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Connecting skills development to productivity and employment growth in developing and developed countries

2.3. Developing countries in Asia and the Pacific,

Latin America, the Arab States and Africa

93. This group comprises a diverse group of over 80 countries (see the annex to this

chapter). Most countries in Latin America and the Caribbean, as well as many countries

in Asia, including China and India, and among the Arab States, belong to this group.

Some two dozen countries in Africa are covered in this group, while most are classified

as LDCs.

94. An important characteristic of countries in this group is the combination of high

growth and productivity in some sectors and regions and low productivity and persistent

poverty in other economic sectors or regions. As indicated in Chapter 1, responses are

needed to address the resulting twin challenges for skills development, which are:

(1) meeting the demand for higher skills in the growing higher-technology, often export-

oriented sectors, thus removing one potential constraint on future growth; and (2) using

skills development to improve productivity and support formalization of economic

activities in the still largely impoverished informal economy.

2.3.1. Patterns in productivity, education and employment

95. Employment and productivity trends vary substantially among countries in this

group:

Most countries in Asia have improved their competitiveness in the global economy,

driven by low production costs, abundant pools of skilled and semi-skilled labour

and rapid growth in labour productivity. Overall in Asia, productivity increased by

40 per cent from 1995 to 2005 (ILO, 2006c). Poverty has retreated, although as

many as 1 billion workers (60 per cent of all workers) live on less than US$2 per

day (ILO, 2007p). The ILO’s 14th Asian Regional Meeting called for measures to

promote productivity growth, and to enhance enterprise and national

competitiveness and faster growth in the number of decent jobs available for

workers (ILO, 2006c).

In Latin America and the Caribbean productivity has risen only slightly: 0.6 per

cent on average per year from 1997 to 2007. Unemployment in 2007 was 8.5 per

cent, slightly less than the 8.9 per cent rate five years earlier. In 2007, 8.0 per cent

of the labour force lived on less than US$1 per day. One quarter of all workers in

the region lived on less than US$2 per day (ILO, 2008c). One substantial challenge

for most countries in Latin America is to create decent job opportunities for the

working poor while also reducing unemployment.

In the Middle East, productivity has remained at about the same level over the past

ten years, actually decreasing by 0.2 per cent on average per year between 1997

and 2007. Employment levels have likewise stagnated, with unemployment rates

remaining high. One fifth of workers live on less than US$2 per day (Fahim, 2008;

ILO, 2008c). In North Africa, productivity growth was higher – 1.4 per cent annual

The UNDP lists 137 developing countries or areas, of which 50 are designated least developed countries. The

classification is made according to three criteria: low income (three-year average estimate of gross national

income per capita under US$750), weakness in composite Human Assets Index (based on indicators of nutrition,

health, education and adult literacy) and economic vulnerability (based on indicators of instability of agricultural

production, instability of exports, proportion of non-traditional activities in manufacturing and services, handicap

of economic smallness and population displaced by natural disasters) (UN Office of the High Representative for

the Least Developed Countries, Landlocked Developing Countries and Small Island Developing Countries,

www.un.org/special-rep/ohrlls/ldc; 29 Jan. 2008).

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Skills for improved productivity, employment growth and development

average growth (1997–2007) but two-fifths of workers live on US$2 per day (ILO,

2008c).

96. Reviewing the relationships between trends in education, productivity and

employment for even a handful of countries in this group is difficult owing to the lack of

up to date comparable data. The best available proxy for skills is literacy, expressed as

the proportion of the population over the age of 15 that can read and write. Owing to

greater data availability, the measurement used to capture trends in quality employment

relates to the working poor, that is the percentage point change in the number of workers

living on US$2 per day. Productivity remains the same: output per worker in constant

dollars. Trends are calculated as simple averages for 1995–2005 for productivity and

working poor, but literacy is for the latest year available.

97. Relationships between these three variables are summarized in figure 2.7. While

conclusions must be guarded because of the small sample size for which data are

available (relative to the large number of countries in this group), the picture that

emerges is that those countries with the best performance in improving labour

productivity and higher literacy rates registered the best average performance, as a group,

in reducing the share of working poor.

