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Arcos Dorados will provide more than 30,000 jobs and an average of 500 hours of annual training over the next five years, with tremendous positive social development and economic impact, the author points out.
Monday, May 13, 2013
Perspectives

Latin America’s Education-Jobs Gap

Innovation will be key to solving the jobs crisis.


BY GABRIEL SANCHEZ ZINNY

Even as the worst of the global economic crisis has passed, the world is still living through a jobs crisis. And it is particularly dire for our youth. According to the International Labor Organization, nearly 200 million people who want work worldwide are unemployed – and that includes almost 75 million youth. Thirty five million of these young unemployed in advanced economies have been out of work for over six months, discouraging them and degrading their skills. 

Even more troublingly, much of this goes beyond mere cyclical unemployment. There is a rising share of young people who are entire outside of the productive economy – the so-called NEET problem, or youth “not in employment, education, or training”, with few if any prospects. In OECD countries, over 16 percent of the population aged 15-24 years is in the NEET category, and the situation is even worse in Latin America. In Mexico, where the problem is known as that of the “ni-ni” (ni estudia ni trabajo), the NEET population among 15-24 year olds is at 22 percent. In Brazil, the number is 20 percent, and it reaches 27 percent for women. 

SKILLS MISMATCH

But this is just one side of a multifaceted problem. While millions of youth can’t find work, there is also a broad swath of the private sector that can’t find enough skilled workers to hire. This “skills mismatch”, present in Latin America, cuts to the heart of a dysfunctional relationship between our educational systems, the students supposedly being trained for a 21st Century workforce, and the businesses that are increasingly demanding new skills. 

The recent report released by McKinsey, Education to Employment: Designing a System That Works, explores just how deep this problem goes. According to the report, “half of youth are not sure that their postsecondary education has improved their chances of finding a job, and almost 40 percent of employers say a lack of skills is the main reason for entry-level vacancies.” This means that even students that are getting advanced educations – which are a distinct minority – don’t feel prepared for the current labor market. And their potential employers agree. The report also concludes that by 2020 there will be a “global shortfall of 85 million high- and middle-skilled workers.”

What is going so wrong that companies all over the world can’t find employees with the capabilities, both hard and “soft” skills, to perform in a competitive global environment? There are several facets to this mismatch, and policymakers should work to address these problems.

LACK OF COMMUNICATION

First, at the most basic level there is a lack of communication between students, education providers and private sector employers. According to McKinsey, one third of employers never even attempt to talk with educators, and many educational institutions either don’t attempt or fail to accurately estimate their graduates’ job placement rate. What makes it even worse is that the students themselves aren’t positioned to make informed decisions, since “fewer than half say that when they chose what to study they had a good understanding of which disciplines lead to professions with job openings and good wage levels.” Thus, a primary need is “data that can be used to educate stakeholders, build transparency, and manage performance.”

The McKinsey report is an important move in the right direction, but there is still not enough information about the underlying causes of this dysfunction, and even less about what works and what doesn’t. Thanks to in depth international educational evaluations such as the PISA and TIMSS reports, we have a better understanding than ever about the level and direction of student performance and school quality around the world. But there is less understanding about what education policies work to make students more employable, and how the private sector can work to make them a reality.

Clearly, a first step is for the two sectors to talk to each other. In Latin America, for instance, there is the example of Arcos Dorados, the world’s largest McDonald’s franchise, one of several companies in the region partnering with the Inter-American Development Bank and the International Youth Foundation in order to help low-income youth get training and find jobs. The company will provide more than 30,000 jobs and an average of 500 hours of annual training over the next five years, with tremendous positive social development and economic impact. Yet according to Woods Staton, President of Arcos Dorados, “Our communication with governments has been on an ad hoc basis. There’s not enough going on between the private and the public sectors.”

PRIVATE-PUBLIC PARTNERSHIP

Another promising path is for the private and public sectors to work together to promote entrepreneurship, which is the driving force behind innovation and rewarding, high-skilled jobs. As Gallup CEO Jim Clifton argues in his book The Coming Jobs War, “the scarcest, rarest, hardest energy and talent in the world to find is entrepreneurship…America doesn’t have enough to fight the coming global jobs war.” Entrepreneurship and human capital are closely linked, which helps explain the seeming paradox of persistently high unemployment paired with high demand for skilled workers. Clifton argues that better public policy can help create ecosystems of innovation, conditions in which start ups can thrive and create the next generation of jobs.

These types of partnerships to create the conditions for innovation can deliver employment opportunities to fill the growing jobs gap. This is particularly critical given the deeply negative social impact of unemployment, especially long-term unemployment, on the next generation. The entire economy loses productive capacity, young workers face depressed wages for the rest of their careers, and it can lead instability as we have seen in a protest-wracked Europe.

Experts like Clifton estimate that the world will need to create an additional 1.8 billion jobs to meet demand – and the pressure’s on, given that destabilizing events like the Arab Spring are driven by the discontent of unemployed, frustrated youth. In Latin America, too, a growing middle class is impatiently demanding more and better jobs. Educational institutions, government policymakers, and the private sector must all take this issue more seriously, and begin to work together in earnest.

Gabriel Sanchez Zinny is president of Kuepa.com, a Latin American Blended Learning company, working in incorporating technologies to reduce drop out rates. Follow

him on Twitter at @gzinny. He wrote this column for Latinvex.

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