% 16.7% 0% Zacatecoluca 9.1% 54.5% 18.2% 18.2% 0% Municipality San Miguel 3.4% 41.4% 24.1% 27.6% 3.4% Ciudad 0% 20% 50% 30% 0% Delgado San Salvador 8.8% 39.2% 33.3% 16.7% 2% Soyapango 0% 42.1% 26.3% 26.3% 5.3%

23 Table 14. Level of difficulty in hiring specialized employees by sector, enterprise size, and municipality

Very Easy Easy Neither easy nor Difficult Very Difficult difficult Agroindustry 0% 18.2% 18.2% 18.2% 45.5% Manufacturing 1.5% 13.1% 16.2% 46.2% 23.1% IT 2.2% 9.8% 18.5% 47.8% 21.7% Sector Tourism 2% 22% 14.0% 50% 12% Renewable 0% 14.3% 0% 57.1% 28.6% Energy Small-sized 2.5% 14.6% 17.2% 47.5% 18.2% companies Enterprise Medium-sized 0% 11.1% 17.8% 42.2% 28.9% size companies Large-sized 0% 12.8% 10.6% 46.8% 29.8% companies Ahuachapán 0% 0% 8.3% 66.7% 25% Colón 0% 15.4% 15.4% 30.8% 38.5% Santa Tecla 2.6% 5.3% 34.2% 31.6% 26.3% Ciudad Arce 0% 0% 0% 83.3% 16.7% Zacatecoluca 0% 27.3% 0% 54.5% 18.2% Municipality San Miguel 0% 17.2% 20.7% 48.3% 13.8% Ciudad Delgado 0% 20% 20% 30% 30% San Salvador 2% 14.7% 13.7% 46.1% 23.5% Soyapango 0% 6.8% 5.8% 8.3% 16.7% Mejicanos 0% 7.6% 5.8% 5% 0% Santa Ana 15% 12.7% 9.3% 10% 16.7%

Although there is less of a challenge in hiring non-specialized personnel, the most commonly-cited challenge of businesses in hiring specialized employees (as shown in Figure 9 below) is that there are few available candida- tes with the required skillset or level of education needed for the job. Additionally, 11% of job candidates have higher salary expectations than what is being offered by the company.

24

The results of the surveys showed that most companies require job applicants for non-specialized, mainly entry-level positions to have completed high school, and a smaller segment requires a lower level of education – the completion of 9th grade. However, statistically significant differences were found in the educational requi- rements of the Renewable Energy sector, which has a greater proportion of personnel requiring university degrees (14.3% for both engineers and two-year superior technical studies). The available opportunities for technical skilled workers with basic or secondary education in that field come from these businesses’ suppliers or subcontractors in maintenance, construction, and installation of equipment rather than from the prime energy company itself. It is also interesting to note that small-, medium- and large-sized companies across the board rely on candidates with basic education or high school diplomas for non-specialized jobs.

Regarding the municipalities, the minimum level of education required for non-specialized, entry-level positions by more than 50% of the companies located in Zacatecoluca (81.8%), Ahuachapán (66.7%), Ciudad Delgado (60%), Mejicanos (58.8%) and San Miguel (51.7%) was a 9th grade education.

Table 19. Minimum level of education required for non-specialized, entry-level positions

Primary Secondary Tertiary Tertiary Secondary Basic Education education education Education (up to Education (up to 12th grade/ (Superior/ (Superior/ 11th grade/High (up to 9th High Technical University School/General) grade) School/Technical) degree) Degree) Agroindustry 45.5% 45.5% 9.1% 0% 0% Manufacturing 55.4% 30% 14.6% 0% 0% IT 19.6% 38% 32.6% 5.4% 4.3% Sector Tourism 46% 42% 10% 0% 2% Renewable Energy 28.6% 14.3% 28.6% 14.3% 14.3% Small-sized companies 42.9% 34.3% 19.2% 1% 2.5% Enterprise Medium-sized 28.9% 40% 28.9% 2.2% 0% size companies Large-sized companies 46.8% 31.9% 12.8% 6.4% 2.1%

25 Ahuachapán 66.7% 8.3% 25.0% 0% 0% Colón 46.2% 38.5% 15.4% 0% 0% Santa Tecla 31.6% 42.1% 26.3% 0% 0% Ciudad Arce 33.3% 33.3% 33.3% 0% 0% Zacatecoluca 81.8% 18.2% 0% 0% 0% San Miguel 51.7% 31% 17.2% 0% 0% Municipality Ciudad Delgado 60% 20% 20% 0% 0%

San Salvador 32.4% 37.3% 23.5% 3.9% 2.9% Soyapango 31.6% 42.1% 21.1% 5.3% 0% Mejicanos 58.8% 23.5% 5.9% 0% 11.8% Santa Ana 39.4% 42.4% 12.1% 3% 3% Total 41.4% 34.8% 19.7% 2.1% 2.1%

For specialized entry-level jobs, the minimum level of education required is higher; 66.3% of surveyed IT compa- nies mentioned they require tertiary or higher education for specialized jobs, whether a university degree (41.3%) or technical diploma (25%). In Renewable Energy, 57.2% of businesses require job applicants for these positions to have higher education, whether university degree (28.6%) or technical diploma (28.6%). In Agroin- dustry, the highest level of education required for specialized entry-level positions is also tertiary education, with technical diplomas required by 45.5% of the surveyed companies. Manufacturing and Tourism require the lowest percentage of higher education for their specialized positions. In Tourism, 60% of the surveyed compa- nies require secondary education for specialized entry-level jobs, whether general high school (34%) or techni- cal high school (26%). In addition, 54.6% of surveyed Manufacturing companies require secondary education or high school, whether technical (33.8%) or general high school (20.8%).

When analyzing the educational requirements by the size of the business, fewer small-sized companies require candidates to have completed higher education for specialized jobs. Specifically, 51.5% of these businesses rely on personnel with high school degrees, whether general high school (22.2%) or technical high school (29.3%), for their entry-level positions. On the other hand, 53.3% of medium-sized companies and 63.8% of large-sized companies mentioned they require candidates for specialized entry-level positions to have higher education, whether a superior technical diploma or a university degree.

Also, it is interesting to note that when analyzing municipalities, companies located in Zacatecoluca (36.4%), San Salvador (35%), Santa Tecla (34.2%), and Soyapango (31.6%) require technical high school as the minimum requi- rement for entry-level specialized jobs.

