Link skills funding to labour market outcomes, suggests World Bank expert

16 Aug 16

Public funding for skills development initiatives should be tied to the programme’s labour market outcomes, the director of strategy and operations at the human development practice in the World Bank has said.

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Employees at work on a construction site

Employees at work on a construction site

 

Speaking at Sri Lanka’s first Human Capital Summit yesterday, Amit Dar said governments should use performance-based financing for programmes intended to match a population’s skills to demand in the economy.

“Currently, nearly all public funding [in this area] is input based,” he pointed out. “A shift in this relationship – towards financing linked to outputs/outcomes – will be critical to make training more relevant for labour market needs.

“Singapore has, for example, established mechanisms which link financing of the training system to measures of labour market outcomes, thereby incentivising institutions to pay particular attention to the needs of the industry.”

Dar said that skills development is increasingly important for all countries’ competitiveness in a global economy that requires advanced and flexible skills, and a work force that can adjust to both domestic and global shifts in the economy.

A workforce with the right skills can be more productive, enabling a faster-growing economy and enhanced job creation, he continued.

He highlighted that in countries like Sri Lanka employers say that the quality and supply of skilled labour is the third-most significant constraint on company growth.

“The other side of this coin is that skills are essential both to reduce poverty and improve personal wellbeing,” he added, pointing to evidence that cognitive, social and technical skills affect wage premiums, earnings, employment and occupation status.

As well as making use of performance-based financing, an effective skills development strategy should start its work in the first few years of life, he recommended, and introduce literacy and soft skill development in schools.

Both government and the private sector have a critical role to play, he continued.

But government should avoid expanding its role in provision, Dar said, and instead explore innovative public-private partnerships and help establish an industry-driven, flexible training system.

Employers need to have a voice at the policy-making table and be involved in decision making at an institutional level, he stressed. 

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