Solving Latin America’s skills crisis
IN 1961 a 16-year-old youngster, with only primary schooling and experience as a shoe-shiner and warehouse assistant, enrolled to train as a lathe operator on a course at Brazil’s National Industrial Training Service (known as SENAI). For Luiz Inácio Lula da Silva, it proved to be a life-changing step: subsequent jobs at metal-bashing companies led to him becoming a trade-union leader and eventually his country’s president.
Half a century ago, SENAI and its counterparts across Latin America offered the poorer and less educated a route to upward social mobility, while providing the skills that new industries demanded. Now the region faces a little-noticed skills crisis. New technology is changing work everywhere. In Latin America a lack of people who know how to harness that technology is slowing its diffusion, says a new report by the Inter-American Development Bank (IDB). In surveys, a growing number of employers complain that they can’t find qualified workers. Already hampered by slower productivity growth than in East Asia, the region risks falling further behind.
It has made big strides in expanding education. Today, primary schooling is almost universal, and three out of four children are enrolled in both pre- and secondary school. Over 40% of the relevant age group get some higher education. Unfortunately, Latin American students don’t learn enough: international tests show that many can’t perform basic maths and language tasks.
These shortcomings—and the need to fix them with better teachers and a longer school day—have become a staple of the policy debate in the region. Yet focusing just on education leaves out most Latin Americans who are adults and are already in the workforce. Sadly, most have little chance to acquire the skills they lack.
Latin America’s labour markets are characterised by high job turnover, low pay and meagre investment in skills both by firms and workers, according to the IDB. Manufacturing firms in the region are as likely to train their workers as those in East Asia. Yet overall, only around 10% of Latin American workers receive some training each year, compared with around half in developed countries, according to a study last year by the Inter-American Dialogue, a think-tank, and Laureate International Universities. Most workers are in small service businesses, such as restaurants, that have little incentive to train them.
All this means that a young adult’s future can be determined shortly after leaving school: a study in Chile found that workers with secondary education saw their wages rise by almost 20% over seven years if they were employed in a large manufacturing firm, while in a small service firm they rose by only 6%.
Not surprisingly, those with less education tend to be in worse jobs, often in the informal economy. So the deficiencies of the education system and lack of opportunities for training interact to reinforce inequality and low productivity. Yet governments are doing little to prevent many of their citizens from being thrown on this human scrapheap.
Skills training in the region is an ill-thought-out patchwork. National training institutes, such as SENAI, continue to exist in many countries. They are financed by payroll taxes (to the tune of 0.3% of GDP in Colombia, Jamaica and Panama, for example). They mostly train workers at large firms. Many private training centres do a similar job.
Several countries have youth-training programmes involving subsidised internships at firms. These seem to work, but are limited in scope. Less common are apprenticeship schemes. A shining exception is Weg, a Brazilian company that is one of the world’s biggest makers of electric motors. Its training school at its biggest factory, at Jaraguá do Sul, takes on some 200 young people for a course of up to two years that combines daytime shop-floor exposure to mechanics and electronics with night school. They are paid a wage and are guaranteed a job. The payoff for Weg is that its workers stay an average of seven to eight years.
Apprenticeships apart, when it comes to training, policymakers have much less evidence than in education as to what works and what doesn’t, says Julián Messina of the IDB. Few training programmes have been evaluated. Rectifying that is a first step. The second is to draw up a comprehensive skills-development system, in close collaboration with employers, perhaps borrowing some ideas from Germany. For those who need to, such a scheme should include more incentives to return to school. It should never be too late for Latin Americans to acquire the skills they lack.