98. Across the six countries which had relatively better performance in increasing

labour productivity and had relatively higher literacy rates, the average reduction in the

share of working poor was 15 percentage points, compared to the 5 percentage point

reduction achieved by countries which had high literacy but relatively low improvements

in productivity. The two countries with relatively strong productivity growth but high

rates of illiteracy (Pakistan and India) reduced the share of working poor by 4 and

13 percentage points respectively.

Trend data for literacy is not available for comparable periods, necessitating the use of a static measurement.

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Connecting skills development to productivity and employment growth in developing and developed countries

Figure 2.7. Developing countries: Productivity, literacy and working poor

Developing countries

Change in share of working poor at US$2 a day, 1995–2005

Grouped according to countries' relative performance in

labour productivity (1995–2005) and literacy

-20.00

-15.00

-10.00

-5.00

0.00

5.00

Percetage point change in share of working poor

Relatively high

productivity

growth and high

literacy

Relatively high

productivity

growth but

relatively low

literacy

Relatively low

productivity

growth but

relatively high

literacy

six countries

two countries

eight countries

Source: ILO, 2007a; UNESCO/UIS, 2007.

2.3.2. Addressing skills shortages in high-growth

countries and sectors

99. Skills shortages curtail the expansion of higher-productivity sectors and the

expansion of local production into higher value added activities.

Among Asia’s high-growth countries, rapid development has accelerated the

demand for higher-skilled workers, professional staff in the medical and legal

fields and business managers. For several years, media reports and surveys of

multinational enterprises (MNEs) have decried shortages of skilled labour in China

and India.

Recent government initiatives in China aim to improve the general

skill level of the labour force and ensure that shortfalls in skill quality will not

become an obstacle to expanding employment and economic growth (China,

Institute for Labour Studies, 2007).

In Latin America there is a general concern that while coverage of education and

training has increased, the quality of that education has not adequately equipped

young people for the labour market. This has led to calls to increase the vocational

content of secondary education.

A recent Economist Intelligence Unit Corporate Network Survey among 600 chief executives of multinational

companies with businesses across Asia found that a shortage of staff was their biggest concern in China and

South-East Asia. It was the fourth biggest concern in India (after problems with infrastructure, bureaucracy and

rising wages for skilled workers) (The Economist, 2007).

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Skills for improved productivity, employment growth and development

In the Arab States, employers often identify a lack of skills as a barrier to

expanding business and employment.

Education systems in these countries tend

to prepare students for public sector jobs, which used to be the primary employer

for labour market entrants, and have not developed sufficient linkages to the private

sector (Assad and Roudi-Fahimi, 2007).

100. There is no single model of an effective national response to the challenge of

upgrading skills development and bridging skills gaps. But across the range of responses,

improving coordination and expanding the availability of training are two critical factors.

101. Improving coordination between prospective employers and education and training

providers is an effective and feasible way to reduce the mismatch between education and

training outcomes and employment opportunities. Employer involvement at the local or

industry level is most important in three ways:

First, employers’ involvement in the management of training institutions helps to

keep institutions abreast of changing technologies, the kind of technical and ICT

equipment used at the workplace, and which industries, occupations and skills are

declining or rising in demand. The development of competency-based standards in

close cooperation with industry can help training become more relevant so that the

skills acquired improve trainees’ employability.

Second, employers can provide experiential learning by accepting interns or

apprentices – sometimes with agreements of later employment – that enhance the

systematic and classroom-based knowledge learning through practical application.

Third, feedback mechanisms through which employers and the trainees they hire

can systematically inform training providers of whether the quality of training

matches on-job expectations. Sometimes this is organized directly within the

labour market area of training institutions, and in other places it is coordinated

through local employment offices of the national employment service.

102. A community- and industry-driven training system is thus essential to redressing

both sides of the skills mismatch coin: relevance and quality of training. This is one of

the key objectives of ongoing vocational training reform policies in Egypt, for example

(see box 2.6). Strengthening ties between tertiary education and the private sector is also

growing in many developing countries in order to provide the professional and

management skills needed by a growing private sector.

For example, in a World Bank Institute survey, 27 per cent of firms interviewed in a sample of Arab States

said that education and skills of the workforce were a major constraint (Tan, 2006).

