Technical education and professional training in LAC: the challenge of productivity

1. Technical education and professional training in
LAC: the challenge of productivity
CAF and Inter-American Dialogue
Washington DC – January 28, 2015
Ángel Melguizo
Head, Latin American and Caribbean Unit
OECD Development Centre

2. Perspectivas económicas de América Latina
1 Macroeconomic outlook: the productivity challenge
Shifting wealth and skills in Latin America2
Vocational education and training: open questions3
Education, skills and productivity in Latin America

3. Slowdown in the short-term
33
GDP growth in Latin America and the Caribbean and the OECD
(annual %)
Source: OECD-ECLAC-CAF (2015), Latin American Economic Outlook 2015. Education, Skills and Innovation for Development
-4
-2
0
2
4
6
8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
OECD Latin American and the Caribbean

4. 4
Persistent middle income trap
Middle Income Trap in Latin America vs. selected OECD economies
(per capita GDP; 1990 USD)
-
5 000
10 000
15 000
20 000
25 000
Chile Uruguay ArgentinaVenezuela C. Rica Mexico Colombia Brazil Peru Dom. Rep. S. Korea Ireland Spain
2013 1980 1950
LI
LMI
UMI
HI
Source: OECD-ECLAC-CAF (2015), Latin American Economic Outlook 2015. Education, Skills and Innovation for Development

5. 5
“Productivity in the long-run is almost everything” (P.Krugman)
Total factor productivity relative to the US
Source: IDB (2014) Rethinking productive development. Development in the Americas 2014

6. Perspectivas económicas de América Latina
1 Macroeconomic outlook: the productivity challenge
Shifting wealth and skills in Latin America2
3 Vocational education and training: open questions
Education, skills and productivity in Latin America

7. La contribución de la región al proceso de reequilibrio de la riqueza
es relativamente modesta
Population by level of education
(millions; 1980-2010)
Shifting Wealth: Gradual increase in global pool of skills
Source: OECD-ECLAC-CAF (2015), Latin American Economic Outlook 2015. Education, Skills and Innovation for Development
0
200000
400000
600000
800000
1000000
1200000
1980 1985 1990 1995 2000 2005 2010
China
complete tertiary incomplete tertiary complete secondary
incomplete secondary complete primary incomplete primary
no training
0
100000
200000
300000
400000
500000
600000
700000
800000
900000
1980 1985 1990 1995 2000 2005 2010
India
complete tertiary incomplete tertiary complete secondary
incomplete secondary complete primary incomplete primary
no training

8. La contribución de la región al proceso de reequilibrio de la riqueza
es relativamente modesta
Shifting Wealth: Mixed impact on skills demand
Globally
• Technological change favours skill demand (skill-biased technical
change)
• Trade and financial liberalization fosters the role of skills as the source
of economic competitiveness
In Latin America
• For countries with natural resource endowments, shifting Wealth
intensifies their role as commodity exporters
• Greater difficulty to develop comparative advantages in a wide range
of manufacturing industries

9. 9
Proportion of firms that consider the lack of labour force with the adequate skills a
significant restriction to growth (% formal firms; circa 2010)
Latin America is characterized by a large skill gap …
Source: OECD-ECLAC-CAF (2015), Latin American Economic Outlook 2015. Education, Skills and Innovation for Development

10. 10
0
10
20
30
40
50
60
70
80
BRA ARG PRY COL CRI BOL DOM ALC ECU GTM MEX SLV PER HND BLZ VEN NIC JAM PANOCDE
Source: OECD-ECLAC-CAF (2015), Latin American Economic Outlook 2015. Education, Skills and Innovation for Development
… with significant variation among countries
Proportion of firms in Latin America that consider the lack of labour force with the
adequate skills a significant restriction to growth (% formal firms; circa 2010)

11. Employment and occupations in LAC tend to be low-skilled…
11
Low skills
(education and task)
Source: OECD-ECLAC-CAF (2015), Latin American Economic Outlook 2015. Education, Skills and Innovation for Development

12. … in stark contrast to OECD countries
12
High skills
(education and task)
Source: OECD-ECLAC-CAF (2015), Latin American Economic Outlook 2015. Education, Skills and Innovation for Development

13. 13
Source: De la Torre, A., E. Levy Yeyati and S. Pienknagura (2013), “Latin America and the Caribbean as Tailwinds Recede: In Search of
Higher Growth”, LAC Semiannual report, World Bank, Washington, DC,
Large skill gaps but falling returns to education: wrong supply?
1.4
1.5
1.6
1.7
1.8
1.9
2
2.1
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Relative wages
Secundaria/primaria Terciaria/secundaria

14. Perspectivas económicas de América Latina
1 Macroeconomic outlook: the productivity challenge
Shifting wealth and skills in Latin America2
3 Vocational education and training: open questions
Education, skills and productivity in Latin America

15. Ingredientes para sistemas de formación para el trabajo
pertinentes y de calidad: algunos casos exitosos.
South Korea
Skills within a productive development policy: targets in sectors and
occupations
Public subsidies, more for SMEs in selected sectors
Chile
Skills framework in strategic industries (e.g. mining) to match demand
with supply
Germany and UK
Dual systems with apprenticeship programmes
Public-private co-funding
Vocational education and training: some OECD good practices

16. Capacitación en el puesto de trabajo en LAC: últimos
avances
Some evidence for the formal sector in Bahamas, Colombia, Honduras,
Panama and Uruguay:
• Limited on-the-job training (30%-50%; less in SMEs), too job-specific
• Training benefits mostly high-skilled workers
• Limited use of available public financing (especially SMEs)
• Positive impact on productivity among big firms (+1 p.p. workers under
training raises productivity by almost 1%). No impact on SMEs
Vocational education and training in Latin America: what do we
know?
Source: Flores, R., C. González-Velosa and D. Rosas (2014), “On-the-job training in Latin America and the Caribbean: Recent
evidence”, Determinants of Firm Performance in Latin America and the Caribbean: What Does the Micro Evidence Tell Us?, IDB

17. Vocational education and training: open questions
Quality of data
How big is the skill gap? Informal sector
Which skills are needed?
Policy
How to reach informal workers and firms?
How to involve the private sector?
How to finance these policies (labour taxes vs. other)?
Evaluation
Duration, contents
Wages and employment + competitiveness and productivity

18. Thank you!
www.oecd.org/dev