The role of the private sector in skills development

Evidence suggests that the provision and access to skills is unequal across different contexts. Marginalised groups are less likely to be able to access skills. Also, gender stereotypes may limit access to skills development, with women and girls being worst affected. Globally, 3 billion people are under 25 years of age, with almost 90 per cent living in developing countries. A large and youthful workforce can drive economic development and play a significant role in social development. To escape poverty, people need better-paying jobs and more employment opportunities. Human capital must be strengthened as skills influence employment and earning potential.

These are just a few of the issues addressed in a new Skills Topic Guide. Skills can be broadly defined as competencies gained from experiences during and after childhood, especially through education. Basic level skills are needed to get a job or acquire further skills. High level skills may be referred to as talent.

Another key area of focus of the Topic Guide was the role of the private sector in skills development. In the 1950s and 1960s, governments in developing countries were encouraged to invest in skills development. The public funding of skills development was believed to be necessary to compensate for limited private capacity. This approach largely failed, as supply did not match demand. Such inefficiencies of the public sector, led to a shift of focus towards the private sector being involved in skills development.

The involvement of the private sector in skills provision may be informed by stakeholder motivation, whether this be to increase productivity or profit, a desire to secure a skilled workforce or to deliver corporate social responsibility. Private companies may be involved in training, funding or sharing knowledge with workers. Also, the skills training institute may be private. The private sector can also strengthen skills development by contributing to governance through national committees or other institutional arrangements. The private sector can help identify demand for skills, feed into curricula development, deliver monitoring and evaluation activities, as well as managing public training institutions.

In many contexts public technical and vocational education and training (TVET) budgets are regarded as vulnerable and unreliable. To make up the shortfall, TVET may require financing through the private sector. This may include skills training being paid for through the contributions of beneficiaries, including employers and trainees. The private sector may have better knowledge of market demands for skills. In addition, private sector partners may have access to resources and capital to ensure programmes are successful.

In Asia, investment from the private sector has driven rapid economic transformation. Such investment in Africa has focused on the exploitation of natural resources, which does not always improve the skills base of the population. It has been argued that in some contexts official development assistance may reduce private investment in skills, shifting the focus to low impact regulatory reforms.

A successful skills development programme, which involves the private sector, is likely to involve a level of participation from employers in their design and operation. Skills developed should be recognised or where possible certified. Buy-in and engagement from employers will be essential. It must be recognised that the level of involvement of the private sector in skills development will depend on the capacity of the country in question. Where there is a lack of existing public-private cooperation, intensive public-private partnerships may be appropriate.

Stephen Thompson – Research Officer, HEART, Institute of Development Studies