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Home arrow Communication arrow Labor Intermediation Services in Developing Economies: Adapting Employment Services for a Global Age

Type 2: Services and Programs to Support Employment

Training and Other Active Labor Market Programs (Type 2)

For good reason, the most sought-after and typical service linked with a core employment service is training. In today’s global labor market, employers are expressing greater concern worldwide about the lack of both technical and life skills, the latter also called “soft” or life skills with technical skills being “hard” skills. As an active labor market policy, good design, linkage to employers, and on-the-job “on site” training are known to improve what can be the modest results of training. From impact evaluations and study, we know that many training programs can cost a lot and have little to no impact; even well-designed training has been shown to have its impact principally in the medium term.3 But the skills and basic education deficits are much greater for many more people in developing countries and there is rightfully an emphasis on experimentation with training models for different developing country contexts that get better results. Many argue, with evidence, that good training may be more effective in developing countries if a skills gap is a particularly binding constraint on getting hired.4

National public and public-private intermediation services are playing a key role in this experimentation either in managing such training, providing incentives for firms (e.g. subsidies to trainees), linking trainees with firms, or creating referral systems that demonstrate which training programs result in jobs at the end. In whatever country context, research is clear that training on the job, or led, designed and operated by firms gets the best results.5

Particularly in developing countries where there is such poor articulation of skill needs combined with poor schooling, labor intermediation services can be seen as a key channel to bring training closer to labor market demand. They are best suited to work with firms on “intermediation plus”-type training - that is, short-term training whose objective is job placement. This is the model pursued by most public employment services in Latin America and the Caribbean, but the Middle East emphasizes classroom-based training without much monitoring and evaluation of placement results as found in Lebanon, Syria, Egypt and Jordan.6 Turkey’s public employment agency (known by its initials ISKUR) introduced job and vocational counselors together with expanding the coverage and quality of vocational training.7 In Bolivia, the public employment service places young people in firms for up to three months of training (paying them a transport and living subsidy) and then measures and monitors how many get hired either in the same or another firm. Turkey jump-started an expansion of what they termed vocational training (three months of skills training) 8 growing from 30,000 traineeships in 2008 to 464,000 in 2012 to accompany labor market reforms. ISKUR managed some of this training directly; other traineeships were contracted out to private providers. With World Bank support, Turkey conducted a comprehensive impact evaluation of its large program. It was the first evaluation for a developing country which included looking three years later at labor market impacts. The evaluation found significant impact on formal employment over the first year, but that impact unfortunately dissipated over the three years. They did find that the training had stronger impacts when delivered by private providers, but even private providers struggled to demonstrate the impact of such training on labor market outcomes.9

“Intermediation plus”-type training for developing countries is for those closest to job ready. Even here, the development field is just beginning to explore whether other modifications of instruments, such as very short work orientation leading to job placement (less than a month), job shadowing, work/study, and mentoring, can be even less costly and potentially as effective for job placement as 3-6 month training programs. In South Africa, the International Youth Foundation is working with young people on “learningships.” In Riviera Maya, Mexico, the local Hotel Association, working with a local vocational-technical institution, developed a range of tools and new career-track curriculums to begin to shift to greater hiring of upper secondary students when this applicant pool had previously been considered not job ready (Box 5.1). Any of these “intermediation plus” instruments requires a good assessment of which candidates need such short-term training or work orientation, comprising largely basic work skills orientation, to facilitate placement, and which job seekers need far more sustained interventions.

While training is the best known active labor market policy instrument, there are a few others which can and have been managed by labor intermediation services. Remember active labor market policies are incentives to enable workers to actively insert themselves into or stay in a job. The two other principal active instruments employed in developing countries are wage subsidies and temporary employment. Wage subsidies partially subsidize a worker’s wage as an incentive for an employer to hire someone they might not have normally hired (for example, a person with disabilities, someone with a criminal record, or long-term unemployed) or to keep a person from being laid off, usually at a time of economic crisis. Wage subsidies have been shown to be effective in some contexts. While training is typically the predominant active labor market program, wage subsidies are utilized more as employment incentives in Middle Eastern and North African countries for young entrants - for example, in Jordan, Morocco and Tunisia.10 They are used to facilitate recruitment of targeted populations who might otherwise be overlooked. Temporary employment, short-term jobs or community jobs, typically at a minimum salary for one to three months, actually have a poor record for helping someone get an actual job later.11 They are more appropriate as income support in times of crisis, as used during financial crises in East Asia12 and in Haiti following the 2010 earthquake.

There are many other types of training designed to address greater skills deficits, requiring longer-term interventions; also included should be the reform of vocational-technical high schools which around the developing world constitute a glaring deficit for preparing the future workforce. Apprenticeships of one to two years have had great success in countries like Germany and Austria, but how to adapt these, and with which sectors or private firms in more challenging developing country markets is still being explored. In building cost-effective training services in Stage 2, this book argues for emphasis first on the type of training for which labor intermediation services are best suited. This requires direct relationships with the private sector (or informal workplaces), strict monitoring and evaluation, and continual experimentation with instruments to keep the programs/ incentives focused on the impact on job placement. Special consideration and different programs are needed for populations facing more complex and multiple barriers to employment (see next section).

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