Recent evidence offers reasons to be a little more optimistic about job training and intermediation programmes, but there remain some reasons for caution
Governments around the world face significant pressure to help jobseekers, prompting a closer look at the effectiveness of job training and job search support programmes. Early evaluations of government-run programmes found rather small impacts, fueling initial skepticism (McKenzie 2017). However, recent years have seen innovations in how job training and job search programmes are designed, targeted and implemented. In our new paper (Carranza and McKenzie 2024), we examine new evidence and outline lessons from recent experiences in developing economies. So, what do impact evaluations now tell us about the effectiveness of such programmes?
Large-scale government job training programmes have limited effects on employment and earnings
Skills training programmes are designed to provide new skills and experience and are predominantly focused on youth and the unemployed. A new meta-analysis, expanding upon McKenzie’s (2017) sample, finds an average impact on employment of 4 percentage points—with a 95 percent confidence interval between 2 to 6 percentage points—and on earnings of 8.2%—with a 95 confidence interval between 2 to 14% (Agarwal and Mani forthcoming). These average impacts align closely with those observed in high-income countries, providing hope that job training can be done better.
However, these effects appear particularly muted when implemented at-scale by governments. Figure 1, below, compares meta-analysis estimates (the vertical lines) with individual estimates from five experimental evaluations of government vocational training programmes that trained at least 5,000 people in a year. The estimated effect on employment is 2 percentage points or lower in these programmes, half that of the meta-analysis average impact of 4.0 percentage points. There is more variability in the impact in earnings, but five out of the seven reported estimates also fall below the meta-analysis average impact of 8.2%.
Figure 1: Impacts from large-scale government vocational training programmes on employment and earnings
In small-scale studies, often of programs run by NGOs (e.g. Alfonsi et al. 2022), large effect sizes are common, reflecting challenges in maintaining training quality and meeting employer needs at scale. Negative effects may also arise if numerous new jobseekers, all trained in the same skills, compete with one another for a fixed supply of jobs, resulting in time away from the labour force if they hold unrealistic earnings expectations and search for jobs only in the areas in which they are trained. Moreover, apparent changes in earnings in percentage terms are often relative to very low bases, meaning that impacts need to last for many months to pass cost-benefit tests.
Policy efforts to improve the effectiveness of training programmes has shifted towards demand-driven content and private sector delivery over traditional public institutes. Yet, simply relying on private sector training providers may be insufficient. While privately-run courses may have greater short-term impacts compared to government-run programmes, this advantage disappears over time (Hirshleifer et al. 2016). Innovations such as results-based contracting which link provider payments to the trainee employment outcomes hold promise (Attanasio et al. 2017). Nonetheless, many governments still struggle with result measurement and implementation capacity.
Subsidising job search to alleviate spatial frictions has positive yet temporary impacts, while skill signaling interventions to help reduce information frictions can have more lasting effects
Even if workers have the skills that employers want, they may encounter difficulties finding suitable job matches, particularly in fragmented and largely informal labour markets where spatial and informational search frictions are pervasive. This might be especially true for young workers without much experience who may hold unrealistic expectations. Recent experimental evaluations in developing countries show potential for interventions that help jobseekers to search in new locations, correct biased beliefs, and better signal their skills.
Figure 2: Shorter- and longer-term impacts of transport subsidies and skill signaling interventions
Supporting workers in exploring new areas within a city via transport subsidies has yielded positive albeit short-term effects, as highlighted in Figure 2, due to high commuting costs and frequent job turnover (Franklin 2018, Abebe et al. 2021, and Banerjee and Sequeira 2023). However, larger impacts are possible if subsidies facilitate migration, enabling the accumulation of networks and assets that sustain access to new labour markets. Addressing biased beliefs among jobseekers, especially young individuals with inflated reservation wages and those who search narrowly, requires delivering credible information—an obstacle for many public employment offices. Conversely, enabling jobseekers to showcase their skills through testing, certification, and reference letters produces longer-lasting impacts, mitigating employer concerns about worker capabilities (Abel et al. 2020, Bassi and Nansamba 2022, Carranza et al. 2022).
Even if jobseekers know where and how to look for jobs, and can credibly signal their skills, behavioural and psychological factors can still hinder job search intensity and success rates. Although this field is relatively new, interventions such as job search action plans that help jobseekers address the so-called “intention-behavior gap”, as well as initiatives targeting conscientiousness and counteracting high discount rates and impatience among workers have also shown promise, resulting in higher employment and reduced job turnover (Abel et al. 2019, Allemand et al. 2023, Abel et al. 2022).
