Youth unemployment and vocational training - World Bank

1 BACKGROUND PAPER FOR THE World DEVELOPMENT REPORT 2013 Youth unemployment and vocational training Costanza Biavaschi Werner Eichhorst Corrado Giulietti Michael J. Kendzia Alexander Muravyev Janneke Pieters Nur a Rodr guez-Planas Ricarda Schmidl Klaus F. Zimmermann Abstract This report focuses on the determinants of the labor market situation of young people in devel-oped countries and the developing World , with a special emphasis on the role of vocational train-ing and education policies. We highlight the role of demographic factors, economic growth and labor market institutions in explaining young people s transition into work. We then assess dif-ferences in the setup and functioning of the vocational education and training policies in major World regions, as an important driver of differential labor market situation of Youth .

2 Based on our analysis we argue in favor of vocational education and training systems combining work experience and general education and give some policy recommendations regarding the imple-mentation of education and training systems adapted to a country s economic and institutional context. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the World Development Report 2013 team, the World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. - i - EXECUTIVE SUMMARY Explaining differences in youths transition into employment needs to take into account, first, demographic developments and economic growth, and second, the interplay between these dy-namics and long-standing institutional patterns, in particular regulatory provisions influencing the supply of flexible or permanent jobs as well as education and training policies.

3 Both general education at schools as well as different forms of vocational education and training , either at schools or on the job or combining both elements in a dual apprenticeship are necessary pre-conditions for the employability and productivity of young people. vocational education and training is a crucial element as it can link young people s competences with employers needs. Bringing vocational training closer to the needs of dynamically changing and evolving labor markets and economies can help young people move into more productive and sustainable jobs. Taking the perspective of young people, a good job is a job that initiates a long-term invest-ment in and attachment to the labor market.

4 A job combined with formal training is by definition a good job. This paper is about the creation of good jobs for the young. The study argues in favor of promoting vocational education and training tailored to labor market needs, but taking into account peculiar starting conditions found in a given national or local con-text. While good education and training can contribute to economic productivity and social co-hesion, vocational education and on-the-job- training with young workers and companies also need to involve governments, social partners or other societal actors to be stable and effective. Given major differences in the institutional setup in different parts of the World the paper dis-cusses feasible options for implementing vocational training under largely differing economic and institutional conditions.

5 In the developmental context it is also crucial to find solutions how society can partner on vocational training with the informal sector. Challenges, but also capacities to act vary across countries and World region, depending on eco-nomic, institutional and societal context. Yet, there are some general points to be made which are relevant for most medium- and low-income countries. Promoting general education In many low- and medium income countries, policies to ensure primary and secondary school attendance, avoid early school drop-outs and leaving school at low levels of qualification are needed. Policy makers should aim at providing basic skills to every young person by compul-sory participation in support classes and intensified personal support.

6 This implies stronger em-phasis on individualized, tailored support to young people at risk, educational guidance and job search assistance (also considering incentives to parents such as conditional cash transfers). The increase of the statutory schooling age might be an avenue to increase the overall educational attainment of Youth , up to upper the secondary schooling level. To minimize drop-out rates, this should be done taking into account differences in motivation, ability and opportunity costs of schooling. Tracking systems, based on pupil performance and preferences might help reduce the number of drop-outs. However, the permeability and interconnectedness of tracks is crucial to prevent the emergence of low and high quality tracks.

7 - ii - Stimulate the creation of formal and sustainable jobs In countries where high shares of informal employment form a major barrier to upward mobility and economic progress policies should be designed to create more enterprises in the formal sec-tor which offer formal jobs. This can be addressed by economic policy reforms such as the ab-olition of bureaucratic business registration procedures, tax reforms, stimulating investment in the private sector and creation of formal companies start-up support. In countries with a large segment of fixed-term contracts with limited access to training and promotion to more stable jobs, overcoming the regulatory divide between permanent and temporary jobs is the major priority.

8 This can best be achieved by creating a flexible system of employment protection eas-ing the barriers between fixed-term and permanent jobs. Modernize vocational schooling Many countries should strengthen the vocational part of their educational schooling system and bring existing vocational education and training systems closer to the current needs of the labor market so that young people can experience a smoother transition to jobs. In particular, voca-tional education provided in the framework of secondary schooling ( vocational schools or voca-tional tracks) should be modernized and complemented with phases of practical work expe-rience, via internships or passing the final year with an employer.

9 Employers should also be consulted regarding the design of vocational schooling curricula. This requires a systematic coordination with networks or associations of employers. Furthermore, in order to avoid a nega-tive perception of vocational education as a dead-end option, transition to further education, in-cluding tertiary education, should be facilitated. Finally, in some countries reducing vocational education fees can help raise enrollment. Bring academic education closer to the private sector In countries with high shares of university graduates with major difficulties in finding adequate jobs a major option is to make academic training more labor market-oriented, incorporating in-ternships with employers into academic curricula so that some experience with current work practices in the private sector can be acquired.

10 Governments responsible for funding academic education can require public universities to modify academic curricula accordingly. Starting from regional or sectoral clusters As can be seen from many examples in the developing World even under adverse conditions, some elements of (dual) vocational training can be implemented and with sufficient support and interest from governments and employers regional or sectoral training clusters can be estab-lished. Most countries could therefore implement feasible or lighter forms of dual vocational training with limited institutional requirements. Starting points could be existing sectoral or re-gional clusters of firms with a shared interest in a specifically skilled labor force in particularly relevant occupations, larger (also foreign-owned) firms in modern sectors or sectoral training schemes run by employer associations.