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Connecting skills development to productivity and employment growth in developing and developed countries

Box 2.6

Egypt: Demand for reforming the training system

Various studies have noted that the Egyptian vocational and education training

system does not provide skills that are in demand by employers and young people for

the following reasons:

inadequate involvement of employers in the management of training centres;

weak links to employers to facilitate post-training employment;

poorly trained and paid teachers;

out of date equipment;

concentration of training for women in traditional occupations;

low quality of training, with inadequate attention to theory as well as practice and

therefore, perhaps, not surprisingly;

low esteem of vocational training among students and parents.

Efforts to address weaknesses and fragmentation include: coordinating training

policy under the Supreme Council for Human Resources Development; improving

training quality through investments in curricula, improved teachers’ salaries, and

offering combined general (coursework) and practical (internship) training; and providing

retraining to adult workers under the Social Fund for Development.

Source: Fahim, 2008; Amer, 2005; de Gobbi and Nesporova, 2005; Van Eekelen et al., 2001.

103. Increased training provision must accompany this enhanced flow of information

about what kind and levels of training are needed – otherwise training institutions will

not be able to respond and adjust their training. Public financing systems increasingly

link funding to employment outcomes, whether for centralized public training

institutions or, increasingly, for individual training institutions. Strong ties to prospective

employers are crucial to meeting these expectations of accountability.

104. Methods of financing skills development increasingly emphasize demand-

responsiveness and accountability for performance. They include: (1) payroll levies on

employers; (2) fees paid by enterprises or trainees; (3) self-funding by training

institutions through production and sale of goods and services; (4) community support;

and (5) expansion of training provision by non-governmental organizations in the

informal economy and by private sector providers in the formal economy (Johanson and

Adams, 2004, p. 9). The effectiveness of such approaches depends on many factors,

including programmes to develop markets for training by demonstrating the benefit of

training to employers and workers, improving the efficiency of tax administration and

labour or employment service administrations, and providing public information on the

performance of individual institutions in order to inform consumer choice and improve

accountability.

105. Encouraging workplace learning is one form of increasing private sector

investment in skills development – targeting adult workers already in the workforce. As

technologies or products change, employers become keenly aware of what skills are

needed by their workers. There should be no mismatch between training provided at the

workplace and the specific types and levels of skills actually needed. The catch is that

workers must have the ability to learn – basic skills, aptitude for learning,

communication skills – based on their pre-employment education and training. The

second challenge is maintaining a policy environment that encourages, or provides

See Galhardi, 2002 and 2004 for compilation of survey data on investment in training for selected countries in

the Americas region and elsewhere.

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Skills for improved productivity, employment growth and development

incentives for employers and workers to extend workplace training. This topic is itself

the subject of Chapter 3 of this report.

106. One of the causes of skills gaps is the fact that more often than not training of girls

and young women is limited to traditional occupational areas rather than being geared to

new demands in the labour market. Overcoming barriers that deter women from training

– at and outside the workplace – serves the twin objectives of reducing inequality and

meeting labour market needs. Unequal division of labour within the family is a major

barrier to increasing women’s participation in education and training. Targeting women

requires an effort to schedule training in accordance with their requirements as regards

when and how to learn. This commitment must start at the secondary and vocational

training levels (see section 4.2 in Chapter 4) and continue at the workplace (lessons

learned in overcoming barriers to women’s training in entrepreneurship are summarized

in Chapter 3). Special effort is needed to reduce occupational segregation

in training

and subsequently in employment, so that women are prepared to meet the skills needs in

emerging industries and occupations. As in the case of Botswana (box 2.7), efforts to

improve training begin with a commitment to overcome gender bias.

Box 2.7

Gender mainstreaming of national vocational training in Botswana

The Botswana Training Authority, in collaboration with the Women’s Affairs

Department within the Ministry for Labour and Home Affairs, drafted a “National policy for

mainstreaming gender into vocational training and work-based learning” (2000) with the

following objectives:

Increase access of women into vocational education and training and reduce their

attrition once they begin the training.