Most policy efforts to encourage jobseekers to use online platforms have not significantly increased employment
In principle, online job platforms offer a solution across various fronts: reducing search frictions by agglomerating job information, helping workers more cheaply find out about jobs in other locations, and potentially matching workers with jobs in other sectors that they might be qualified for, as well as offering online testing and verification of skills. Large private sector jobs platforms indicate that many firms and jobseekers indeed see some value. However, developing country governments typically lack a comparative advantage in setting up and maintaining jobs portals over time, and may be limited in the types of jobs they can post for legal reasons. Moreover, policy efforts to encourage jobseekers to utilise existing online platforms have generally failed to significantly impact employment.
Figure 3: Impacts from interventions encouraging workers to register and utilise job platforms
Figure 3 presents findings from recent randomised experiments employing nudges to prompt a treatment group to start using an existing platform. Four interventions had minimal or even negative impacts on employment (Afridi et al. 2022, Jones and Sen 2022). One explanation may be the low take-up of encouraged services by jobseekers and employers. Jobseekers’ initial overestimation of the platform’s job prospects may delay adjustment of their reservation wages (Kelley et al. 2024). Programmes may need to be better targeted at marginal disadvantaged jobseekers and offer job-readiness training (Wheeler et al. 2022), or address employers’ low trust in workers outside their usual networks (Fernando et al. 2023).
How might these policies be implemented more effectively and where is the role for government?
Overall, the recent evidence offers some reasons to be a little more optimistic about some training and intermediation programmes than perhaps was the case five to eight years ago. But there remain plenty of reasons for caution. The modest average impacts of vocational training and short-lived impacts of job search assistance suggest that skill deficiency is unlikely to be the sole obstacle to employment or increased earnings for most programme participants, and that boosting labour demand by increasing firm productivity remains important.
However, there has been recent progress in how job training and job search programmes in developing countries are designed and implemented. More and more, efforts to improve training and job intermediation services work closely with labour demand and not just labour supply, improving programme impacts. Moreover, large effects for certain subsets of jobseekers imply that working to identify how best to target and select participants into these programmes is a key area for both policy improvement and learning. Similarly, for lasting impacts, jobseekers must learn something more fundamental about the way the labour market works, causing them to change where they look and what types of jobs they look for, and changing beliefs and reservation wages. Furthermore, efforts to provide workers with ways to certify and signal the skills they have in a credible manner can change how the labour market sees them, when education systems do not provide good signals.
Still, should governments get involved in providing job training and search assistance rather than leaving it to the private market? We believe that governments can play a real, if more limited, role in providing these programmes. For example, government action may be warranted when private firms are underinvesting in worker training due to the possibility workers will leave. Similarly, search and matching frictions slow down or prevent the reallocation of workers across sectors and geography that are critical for structural transformation. They can also mean inefficiently high rates of job turnover, which can be costly for both workers and firms. So, efforts to improve match quality may increase labour productivity. Furthermore, governments may wish to be involved for social mobility and equity reasons, to help disadvantaged jobseekers find jobs. Finally, effective policy needs solutions tailored to localities, sectors and jobseeker-types along with good data systems. Much more public investment in improving data systems is needed.
Editor’s note: For a deep-dive into barriers to search and hiring in urban labour markets, see also our recent VoxDevLit on this topic.
References
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Abel, M, R Burger, E Carranza, and P Piraino (2019), "Bridging the Intention-Behavior Gap? The Effect of Plan-Making Prompts on Job Search and Employment", American Economic Journal: Applied Economics, 11(2): 284-301.
Abel, M, R Burger, and P Piraino (2020), "The Value of Reference Letters: Experimental Evidence from South Africa", American Economic Journal: Applied Economics, 12(3): 40-71.
Abel, M, E Carranza, K Geronimo, and M Elena-Ortega (2022), "Can Temporary Wage Incentives Increase Formal Employment? Experimental Evidence from Mexico", IZA Discussion Paper no. 15740.
Afridi, F, A Dhillon, S Roy, and N Sangwan (2022), "Social Networks, Gender Norms and Women’s Labor Supply: Experimental Evidence Using a Job Search Platform", IZA Discussion Paper no. 15767.
Agarwal, N and S Mani (2023), "New Evidence on Vocational and Apprenticeship Training Programs in Developing Countries", forthcoming in the Handbook of Experimental Development Economics (U Dasgupta and P Maitra, Eds.).
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