Table 15. Minimum level of education required for specialized, entry-level positions

Secondary Secondary Tertiary Tertiary Education Primary Basic Education (up education education th (up to 12th Education (up to 11 (Superior/ (Superior/ grade/ High to 9th grade) grade/High Technical University School/General) School/Technical) degree) Degree)

Agroindustry 18.2% 9.1% 27.3% 45.5% 0% Manufacturing 16.2% 20.8% 33.8% 13.1% 16.2% IT 3.3% 8.7% 21.7% 25% 41.3% Sector Tourism 8% 34% 26% 22% 10% Renewable 0% 0% 42.9% 28.6% 28.6% Energy

26 Small-sized 13.1% 22.2% 29.3% 16.7% 18.7% companies Medium-sized 6.7% 6.7% 33.3% 20% 33.3% Enterprise size companies Large-sized 2.1% 12.8% 21.3% 34% 29.8% companies Ahuachapán 33.3% 16.7% 25.0% 8.3% 16.7% Colón 15.4% 38.5% 7.7% 23.1% 15.4% Santa Tecla 7.9% 7.9% 34.2% 28.9% 21.1% Ciudad Arce 16.7% 0% 0% 33.3% 50% Zacatecoluca 9.1% 27.3% 36.4% 18.2% 9.1% San Miguel 3.4% 20.7% 27.6% 20.7% 27.6% Municipality Ciudad Delgado 30% 20% 30% 20% 0%

San Salvador 4.9% 13.7% 35.3% 22.5% 23.5% Soyapango 15.8% 15.8% 31.6% 15.8% 21.1% Mejicanos 23.5% 23.5% 11.8% 17.6% 23.5% Santa Ana 9.1% 33.3% 21.2% 6.1% 30.3% Total 10.3% 18.3% 28.6% 20% 22.8% While the educational requirements of the businesses surveyed provide an idea of the training needed for various positions, businesses also seek out job candidates with specific competencies and life skills. When recruiting a new employee, 97% of surveyed businesses look for candidates with interpersonal skills. Interper- sonal skills are important for 91% of the businesses. Numeracy skills were prized by 93% of employers.

Table 21 shows how employers ranked the importance of specific life skills, on a scale where one (1) means “it is not a priority” and five (5) means “it is essential.” With no statistically significant differences across sectors, the skills most valued by surveyed companies are: responsibility (4.9), trustworthiness (4.9), willingness to coo- perate with others (4.7), teamwork (4.6), communication (4.6), proactivity (4.6), ability to read and write (4.5) and meeting deadlines (4.5). Table 21. Desired skills of job candidates Sector Renewable Total Agroindustry Manufacturing IT Tourism Energy Valid Valid Valid Mean Valid N Mean Valid N Mean Valid N Mean Mean Mean N N N Reading and writing 4.5 289 4.3 11 4.4 130 4.7 91 4.8 50 4.1 7 Numeracy skills 4.2 270 4.1 11 4.2 115 4.3 89 4.1 48 3.7 7 Interpersonal skills Teamwork 4.6 280 4.6 8 4.5 126 4.6 92 4.7 48 4.8 6 Communication 4.6 280 4.8 8 4.4 126 4.6 92 4.7 48 4.7 6 Proactivity 4.6 280 5.0 8 4.5 126 4.6 92 4.8 48 4.3 6 Verbal and written 4.3 280 4.5 8 4.2 126 4.3 92 4.4 48 4.7 6 expression Reliability 4.9 280 5.0 8 4.9 126 4.9 92 4.9 48 5.0 6 Cooperation 4.7 280 4.8 8 4.7 126 4.6 92 4.8 48 4.5 6 Responsibility 4.9 280 4.9 8 4.9 126 4.8 92 5.0 48 4.8 6 Intra-personnel skills Deadline achievement 4.5 264 4.6 7 4.5 120 4.5 87 4.5 44 5.0 6 Problem-solving 4.4 264 4.7 7 4.3 120 4.5 87 4.5 44 4.7 6 Creativity 4.2 264 4.1 7 4.1 120 4.3 87 4.3 44 4.5 6 Self-learning 4.4 264 4.4 7 4.4 120 4.4 87 4.5 44 4.7 6 Transversal English/written and 2.7 191 3.0 8 2.3 73 2.9 72 2.8 33 3.0 5 spoken Learning skills 4.4 191 4.6 8 4.5 73 4.4 72 4.4 33 4.2 5 IT* 3.7 191 3.9 8 3.6 73 3.9 72 3.4 33 4.0 5

27 In Table 22, the data shows that all life skills tend to be essential throughout all sectors assessed.

Table 22. Desired skills of job candidates by sector and enterprise size

Skills/ Total Sector Company Size Competencies

Agroindustry Manufacturing IT Tourism Renewable Small Medium Large

Energy Enterprise Enterprise Enterprise

Reading and 99.7% 100% 100% 98.9% 100% 100% 99.5% 100% 100% Writing

Interpersonal Skills 96.6% 72.7% 96.9% 100% 96.0% 85.7% 96.5% 95.6% 97.9%

Numeracy 93.1% 100% 88.5% 96.7% 96% 100% 92.4% 93.3% 95.7%

Intrapersonal Skills 91.0% 63.6% 92.3% 94.6% 88% 85.7% 89.4% 93.3% 95.7%

Cross-cutting 65.9% 72.7% 56.2% 78.3% 66% 71.4% 60.6% 66.7% 87.2%

Base 290 11 130 92 50 7 198 45 47

Although these skills are important to all businesses in all sectors, there are certain significant differences on the degree of importance assigned. Small-sized companies value life skills disproportionately more than medium- and large- sized companies do, and are more open to hiring youth for the first time. The following table lists the skills that reflect statistically significant differences by segmentation variables.

28 Table 23. Skills that reflect statistically significant differences regarding desirability

Statistical Differences by segmentation Skill significance Analysis variable level

Proactivity Sector 0.01 Reaches the highest levels of desirability sectors such as Agroindustry Renewable Energy , and Tourism. Numeracy Company size 0.011 It is perceived as a more desirable skills skill among small-sized companies.

Verbal Company size 0.0 It is perceived as a more desirable expression skill among small-sized companies.

Cooperation Company size 0.042 It is perceived as a more desirable skill among small and medium- sized companies.

Creativity Company size 0.003 It is perceived as a more desirable skill among small-sized companies.

Self-learning Company size 0.001 It is perceived as a more desirable skill among small-sized companies.

Learning skills Company size 0.031 It is perceived as a more desirable skill among small and medium- sized companies.

As mentioned previously, businesses tend to provide more job opportunities to men even though seven in every 10 respondents stated that there are no differences in academic or technical education, or soft skills/- competencies between young men and women.