Eradicate gender blindness and increase gender awareness in vocational training

institutions by integrating inclusive language into curricula, improving attitudes of

trainees, instructors and administrators towards gender disparity, equality and equity

in vocational training and promoting gender training to overcome gender

stereotyping and prejudice.

Articulate what constitutes sexual harassment, raise awareness of it and create

strict reporting and response mechanisms.

Develop and implement a system of regular data collection and reporting of

information by gender in all vocational training institutions about the status and

training needs of men and women with a view to reducing occupational segregation.

Source: Botswana Training Authority, 2006.

107. Examples from India, Brazil and Jamaica (boxes 2.8–2.10) illustrate policy

initiatives to address challenges on coordination, expansion and inclusion. The following

section examines ways to enable persons already working in the informal economy to

acquire the skills needed for higher productivity formal economy jobs.

Occupational segregation refers to the concentration of women or men in certain trades, fields of work or

industries. For example, a survey on the participation of women in vocational and technical training in Latin

America found that the ten specific sectors with the greatest number of female students reported 77 per cent

female enrolment (Silveira and Matosas, 2001).

Connecting skills development to productivity and employment growth in developing and developed countries

Box 2.8

Addressing the demand–supply gap of skills development in India

India’s economy is highly dichotomous and shows signs of becoming more so.

Productivity has grown rapidly in the modern sector, led by services, transport,

communications and manufacturing, and the share of employment has been decreasing

in agriculture and growing in the service sector. However, employment growth is

insufficient to absorb the estimated 12.8 million labour market entrants each year, or to

create more productive jobs for the vast majority of workers who make a living in the

informal economy. There is concern that even vocational training graduates are not

highly employable owing to the mismatch between what they have been taught and what

employers need – in both technical and core skills (FICCI, 2007; TeamLease, 2007).

Expansion, quality and inclusion comprise the goals of the Planning Commission’s

strategy to address the skills gap, make education and training relevant to labour market

needs and improve the access of poor and vulnerable people to skills development

opportunities (Planning Commission, Report of the Working Group on Skills

Development and Training).

Expansion: India’s Five-Year Plan (2007–12) foresees a tenfold expansion of education

and training infrastructure, from some 5,000 to about 50,000 industrial training institutes

(ITIs) and industrial training centres under the Ministry of Labour and Employment, to

provide training in relevant skills for industry and service sectors and also in skills for

agricultural and rural employment. “The challenge … is to increase the skilled workforce

from 5 per cent at present to about 50 per cent. To make our working people

employable, we must create adequate infrastructure for skill training and certification and

for imparting training. Industrial Training Institutes must keep pace with the technological

demands of modern industry and the expanding universe of technical knowledge” (Prime

Minister Manmohan Singh at the Indian Labour Conference, April 2007, New Delhi).

Quality: Upgrading of training facilities, tools, faculty and curricula are all targeted. With

World Bank assistance, some 500 ITIs are to become “Centres of Excellence” that will

be closely linked to industry. Industry Management Committees are to be given

enhanced financial and programme development autonomy to manage individual ITIs.

State governments will, however, retain ITI ownership and continue to regulate

admissions and fees.

Inclusion: Over 90 per cent of Indian workers earn a living in the informal economy. Few

of them have the necessary skills to help improve their productivity and income-earning

capacity. The Skills Development Initiative aims to provide 1 million workers with

employable skills over the next five years and 1 million workers each year after that. The

Initiative’s public–private partnership combines provision of short-term training courses

with certification. The programmes target poor and less-educated individuals who cannot

afford mainstream long-term training programmes owing to high entry qualifications and

costs. In partnership with the ILO, the Ministry of Labour and Employment is

implementing a pilot programme focusing on four clusters: brassware (Moradabad, Uttar

Pradesh), glassware (Firozabad, Uttar Pradesh), textiles (Tiruppur, Tamil Nadu) and

domestic workers (Delhi). While the programme aims to contribute to improving

productivity and competitiveness of enterprises and employability of workers in the

clusters, it also pilot tests implementation frameworks and methodologies for skills

provision and certification in the informal economy.

Source: Ratnam and Chaturvedi, 2008.

Skills for improved productivity, employment growth and development

Box 2.9

Training for new industries in Brazil

In Brazil, the challenges of new technologies and the aim to extend industrial

development to new geographical areas were the reasons behind the initiative of the

National Confederation of Industry to start a new education and training programme.

