Chapter 3. Strengthening the employability of Peruvian youth

Strengthening the capacity to reach out to young NEETs

The recent experience of several OECD-EU countries that have undertaken measures to widen the outreach activities of PES, with a view to strengthen the support provided to the most deprived low-skilled NEETs, would be beneficial for Peru to consider. This experience suggests the relevance of bringing PES services closer to the places where the NEETs meet. To this end, the European Network of Public Employment Services has proposed a strategy in four dimensions: i) Communication (disseminating information on PES offer); ii) Collaboration (building networks with partners); iii) Multichannelling (Providing new points of entry to PES through digital services); and iv) Low thresholds (One-stop-shops in easy access spaces) (EC, 2016 and EU 2015).

The practice to improve PES communication involves, among others, designating youth outreach workers and organising publicity campaigns. At the same time, the effectiveness of PES efforts to communicate with the NEETs could be strengthened by reinforcing the cooperation with the institutions that bring together young people. Intensive collaborations between PES, the schools and teachers, youth organizations and social activists can be instrumental to identifying school drop-outs and youth at risk of becoming NEETs. Examples of “detached” outreach models can be found in Sweden and UK, which have appointed ‘street marketers’ to provide direct street-based outreach to youth. Among the OECD countries, Italy and Norway have introduced innovative models of cooperation between PES and schools that help monitoring the attachment of young people to the labour market and enable early intervention. In addition, the Belgian Le Forem and German BIZ-mobil provide successful examples of multi-channelling, which uses a wide range of Information and Communication Technology (ICT) tools to advertise PES services and organize ‘low threshold’ PES units, capable of implementing out field campaigns in remote areas using mobile centres. These experiences are summarised in (Box 3.4).

Tailoring services better to specific needs

More could be done to gear the assistance currently provided by the Peruvian Employment Centre towards the specific needs of the most disadvantaged youth. For the main, counselling and advice rely on group workshops in Peru. Recent steps to enable Jóvenes Productivos to select training centres for the implementation of specified curricula and to facilitate the intermediation between youth and the firm sector go in the right direction. SOVIO offers access to personalised career guidance. These experiences could be used to inform the development of a new model of personal guidance, aimed at labour market integration of disadvantaged youth.

Greater capacity will be essential to deliver effective employment services

The implementation of personalised services on a larger scale will require the support of adequate measures to expand the number of PES offices, as well as staffing levels. In considering these measures, priority should be given to the most remote regions, where shortages in infrastructure and human resources are largest. Moreover, since the recruitment and the training of new staff to equip them with the skills needed to operate effectively may require some time, partnerships with private employment agencies could be a viable option to alleviate capacity constraints of the Employment Centre in the short- to medium-term.

To broaden the job opportunities for youth candidates, the Employment Centre should also increase the number of offers in the job bank. Analysis of the job bank and the posts available at the central web portal of PES shows that as of November 2017 there were no more than 6 500 vacancies. Moreover, most job offers are targeted at medium-skilled or high-skilled professionals with secondary or even tertiary education, which shows that PES does not provide many opportunities for the most disadvantaged low-skilled youth. As a way of upgrading the vacancy bank, private employers should be encouraged to place more job advertisements on the platform. To this effect, employers could be granted free access to the database of youth candidates in exchange for advertising vacancies on PES platform.

Strengthening the training component of youth ALMPs

Recent studies on ALMPs in Latin America have pointed to the positive impact of dual training-with-apprenticeship programmes on the probability for youth participants to find a job in the formal sector (Escudero et. al, 2017; OECD, CAF and ECLAC, 2016). These studies also show that much of the success of on-the-job training depends upon the capacity to engage the employer sector. Countries typically have a range of employment and/or wage subsidies in place to reinforce such an engagement and Peru is no exception. As part of Jóvenos Productivos, for example, the Peruvian business sector already participates in the design and implementation of training in close collaboration with the authorised training centres and the government.