Regardless of the sector involved, representatives of private sector companies noted during the interviews that hiring youth poses particular challenges for businesses. One of the most frequently-cited challenges faced by employers is finding responsible youth, since 33% of respondents believe youth do not care about work. In addition to the issue of responsibility, 14% of respondents believe youth show little commitment to their jobs. Another challenge that stands out from respondents’ comments is that most youth lack previous work expe- rience (14.5% incidence).

Most skills are highly desirable, but surveyed employers note that the likelihood of finding candidates with these skills, particularly proactivity, verbal and written expression, problem-solving ability, creativity, self-learning, English and IT proficiency, is not high. 29 No statistically significant differences were found by sector of business leaders’ perceptions of youth skills, but differences emerged based on business size. Representatives of small-sized companies perceive youth to have stronger skills in numeracy, teamwork, communication, and verbal and written expression than representatives of medium- and large-sized companies do. Notwithstanding their perceptions, the data indicates that businesses have adjusted to the level of skills they are able to find among the country’s workforce. Only 34.8% of survey respondents believe that the current level of technical/professional training of new youth employees poses an obstacle to business growth. Only companies in the Renewable Energy sector see the level of skills of youth as in impediment to the growth of their respective businesses. When respondents were asked to mention additional education and training needed by youth applicants, the answers varied widely, as shown in Figure 11. There are two plausible explanations for this phenomenon: a) employers are considering such training from a point of view related to very particular needs of their business and/or b) employers are not clear about additional training areas required. The latter is likely when considering that each area manager is the person who is more aware of personnel shortcomings and, therefore, survey respondents were likely limited to making general statements regarding this question.

30 Personnel recruitment and screening processes

The methods used by most businesses to recruit and screen job applicants are interviews (91.7%) and recom- mendations from trusted sources (91%). Job ads in traditional media are the third method businesses use the most (40%). Ministry of Labor job boards are used by 37.6% of the companies. Social networks are used for recruiting purposes by 36.6% of the surveyed businesses, and in 31.4% of the cases, they tend to use virtual job boards. While differences were found in the approach businesses use to recruit and screen job applicants, the differences were not statistically significant.

Table 24. Recruitment and screening methods used by sector

Renewable Agroindustry Manufacturing Method used Total IT Tourism Energy Interviews 91.7% 100% 88.5% 94.6% 94% 85.7%

Personal contacts 91% 81.8% 93.8% 90.2% 90% 71.4%

Ads in media (press, 40% 45.5% 38.5% 45.7% 34% 28.6% radio, etc.) Ministry of Labor job 37.6% 27.3% 37.7% 42.4% 32% 28.6% boards Social networks 36.6% 36.4% 31.5% 43.5% 36% 42.9%

Virtual job boards 31.4% 27.3% 29.2% 42.4% 20% 14.3%

Job fairs 22.4% 27.3% 21.5% 26.1% 18.0% 14.3%

Recruitment agencies 22.1% 36.4% 17.7% 30.4% 12% 42.9%

Municipal job boards 15.2% 27.3% 17.7% 9.8% 14% 28.6%

Employee referrals 4.1% 9.1% 4.6% 5.4% 0% 0%

Universities 1.7% 0% 1.5% 3.3% 0% 0%

Institutions 0.7% 0% 0.8% 0% 0% 14.3%

Own job boards 0.3% 0% 0% 0% 2% 0%

Company mail 0.3% 0% 0.8% 0% 0% 0%

LinkedIn 0.3% 0% 0% 1.1% 0% 0%

Database 0.3% 0% 0% 1.1% 0% 0%

Friend referrals 0.3% 0% 0.8% 0% 0% 0%

Total 100% 100% 100% 100% 100% 100%

31 As mentioned previously, interviews and personal referrals are the most widely-used recruitment methods for companies of all sizes. In general, businesses consider these two methods, along with the use of virtual job boards and social networks, to be most effective in recruiting employees. However, statistically significant diffe- rences were identified in the recruitment methodologies based on business size. Medium-sized companies use the Ministry of Labor job boards (78.7%), virtual job boards (68.1%) and social networks (57.4%) for recruit- ment purposes more than small- and large-sized companies. It is worth noting that small-sized companies tend to use ads in media (57.8%), Ministry of Labor job boards (48.9%) and virtual methods (48.9%) to recruit staff more than large businesses

Table 25. Recruitment and screening methods used by business size

Business size Method used Total Small Medium Large Interviews 90.4% 95.6% 93.6% 90.4% Personal contacts 90.9% 91.1% 91.5% 90.9% Ads in media (press, radio, etc.) 35.4% 57.8% 42.6% 35.4% Ministry of Labor job boards 26.3% 44.4% 78.7% 26.3% Social networks 31.3% 37.8% 57.4% 31.3% Virtual job boards 18.7% 48.9% 68.1% 18.7% Job fairs 11.6% 31.1% 59.6% 11.6% Recruitment agencies 17.2% 28.9% 36.2% 17.2% Municipal job boards 7.1% 17.8% 46.8% 7.1% Employee referrals 2% 4.4% 12.8% 2% Universities 1% 4.4% 2.1% 1% Institutions 0.5% 0% 2.1% 0.5% Own job boards 0% 2.2% 0% 0% Company mail 0% 2.2% 0% 0% LinkedIn 0% 2.2% 0% 0% Database 0% 0% 2.1% 0% Friend referrals 0.5% 0% 0% 0.5% Total 100% 100% 100% 100%

Respondents’ opinions change when focusing specifically on entry-level positions since they consider that in these cases, personal contacts and interviews (68% and 55%, respectively), are the best methods to identify qualified applicants.

Professional training and internships Internships Of the surveyed businesses, 58.3% state that they offer internships. The responses revealed statistically signifi- cant differences by sector: 100% of Renewable Energy businesses offer internships, compared to 62% of IT busi- nesses, 55% of both Manufacturing and Agroindustry businesses, and 54% of Tourism businesses. Among large-sized companies, approximately nine in every 10 offer internships, while half of small- and medium-sized companies do. According to the survey responses, only three in every 10 businesses located in the municipali- ties of Zacatecoluca and Ciudad Delgado offer internship opportunities. During a year, these businesses create a total of 1,144 internships, which breaks down to an average of 6.8 inter- nships per business. Of these, an average of 3.5 internships are awarded to young men while 3.3 are awarded to young women. Businesses in the IT and Tourism sectors have more internships on average, with IT offering the highest number of internships out of all of the sectors.

