Latin America has the world’s biggest skills gap. Apprenticeships could close it

Latin America holds a promising richness: youth. A quarter of its 163 million people are aged between 15 and 20. With such a huge working age population, Latin America has a massive demographic bonus, especially in comparison to ageing Europe and Asian countries such as Japan.

The challenge is to transform the concept of “working age population” into “talent” and “human capital”. That’s not yet happening. On the contrary, about a fifth of Latin America’s young people – or nearly 30 million individuals – are “NEET”, either not employed or not engaged in education or training. When they are working, about half are in the unregulated, “informal” labour market.

As the world is looking to address the various effects linked to the Fourth Industrial Revolution, the “war for talent” is intensifying, with regions like China and South East Asia competing to develop ever-higher skilled workers. By contrast, Latin America’s talent has not taken off. In the 2017 edition of the Global Talent Competitiveness Index, the INSEAD and The Adecco Group annual ranking of countries based on their ability to develop, attract and retain talent, the highest Latin American country featured is in 34th position – Chile. And the lowest ranked, Venezuela, brings up the rear in 105th out of 118 countries ranked globally.

As the Global Talent Competitiveness Index reveals, the region betrays two consistent weaknesses: informal work and a lack of vocational and technical skills, amid a high overall skills shortage.

Focusing on skills, the good news is that education has made strides, particularly over the past decade. But growth has not always been coupled with stronger links to the labour market. Fewer than one in three young Latin Americans aged between 25 and 29 have college, university or higher technical school educations. Many leave school too early: one-third do not complete their secondary education. Even where technical and vocational education is available, training seldom focuses on pertinent, high-level trade, technical, professional or management skills. In fact, the region shows the world’s widest gap between the available pool of skills and those demanded by firms – creating a major challenge in transitioning to a knowledge-based economy.

The longer an individual remains marooned in the NEET category, the lower the chances of building further skills and the higher the loss of human capital and tax revenues to the economy. A corollary is the spiralling importance of lifelong learning, but according to the World Bank Enterprise Surveys, only 44% of companies train employees.

A first step to fighting the informal labour market requires simplifying and untangling overly complex, highly bureaucratic labour regulations and standards, which in most Latin American countries stifle economies and innovation.

The focus on appropriate regulation for labour markets, enhancing both competitiveness and ensuring workers’ rights, needs to shift to the top of the political agenda of every country. A host of measures taken in countries with well-functioning labour markets should also be applied in Latin American countries. Best practices such as Denmark’s flexicurity system show how regulatory frameworks can provide protection and flexibility at the same time.

Active employment policies that promote training and upskilling, and stimulate entrepreneurship, including active tax policies and schemes to reduce high labour costs, show positive results when applied. A greater recognition of the role of agency work spurs employment opportunities for youth. Data shows 40% of young people who start working with private employment services transition to a permanent position with the client company. Finally, countries with improved links between private and public employment services see efficiency and quality gains for the benefit of workers and companies.

A well-tested path to tackle skills shortages is apprenticeships. The evidence consistently shows that lack of work experience is the main obstacle for young people wanting to join the labour market. Countries that have long established apprenticeship models have low youth unemployment rates, demonstrating their success. Youth unemployment in Switzerland is just 3.5% and in Germany it stands at only 6.5%. Both have traditions of governments, education systems and employers working hand in hand to shape professional profiles and create the right skills for the labour market, triggered by the needs of employers. They keep pace with changes in technology, work practices and market dynamics. And they combine the classroom with workplace training so young people acquire relevant skills via apprenticeships.

That is what the Global Apprenticeship Network (GAN) aims to do. Its members include leading global companies like The Adecco Group, Accenture, Hilton, Nestlé, IBM, Samsung Electronics, Telefónica and UBS. Recognizing that even the best models for youth employability programmes can’t always just be replicated, GAN focuses on creating national networks to rally local partners.

Latin America is a natural focus area for GAN. In the past two years, we have been able to rally key partners to launch GAN National Networks in Mexico, Argentina and Colombia – with a clear ambition to take the benefits of the apprenticeship model to other countries in the region.

Building on the support of these private sector partners, paired with the commitment of the country offices of the ILO, the OECD and the International Organisation of Employers, we strongly encourage more partners, both local and global, to join the movement.

GAN is the best example of action-led commitment, translated into a successful public-private cooperation, which builds on the global scope of the issue and the necessity to act locally. It is driven by the belief that only by working together will it be possible to build the workforce the region requires, considering the needs of businesses and addressing the skill requirements of young Latin Americans.