Nevertheless, the evidence available is that firms in Peru make little use of the apprenticeship incentives provided to them. The factors behind this little traction include the obligation to use the tax benefits exclusively for employees listed in the electronic payroll system of the company. Since many youth candidates to become training apprentices do not have a job contract, they do not appear in the electronic payroll and therefore are not eligible for the tax benefit. In addition, the tax authority can apply considerable discretion when it decides which parts of the training expenses are eligible for the tax benefits. Given that this discretionary power is not precisely defined, firms prefer to err on the side of caution, which results in an underinvestment in training for fear of being declared ineligible for the benefit. 

Public work programmes to boost incomes and work experience

Besides providing income support, public works programmes have been argued to bring a number of other benefits (Subbarao et al., 2013). Because they provide individuals with work experience, they help maintain and/or improve skills and therefore promote labour force participation and more permanent pathways out of poverty than simple cash transfer programmes. They can be particularly helpful for groups at the margins of the labour market, such as women, youth and the low-skilled, and help them raise their bargaining power by guaranteeing work at the minimum wage rate and, therefore, enforcing a minimum wage rate on all casual work. Public works also tend to rely on self-selection as the primary targeting mechanism with the central parameter being the wage at which the work is rewarded. The wage for such programmes has to be set at a level low enough to attract only those in need of temporary work, but high enough to provide an adequate source of income.

In addition, public work programmes have a number of secondary benefits, including the creation of public goods and the promotion of social cohesion. In some countries, they have also been used for environmental (e.g. generation of water storage, afforestation, and compost generation) and social purposes (running child care centres, nursing homes, school kitchens, etc. see Lieuw-Kie-Song et al., 2010).

More recently, some programmes have also been moving beyond the mere provision of temporary work by providing training opportunities to prepare participants for possible longer-term employment, self-employment, or further education and training. The basic motivation behind this is to provide individuals with a more permanent pathway out of workfare and poverty. The type of training provided can include vocational training, basic skills training (literacy and numeracy) as well as entrepreneurship training. These considerations suggest that Trabaja Perù could benefit from a strong training component.

The supportive role of certification

In order to strengthen the labour market prospects of youth, on-the-job training experiences should be certified by an independent certification body. Recent work by Cahuc, Carcillo and Minea (2018) sheds new light on the effects of individual pathways with various forms of labour market experience for youth who have dropped out of high school. Building on information collected through a field randomized experiment (i.e. after sending fictitious résumés to real job postings), their results indicate that the likelihood of receiving a call-back from employers sharply improves when youth get a certification of their skills. Other pathways in the labour market without skills certification seem unable to improve the employment outlook of unskilled youth. Notably subsidized or non-subsidized work experience, either in the market or non-market sector, even for a few years does not significantly improve the chances to be contacted by employers compared with an unemployment spell of the same duration. These results suggest that accruing work experience, even in the market sector, is not always sufficient to get more frequently call-backs. Employment support measures, such as temporary jobs in the non-market sector or hiring subsidies in the market sector, should be conditional on getting a certification of skills at the end of the employment period, at least for previously unskilled youth.

Nurturing a monitoring culture

Developing an impact evaluation culture is also critical. One key challenge in Peru relates to the limited access to data and information on the outcomes of ALMPs; for example, information from randomized experiments about these outcomes are scarce in Peru. To fill this gap, the Ministry of Labour and Employment Promotion could build on the experience of the Ministry of Education, which launched MineduLAB in 2016. Working in partnership with regional arm of the Abdul Latif Jameel Poverty Action Lab (J-PAL LAC) and Innovation for Poverty Action Peru, MineduLAB is actively engaged in evaluating the effectiveness of innovative education policies to improve children’s learning in the country. To this effect, it makes extensive recourse to randomized controlled trial field experiments. A similar approach could be used to assess the performance of ALMPs.