32 In comparison to the 2016 assessment which reported 1,481 internship opportunities, this represents a slight reduction, although not statistically significant, in the proportion of businesses that offered internships (65.3% in 2016). Table 26. Number of internships created by sector

Sector Renewable Agroindustry Manufacturing IT Tourism Energy Mean Sum Mean Sum Mean Sum Mean Sum Mean Sum How many interns do you incorporate annually? (Men) 3.0 18 2.6 189 4.5 254 4.4 119 1.6 11 How many interns do you incorporate annually? 0.5 3 2.2 159 4.7 266 4.4 120 0.7 5 (Women) How many interns do you 3.5 21 4.8 348 9.1 520 8.9 239 2.3 16 incorporate annually? (Total) Of the businesses offering internships, half or 50% reported offering paid internships; four in every 10 or 40% offer unpaid internships, and one in every 10 or 10% offers per diem as compensation for internship work. The proportion of paid internships found in this assessment is similar to that reported in 2016. Across all businesses, 73.4% claim that they are willing to accept or continue accepting interns under the same terms they have been using.

The length of internships varies significantly by sector. In general terms, internships usually last between one and six months. However, in the Renewable Energy sector, internships may last for over a year.

Professional training

A total of 63.8% of the businesses surveyed mention that they provide some type of professional training to their employees, but there are statistically significant differences by both sector and company size. Sectors offe- ring more professional training to their existing employees are Renewable Energy (100%) and IT (75%). By size, a higher proportion of large businesses provide professional training (87.2%) compared with medium-sized (62.2%) and small-sized companies (58.6%).

33 Table 27. Incidence of professional training offered to employees by sector and business size

Offer Sector Company size professional Renewable Medium- Total Agroindustry Manufacturing IT Tourism Small Large training Energy sized Yes 63.8% 45.5% 59.2% 75% 54% 100% 58.6% 62.2% 87.2% No 36.2% 54.5% 40.8% 25% 46% 0% 41.4% 37.8% 12.8% Total 100% 100% 100% 100% 100% 100% 100% 100% 100%

The level of seniority required for employees to be entitled to receive technical training varies, but most busi- nesses (73%) train employees who have been working for less than a year.

80% 20% 0% 0% 0% 0.5% 0% 0% 0% 0%

In general, businesses provide training in the areas of customer service (21.6%), sales (11.4%), technical training (8.6%), English (8.1%), and teamwork (7.6%), among others to their employees. The type of training provided to employees varies significantly by sector. The following table lists the five most common types of training offered within each sector. Table 28. Training areas showing higher incidence by sector

Renewable Total Agroindustry Manufacturing IT Tourism Energy Customer Customer service Customer service Customer Customer Electricity service (21.6%) (20%) service (11.7%) service (26.1%) (28.6%) (44.4%) Machinery Technical training Sales Sales (11.4%) operation Sales (13%) English (28.6%) (20%) (22.2%) (10.4%) Technical training Technical English Finance English (20%) English (9.1%) (8.6%) training (10.4%) (11.1%) (14.3%)

Manufacturing Teamwork Teamwork Teamwork Administration English (8.1%) (20%) (6.5%) (8.7%) (11.1%) (14.3%)

Human Resou rces Manufacturing Leadership Finance Industrial Teamwork (7.6%) (20%) (6.5%) (7.2%) (7.4%) safety (14.3%)

34 Only 31.9% of businesses claim that they provide specific training to their younger employees. The difference by sectors is statistically significant. The Agroindustry sector does not provide any formal training to younger employees, while 14.3% of businesses in the Renewable Energy sector, 28.6% in Manufacturing, 34.8% in IT, and 37.8% in Tourism do.

Overall, three in every 10 businesses or 31% have established a formal alliance with at least one professional training center other than INSAFORP while 69% have not established alliances with training centers. Additiona- lly, the data shows significant differences only in the Agroindustry segment, a sector with no alliances with any professional training center. Small-sized companies report the fewest alliances with professional training centers (23.3%), with a statistically significant difference in relation to medium- (42.9%) and large-sized (43.9%) companies.

Table 29. Incidence of businesses that have established alliances with training centers (excluding INSAFORP) by sector and enterprise size

Professional Sector Enterprise size training Renewable other than Total Agroindustry Manufacturing IT Tourism Small Medium Large Energy INSAFORP Yes 30.8% 0% 28.6% 34.8% 37% 14.3% 23.3% 42.9% 43.9% No 69.2% 100% 71.4% 65.2% 63% 85.7% 76.7% 57.1% 56.1% Total 100% 100% 100% 100% 100% 100% 100% 100% 100%

Half of the businesses surveyed claim that more than 75% of their employees have access to professional training opportunities within the business.

0% 0% 40% 0% 20% 13% 0% 0% 0% 40% 63%

35 Below is a list of the most commonly-cited professional training institutions collaborating with the surveyed businesses. Table 30. Professional training institutions with higher incidence of working with businesses surveyed by sector and business size

Sector Enterprise size Institution Renewable Total Manufacturing IT Tourism Small Medium Large Energy Chamber of Commerce 20.2% 16.1% 26.3% 10% 25% 16.7% 23.5% 24%

ITCA 19.0% 25.8% 10.5% 20% 50% 16.7% 17.6% 24%

FEPADE 13.1% 16.1% 13.2% 0% 25% 11.9% 5.9% 20%

Universidad Don Bosco 11.9% 16.1% 7.9% 0% 50% 2.4% 0% 36% Asociación Salvadoreña 9.5% 19.4% 5.3% 0% 0% 2.4% 5.9% 24% Industrial (ASI) Universidad Centroamericana José 7.1% 9.7% 7.9% 0% 0% 7.1% 0% 12% Simeón Cañas (UCA) Universidad Católica de El 3.6% 0% 7.9% 0% 0% 4.8% 5.9% 0% Salvador (UNICAES) Universidad Matías 3.6% 3.2% 5.3% 0% 0% 2.4% 0% 8% Delgado Academia Europea 3.6% 3.2% 5.3% 0% 0% 2.4% 11.8% 0%

ADEN 3.6% 0% 7.9% 0% 0% 0.% 5.9% 8%

Out of all surveyed businesses, 82.7% actively use INSAFORP services. Minor differences were detected by business size: 100% of large- and medium-sized companies work with INSAFORP, while only 72% of small-sized companies use this service.