Building on the PLANFOR worker qualification programme (1995–2002), Brazil’s

Education for New Industry programme plans to expand the outreach and functions of

SESI (social service for workers and their families) and SENAI (the national industrial

training service) to cover basic and continuous education and vocational training. The

training supports the strategic plan for industrial development. It is designed to meet

employers’ requirements for greatly improved basic work skills so that workers can read

instructions, interpret graphs and exchange knowledge. Its objectives are ambitious: the

40 per cent of industrial workers who are currently either illiterate or have completed

fewer than eight years of education are expected to complete basic education; nearly

700,000 workers are expected to complete intermediate-level education and improve

their basic and vocational skills. The programme will also provide initial, further, lifelong

and specialized industrial training, and middle-level technical education linked with

formal education. Graduates of the programme, 40 per cent of them technicians, are

expected to fill the 1 million new industrial jobs that are envisaged in the new industries.

The programme focuses mainly on industrial workers and their families/communities.

Source: Gallart, 2008.

Box 2.10

Skills development and productivity and the

National Training Agency of Jamaica (HEART Trust/NTA)

One of the goals of the National Development Plan 2030 is to reduce the

“productivity gap”. Jamaica’s growth in labour productivity was the lowest in the region,

at 0.4 per cent per annum over the past decade and a half. The low level of adoption of

new technologies, slow skills upgrading, low economic relevance of education,

concentration of activity in tourism and mining with little diversification and the growth of

the informal economy, are all factors in the low productivity growth. The National

Development Plan responds by creating incentives for enterprise development and

performance, a national qualification framework being adopted by all education and

training providers, and by increasing cooperative training programmes with private sector

enterprises.

The Jamaica Productivity Centre, a tripartite organization funded by the Ministry of

Labour and Social Security and comprising representatives from the Jamaica Employers’

Federation and the Jamaica Confederation of Trade Unions, helps firms to diagnose

productivity and competitiveness gaps and design solutions while also influencing

secondary and tertiary curricula to provide competence-building training and educational

programmes. The Centre works with the enterprise based training section of HEART

trust/NTA to develop a productivity measurement methodology for monitoring the impact

of training on enterprise productivity.

Source: McArdle, 2007.

2.3.3. Promoting formalization: The role of training

Members should identify human resources development, education, training and lifelong

learning policies which … address the challenge of transforming activities in the informal

economy into decent work fully integrated into mainstream economic life; policies and

programmes should be developed with the aim of creating decent jobs and opportunities for

education and training, as well as validating prior learning and skills gained to assist workers

and employers to move into the formal economy (Human Resources Development

Recommendation, 2004 (No. 195), Paragraph 3(d)).

Connecting skills development to productivity and employment growth in developing and developed countries

108. The conclusions of the general discussion on skills at the International Labour

Conference in 2000 (as quoted in Chapter 1), the conclusions of the general discussion

on the informal economy in 2002, and the subsequent Human Resources Development

Recommendation, 2004 (No. 195)

address the connections between more and better

training and formalizing work and enterprises. Formalization brings better working

conditions and rights at the workplace for workers and fairer competition among

employers. For society, formalization expands the tax base and makes laws and labour

regulations easier to enforce.

109. As noted in the conclusions of these tripartite ILO discussions, skills development

is not a panacea – it is not the only necessary condition for formalization – but it is one

essential contributing factor. Among other factors, the importance of policies to expand

employment growth in the formal economy must be highlighted. Improving skills

matching and efforts to promote formalization through better skills development

assumes an expanding formal economy with jobs to fill. The pace of job creation must

accelerate to absorb the un- and underemployed, including providing better employment

opportunities for those in the informal economy. In the absence of such job creation, the

informal economy will continue to absorb larger portions of the labour force who cannot

find decent work despite having higher qualifications.

110. In many developing countries a large formal economy coexists with a large

unorganized informal economy. It is especially in this group of countries that there is an

important opportunity to use training as a bridge from livelihoods in the informal

economy to more productive and decent work in the formal economy.