Youth guarantees to re-engage NEETs in employment, education or training

Many OECD countries have recently committed themselves – through so-called “youth guarantees” – to providing all young NEETs with a suitable employment and/or educational offer, with a prominent example being the European Union’s Youth Guarantee scheme, introduced in 2013. It is meant to ensure that all young people under the age of 25 – whether registered with employment services or not – receive a good-quality offer of employment, continued education, an apprenticeship or a traineeship within four months of leaving formal education or becoming unemployed. Such initiatives can be a valuable tool to help improve young jobseekers’ employment prospects. Their success relies, however, on effective outreach to inactive and disconnected youth. The quality of options offered, moreover, is important, and solutions must be tailored to young jobseekers’ individual needs.

Improving the unemployment benefit system

As a short-term solution, Peru could consider strengthening the requirements for CTS withdrawals in the event of unemployment. For example, the threshold above which employees are allowed to withdraw 100% of the CTS funds could be raised to six monthly gross salaries from the current level of four monthly salaries. This means that the equivalent of at least six gross monthly salaries would have to be kept in the individual’s CTS account to prepare for the eventuality of unemployment, corresponding to an increase of 50% from today’s threshold. In addition, access to the core part of the CTS account could be made at least partly contingent upon the jobseeker’s active job search in the formal sector.

A more ambitious approach would involve re-designing the current unemployment insurance system possibly combining a system of individual saving accounts with a common solidarity fund and including elements that encourage job search. This two-tier approach could draw inspiration from the model set up in Chile. Under the first pillar, individual savings accounts for each worker would be financed by contributions from the worker and the employer in the case of open ended contracts, and only by the employer in the case of workers with atypical contracts. The second pillar would rely on the creation of a solidarity fund (Fondo de Cesantía Solidario in the Chilean UISA scheme), financed by the employers and from the government budget. Unemployed workers would only receive payments from the solidarity fund if their own savings are insufficient to cover their period of unemployment.2 Also, the number of payments from the solidarity fund would be limited – for example, payments can be withdrawn at most twice over a five-year period in the Chilean system.

On top of the inclusion of the solidarity fund, another salient characteristic that sets the Chilean model apart from other unemployment insurance systems in Latin America is the incorporation of a strong link to labour market activation (Sehnbruch and Carranza, 2015). For example, registration with PES is automatic under the Chilean UISA. This ensures that unemployed workers receiving insurance payments and made redundant for economic reasons benefit from preferential access to the vocational education and training programmes provided by the country’s national training and employment service. At the same time, insurance payments are contingent upon the worker’s acceptance of a place in the publicly provided vocational training programme. Similarly, the unemployed cannot decline without justification a job offer by PES that would have rewarded him an earning at least equal to 50% of the last earning.

A number of potential strengths of the Chilean UISA system could appeal Peru (Ferrer and Riddell, 2009; Huneeu, Leiva and Micco, 2012; Sehnbruch and Carranza, 2015):

• First, the combination between individual savings accounts with pooled risk sharing provides for a more adequate insurance against unemployment risks than the blend of CTS and severance pay.

• At the same time, the individual savings accounts help containing the risk of adverse selection typically stemming from the fact that only those workers likely to become unemployed contribute -- a situation that could lead to undermine the long term sustainability of the system. In fact, the prospect to defer the use of the deposits to after retirement, not only raises the attractiveness of the scheme to a much wider pool of contributors. It also generates an incentive to avoid falling in long-term unemployment since the individual has an interest to accumulate as much as possible funds to increase old-age income. Furthermore, the presence of strong mutual obligation requirements helps reducing concerns about moral hazard that characterise the traditional unemployment insurance systems.

• Finally, the findings of new analysis suggest that affiliation may support job quality. These results point to a small difference between wages prior and after the unemployment spell for workers affiliated to the Chilean UISA. It also finds no difference in contract types (Nagler, 2016).

In thinking about the implementation of a system modelled along the Chilean UISA, some decisions would have to be taken and policy makers will face some key implementation challenges. One challenge relates to the existing high level of turnover induced by the extensive use of temporary contracts in a context of strong labour market duality. The other challenge stems from the extent of the administrative and budgetary efforts required to implement effectively strong mutual obligation requirements in an economic environment characterised by a sizeable informal sector, which implies that abuses may be difficult to monitor. These considerations suggest that initially it might be more prudent to keep replacement rates relatively low and benefits durations short. From a broader strategic perspective, they underscore the importance of following an integrated policy approach that takes into account the policies discussed in Chapters 2 and 3. The policy insights of Chapter 2 precisely aim to reduce labour market duality. The previous sections of Chapter 3 provide useful insights as to how to improve the effectiveness of activation.

