LABOR MARKET CHALLENGES:
AND HOW TERTIARY EDUCATION SYSTEMS CAN RESPOND
Claudia Costin
Senior Director
Education Global Practice
14 May 2015
Structure of the Presentation
1. Economic Developments: ECA and Globally
2. Changes in Skills Demand and Supply
3. How can Tertiary Education and Institutions respond?
a. The Wider Reform Agenda
b. Supporting Employability and Labor Market Transition
Developments
Demand-side
Supply-side
Universities
Strong GDP and productivity growth in early 2000s
Real GDP growth and labor productivity (2000-2007)
Percent (annual average)
Percent (annual average)
8
50,000
45,000
7
40,000
6
35,000
5
30,000
4
25,000
20,000
3
15,000
2
10,000
1
5,000
0
0
ECA
LAC
Real GDP growth (annual average, percent)
EAP
OECD (Europe)
OECD (Non Europe)
Real GDP per capita growth (annual average, percent)
GDP per person employed (US$ at PPP, 1990)
Source: World Development Indicators (WDI);
World Bank (2014), Back To Work: Growing with Jobs in Europe and Central Asia
3
Developments
Demand-side
Supply-side
Universities
But GDP and productivity growth slowed down
due to crisis
Real GDP growth and labor productivity (2008-2012)
Percent (annual average)
Percent (annual average)
8
50,000
7
45,000
6
40,000
5
35,000
4
30,000
3
25,000
2
20,000
1
15,000
0
10,000
-1
5,000
-2
0
ECA
LAC
Real GDP growth (annual average, percent)
EAP
OECD (Europe)
OECD (Non Europe)
Real GDP per capita growth (annual average, percent)
GDP per person employed (US$ at PPP, 1990)
Source: World Development Indicators (WDI);
World Bank (2014), Back To Work: Growing with Jobs in Europe and Central Asia
4
Limited employment creation in ECA pre-crisis…
Developments
Demand-side
Supply-side
Universities
…due to weak relationship between economic and employment growth
140
Employment growth, 2000=100 (2000-2012)
135
130
125
120
115
110
105
100
95
90
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
ECA
LAC
EAP
OECD (Europe)
Source: Authors’ calculations based on ILO and WDI.
Notes: ECA = Europe and Central Asia (Transition economies , and Turkey) ;
LAC = Latin America and the Caribbean; EAP = East Asia and Pacific.
OECD (Non Europe)
Developments
Demand-side
Supply-side
Universities
As a result, the region is missing out on its
human capital potential to spur growth and welfare
Average years of lost employment for an individual, circa 2010
35
30
25
6
6
6
7
Turkey
7
7
Macedonia
Latvia
6
4
6
Moldova
Ukraine
3
Croatia
5
ECA
6
Romania
5
Poland
6
Lithuania
EU
4
Bulgaria
Slovenia
5
LAC
Czech Republic
5
Estonia
7
4
Kyrgyzstan
5
ASIA
5
4
OECD
5
3
5
4
Azerbaijan
10
Russia
15
6
Tajikistan
20
6
7
25-34
35-44
45-54
55-64
Serbia
Hungary
Armenia
Slovakia
Georgia
Kazakhstan
0
Female total
Source: World Bank (2014), Back To Work: Growing with Jobs in Europe and Central Asia
6
Demographic trends put added pressures
on productivity and growth
Developments
Demand-side
Supply-side
Universities
ECA Countries: Change in 15+ Population 2010 - 2030 (%)
Older workers will
outnumber youth due to:
Aging, Low Fertility,
and Out-migration
“Younger” countries also
face demographic pressures:
Out-migration, youth bulge,
and long-run aging
Source: World Bank (2014), Back To Work: Growing with Jobs in Europe and Central Asia
7
Structure of the Presentation
1. Economic Developments: ECA and Globally
2. Changes in Skills Demand and Supply
3. How can Tertiary Education and Institutions respond?
a. The Wider Reform Agenda
b. Supporting Employability and Labor Market Transition
Globally, skills demand is shifting
towards “New Economy Skills”
Developments
Demand-side
Supply-side
Universities
(non-routine cognitive and interpersonal skills)
Employment Composition (simple cross country average by type of occupation;
2000-2012)
OECD countries
60
Developing countries
60
Share in total employment (%)
Share in total employment (%)
50
50
40
30
20
10
40
30
20
10
0
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Non-routine cognitive or inter-personal
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Non-routine cognitive or inter-personal
Routine cognitive or manual
Routine cognitive or manual
Non-routine manual
Non-routine manual
Source: WDR 2016 team, based on ILO KILM data. Skills classification follows Autor (2014).