Table 31. Incidence of use of INSAFORP services by sector and enterprise size

Sector Enterprise size Renewable Total Agroindustry Manufacturing IT Tourism Energy Small Medium Large Yes 82.7% 80% 81.8% 87% 74.1% 85.7% 72.4% 100% 100%

No 17.3% 20% 18.2% 13% 25.9% 14.3% 27.6% 0% 0%

Total 100% 100% 100% 100% 100% 100% 100% 100% 100%

Approximately six in every 10 businesses, or 58.2% of the companies, claim that they are very satisfied with the services provided by INSAFORP, with 70% of Tourism businesses, 58.7% of Manufacturing businesses and 58.3% of IT businesses. However, 50% of Agroindustry businesses said they are neutral (neither satisfied nor unsatis- fied) and 16.7% of the Renewable Energy companies said they are somewhat unsatisfied with INSAFORP servi- ces, noting the need for more courses to respond to their sectors.

36 Table 32. Level of satisfaction with services provided by INSAFORP by sector and enterprise size

Sector Enterprise size Level of satisfaction INSAFORP Renewable Total Agroindustry Manufac- IT Tourism Small Medium Large turing Energy

Very 58.2% 25% 58.7% 58.3% 70% 33.3% 54.8% 60.7% 63.4% satisfied

Somewhat 28.8% 25% 31.7% 28.3% 15% 50% 31% 28.6% 24.4% satisfied

Neutral: neither 9.8% 50% 6.3% 11.7% 10% 0% 14.3% 3.6% 4.9% satisfied nor unsatisfied

Somewhat 1.3% 0% 1.6% 0% 0% 16.7% 0% 0% 4.9% unsatisfied

Very 2% 0% 1.6% 1.7% 5% 0% 0% 7.1% 2.4% unsatisfied

Total 100% 100% 100% 100% 100% 100% 100% 100% 100%

Employee retention plan

Of the businesses surveyed, 52.4% assert that they do not have an employee retention strategy or plan, revea- ling statistically significant differences by enterprise size and by municipality. Compared to other sectors, fewer companies in the Tourism sector have instituted employee retention plans (36%), followed by the Renewable Energy (42.9%), Manufacturing (45.4%), IT (55.4%), and Agroindustry (63.6%) sectors. In comparison to large firms, a lower proportion of small-sized businesses have a retention plan in place.

Table 33. Incidence of retention plans by sector and enterprise size

Sector Enterprise size Renewable Total Agroindustry Manufacturing IT Tourism Small Medium Large Energy Yes 47.6% 63.6% 45.4% 55.4% 36% 42.9% 42.4% 51.1% 66% No 52.4% 36.4% 54.6% 44.6% 64% 57.1% 57.6% 48.9% 34% Total 100% 100% 100% 100% 100% 100% 100% 100% 100%

In addition, fewer businesses in Santa Tecla, Colón, and Ciudad Delgado report having employee retention plans than businesses in other municipalities.

37 Table 34. Incidence of retention plans by municipality where businesses are located

Municipality

Santa Ciudad Zacatecolu Ciudad San Santa Ahuachapán Colón San Miguel Soyapango Mejicanos Tecla Arce ca Delgado Salvador Ana Yes 50% 30.8% 21.1% 83.3% 81.8% 65.5% 30% 46.1% 68.4% 47.1% 48.5%

No 50% 69.2% 78.9% 16.7% 18.2% 34.5% 70% 53.9% 31.6% 52.9% 51.5%

Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

VI. Qualitative Assessment Findings

Economic outlook of sectors

Respondents from all seven sectors included in the assessment mentioned that the country’s economic outlook is unfavorable and that it has an impact on their businesses. Although none of them mentioned that they have experienced a decrease in production or sales, they did express their difficulties in “staying afloat” or that “a stagnant economy” does not allow them to thrive. Sectors such as Manufacturing (plastics), IT, and Renewable Energy are the only ones claiming to be experiencing steady growth in recent years, because trends in their international markets offset the adverse local conditions.

Most respondents identified that the main obstacles to economic growth are the minimal government support to the private sector and to investment, and poor quality of the country’s education system, training that is not aligned with the needs of the labor market, bureaucracy and a changing legal environment, among others.

The next table summarizes the observations expressed by respondents.

38 Table 35. Economic outlook of sectors and obstacles they face SECTOR ECONOMIC OUTLOOK OBSTACLES -Dependence on international prices -Low growth of local/domestic “Every year we hear that the authorities say that consumption the agricultural sector is reactivated and that Agroindustry -Climate change record harvests are expected, but in the end, -Little government actual figures show the contrary.” support for the sector -Use of outdated equipment and technology -Lack of understanding “University education represents a weakness about the sector and its because it focuses purely on technical topics and areas of specialization IT not on project management topics… this keeps -Low wages in us up in the hierarchy at operational level and operational positions there is no career path in management levels.” -Lack of specialization and strategic thinking “The sector is growing. But in general, the -Lack of compliance with situation for us is very difficult because the government planning attitude in certain government institutions makes -Bureaucratic processes Renewable Energy foreign investors lose confidence in us, due to -Lack of cooperation bureaucracy and the lack of follow-up on plans from government created by the same government.” entities “At a local level, some business people are -Low level of investment disappointed. However, this is a very dynamic in the country sector that has been investing every year, -Lack of recycling Manufacturing because the world of plastics is a globalized culture (Plastics) world, and currently there are no borders. We compete abroad, and others come to compete with us.” -Emergence of “There has been stagnation. Hotels have videoconference corporate customers and this flow has platforms that have decreased, probably due to the use of Commerce/Tourism reduced the need for videoconferences … and the government is not (Hotels) business travel doing enough to promote tourism in the -Very little tourism country… to survive, we have resorted to other promotion activities such as food and beverages.”

-Inefficient formal basic education and high Civil Society school Organizations “We believe that soft skills and competencies -Lack of teacher training (Related to job are becoming more common among businesses -Lack of community promotion activities job requirements… but schools and universities programs focused on and access to are very inefficient in developing them.” skill training education) -Lack of focus on competencies

39 As shown in the table, the most common obstacles are: • The need for greater government support • Lack of specialized training at vocational and technical levels to meet specific private sector needs • Lack of certain life skills • Inefficient secondary education or high school education system

However, interviewees pointed out that there are opportunities to strengthen the development of El Salvador’s workforce, particularly through increased collaboration between the government and the private sector as well as by improving the quality of education, which can positively impact the country’s economic growth.

“If the government, the international cooperation (agencies) and the private sector could work together, we are confident that the country can make progress. But (it) all depends on reaching agreements.”

Foreign investment, as well as maintaining or even increasing the level of exports, are also factors that could create growth opportunities for the various sectors.