Targeting social assistance at NEETs who actively search a job in the formal sector

The Peruvian government could also take steps to better gear the provisions of social assistance to the needs of jobless youth who, reflecting their very short, or even lacking, work histories, do not qualify for the unemployment benefits. Implementing a mean tested Jobseeker Allowance (henceforth JA) that provides financial support to unemployed persons not eligible for any kind of benefits, could represent a desirable option. A salient feature of a JA scheme is that, as a counterpart to the unemployment subsidy, candidates would be mandated to register with PES and to engage intensely in job search. Beneficiaries would not be in a position to reject suitable job offers.

Conceived in this way, the JA scheme is very similar to the non-contributory component of the Chilean UI system. However, qualification criteria are typically less restrictive since they do not require an earlier work history, implying that first-time job seekers can also apply for benefits. The scheme can thus be particularly appealing for attracting Peruvian NEETs into labour markets. Since the costs of implementing the JA on a universal scale can be significant, it could exclusively target the NEETs as a way of containing the expenses.

An alternative solution would involve subordinating access to existing social assistance transfers (i.e., Juntos) to the effort to actively search for a job. Obliging capable members of families receiving the subsidy to register with PES and to participate in activation could be a viable way to motivate youth to search for a job. Roughly 10% of Peruvian NEETs, i.e. 180 000 youth, live in households entitled to the Juntos transfer. At the same time, Peru could also use Juntos as a tool to reward achievements. For example, the Chilean programme Ingreso Ético Familiar (Ethical Family Income provides an extra support to beneficiaries who have integrated the formal sector after obtaining an educational degree (See Box 3.6 for details).

Using ICT to leverage the development of social protection

ICT can provide a useful support to the development of social protection transfers. For example, it can facilitate the identification of individuals registered with PES and at the same time are beneficiaries of welfare programmes. This could help conditioning the transfer of unemployment benefits on active participation in PES services.

Recourse to systems of unique identification number and unified contribution collections has been marked across LAC countries. The establishment of Brazil’s database Cadasdro Unico dates back to 2001. It was built on the initial data collection efforts for Bolsa Família (the flagship Brazilian cash transfer programme) and now covers more than 20 million households and is used to coordinate several different social safety programmes. Chile’s Integrated System for Social Information (SIIS) is an ICT platform conceived to link many databases belonging to public entities through the internet. SIIS is often cited as one of the most advanced example of integrated data management across the social protection sector and beyond (Barca and Chirchir, 2014). In Peru, the civil identification system, Reniec, allows social security services to reach out to remote populations in the Andean and Amazonian areas and to indigenous communities (Reuben and Carbonari, 2017). The benefits of these practices to the population are visible in terms of reduced fragmentation of services and reduced administrative costs and errors. At the same time, the administrations gain in terms of improved data exchanges across institutions and reduced abuses.

Overall, these advantages mean that ICT can play an important role to help strengthening institutional coordination of the system of social protection. Yet, the digital divide remains strong in Peru, where 34% of NEETs still declared non-use of the internet in 2016. Increasing access to an affordable digital infrastructure, especially in remote rural areas, is a key to strengthening regional development and improving the integration of disadvantaged youth into labour markets. An intermediate solution that could ease the lack of access to the internet, while at the same time attracting youth to PES, could be through promoting the wider dissemination of toll-free kiosks with PC terminals in the regional offices of Employment Centre.