9
Developments
Demand-side
Supply-side
Universities
Youth are, overall, adjusting better
to the shift in skills demand
Czech Republic, Cohort born before 1955
Czech Republic, Cohort born 1975-1984
70
New Economy
Skills
Routine
cognitive
50
Manual Skills
60
Mean Skill Percentil of 2002
Skills Distribution
Mean Skill Percentil of 2002
Skills Distribution
60
70
New Economy
Skills
Manual Skills
40
40
30
30
2002 2003 2004 2005 2006 2007 2008 2009 2010
Routine
cognitive
50
2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: World Bank 2014 “Back to Work”, based on LFS.
10
But not all education systems
prepare youth adequately
60.0
50.0
Developments
Demand-side
Supply-side
Universities
Too many youth fall behind in basic cognitive skills
% of 15-year olds who are functionally illiterate, scoring “below level 2”
on PISA Reading Test 2012
40.0
30.0
OECD Average = 18 percent
20.0
10.0
Kazakhstan
Albania
Montenegro
Bulgaria
Romania
Serbia
Cyprus
Slovak Republic
Russian Federation
Lithuania
Slovenia
Hungary
Croatia
Latvia
Czech Republic
Poland
Estonia
Mexico
Chile
Israel
Sweden
Greece
Luxembourg
Turkey
Iceland
Italy
Austria
France
Portugal
Spain
United Kingdom
United States
New Zealand
Norway
Belgium
Denmark
Germany
Australia
Netherlands
Switzerland
Finland
Canada
Japan
Ireland
Korea
0.0
ECA
OECD, non-ECA
Source: WB Staff calculations using OECD PISA 2012.
11
Relative to other obstacles, skills have become
a more severe constraint to business
Developments
Demand-side
Supply-side
Universities
Source: World Development Report 2013
12
And the demand for skills may be changing
even more: Skills for which jobs?
Developments
Demand-side
Supply-side
Universities
By 2030, 2 billion jobs will be automated…
Source: Frey and Osborne 2013
Probability that occupation will disappear:
HIGH: Tax Preparers, Watch Repairers,
Insurance Underwriters, Telemarketers
MODERATE: Shoe and Leather Workers and
Repairers, Massage Therapists, Commercial
Pilots, Teacher Assistants
LOW: Mathematicians, Floral Designers,
Emergency Medical Technicians and
Paramedics, Editors
13
Structure of the Presentation
1. Economic Developments: ECA and Globally
2. Changes in Skills Demand and Supply
3. How can Tertiary Education and Institutions respond?
a. The Wider Reform Agenda
b. Supporting Employability and Labor Market Transition
Tertiary education responded – and will continue
to respond – through rapid expansion
Developments
Demand-side
Supply-side
Universities
Projections of the number of 25-34 year-olds with tertiary
education, 2005-2030
Note: Figures are estimates based on available data. Population estimates are based on OECD’s annual population projections
Source: OECD, UNESCO, and National Statistics websites for Argentina, China, India,
Indonesia, Saudi Arabia and South Africa
15
Developments
Demand-side
Supply-side
Universities
And the expansion of the 2000s has paid off
for individuals and economies
Evolution of average wage premia for tertiary education in the 2000s,
Salaried workers, Age 25-64
average return to college
initial value
90%
80%
70%
60%
50%
40%
30%
20%
10%
TUR
HUN
POL
LTU
ROM
LVA
MKD
ALB
GEO
RUS
SVN
BGR
EST
CZE
ARM
TJK
0%
KGZ
Returns to College Education
100%
Source: Back To Work: Growing with Jobs in Europe and Central Asia (2013).