“If public policies that foster investment and exports are implemented, the economy could become more dynamic… Businesses need greater support to diversify their export production.”

High-growth sectors

Several interviewees stated that, in general, various sectors are facing a stagnant economy.

“My general perception, because we are members of several trade associations, is that almost everyone is in the same situation. No one is showing dynamic growth. Everyone feels stagnant, as if being anchored with no ability to grow as they should.”

Sectors are interconnected and, thus, interdependent.

“Industry and trade are the two engines in any economy, and services and commerce depend on these two sectors. For example, if the industrial sector does not produce any goods, there is nothing to trade.”

Despite the comments above, representatives of several subsectors shared their expectations for high levels of growth in entry-level positions, such as: a) Textiles: production line operators b) Call Centers: customer service representatives c) Plastics: production line operators d) Pharmaceutical: production line operations e) Shoes: manufacturing f) Banking: tellers g) IT: software developers, computer programmers

Some of these sectors share the characteristic of being attractive or necessary for investing, not limited to the local market, and that have reached a certain level of specialization regarding human resources. Others have thrived due to technological advances.

40 Sectors such as textiles, plastics and banking have been very dynamic for several years. However, others, such as agriculture and the metalwork industry, have grown in the past but the rate of growth was not sustainable over time.

Projections for the target sectors are expected to remain the same over the coming year, but others, such as food and packaging, are expected to join the growth list.

“A segment showing high potential is food, because the world market is demanding new goods and we have the ability to adapt and develop them because the technology required is not too expensive… furthermore, we have a nostalgic market in the United States.”

Creation of job opportunities for youth

Several of the surveyed sectors lack statistics to allow them to measure job creation and particularly opportuni- ties for youth, but consider that both are low in general. Even sectors that have experienced growth, such as Renewable Energy, present this phenomenon.

The youth population faces a major difficulty in finding a job and in many instances, there is great competition between youth and applicants from other age groups for the positions available.

Even though most interviewees report low levels of job creation in their sectors, the opposite is seen within IT, which includes call centers, which have become the source of numerous jobs for Salvadorans. Nonetheless, this sector is often criticized by civil society organizations for limiting professional development of youth employees.

“Call centers do not foster youth development… the growth seen is that they go from one call center to another offering a few more dollars, and sometimes only for a bonus or a Play Station.”

As part of the Manufacturing sector, plastics is outside the trend, creating close to 1,500 jobs each year to meet the rapidly-growing demands for labor. However, the rest of the sectors reported that they are not able to offer a significant number of job opportunities, either because of their low levels of growth or due to factors such as turnover rates or difficulties in finding local candidates with specialized skills.

41 Table 36. Job creation by sector and challenges they face related to employability

SECTOR JOB CREATION CHALLENGES The sector has become very specialized and positions include high “Stagnated. There isn’t any. I would say that job levels of responsibility. The sector opportunities arise when someone dies or is tends to hire older applicants, even in Agroindustry dismissed. Nothing more, because turnover in the area of operations, assuming they this sector is very low.” have experience, emotional maturity and resilience. There are not many entry-level positions for youth. “There are many job offers in areas such as call The call center sector does not centers, but these positions do not offer youth provide youth professional growth development opportunities … There is also opportunities. IT demand in IT, but it is hard to find certain very Regarding IT, universities and technical specialized profiles. Sometimes people must be programs are not achieving the level of brought from abroad.” specialization required. Being a relatively new sector, there is “Just imagine that I need 3 engineers right now, still a lot of bureaucratic processes, but then I only hire 1 and I wait, because I don’t and there is a lack of specialized talent. Renewable know if maybe a project I had planned for this Businesses in this sector must fund Energy year, with government filings and bureaucracy, I between 6 and 9 months of training end up not implementing it until after two years, before someone can undertake all and by hiring people I impact my profitability.” related job duties. Industry diversification, as well as foreign investment, and entering “I don’t have all the details, but I believe that international markets have made it Manufacturing the industry is creating around fifteen hundred necessary to open new positions, (Plastics) jobs annually.” which are filled mostly thanks to training provided by FUNDEPLAST, the plastics sector foundation. Most positions are temporary and, “We do create jobs, but since the diversification thus, turnover is high. The same is of services has taken us to make inroads in the Commerce/Tourism with true investment in training. area of events, most of the jobs created are temporary.” “Here there are 80,000 kids graduating from A wide gap has been detected Civil Society high school, and of those 20,000 go on to the between the size of the existing Organizations university…but the country is creating only demand and the supply of jobs in the (Related to job 2,000-3,000 jobs annually… It is a critical country. promotion activities) situation because youngsters end up in gangs or go to the United States.” “There are few job opportunities, but, yes, there Educational institutions and training are. What happens is that our youth lack centers are facing the need to provide Education training to be able to apply for such better training to students so youth (Related to job opportunities… because they do not meet can fill the profile required by the promotion activities) requirements such as English or experience. We businesses. are working to provide youth with better training, so they can seize such opportunities.” These are some of the factors that are having an impact on youth job opportunities: -Few positions available and these are not exclusive for the youth segment -Positions that require experience or specialization -Inefficiencies in the technical and university education available -Lack of certain life skills 42 Entry-level positions One might assume that there are more entry-level positions for youth in the area of operations since only basic knowledge and minimum experience are required. However, interviewees contradicted this perception, since in terms of numbers there are more positions opened in operations, specialization and experience are increasingly becoming indispensable. Even adults are being hired over youth due to the perception that by having family obli- gations they will be more committed to the work, responsible, and less likely to leave the job. “For factory workers, safety is one of the most important aspects. There is no room for error because we are not only talking about loss of products, but of the lives of people inside the factory. That is why we cannot hire people without experience and without a well-developed sense of responsibility.” The following is a list of entry-level positions available to youth by sector. Table 16. Entry-level positions available to youth Job opportunities for youth evidently include both basic entry-level positions as well as specialized positions. However, seldom are positions aimed exclusively to youth.

Position requirements

Trade associations were emphatic on the fact that they lack specific information regarding profiles required by their members, suggesting that individual businesses should be contacted for more detailed information. Asso- ciations that have their own organizations and/or foundations or training programs were able to provide more precise information about these profiles.

Regarding professional training, operational positions often require a minimum of high school completion or technical certificates, in addition to work experience. In addition, several sectors require applicants to be over the age of 25, which is associated with having life skills such as responsibility, self-control, and commitment.

Regarding profile differences related to gender, the common remark was that there is no difference, but that the nature of the position or its perception typically makes some positions more inclined towards one of the two genders.