111. Many countries pursue explicit broad policies and programmes that include skills

development to help move workers and enterprises into the formal economy and so

create durable, productive and decent employment.

These efforts are discussed under

three broad policy headings: extending access to training outside the high-growth formal

economy; recognition of prior learning; and including formalization in entrepreneurship

training.

112. Improving access to quality skills development outside high-growth urban areas is

the first requirement. In many developing countries people’s access to relevant education

and training programmes that could enhance their productivity at work often remains

inadequate. Training opportunities may simply be lacking; illiteracy may bar young

people and adults from vocational training; education and training services may be too

expensive or have a poor record of enabling trainees to move into better jobs; and

training may not fit the needs of certain population groups, such as women or migrant

workers.

113. Education enrolment and attendance figures have improved in most developing

countries. However, the quality of education and its relevance to employability and

careers in the formal economy are becoming the paramount policy issue. In Latin

America, there are calls to increase the job or skills-related components included in

secondary education programmes, especially in marginal rural and urban areas, in order

to enable students to obtain a grounding in technical and job-related skills that will give

them a better chance of entering the job market (Pieck, 2007, p. 13). Efforts to redress

deficiencies in formal education and improve articulation between basic and general

For a review, see reports and articles collected for the ILO Interregional Symposium on the Informal

Economy: Enabling Transition to Formalization, held on 27–29 November 2007, Geneva, to share experience on

formalization of the informal economy.

Skills for improved productivity, employment growth and development

education, on the one hand, and work-related training, on the other, reveal some good

practices that might be adapted more generally. These are:

Link local and national training institutions. In Honduras, Education for Work

Centres (Centros de Educación para el Trabajo – CENETs) provide education and

training primarily for poor women in rural and urban communities with low levels

of education. They build on local needs assessments and community participation,

but are also linked to the national vocational training institution INFOP. The

training combines core skills, such as training in literacy and gender issues,

technical and vocational training (in agriculture, agro-industry, trade and services)

and entrepreneurship training. A recent impact assessment found that employment

in the communities rose by 136 per cent following training, increased investment

and introduction of new technologies (Rosal, 2007; Ooijens et al., 2000).

Combine remedial education and employment services with technical training. The

Training for Work Programme (Programa de Capacitación Laboral – CAPLAB) in

Peru (1997–2006) integrated poor underemployed and unemployed young people

and women into the labour market by matching vocational training to the

experience and motivation of trainees, targeting demand in the labour market,

primarily of local small enterprises, and including on-the-job experience. The

programme is based in formal training institutions and emphasizes training of

trainers in new technologies and training methods, and in ways of combining

technical training with remedial education where necessary and linking training to

decentralized employment services. Originally donor funded, the programme was

incorporated in the General Law on Education in 2003 (CAPLAB, 2007).

Take women’s training needs into account. Programmes that target women, or men

and women, need to take into account the particular circumstances that influence

women’s abilities to take advantage of training opportunities, such as family

responsibilities and workload, the seasonal character of work or ability to travel to

training centres. Some of the ways in which public policy can meet these criteria

for targeting women workers stem from experimentation in the private and non-

government sectors, where women have taken the initiative to organize training in

ways that are accessible and meaningful to them. For example, teleworking in the

small office/home office (SOHO) industry appears to be growing in some Asian

countries. It is a new type of working space, which appears to be particularly

relevant in helping women improve their access to the technical and core skills

development, networking and employment benefits traditionally associated with

formal economy work.

Target young adults who have missed out on good secondary education. So-called

“second chance programmes” target adults who, for whatever reason, did not

receive an adequate education at a younger age. Such programmes generally offer

flexible timing, short duration courses and social services, where needed, to

facilitate entry into the formal labour market. For example, the Chilecalifica

programme launched in 2002 by the Chilean Ministries of Education, Economics,

and Labour aims to improve the level of schooling, the quality of technical

training, national certification of skills and competencies and labour market

information. Between 2002 and 2004, some 74,000 people were certified through

the programme; for those who completed the course, income levels increased by

For example, see information about “eHomemakers” in Malaysia that provides professional training on

business development, financial planning, shariah law and networking to women working from home in ICT and

other office support work (available at http://www.ehomemakers.net).

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