Higher school enrolment and educational attainments but low quality education

Over the past decade Peru made remarkable progress in terms of school enrolment and educational attainments. UNESCO data show that the country is well on the way to creating a highly educated labour force. With 21% of population aged 25 and over holding a tertiary degree, and 35% holding an upper-secondary degree, Peru outranks many countries from both LAC and OECD regions in terms of human capital endowments (Figure 3.10). At the same time, youth attain systematically higher educational levels than their peers did not long ago. With primary schooling being virtually universal today, 80% of adolescents continue education at a secondary level and nearly 35% of youth aged 18-21 enrol in post-secondary education. Consequently, more youth than ever before are graduating from tertiary level educational institutions.

Figure 3.10. Shares of population by educational attainments

As a percentage of the total population aged 25 and over

Note: Low-skilled refers to education lower than upper level secondary school; Medium-skilled refers to education lower than a bachelor equivalent tertiary degree; High-skilled corresponds to a bachelor equivalent tertiary degree or higher. OECD is an unweighted average of 35 countries. LAC is an unweighted average of 11 countries (two OECD Member countries and nine Non-Member countries). Data refer to 2016.

Source: UIS database.

Despite the improvement in enrolment and schooling attainments, there is still scope to enhance the quality of the educational system in Peru. The OECD Programme for International Students Assessment shows that Peruvian high school students not only lag far behind their counterparts from the best performing countries, but also score systematically worse than students from other LAC countries participating in the survey. The share of Peruvian pupils who in the latest edition of the test achieved one of the top two proficiency levels (level 5 or 6) in any of the three core competences, i.e. reading, mathematics or science, is negligible (Figure 3.11). Roughly one in two Peruvian students scored below level 2 in all three subjects, which means that almost half of the 15-year olds were unable to solve even simple tasks requiring straightforward reasoning. The small share of top performers combined with excessively high proportion of low achievers places Peru at the bottom of the international comparison, suggesting that the schooling system does not provide students with the basic foundation and cognitive skills that are commonly taught in schools.

Figure 3.11. Top performers in reading, mathematics and science, 2015

Percentage of students reaching the two highest levels of proficiency (5^th and 6^th)

Note: The OECD Programme for International Student Assessment (PISA) tests literacy in three core competences: reading, mathematics and science. Assessment of literacy is based on a 1 000-point scale based on levels of proficiency. PISA proficiency levels range from 1 to 6, where, higher levels correspond to the knowledge, needed to perform tasks of large complexity; middle proficiency levels represent skills allowing drawing adequate inferences and apply simple inquiry strategies; and lower levels stand for ability to address simple problems using straightforward reasoning. For more details, see PISA 2015 Technical Report (http://www.oecd.org/pisa/data/2015-technical-report/).

Source: OECD Programme for International Student Assessment (PISA) 2015.

Gaps in proficiency accrued earlier in the lifecycle are likely to be transmitted to higher stages of education and to take a toll on working careers in adulthood. Without addressing issues undermining quality of both elementary and secondary level education, successful decent tertiary level education becomes more difficult. Yet, deficiencies in educational background of students are only one of the many challenges facing tertiary education in Peru. As referred to in Chapter 1 (Box 1.1), one of the country’s biggest problems lies in the relatively uncontrolled increase of privately owned post-secondary educational institutions -- itself rooted in the approval of Law N° 882, better known as “Law to promote investment in Education” of 1996. There is a growing concern that the significant expansion of tertiary education that has been achieved has not been matched by a parallel increase in service quality (Espinoza and Urzua, 2015). Many of the privately owned institutions provide skills of little relevance and low marketability, which undermines the value of tertiary education and likely affects the returns to education.

According to the OECD Skills Strategy Diagnostic Report the reasons behind this situation are manifold (OECD, 2016a). Firstly, the growing number of private schools has led to relax admission requirements, in turn lowering the average skill levels of students. Secondly, the limited availability of university professors and lecturers has accentuated the reliance on part-time teaching agreements, with staff originating from external educational institutions. This might have led to a deterioration of both the quality of teaching provided and courses content (OECD, 2016a; Castro and Yamada, 2013). Furthermore, financial incentives driving the choice of private university curricula imply that the programmes offered are highly concentrated in a few fields of study, mostly revolving around Business and Finance (Figure 3.12).

