Skills for Employability in East Asia Emanuela di Gropello Skills and Employability Workshop, June...

Skills for Employability in East Asia

Emanuela di GropelloSkills and Employability Workshop, June 8, 2009

OUTLINE

1. BACKGROUND – Study and methodology

2. CONTEXT – Trends in Demand for Skills

3. PROBLEM – Skills gaps

4. CAUSES – Demand for skills; Supply of skills; Labor market

5. SOLUTIONS - Demand for skills; Supply of skills; Labor market

BACKGROUND – Study and Methodology

Regional study on skills in East Asia – Comparative analysis of trends in demand and supply of skills; case studies

Intensive use of household, labor force and firm surveys, complemented with employer-employee skill surveys in Indonesia and the Philippines

CONTEXT – Trends in Demand for Skills

Demand for skills remains sustained in most countries:

– sustained in the Philippines, Indonesia and Thailand in spite of strong increase in supply of skills

– particularly strong in China and Vietnam– less clear-cut in Mongolia and Cambodia

Some emerging trends:– Services have become the main driver (sluggish demand in

manufacturing)– Within manufacturing: pace of technology innovation/adoption and

some measures of economic openness remain key drivers – showing evidence of SBTC -but role of exports is less clear-cut

Wage skill premiums and share of skilled workers in four EAP countries

Philippines: Skill Premium and Skilled Workforce - Basic controls only

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

1988 1991 1994 1997 2001 2004 2006

Year

Ski

ll p

rem

ium

an

d p

rop

ort

ion

of

skil

led

wo

rkfo

rce

Skilled-1: At leastUpper Secondary

Skilled-2: Tertiary andabove

Skill premium-1

Skill premium-2

Indonesia: Skill Premium and Skilled Workforce - Basic controls only

00.10.20.30.40.50.60.70.80.9

1

1994 1999 2001 2003 2005 2007

Year

Ski

ll p

rem

ium

an

d p

rop

ort

ion

o

f sk

illed

wo

rkfo

rce Skilled-1: At least

Upper Secondary


Skill premium-1

Skill premium-2

Vietnam: Skill Premium and Skilled Workforce - Basic controls only

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

1992 1998 2004 2006

Year

Ski

ll p

rem

ium

an

d

pro

po

rtio

n o

f sk

illed

w

ork

ers

Skilled-1: At least UpperSecondary


Skill Premium-1

Skill Premium-2

Thailand: Skill Premium and Skilled Workforce- Basic controls only

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1990 1994 2000 2004

Year

Ski

ll P

rem

ium

an

d

Pro

po

rtio

n o

f S

kille

d

Wo

rker

s

Skilled-1: UpperSecondary and above


Skill Premium-1

Skill Premium-2

Change in wage skill premiums across sectors in four EAP countries

Chart 1: Indonesia - Change in un-standardized weighted industry and skill premia by sector: 1996-2007

-0.06-0.05-0.04-0.03-0.02-0.01

00.010.020.030.04

1 3 5 7 9 11 13 15 17 19

Industry

Cha

nge

Change in Ind Premium

Change in Skill premium

Chart 4: Vietnam - Change in un-standardized weighted industry and skill premium by sector: 1992-2006

-0.02

0

0.02

0.04

0.06

0.08

0.1

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Industry

Ch

ang

e

Change in Industrypremium

Change in Skillpremium

Table 5: Cambodia - Change in un-standardized weighted industry and skill premium by sector: 1997-2007

-0.1

-0.05

0

0.05

0.1

0.15

1 2 3 4 5 6 7 8 9

Industry

Ch

ang

e



Chart 2: Philippines- Changes in un-standardized weighted industry and skill premium by sector: 1988-2006

-0.5

-0.4

-0.3

-0.2

-0.1

0

0.1

0.2

0.3

0.4

1 3 5 7 9 11 13 15 17 19 21

Industry

Ch

ang

e



Share of Skilled Workers: Cross-country Correlation by Foreign Ownership

VNM

KHM

THA

IDN

MYS

PHL

CHN

0

10

20

30

40

50

60

0 10 20 30 40 50 60

Non-Foreign-Owned

For

eign

-Ow

ned

Share of Skilled Workers: Cross-country Correlation by

Technological Intensity

VNM

KHM

THA

IDN

MYS

PHL

CHN

KOR

0

10

20

30

40

50

60

0 10 20 30 40 50 60

Non-Technologically Innovative

Tec

hn

olo

gic

all

y I

nn

ov

ati

ve

Share of Skilled Workers: Cross-country Correlation by Export Status

KHMVNM

THA

IDN

MYS

PHL

CHN

KOR

0

10

20

30

40

50

60

0 10 20 30 40 50 60

Non-Exporting Firms

Exp

orti

ng F

irm

s

CONTEXT – Trends in Demand for Skills

Difficult in the current environment to predict future demand but emerging trends, increasing pressures to diversify and employers/employees’ perceptions suggest higher need for:

– Skills applicable to the service sector Behavioral skills, service-related careers

– Combination of job specific and generic skills Importance of analytical thinking, leadership skills and behavioral skills

– Practical knowledge of the job – Skills to help manufacturing firms adapt technological innovations

and compete internationally Importance of creative thinking, business skills

CONTEXT – Trends in Demand for Skills0.54

0.70

0.64

0.32 0.32

0.47

0.31 0.32

0.24

0.11

0.1

.2.3

.4.5

.6.7

.8.9

1

Manager/Professional Skilled Worker

Basic Skills (math and literacy) Thinking Skills

Behavioral Skills Computer Skills

English Skills

Source: Employer Skill Survey (2008)

Share of firms rating workers' skills 'very important'

4.11

28.31 24.66

42.92

01

0203

0405

0

Unimpo

rt

Fairly

impo

rt

Impo

rt

Very i

mpo

rt.

Dealing with people

8.676

25.1133.79 32.42

01

0203

0405

0

Unimpo

rt

Fairly

impo

rt

Impo

rt

Very i

mpo

rt.

Creative thinking

8.676

31.51 34.2525.57

01

0203

0405

0

Unimpo

rt

Fairly

impo

rt

Impo

rt

Very i

mpo

rt.

Reading and basic math

21 17.81

30.14 31.05

01

0203

0405

0

Unimpo

rt

Fairly

impo

rt

Impo

rt

Very i

mpo

rt.

Using computers

Source: Employee Skill Survey (2008)

Importance of various skills on the job

0 5 10 15 0 5 10 15

Computer

Language

Writing

Math

Initiative

Time management

Literacy

Teamwork

Negotiation

Creativity

Independent work

Communication

Leadership

Problem solving

Computer

Language

Writing

Leadership

Math

Negotiation

Initiative

Creativity

Literacy

Problem solving

Time management

Communication

Teamwork

Independent work

Managers Prod/SalesKey Core Skills Key Core Skills

PercentGraphs by occupation

0 5 10 15 20 25 0 5 10 15 20 25

Voc-tech qual

Foreign degree

Technical qual

Sec diploma

Exp diff field

Grades

General exp

Theory

Exp same field

Local degree

Practical

Foreign degree

Voc-tech qual

Technical qual

Exp diff field

Grades

Sec diploma

General exp

Local degree

Theory

Exp same field

Practical

Managers Prod/SalesKey Job-Specific Skills Key Job-Specific Skills


Indonesia

Philippines

PROBLEM – Skill Gaps for Employability

Skills are seen as a bottleneck by a significant share of firms in several countries

– In particular in technologically intensive firms, exporting firms

Vacancies for skilled workers are hard to fill in several countries – In particular in exporting firms, and service sector for higher level

positions in some countries (see Indonesia, Philippines)

…but youth unemployment and/or employment in under-qualified/low-productivity jobs is also an issue in some countries

– See Indonesia, the Philippines, Mongolia and Vietnam

Share of Firms Reporting Skills of Workers as an Obstacle, in East Asia, by Country

0%

10%

20%

30%

40%

50%

60%

70%

SouthKorea

Cambodia

Laos

Philippines

Mala

ysia

Vietnam

Indonesia

Mongolia

Thailand

China

Major or VerySevereObstacle

Moderate,Major, VerySevereObstacle

Share of Firms Reporting Skills of Workers as an Obstacle, by Region

0%

5%

10%

15%

20%

25%

30%

35%

Middle Eastand North

Africa

East Asia &Pacific

Sub-saharanAfrica

Latin America& Caribbean

Europe &Central Asia

Europe HighIncome

South Asia

Share of Firms Reporting Skills of Workforce as an Obstacle, by Exporting Intensity

Mongolia

ChinaThailand

Vietnam

MalaysiaLaos

Indonesia

Philippines

CambodiaSouth Korea

0%

10%

20%

30%

40%

50%

60%

70%

0% 10% 20% 30% 40% 50% 60% 70%

Non-Exporting Firms

Exp

ortin

g Fi

rms

Time to fill skilled vacancies in EAP

Time to Fill Vacancies for Professionals (weeks)

0

1

2

3

4

5

6

7

Cambodia China Indonesia Malaysia Mongolia Philippines Thailand Vietnam Korea,Republic

