23, July, 2013

From Supply- to Demand-led: Labour Training in Latin America

Latin America’s approach to labour training programmes changed dramatically in the 1990s, shifting from a supply-driven to a demand-driven model. Many of these programmes have been rigorously evaluated, yielding useful lessons for other regions.

Over the past two decades, most Latin American countries began to see the need to reform their labour training systems. Up until this time, traditional training in Latin America had been supply-driven, with large-sized public sector institutions providing training based on what they perceived was needed within a state-led industrial development framework. Graduates of these training institutions were supposed to be absorbed by the emerging industrial sector. However, this model broke down during the crisis-ridden 1980s, as the firm-size structure of the economy shifted dramatically towards smaller firms and the informal sector grew exponentially. The response in the 1990s was a demand-driven approach, where the state had a role in financing, but much less so in providing training. A host of programmes along these lines were implemented across Latin America, many of which included built-in impact evaluations.  This Brief begins by describing general features of the shift to a demand-led approach to labour training and highlights some of the main programmes in the region.  It then presents the results of the impact evaluations undertaken, concluding with some key lessons that may be useful for labour training initiatives in other contexts.

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Key Lessons:

  • The market mechanisms of the demand-driven model have encouraged competition among training institutions and the creation of a market for training in cases where none existed previously. Key elements for the success of these programmes are in the design: private sector participation in consultations during the design phase; competition promoted on the basis of relevance, quality and cost-efficiency; and a clear mechanism to link training to a future job, such as through internships.
  • Although measured impacts are hardly homogeneous, some clear patterns emerge across countries and programmes. In particular, impacts on job quality - through formal sector employment and higher wages - seem more likely than on employment rates alone.
  • Interestingly, impacts among women are both more frequent and larger than for men. This indicates that these programmes may play an important role as policies orientated to reduce gender gaps in the labour market.

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