Figure 3.12. Top 30 fields of study in Peru, 2016

Students enrolled

Note: Students enrolled at University and Non-University institutions on the left axis; percentage of all students enrolled at private universities on the right axis. Non-University institutions refer predominantly to VET.

Source: OECD calculations from ENAHO 2016.

Figure 3.13 depicts the level of mismatches for graduates specific to broadly defined fields of study, distinguishing between education completed at University and Non-University institutions (which mainly refer to VET programmes). The results clearly show that University education significantly enhances the capacity of students to find an adequate job than education obtained from Non-University institutions. Furthermore, for some of the disciplines reviewed, the labour market appears to be particularly competitive, which reduces the space available to graduates for finding jobs closely corresponding to their educational background. These comprise the broad category of Business and Administration, which ranks high in students’ preferences, as well as Life Sciences and Humanities and Arts. While graduates of sciences, i.e. Mathematics, Physics and Chemistry, have the highest propensity to be matched to job in terms of qualification, they typically find employment in segments that do not closely correspond to their field of specialization.

Figure 3.13. Incidence of skill imbalances by field of study in Peru

Note: Imbalances are estimated for individuals aged 15-35 with finished University and Non-University degree.

Source: OECD estimates based on OECD Skills for Jobs Database, 2018. Data are from ENAHO 2016.

Sluggish demand for high-skilled labour

Compared to 2005, when the low-skilled occupations accounted for roughly two-thirds of total employment, and jobs for medium- and high-skilled comprised together merely one-third of the market, progress towards creating opportunities for highly educated workforce has been visible in Peru. However, roughly half of jobs available in the labour market were still at the low skills level in 2016, requiring at most lower secondary education (Figure 3.14). Jobs for middle-skilled workers with education corresponding to upper-level secondary school constituted around 35% of the market, while some 15% of jobs were related to positions demanding tertiary education.

Comparing the labour market’s occupational structure with the educational profiles of the labour force shows that the speed of the increase in the demand for skills in Peru has not been enough rapid to match the increase in supply. Less than two million high skilled jobs provided, corresponding to 16% of the labour market, are far too few to accommodate around three million tertiary educated workers, representing about 25% of the labour force. Conversely, the demand for over five million low-skilled workers, roughly 50% of all jobs in the market, significantly exceeds the labour force with exactly adequate qualification level.

By limiting the capacity of the Peruvian productive sector to accommodate the rise in the supply of skilled workforce, the observed strong concentration of jobs in low added value activities plays a major role in explaining the qualification mismatch in Peru. It may also explain the reversal in the trend of educational wage premium that the country has recently experienced. Closing this gap will likely require more than just skills policies. It will require the support of a broader set of policies to move towards a path of economic diversification, capable of generating new productive employment opportunities for Peruvian youth.

Figure 3.14. Evolution of skill demand and supply in labour market in Peru

Note: Skill supply and demand is derived following the methodology used for the skills for job indicators. Supply of skills is an aggregate sum of workers by skill level: low-skilled refers to education lower than upper level secondary level; medium-skilled refers to education lower than tertiary degree; high-skilled corresponds to a tertiary degree. Demand for skills is an aggregate sum of occupations by skill level: low-, medium- and high- skilled occupations are those where the most common (modal) educational level of workers is low, medium and high respectively.

Source: OECD calculations based on OECD Skills for Jobs Database. Data are from ENAHO 2005-2016.

Assessing professional shortages and surpluses

The new methodology for the OECD Skills for Jobs Indicators also allows gauging the professions where labour shortages, or conversely surpluses, are most pronounced. Box 3.8 provides a detailed description of the indicators.

Applying the analysis of the occupational needs indicator to Peru reveals that the set of professions currently needed by the country’s labour market is very heterogeneous. Many low-skilled positions continue to prevail among the occupations that are in short supply. At the same time, there is evidence that demand is increasing for a number high-skilled professions that require a high level of specialisation that does not leave much space for substitution with graduates from a different field of study.