Source: ICS and Skills Surveys

Difficulties to find the right skills in the Philippines and Indonesia

Difficulty Finding Right Skills - Sector

0.0 10.0 20.0 30.0 40.0 50.0 60.0

Directors/Managers

Professionals

Administrative

Sales workers

Skilled Production

Unskilled workers

% Saying Very and Rather Difficult

Manufacturing Services

22.21

58.38

11.227.078

1.109

14.85

46.82

14.7120.32

3.301

12.57 10.96

59.04

17.42

2.365

24.83

12.68

42.76

17.37

2.854

23.31

5.923

52.71

15.2

3.852 2.367

32.95

60.83

02

04

06

08

00

20

40

60

80

Very d

ifficu

lt

Rathe

r diffu

cult

Neithe

r eas

y nor

diff

icult

Rathe

r eas

y

Very e

asy

Very d

ifficu

lt

Rathe

r diffu

cult

Neithe

r eas

y nor

diff

icult

Rathe

r eas

y

Very e

asy

Very d

ifficu

lt

Rathe

r diffu

cult

Neithe

r eas

y nor

diff

icult

Rathe

r eas

y

Very e

asy

Director Professional Administrative

Sales Production Unskilled


Degree of difficulty of matching needs with available skills

Philippines

Indonesia

CAUSES – What are the causes?

Possible causes for these skill gaps can include:

– Demand-side factors (demand for skills)– Supply-side factors (supply of skills)– Broader labor market issues

Employers across the region offer some insights, pointing to:

– Insufficient quality and relevance of skills and skill supply – Job turnover, low starting wages, emigration of skilled workers in

some cases– Much less emphasis on other reasons (but quantity issues

mentioned in Vietnam)

0.27

0.30

0.35

0.30

0.26

0.23

0.30 0.30 0.30

0.20

0.1

.2.3

.4

Manufactures Non education services


Share of firms identifying variable as important or extremely important

Causes of skills shortage

Too few students trained locally Low quality of local training

Job turnover Low starting wages

Emigration of skilled

Reasons for Skill Shortages - Sector

0 5 10 15 20 25 30 35 40

Quantity Education Training

Quality Education Training

Staff job turnover

Starting pay too low

Emigration skilled workers

Other reasons

% Very or Extremely Important

Manufacturing Services

Percentage of Firms Pointing Out to Each Factor as One of Main 3 Causes for Vacancies

0

10

20

30

40

50

60

70

80

90

ApplicantsDemand VeryHigh Wage

Univ. NotProduceSufficientNumber

Graduates

Applicants NotHave Required

Basic Skills

Applicants NotHave RequiredTechnical Skills

No Applicantsfor Unskilled

WorkersPosition

High Turnoverof New Recruits

Thailand Malaysia

Indonesia

Philippines

Thailand/Malaysia

CAUSES – Demand for Skills

Demand for skills is sustained in the region and should therefore not be a big obstacle

…but it may not be strong enough to absorb out-of-school and unskilled workers who get skilled

Demand for skills has been changing (focus on service sector; increasing need for work-related generic skills; etc) generating skills mis-matches as the supply of skills has still not adapted

CAUSES – Supply of Skills

Quality and relevance are the main constraints: Gaps in leadership skills, problem solving, foreign language,

and practical knowledge of the job Lack of relevance and responsiveness to labor market needs of

formal education (curriculum and pedagogical relevance) Low quality of skills training programs and growing but still

limited opportunities of skills upgrading in several countries

Quantity is not a central constraint at this point –with the exception of Vietnam and China But the still limited opportunities of skill development for the

unskilled may hinder the provision of sufficient skills as demand grows

Re-training needs in Indonesia and gaps in core skills in the Philippines

47.02

30.63

10.86

01

02

03

04

05

0


(average, by age group)

Share of staff in need of training

Under 30 Between 30 & 45 Over 45

0 5 10 15 0 5 10 15

Language

Literacy

Writing

Computer

Math

Communication

Independent work

Teamwork

Creativity

Problem solving

Leadership

Negotiation

Initiative

Time management

Literacy

Math

Teamwork

Writing

Computer

Language

Creativity

Independent work

Communication

Negotiation

Time management

Leadership

Initiative

Problem solving

Managers Prod/SalesGaps in Core Skills Gaps in Core Skills


Indonesia

Philippines

Skill rating in Vietnam, Thailand and Malaysia

Generic Skills

Very Good Good Partially satisfactory Unsatisfactory

Percentage of Managers Ranking Local Skilled Production

Workers as Having Poor Skills

0

10

20

30

40

50

60

70

80

90

100

Thailand Malaysia

Vietnam

Problem solving skills in Indonesia, Thailand and Korea

Problem Solving Scale Average Scores Percentage of Students in Top Scale

Variance in Problem Solving scale explained by parents occupational status

Variance in problem solving capabilities explained by parents' HISCED

Indonesia 361.0 0.0 10.2 2.8

Thailand 425.0 3.0 9 7.2

Korea 550.0 32.0 4.5 6.6

– PISA Scores, problem solving scale

Source: PISA 2003 Results, various tables

Relevance of secondary education to labor markets needs in the Philippines

Strengths / Weakness Secondary Schools Secondary Vocational Schools Non-formal Secondary Schools

