Skills affect individual and firm productivity as well as countries’ prospects for sustained and faster economic growth. Yet evidence exists that many employers are concerned about skills constraints (see figure below); and that in many countries, unemployment and underemployment among educated youth are a problem.
Policy making in the skills arena is complex, in part because individuals acquire skills throughout life via multiple channels: from their families, through schools and vocational training programs; and eventually through on–the-job training, experience and continuing education and training. The World Bank’s 2010 Skills toward Employment and Productivity (STEP) framework  recognizes the cumulative nature of skills acquisition and the impact of labor market processes on the relation between skills and employment and productivity. In order to deepen its work on skills policies based on more precise data, the Bank recently launched a new multi-country STEP Skills Measurement Study. This work benefits from collaboration with the OECD’s Programme for the International Assessment of Adult Competencies (PIAAC ).
This ABCDE session presents three papers that illustrate the complexity of policy issues in the skills arena. Almeida and Aterido (2010) analyses private firms’ investments in on-the-job training, based on data from Enterprise Surveys from 99 developing countries. Smaller firms are less likely than larger firms to invest in training their workers—a robust statistical finding across and within countries. But no evidence exists that market imperfections (e.g., poor access to finance or to information and uncertain returns) are responsible for the differences by firm size. A more important explanation is that smaller firms expect lower returns to their investment. These findings caution against blind inclusion of on-the-job training in developing pro-SME policies.
The second presentation reports on a randomized evaluation of Colombia’s Jóvenes en Acción program for disadvantaged youth. Attanasio, Kugler and Meghir (2008) show that the program’s graduates were more likely to have a formal sector job and to earn more. Women who received training earned 18% more than women who did not receive training; the corresponding gap for men was 8%. Also interesting is that the on-the-job component is a key factor in boosting the returns to training. The evaluation concludes that the program generates a large net gain, especially for women.
The third presentation provides a practitioner’s perspective on research to inform the design of skills policies. Willmott (2011) traces Singapore’s experience in moving to evidence-based policy and practice in continuing education and training, in order to support the country’s strategy for knowledge-and innovation-driven economic growth. A key challenge is to ensure that all workers, particularly the low-skilled, are able to upgrade their skills and gain access to better-paying jobs as part of a strategy for shared growth.