Figure 3.15 presents results of the analysis for a set of selected occupations. One area where the emergence of middle-skills professional needs appears now to be strong in Peru is that of personal care -- including, child care workers and teachers’ aides, as well as personal health care workers, for example. A number of relatively low-skilled occupations also are in growing demand, probably driven by the expansion of certain service activities, particularly in urban centres. These include currier and delivery workers, for example, workers employed in waste collection and recycling, as well as meter workers for the checking and recording of gas, electricity and water consumption. The dynamism of all these occupations appears supported by the same drivers, namely the emerging tensions in the corresponding wage and employment patterns. At the same time, working hours have been lengthening for these occupations during the recent past.

Key examples of highly qualified professionals for which the Peruvian labour market is expanding include the medical professions (doctors, dentists, pharmacists and nursing professionals) and Information and Communications Technology (ICT) specialists (OECD, 2018). Both wages and employment have been steadily growing in the past years for the medical professions, which can suggest that difficulties to attract talent in the Peruvian medical sector are growing. Similarly, ICT professionals, such as software and applications’ developers, database and network administrators, appear to be in short supply. This appears again revealed by the observed increase in both wages and employment during recent years.

Interestingly, the results of the OECD’s Skills for Jobs Database also suggests that business and administration professionals, including finance and administration specialists as well as sales, marketing and public relations professionals, are among the occupations experiencing a significant surplus in the Peruvian labour market. There is evidence of a decrease in employment and hours worked, accompanied by unstable wages for these professions -- a pattern probably compounded by technological progress and growing digitalisation in a number of service sectors. These changes in demand conditions may help explaining current growing evidence of field-of-study and qualification mismatches among graduates in business and administration (Figure 3.13).

Numerical and material recording clerks, accounting and bookkeeping clerks, finance, insurance and payroll clerks, as well as material recording and transport clerks face similar challenges -- possibly a result of some of these jobs being increasingly automated. Automation may also be taking a toll among a range of low skilled professions such as plant and machine operators and assemblers whose wages and hours worked have been decreasing consistently, as well as food processing workers who have experienced a reduction in employment.

Figure 3.15. Occupational needs for selected groups of professionals, 2016

Note: Higher value of indicator signals higher occupational need. Positive values stand for occupational shortage, negative for occupational surplus. Values of the indicator as such do not have direct interpretation. Occupational categories correspond to ISCO08 codes aggregated at 2 digits level.

Source: OECD estimates based on OECD Skills for Jobs Database, 2018. Data are from ENAHO 2016.

Supporting better education and career choices and delivering evidence-based policy making

The Diagnostics recognises the progress made by Peru to create the institutional capacity to produce the indicators necessary to implement evidence-based skills policies. However, it also underlines that as in many OECD countries, challenges persist for ministries to make full use of indicators to inform policy making. Moreover, students in Peru, on average, do not have the information they need to make informed field of study and career choices, especially as the upper-secondary education system has become increasingly complex and somewhat opaque.

Web portals, such as the Ponte en Carrera observatory (which collects relevant and quality information on educational offerings and labour market demands), and other instruments such as SOVIO should be strengthened to provide students with information about available study options and professional career paths after graduation (see also Ministerio De Trabajo y Promoción del Empleo, MTPE, 2018). In line with the findings of the Section in this Chapter devoted to activation, the Diagnostic concludes that workers and job seekers could make better use of labour market information, if it were more accessible. As a promising initiative, Proyecta tu Futuro (Project your Future) aims to accompany the youth in the search of a vocational study or training and to provide job orientation.

Furthermore, skills assessment and anticipation exercises – such as those already conducted in a number of OECD countries – could be developed in Peru to provide guidance on future skills demands, thereby mitigating the incidence of skills shortages and mismatches. In addition, a regular assessment framework would allow tracking progress towards the achievement of policy objectives. For example, stronger monitoring would help addressing the issue of the low quality of tertiary education institutions in Peru to ensure that universities meet the expectation of students as well as international standards. The University Law enacted in 2014 created the conditions for a stronger process of quality assurance of tertiary education in Peru. The creation of SUNEDU (Superintendencia Nacional de Educacion Superior Uviversitaria), whose mandate is to monitor the quality of services provided by universities, marked a key step towards addressing issues. Notwithstanding this progress, the problem of low quality of post-secondary educational institutions is still widespread, in particular in the VET sector. In 2016 Peru has passed the Law on institutes and schools of higher education (including VET), which aims to ensure quality across programmes and providers. Supporting further the efforts to evaluate the quality of tertiary education is indispensable to improve the supply of adequate skills.