16
Tertiary education can be a powerful engine of
productivity and growth
Knowledge
Skills
Competences
Highly
Proficient
Graduates
Developments
Demand-side
Supply-side
Universities
Skills
for
Innovation
Tertiary
Education
Institutions
Productivity
and
Growth
Research
Basic and
Applied
Research
Technology
Transfer
“Third
Mission”
17
Economic growth is important –
but so are social benefits
Higher education attainment
Citizenship building
Citizens’ Awareness
Tolerance
Health/Longer life
Environmental Consciousness
Developments
Demand-side
Supply-side
Universities
But tertiary education does not always work
as a system of connected actors
Developments
Demand-side
Supply-side
Universities
Employers
(skill users)
Companies
(research
users)
HEIs and
Training
providers
Tertiary
Education
Institutions
Earlier
education
Research
Institutions
19
Developments
Demand-side
Supply-side
Universities
20
Making connections through policies
POLICY PILLARS
TO ADDRESS
Developments
Demand-side
Supply-side
Universities
DISCONNECTS
Employers
(skill users)
Financing
Management
Stewardship
STRONGER
INCENTIVES
Companies
(research
users)
HIGHER
CAPACITY
Research
Institutions
BETTER
INFORMATION
HEIs &
Training
providers
Earlier
education
21
How can financing policy improve
incentives and capacity?
Developments
Demand-side
Supply-side
Universities
Identify priority activities for public spending
 Employability, research, STEM, equity, internationalization…
Fund effectively
 Increase public resources
 Improve efficiency of public funding (selectivity, incentive)
 Complement with private funds (transparent, fair and
equitable system of fees and loans; matching grants)
 Develop appropriate mechanisms (performance-based
financing, performance contracts)
22
Tertiary education financing remains inequitable
Developments
Demand-side
Supply-side
Universities
In many ECA countries less well off students pay
Expenditure on educational institutions as a percentage of GDP (2011)
Public and Private Sources
Note: Public expenditure only (for Switzerland, in tertiary education only; for Norway, in primary, secondary,
and post-secondary non-tertiary education only)
Source: OECD, Education at a Glance 2014, Table B2.3
23
How can institutions be improved
through incentives and information?
Developments
Demand-side
Supply-side
Universities
Support more autonomous and accountable institutions:
 Align academic, managerial and financial autonomy
 Strengthen governing bodies
 Functions, representativeness
 In particular more voice to employers
 Improve internal quality assurance and flow of information
 Agreed performance indicators
 Tracking graduates
 Nurture linkages to environment (industry and other employers,
community…)
 Provide incentives for collaboration
24
Developments
Demand-side
Supply-side
Universities
Better governance on system level:
Aligning regulations, information, financing, and QA
 Clear and efficient regulation (be aware of excessive and
undifferentiated regulation)
 Agreed learning outcomes laid down in National
Qualifications Framework
 Information to include indicators of academic, research
and labor market performance and to be available to all
stakeholders
 Financing policy to reward performance and efficiency
 Effective external and internal quality assurance
 Strengthen coordination within and across ministries and
with stakeholders
25
Structure of the Presentation
1. Economic Developments: ECA and Globally
2. Changes in Skills Demand and Supply
3. How can Tertiary Education and Institutions respond?
a. The Wider Reform Agenda
b. Supporting Employability and Labor Market Transition
26
How can tertiary education support
employability and labor market transition?
Developments
Demand-side
Supply-side
Universities
Universities (and countries) can improve employability and labor
market transition, for example, through:
1. Stronger focus on employability and entrepreneurship in curricula
and institutional set-up
2. Bridging Programs
3. Collect information (e.g. tracking graduates) and use for steering
Countries can support these structures and activities at the national
level and support a more diversified institutional landscape.
No matter what type of institution:
Employability of students is key
Developments
Demand-side
Supply-side
Universities
It can be ensured through:
 Clearly established learning outcomes (National Qualifications
Frameworks – NQF; Tuning Project, etc.)
 Involvement of employers and other stakeholders (NQF, curricula
development, practical aspects of studies, teaching)
 Curricula need to fit envisaged generic and technical learning
outcomes
 “Skills not just diplomas” - in addition to generic and
technical/professional skills, development of
competences/“attitudes”
 Practical placements, internships
 Career guidance
 Information on labor markets and career perspective before,
during, at the end of tertiary education
28
Focus on employability example:
University of Aberdeen
Developments
Demand-side
Supply-side
Universities
“Our promise
What we provide:
 Support and guidance with planning your future.