For management or specialized positions, a university degree is the most common educational requirement and, sometimes, even a graduate or specialized degree. For these positions, higher levels of experience and addi- tional knowledge are required, including knowledge and domain of the English language.

The frequently-demanded life skills include responsibility, teamwork, interpersonal communication, conflict resolution, creativity, adaptability, punctuality, trustworthiness, and ability to learn new skills, in addition to ethi- cal behavior and values. Table 38. Technical competencies and soft skills required

44 Quality of education

As mentioned previously, respondents frequently cited the poor quality of education in El Salvador as one of the elements that limit youth access to certain job opportunities; and beyond this limitation, the level of educa- tion of the workforce is recognized as one of the factors influencing sector dynamics.

“The level of employee training is a factor that affects industry growth… for example, the more trained people they have, the higher levels of production businesses achieve.”

Unfortunately, the public education system has limitations that go from infrastructure, up to the teachers’ ability to transfer knowledge. This applies not only at the elementary school level, but more strongly at the middle and high school levels. Taking into consideration these limitations, some civil society organizations have developed programs to strengthen soft skills to complement high school education; while universities, in addition to the above, provide their new students with remedial classes covering mathematics, reading comprehension, writing, and grammar, which are basic competencies they should already possess.

Basic education inefficiencies also limit youth’s access to higher education and, in fact, certain organizations that grant university scholarships to low-income youth, sadly state that sometimes it is difficult for them to find students that meet scholarship requirements due to the lack of basic competencies.

45 In terms of basic education, interviewees mainly propose a strategy to further train teachers and school princi- pals so they can spread knowledge. In the same way, some foundations urge the government to stop computing averages in assessments such as PAES to motivate students to obtain better results and to improve the quality of applicants that universities receive.

Regarding technical education, there is a need to establish not only more technical centers but also more specialized technical programs that are of high quality and respond to employers’ current demands.

“Where I believe that there is a huge limitation is in the technical field, and with technical programs the kids not only are well trained, but they also find jobs quickly. However, the supply of technical education is limited. Besides the Salesians, ITCA and MEGATEC, there are no other institutions.”

It is recommended that universities and other educational institutions work hand in hand with the private sector to create new degree programs and update the curricula, considering the current needs, as well as future trends. In this respect, representatives of universities said they currently have programs related to this and that they are designing new degree programs to be available shortly to students.

Despite these efforts, certain trade associations have chosen to develop their own specialized training centers, which has enabled them to develop skilled candidates that are hired by their member businesses. Such is the case of ASIPLASTIC with its FUNDEPLAST foundation, which currently offers several technical careers in plas- tics manufacturing.

Another effort worth mentioning in higher education is the work being done by university job boards with USAID support, developing centers with functions beyond intermediating between the student body and priva- te sector offers. These centers now offer students an internship program starting in the second year that gives them the chance to gain experience required by employers, additionally offering students in the last years of school job interview advice and training, helping them in preparing resumes and even giving feedback on posi- tions to which they have unsuccessfully applied.

“At the university we are promoting two types of professional practical experiences. The first one is mandatory as gradua- tion requirement… these are 100 to 150 internship hours. The second one is voluntary and can be completed during the second year. It can last at least 6 months and up to 9 months or one year. The purpose is for students to gain work experience businesses require in job profiles.”

With respect to professional training, INSAFORP received mixed reviews. A few respondents mentioned that they consider it a support for their staff training efforts by offering specialized training courses. However, the opinion of a little over half of the key stakeholders is that INSAFORP offers general courses with little speciali- zation or relevance for professional development and the quality of trainers is not controlled.

“Currently, the training provided by INSAFORP has become a business and a way of life. They have lots of people unable to teach competencies… there are people that lose their jobs trained in courses provided through INSAFORP.”

Due to the above, key stakeholders suggested INSAFORP courses should be better aligned with the current needs of the private sector. In addition, INSAFORP should provide closer oversight of authorized training centers to ensure they meet the established standards and requirements.

46 Hiring difficulties

Hiring difficulties is another topic about which certain interviewees from trade associations mentioned that they lack specific information, because the hiring processes are managed by each business with no intervention from associations.

What they did assert is that it is difficult to find candidates that meet all of the position requirements because they may lack: - Necessary technical competencies - Life skills required - Language skills - Previous work experience - Specialization

Of all the above, specialization is the most difficult factor, followed by technical competencies and soft skills. To overcome these difficulties, businesses resort to in-house training, which is not profitable because they need to invest resources that could vary from a couple of months up to almost one year. This is why some trade associa- tions have chosen to establish their own training centers.

“There are individuals who want to work, but they do not meet the requirements and not every business takes the time to train an individual for 6 to 8 months. The learning curve is difficult and the first months you are almost giving wages away to bring them to the level where they can perform on their own.”

Medium- to long-term employability

All sectors wish to experience medium and long-term growth. However, there are several factors that impact the possibility of this happening. The most important ones relate to government policies, investment promotion, and sectoral support, which are outside of the control of businesses. Internal factors relate to productivity and their employees’ productive capacity, towards which they are making efforts.

However, due to the importance of external factors, most sectors prefer to be conservative and mention a growth rate that is in line with the growth rate of the economy, which is currently projected at 2% to 3% annua- lly.

“Employment is tied to economic growth. If we are stagnant, we could not think of generating more jobs… it depends on the ability of the next administration to create a more investment-friendly environment.”

Future job possibilities for youth will be impacted by such economic growth. However, if the gap between busi- ness requirements and desired levels of specialization, soft skills, and experience of youth applicants can be reduced, their employability would be more promising.

47 VII. Conclusions

Any assessment of labor market demand reflects a specific point in time and the dynamics and constraints present at that point. The results of this labor market assessment indicate that low growth rates and challenging security issues persist in El Salvador, limiting the demand for young workers.

The employment situation in El Salvador continues to be difficult, particularly for youth. The country’s econo- mic growth continues to be low, and job growth is therefore slow. Altogether, surveyed businesses created a total of 26,323 jobs in 2017, with youth under age 29 filling 3,423 – or one in eight – of the jobs. The supply of labor continues to greatly exceed the demands of the formal labor market, and employers seek more experien- ce than most youth have. The qualitative phase of the research depicts a clear situation facing the country: an excess supply of workers and a job demand widely exceeded by such supply.

This excess supply has a direct impact on employment opportunities for youth since businesses can hire older candidates for entry-level positions who have had the chance to gain previous work experience. Additionally, an employer’s perception about youth’s lack of responsibility and/or lack of commitment towards work is another strong reason for businesses preferring to hire older individuals. In summary, entry-level job opportunities that could be directed to youth are currently positions for which they must compete against older candidates, a competition that as of today, youth are losing.

