Tackling youth unemployment and building economic resilience through skills training
- December 21, 2022
- By Livia Alfonsi, Vittorio Bassi, Imran Rasul and Elena Spadini
Nowhere is the youth unemployment challenge more keenly felt than in sub-Saharan Africa, where over 60 per cent of the population is below the age of 25 and the number of unemployed was increasing by 1 million every year even before the outbreak of the pandemic, mostly due to youth failing to enter the labour market [1, 2]. The urgency of tackling youth unemployment in sub-Saharan Africa has intensified since the pandemic, which pushed over 4.9 million workers and their families into extreme poverty .
We summarize the results of a field experiment we conducted in Uganda to evaluate the impact of skills training in facilitating the transition of youth into the labour market. The experiment was carried out pre-pandemic, but we followed-up with our sample after the onset of COVID-19, allowing us to also study the role of skills training in building resilience to the crisis.
An experiment in the Ugandan labour market
We collaborated with the NGO BRAC Uganda to conduct our field experiment. In 2012, BRAC advertised vocational training scholarships across the country. To be eligible to apply, individuals had to be below the age of 25, out of school and economically disadvantaged. There were more eligible candidates than available scholarships, so we randomized applicants into three groups: the first group was offered vocational training (VT), the second group was offered firm-provided training through apprenticeships (FT), and the third group was held as control.
The VT offer included a scholarship to attend six months of training at a partner vocational institute. The training was sector-specific and workers could select among vocations that are in high demand in Uganda, such as motor-mechanics or hairdressing. Upon completing the training, the workers obtained a skills certificate. The FT offer involved paying a subsidy to firms to hire and train the worker for six months. On-the-job training was provided at the firm and was sector-specific. No training certificate was issued in the FT arm.
The baseline survey and randomization took place in 2012 and the training programmes commenced in 2013. We followed up with the workers every year until 2016, using these three rounds of follow-up survey data to evaluate the impacts of the VT and FT interventions on skills and labour market outcomes during normal economic times .
Both programmes resulted in substantial gains in sector-specific skills
In the follow-up surveys, we tested the skills of workers in all treatment arms through a written sector-specific skills test. We find that the two training tracks resulted in similarly large gains in the trainees’ sector-specific skills, corresponding to an increase of around 0.4 standard deviations over the control group. In short, both VT and FT proved effective at generating productive human capital.
Labour market gains were short-lived for apprenticeships, but long lasting for vocational training
When averaged over the three years post-intervention, both VT and FT resulted in positive and significant impacts on labour market outcomes. Workers in the FT group experienced a 14 per cent increase in the probability of employment over the control group, and workers in VT saw a 20 per cent increase.
However, exploring the dynamics of impacts over time reveals a striking finding: gains for the FT group were short-lived while they were long lasting for the VT group. Impacts for the FT workers materialized quickly, reflecting the initial placement in firms and the fact that some workers were retained upon completion of the training. Yet these early gains diminished over time, and by the end of the follow-up period, FT workers’ employment rates resembled those of the control group. On the other hand, the gains for the VT group progressed slowly but were long lasting, with no sign of diminishing by the end of the study period. These dynamics, illustrated in the figures below, reveal that the effects averaged over the post-intervention period conceal a remarkable reversal of fortune between the workers in the two tracks. We find similar dynamics when looking at total earnings.
Mechanisms: the role of labour market mobility
We find that labour market mobility played a key role in explaining the reversal of fortune between VT and FT workers. Whenever VT workers lost their jobs, they were able to jump back into employment much faster than FT workers and the controls. Instead, when FT workers became unemployed, they were no more successful than control workers in finding new employment.
Labour market mobility played a key role in explaining the reversal of fortune between vocationally trained and firm trained workers.
The fact that only VT workers’ skills were certified may explain these results: when unemployed, VT workers were able to use their certificate to prove to employers that they possessed skills; on the other hand, the higher skills of FT workers counted for little during bouts of unemployment, since they lacked a credible way of demonstrating their skills to employers.
Long-run impacts and resilience to COVID-19 lockdowns
We followed up again with the sample of workers assigned to VT and the control group in three more survey waves in late 2020, late 2021 and early 2022. In the 2020 and 2021 waves, we asked workers to report on their labour market outcomes before, during and after the recent lockdowns.
On long-term impacts pre-pandemic, we find that vocational trainees still reported better labour market outcomes in early 2020, i.e. before the onset of the crisis. That is, vocational training still had a positive effect over 7 years after completion of the training. Vocational trainees were still 14 per cent more likely to have their primary job in a skilled sector and reported 15 per cent higher earnings from wage- or self-employment (as opposed to casual work).
On impacts during the pandemic, we find that vocational trainees were hit hardest during the lockdowns, possibly because they were more likely to work in small-scale trades and services sectors directly affected by the lockdowns. However, vocational trainees also recovered faster after the lockdowns were lifted, meaning that vocational training continued to have positive impacts on labour market outcomes throughout the pandemic. Our data again indicate that labour market mobility played a key role in explaining the positive impacts of vocational training during the pandemic: vocational trainees were more likely to move to different firms after each of the two lockdowns.
Our results provide new insights on the significance of investing in human capital in developing countries to tackle youth unemployment and build resilience to macroeconomic shocks such as COVID-19. Intensive formal vocational training provided at institutes can be a cost-effective means to improving the labour market outcomes of youth, with such impacts being sustained over several years and through a period of heightened economic uncertainty.
Our findings also highlight that human capital alone is not sufficient. Making sure that workers have credible means to demonstrate their skills to potential employers is essential to fully reaping the benefits of human capital investment and ensuring that youth can transition to productive employment. Therefore, programmes targeting both human capital accumulation and skills certification are likely to be the most promising avenue.
This piece is based on a research paper which benefited from the work of Oriana Bandiera, Robin Burgess, Munshi Sulaiman and Anna Vitali.