 Attractive and relevant courses with a focus in building
attributes sought by employers.
 Advice on finding work experience.
 A wide selection of volunteering opportunities.
 Help with CV building and making effective job applications.
 The possibility to study abroad as part of your degree.
 A record of your achievements in your enhanced student
transcript when you graduate.”
Source: http://www.abdn.ac.uk/study/about/career-prospects-142.php
29
Bridging programs
Developments
Demand-side
Supply-side
Universities
Bridging Programs provide accelerated, focused learning
opportunities to help relatively less prepared students acquire
knowledge and skills needed for tertiary education success.
 Often provided in the summer months (but can be longer)
 Intended to build skills and competences
 May be general (e.g. programs about studying at university) or
specific (e.g. math and science bridge program)
Source: Based on National Center for Postsecondary Research, NCPR Brief, July 2012
30
Bridging program example:
World Bank ROSE Project
Developments
Demand-side
Supply-side
Universities
The Romania Secondary Education (ROSE) Project (2015-2022)
includes a competitive grant scheme to finance summer bridge
programs.
 Tertiary-level campus-based summer courses will be offered
to 8,000 upper secondary students
 160 bridge programs will be offered
Source: World Bank, 2015, Romania – Secondary Education Project
31
Tracer studies provide empirical basis for
addressing TE to work transition issues
Developments
Demand-side
Supply-side
Universities
Survey
School
Studies
Working life
Source: Puettmann, V., Graduate Tracking in Europe, Tbilisi – December, 2013
32
Tracer study example: The Graduate Survey
Cooperation Project (Germany)
Developments
Demand-side
Supply-side
Universities
Institutionalization
• Coordinated by the International Centre for Higher Education Research Kassel (INCHER) since
2007
• INCHER provides advice to participating institutions, processes the data and aggregates them
into a database
Approach and Methods
• Yearly study surveying all graduates of the participating institutions 1.5 years after graduation
• Panel study with graduates 4-5 years after graduation
• Common core questionnaire that allows for additions by the participating institutions
Information
• Study path and assessment of courses and study conditions
• Detailed information on employment
• Assessments of the relationship between education and employment
Features
• The average response rate for both parts of the study has been around 50 %
Source: Puettmann, V., Graduate Tracking in Europe, Tbilisi – December, 2013
33
How tracer studies inform
tertiary education policies
Developments
Demand-side
Supply-side
Universities
To decide which programs to
To assess program
offer; and how many graduates effectiveness—whether programs
to enroll to fill available jobs
provide relevant skills for students
related to the program.
to succeed after they graduate.
Data from
Graduates
To help students make
informed choices about which
programs to enter.
To contribute to the
program/institutional quality
assurance process.
Source: Puettmann, V., Graduate Tracking in Europe, Tbilisi – December, 2013
34
Some countries use tax data as a basis for
tracking: “Mi Futuro” – My future (Chile)
Developments
Demand-side
Supply-side
Universities
Informs about 700 professional and technical programs from
almost 180 institutions, accounting for more than 90 percent of
the current graduates (there are over 12,000 programs):
 Income and income dispersion at 4 years after graduation
 Likelihood of employment during first year after graduation
 Information about the careers: enrollment, graduation rate,
drop out rates, duration of the studies, fee ranges and
accreditation status of the institutions and its programs
35
Combining information and placements:
AlmaLaurea (Italy)
Developments
Demand-side
Supply-side
Universities
Founded in 1994, Alma Laurea is a university-based consortium,
supported by the Ministry of Education in Italy.
 Graduates are monitored for five years, beginning just before
graduation
 Goals:
1. Assessment of Tertiary Education system
2. Labor market insertion
 Graduates are encouraged to update their information for
future job prospects
For further review: visit http://www.almalaurea.it
36
Summary
 Tertiary education is an important driver of productivity and growth;
however on the system and institutional level, more can be done to
ensure a better labor market connect.
 There are numerous disconnects in the tertiary education system
that constrain its potential.
 Improving finance, management, governance can help strengthen
connections.
 This needs to be coupled with specific measures targeted at better
employability (tracer studies, observatories, etc.).
 This could become an important policy area for the next phase of
the Bologna Process.
37
Senior Director
Education Global Practice
Claudia Costin
ccostin@worldbank.org
38