Strengths Weakness Strengths Weakness Strengths Weakness

Cycle Length 12.6 5.5 10.2 9.6 8.1 11.6

Teaching Quality 11.1 8.1 10.7 8.8 9.5 10.3

Teacher Qualification 11.3 7.7 10.6 8.9 10.6 9.4

Facilities Quality 9.2 11.3 8.6 12.5 8.4 11.4

Curriculum Balance 11.3 7.7 9.9 10.2 10.0 9.9

Curriculum General 12.1 6.3 9.8 10.3 10.5 9.5

Curriculum Specific 9.3 11.2 11.6 7.2 11.4 8.6

LM Relevance 7.6 14.0 10.5 9.1 10.2 9.8

Industry Linkage 6.8 15.5 9.2 11.4 8.6 11.2

Cost 8.5 12.5 9.1 11.5 12.4 7.7

Other features 0.2 0.3 0.1 0.6 0.3 0.4

Source: Philippines Skills Survey

Firm training in EAP

All Skilled Unskilled Non-Production

Cambodia 22% … … …

China 85% … … …

Indonesia 24% 64.22 29.88 …

Malaysia 42%

Mongolia 47% 19.13 … …

Philippines 22% 26.59 13.04 …

Thailand 76% … … …

Vietnam 34% 45.19 28.37 27.88

Korea 57% 63.16 55.79 53.61

Percentage of firms offering formal training for permanent employees

Source: ICS

CAUSES – Labor Market

While labor markets regulations in EAP tend to be relatively flexible, some evidence of rigidities and segmentation:

– formal/informal (Indonesia, Philippines)– public/private sector (Vietnam, China)– across economic sectors (Philippines)

…but more analysis needed on wage/benefit determination and nature of segmentation

Limited recruitment practices - leading to small pools of qualified applicants - is also an issue in some countries:- see Vietnam and Indonesia

.17 .16

.082

.36

.47

.035

.087 .084

0.1

.2.3

.4.5

Source: Employee Skill Survey (2008)

Main method for finding a job

Newspaper ad Vacancy notice Internet Employer recommend.

Private network Employ service Via school / job fair Promot. within firm

0.3

0.2

0.10.0

0.5

0.8

0.0 0.10.1 0.1

0.2

0.1

.2.3

.4.5

.6.7

.8.9

1


(Share of affirmative responses)

Normal method for filling vacancies

Newspaper ad Vacancy posted outside firm

Internet Job fair

Recommend. by current employees Private networks

Public employment service Private employment service

Through recruiters Contact w. schools

Internal promotions

Employers and employees’ recruitment strategies in Indonesia

SOLUTIONS – Demand for Skills

Future trends in demand difficult to predict but higher supply of skills in some sectors may help drive demand up in the medium-long run

Most important: get better data on employment opportunities and skills in demand

– More use of tracer surveys– Develop career orientation services– Incorporate employer-employee employment and skill

modules in firm surveys– Extend firm surveys to service sector

SOLUTIONS – Supply of Skills

One size does not fit all –underlying policy and market failures are different requiring different actions…but there are some key principles:

Flexibility Diversity Demand-orientation Efficiency

Improve responsiveness of formal education system by: decreasing institutional rigidities (autonomy) facilitating further private sector entry (where it is still limited) developing school/university-industry linkages learning across education tracks


Support multiples paths to skill development: Overall:– Increase traditionally low financial support – Provide policy framework to address

fragmentation– Complete national qualification frameworks (see

skill standardization, testing and certification in China, Philippines and Thailand)


Non-formal education/second-chance: Set up Equivalency Programs (Philippines, Indonesia, Cambodia)

Skills training: Involve private sector Use skills training vouchers’ programs Consider Skill Development/Training Funds for firms (Thailand,

Malaysia, Singapore)

LLL out of the workplace: Set up more effective funding strategies (education savings accounts

for adult learners, learning tax credits, etc) More emphasis on life skills in curriculum (Japan, Malaysia)

SOLUTIONS – Labor Market

Be more innovative on strategies to find the right skills: diversified practices use more intensively existing employees by re-training or task re-

allocation/work sharing train and hire undergraduates – see DTS in the Philippines

Improve understanding on labor markets in EAP

Consider more intensive use of Active Labor Market programs – including job mediation services, job training, wage subsidies

Skills for Employability in East Asia Emanuela di Gropello Skills and Employability Workshop, June...

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Transcript of Skills for Employability in East Asia Emanuela di Gropello Skills and Employability Workshop, June...