Sectors with higher levels of job creation, such as Manufacturing, IT, and Renewable Energy, present an opportu- nity for youth employment, since there is a trend both in supply and demand towards youth. However, such positions are not created exclusively for this age segment. Even in other sectors, a “non-exclusive” element was found as well as a preference for people older than 25, as employers correlate age with soft skills development, such as responsibility, ethical behavior, and low turnover.

Although the baseline sample is not fully equivalent to the 2018 sample1, the data appears to indicate that youth job opportunities are decreasing, particularly in large businesses. On average, in 2015, each of the surveyed busi- nesses hired 46 youth to fill positions in their firms, compared to 11 in 2017.

Based on the survey results, the largest proportion of jobs for youth continues to be in Manufacturing, but other sectors may be growing faster. Contrary to the trend towards creating few youth jobs reported by the Association of Agroindustry, the survey data showed that Agroindustry businesses on average created the largest number of youth jobs per company. The IT sector is interested in creating jobs for youth. Although it is a “young sector” comprised of the smallest number of businesses, the Renewable Energy sector stands out with a high average of jobs created for youth under 29 years old. This represents a shift from the 2016 assessment findings, in which Manufacturing and other sectors offered more youth opportunities.

Most of the new jobs for youth will be located in the greater San Salvador metro area, concentrating economic opportunities. Some job creation also occurred in the interior of the country, in cities like Santa Ana and San Miguel, which are the second and third largest cities in the country. These three municipalities account for more than 75% of the jobs generated in 2017.

1 Differences in business characteristics in the assessments could have an impact on the differences found and reported, but it is also true that the contexts and variables influencing the businesses remain rather similar for all types of businesses, at least throughout the last three years.

48 Significant difficulties persist for most firms in the recruitment of specialized personnel, similar to the findings in the baseline assessment. This gives relevance to creating new technical and specialized university and techni- cal programs.

Another great challenge for workforce development service providers is the ability to respond to businesses’ demand for applicants to meet specific education and training requirements, notwithstanding the sector in which they operate. Beyond the specific requirements from each business, the reality is that the minimum level of education required for more than half of the positions is secondary school education, either vocational high school or general high school. It would be a mistake to believe that with that level of education, businesses should not have any problem in finding employees that meet their requirements, but this is far from reality. Although minimum education levels apparently may not be a barrier for youth, the poor development of basic skills among many high school graduates encourages firms to increase their requirements (education and/or experience) to compensate for that. In addition, businesses are demanding a suite of life skills, such as teamwork, responsibility, communication, cooperation, reliability, proactivity among many other skills; skills that mainly medium-sized and large businesses do not find among youth who are currently entering the job market. The challenge for workforce development service providers is to respond to businesses’ most important need: training youth with the skills and competencies demanded by employers.

Although businesses have identified a need for better-trained employees, specifically young employees, only three in every 10 businesses have established alliances with training centers to train their employees. The small proportion of alliances with training centers is due to the fact that professional training curricula and course offerings are not aligned with the needs of employers. A proposal that matches the needs of businesses with training programs will be more attractive.

Like jobs, internship opportunities appear to be decreasing. Although 73% of surveyed employers indicate that they would be willing to host interns, only 58% report that they actually had interns. In addition, some busines- ses, particularly those in the Renewable Energy sector, report long internship periods, which is problematic if their internships are unpaid, as work could become exploitative or require independent financial resources that vulnerable youth do not have. VIII. Recommendations Many of the strategies and approaches USAID Bridges to Employment has adopted remain critical to building the capacity of the youth workforce. The discussion below identifies those and potential opportunities that may help address the changing labor market environment in the short term. Most businesses are located in the municipality of San Salvador and surrounding areas or in the larger cities in the interior of the country. Therefore, most job opportunities are concentrated within the larger San Salvador area and regional cities like Santa Ana and San Miguel. Promoting labor intermediation for youth in these regions will result in more job placements. In more rural areas, entrepreneurship (where clear opportunities have been identified) and approaches to moving operations up the (primarily agriculture/agroindus- try) value chain may also be important strategies for creating job opportunities that do not requir commuting to an urban area.

In terms of sectors, Manufacturing (and particularly plastics) will generate the largest supply of jobs in the short term. However, focusing on the total number of jobs to be crea- ted by one sector could be a strategic error. Although Manufacturing created the largest

49 number of new youth jobs in 2017, the average number of positions created by business is not the highest, and it may be more affected than other sectors by the reduction in youth-filled positions. Although employment opportunities seem to be more abundant in Agroindustry and Renewable Energy (which was not included in the baseline), given the apparent overall tightening of demand, diversification across sectors may be necessary, and continued focus on those jobs or services that are critical across industries (such as IT administration) may increase efficiency in programming and placement of trained youth.

Collaboration between the private sector, educational institutions, and foundations is important to solve educational shortcomings, both at basic and higher levels, where promoting technical programs is seen as an opportunity to provide youth with specialized knowledge and more immediate access to employment. Dialogue among employers, edu- cation and training providers, and relevant government agencies should be promoted.

The inclusion of life skills in youth technical education is key. Technical training is important, but beyond academic education, youth need to demonstrate those life skills throughout the application and interview processes. Business partners may be asked what metrics or tests they use to assess life skills in the application process so wraparound services for youth can help applicants demonstrate their acquisition of those skills, helping them become more competitive applicants.

For businesses, applicants’ experience seems to be of increasing importance in personnel selection. In this respect, an emphasis should be placed on the fact that training provided to young people entails a high dosage of hands-on learning and structured experiential opportunities.

The gap between those businesses that report they are willing to host interns and those that actually do may provide an opportunity to partner with more organizations to create internship and mentoring opportunities for participants. The current partner base could be expanded, and this would assist with addressing the need for experience as well.

There is a need to continue working on changing perceptions of employers regarding the hiring of vulnerable youth. Youth employment opportunities are limited if the perception persists that hiring older applicants is more profitable because of the experience and level of responsibility that older workers bring to the job. Most businesses are data driven, and drawing on the statistics for the first cohorts of responsible youth participants may be helpful in shifting attitudes. In addition, word of mouth in the business sector may be very helpful. Consider some award or recognition program for businesses that have recruited youth participants who have completed their training.

The sustainability strategy with partners and businesses is key. In that respect, the alliances between businesses and training centers will assure that youth trained are placed in jobs and that this trend will continue over time.

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