The Private Sector and Youth Skills and Employment Programs
Getting youth into productive employment is an urgent policy issue for countries around the world. A successful transition to the labor force is essential for young people to be assured of success in life, but many young people encounter significant obstacles to this transition. Youth are three times more likely than adults to be unemployed; worldwide, almost 73 million youth are looking for work. In the wake of the financial crisis at the end of the last decade, the share of youth neither participating in the labor force nor enrolled in school has been increasing. In some regions, slow economic growth hampers the ability of the economy to absorb growing numbers of labor force entrants, especially in formal sector jobs. In many countries, serious shortcomings with regard to necessary skills for the labor market have been identified as a cause for high and persistent youth unemployment.
Many governments in low- and middle-income countries are actively engaged in policies to help youth attain the skills they need to do well in work and in life, as well as to find suitable employment. The range of policies is wide and includes skills training, employment intermediation services to place workers with firms, self-employment promotion, and subsidies to firms to hire youth, among others. The record of success for such efforts in low- and middle-income countries is mixed (Betcherman et al. 2007, 2004)—as it is in high-income countries—and efforts to understand this record and improve program efficacy continue.
Increasingly, it has come to be recognized that private sector firms and employers have a vital role to play in developing and implementing these programs and in planning national strategies for skills development. There are several reasons for this. Partnerships with firms can inject resources beyond what strapped governments can muster for these programs, and private providers of services like training might be more efficient and responsive to the needs of the labor market. The most important factor, however, is the realization that only with active engagement of employers can the development of skills, both in schools and training programs, be aligned with actual requirements in the labor market. In many countries, the effectiveness of technical vocational education and training (TVET) systems has suffered by being heavily driven by the supply side, with curricula and standards developed without substantial input from employers, hence without appropriate incorporation of the needs of the labor market (Dunbar 2013).
The private sector can be—and has been—involved in multiple ways to promote youth employment and skills, including but not limited to:
- Partnering in initiatives to train youth by providing funding, developing course content, contributing to teaching, and providing on-the-job experience to trainees
- Funding entrepreneurship promotion programs, and supplying credit, grants, and technical assistance to young entrepreneurs
- Engaging in high-level planning for training and employment strategies with government and other stakeholders
- Supplying training services under competitive contracting with the public sector or with employers
- Developing inclusive value chains in agriculture and other sectors involving young entrepreneurs
The involvement of the private sector in youth skills development and employment is a complex issue, not just because the modalities of this involvement are diverse, but also because the nature of the firms and their motivations vary significantly. Multinational corporations operating in low- and middle-income countries might be motivated by direct productivity or profit objectives—to secure a skilled workforce, or reliable suppliers—but also, or even primarily, by corporate social responsibility (CSR) factors. In contrast, domestic firms may be more focused on ensuring an adequately trained workforce. Firms that supply training or employment services will be driven by profit considerations when entering these markets and deciding what services to offer and to whom.
The purpose of this paper is threefold: (1) to provide a comprehensive look at the way the private sector is involved in youth skills and employment in low- and middle-income countries, considering the broad range of program types and firm types; (2) to present and interpret the available evidence of the effectiveness of this involvement; and (3) to understand where the private sector has been most effective at promoting young people’s labor market success, and what could be done to enhance the role of the private sector to achieve this objective. In attempting to understand firms’ engagement and effectiveness, we draw on a basic economic framework that considers this behavior in light of factors such as costs, perceived returns, information, and externalities.
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