Improving co-ordination to achieve better skills outcomes

Peru could improve its skills outcomes by strengthening horizontal collaboration among different ministries and vertical collaboration across different levels of government. Many ministries and authorities in Peru have an impact on the development, activation and use of skills, but systems of inter- ministerial collaboration are relatively underdeveloped. The Diagnostic recognises the initiatives recently undertaken by the Ministry of Labour to foster collaboration across ministries that have a stake in skills. These include the launch of three sector skills committees in the areas of sanitation services, construction and tourism. Sustaining this dialogue and transforming it into co- ordinated action will be critical for the long-term success of such initiatives.

In addition, the Diagnostic emphasises the crucial role played by the co-ordination among different levels of governments. In many cases, more than one level of government has responsibility for the same policy area, with unclear division between national, regional and local levels. This issue is particularly visible in the case of education. To achieve a more efficient decentralisation, the capacity of regions and local authorities should be strengthened to allow for a more thorough implementation of place-based policies with the goal of reducing regional and urban-rural disparities in skills outcomes.

Building partnerships to ensure that policies are responsive to changing skills needs

To improve countries’ performances in the development, activation and effective use of skills, governments must foster collaboration and co-ordination among the various actors with both a stake in, and an influence on, skills outcomes. Stronger partnerships can increase the relevance of skills developed in VET and higher education. According to the Diagnostic Peru’s VET system is characterised by the existence of strong sectorial schools, which are designed to respond to the skills demand of specific economic sectors, and a weaker public and private system for the rest of the economy. Engaging firms in the co-design and running of training programmes in non-sectorial schools would ensure a better alignment between the skills developed and labour market demands.

At the same time, corroborating the findings of this chapter’s section devoted to activation policies, the Diagnostic stresses that employers should play a more active role in the design and implementation of ALMPs. Their involvement in training and activation programmes would enhance the skills quality and relevance of those still searching for jobs and build up a ready-to-use talent pipeline. A more active participation of employers in skills assessment and anticipation exercises would ensure better alignment between skills supply and demand. Partnerships between higher education institutions and the private sector could ensure that local demand for highly skilled workers is met by a relevant tertiary education offering. Partnerships between academia and the private sector could help knowledge dissemination and foster a more productive use of academic researchers’ skills. Engagement with the Socio-Economic and Labor Observatories (OSEL) could also be helpful to provide local labor market information to end users (Ministerio De Trabajo y Promoción del Empleo, MTPE, 2018).

Complementary policies to support the demand of quality jobs for youth

Higher levels of skills enable the introduction of new products, while also ensuring that workers can adapt more quickly to the technological and organisational transformations required by the transition towards a more diversified economy. However, important as they are, the policies to support the supply of qualifications and skills will not alone be enough to boost youth employment in Peru. As the evidence provided in this section shows, policy makers will also need to factor in the essential role played by the complementary policies to sustain strong economic growth and to improve the country’s record on the creation of quality jobs.

This means maintaining the focus on a broad mix of macroeconomic policies, combined with addressing a range of structural weaknesses that have to date prevented economic growth from being more diversified and inclusive. Many of the policies that could set Peru on such a growth path -- fuelled by technological progress and the diffusion of added-value activities, capable of generating a stable demand for new, more productive and better qualified jobs -- pertain to areas that are beyond the scope of this report. In addition, they must include the actions to bring down structural labour market barriers that affect the willingness and ability of employers to hire youth (Chapter 2). Activation policies and social protection systems will also need to be strengthened, as discussed in this Chapter, given the key role they play in providing an adequate safety net for youth who are out of work.