»Education to. Employment: Designing a System that Works. McKinsey Center for Government - PDF

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»Education to Employment: Designing a System that Works McKinsey Center for Government Education to employment: Designing a system that works Authors 3 authors Mona Mourshed Diana Farrell Dominic Barton

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»Education to Employment: Designing a System that Works McKinsey Center for Government Education to employment: Designing a system that works Authors 3 authors Mona Mourshed Diana Farrell Dominic Barton Visit our website: mckinseyonsociety.com/education-to-employment Join the conversation on #mcke2e 6 a teacher Education to employment: Designing a system that works Contents 7 08 introduction Two crises, one paradox 14 Executive summary 22 chapter one a congested highway 1.1 Critical intersection 1: Enrolling in Postsecondary Education p Critical intersection 2: Building Skills p Critical intersection 3: Finding Employment p40 56 chapter two Learning by example: Stories of success 2.1 Enrollment p Building Skills p Finding a job p72 82 chapter three creating a new system 3.1 Improving the odds of success p Scaling Up Success p91 98 ENDnotes 102 Bibliography 104 appendices 8 introduction Two crises, one paradox 10»In Japan, an estimated 700,000 young people, known as hikikomori, have withdrawn from society, rarely leaving home. In North Africa, restless youth were at the vanguard of the demonstrations that toppled governments in Egypt and Tunisia. In the United States, the stillfaltering economy has been so difficult on Generation Y that there is even a television show, Underemployed, about a group of 20-something college graduates forced into dead-end or unpaid jobs. It is a comedy, but of the laughter-through-tears variety. Education to employment: Designing a system that works Two crises, one paradox 11» These examples hint at two related global crises: high levels of youth unemployment and a shortage of people with critical job skills. Leaders everywhere are aware of the possible consequences, in the form of social and economic distress, when too many young people believe that their future is compromised. Still, governments have struggled to develop effective responses or even to define what they need to know. Worldwide, young people are three times more likely than their parents to be out of work. In Greece, Spain, and South Africa, more than half of young people are unemployed, and jobless levels of 25 percent or more are common in Europe, the Middle East, and Northern Africa. In the Organisation for Economic Co-operation and Development (OECD) countries, more than one in eight of all 15- to 24-year-olds are not in employment, education, or training (NEET). 1 Around the world, the International Labour Organization estimates that 75 million young people are unemployed. Including estimates of underemployed youth would potentially triple this number. 2 This represents not just a gigantic pool of untapped talent; it is also a source of social unrest and individual despair. Paradoxically, there is a critical skills shortage at the same time. Across the nine countries that are the focus of this report (Brazil, Germany, India, Mexico, Morocco, Turkey, Saudi Arabia, the United Kingdom, and the United States), only 43 percent of employers surveyed agreed that they could find enough skilled entry-level workers. This problem is not likely to be a temporary blip; in fact, it will probably get much worse. The McKinsey Global Institute estimates that by 2020 there will be a global shortfall of 85 million high- and middle-skilled workers. If young people who have worked hard to graduate from school and university cannot secure decent jobs and the sense of respect that comes with them, society will have to be prepared for outbreaks of anger or even violence. The evidence is in the protests that have recently occurred in Chile, Egypt, Greece, Italy, South Africa, Spain, and the United States (to name but a few countries). The gap between the haves and the have-nots in the OECD is at a 30-year high, with income among the top 10 percent nine times higher than that of the bottom 10 percent. 3 In order to address youth unemployment, two fundamentals need to be in place: skill development and job creation. This report focuses on skill development, with special attention to the mechanisms that connect education to employment. Clearly, employers need to work with education providers so that students learn the skills they need to succeed at work, and governments also have a crucial role to play. But there is little clarity on which practices and interventions work and which can be scaled up. Most skills initiatives today serve a few hundred or perhaps a few thousand young people; we must be thinking in terms of millions. Why don t we know what works (and what does not) in moving young people from school to employment? Because there is little hard data on the issue. This information gap makes it difficult to begin to understand what practices are most promising and what it will take to train young people so that they can take their place as productive participants in the global economy. One way of looking at this is to think about where school-system reform was a dozen years ago. Before 2000, policy makers, educators, parents, and students had little understanding of how to improve school systems, or how school systems across the world performed in comparison with one another. 12 in sales Education to employment: Designing a system that works Two crises, one paradox 13 That changed with the creation of the Program for International Student Assessment (PISA). Administered through the OECD, PISA tested the abilities of more than 300, year-olds across 42 countries. 4 The results were groundbreaking. Finland and Canada proved to have the bestperforming systems in reading in that initial test. Then PISA went a step further, collecting detailed and wide-ranging data on educational practices by country. This allowed nations to assess which interventions were successful across the board and which were dependent on the context of specific systems. School-system reform is still a work in progress, but with good information in hand, countries have a foundation from which to build. With regard to education to employment, there is nothing comparable to PISA. There is no comprehensive data on the skills required for employment or on the performance of specific education providers in delivering those skills. Existing data is limited and cannot be compared across countries. This was a major challenge in compiling this report; another was the heterogeneous and fragmented nature of job-training systems. Skills training takes many different forms and is provided by many different stakeholders, including vocational schools, universities, companies, industry associations, and local and national governments. Multiple entities are involved in government alone, responsibility typically is shared among education, labor, and industry departments. No one has a bird s-eye view of the whole process. Trying to develop an understanding of education to employment, then, is akin to comparing apples to cherries, even within the same country. To build a knowledge base, we studied more than 100 approaches in 25 countries. As a result, we have developed a truly global perspective on what characterizes successful skills-training systems. To build a strong empirical base, we also surveyed more than 8,000 young people, employers, and education providers in the nine countries that are the focus of this research. The education, employment, social, and political systems of these nine countries span a wide spectrum. We observed, however, that certain preferences and practices pertain across borders. By studying these commonalities and outcomes, we were able to define global segments of young people and employers in much the same way that consumer-product companies define segments of different kinds of shoppers. We began to see which attitudes and behaviors mattered most. This analysis is central to the way we came to understand the issue, and it represents a new way of thinking about how to address the twin crises of joblessness and the skills shortage. The journey from education to employment is a complicated one, and it is natural that there will be different routes. But too many young people are getting lost along the way. This report, the first of its kind for McKinsey, is not the last word on the subject. We believe, however, that it is a good start in beginning to fill the knowledge gap and thus provides a useful road map for the future. 14 executive summary 16 Seventy-five million youth are unemployed Half of youth are not sure that their postsecondary education has improved their chances of finding a job* Almost 40 percent of employers say a lack of skills is the main reason for entry-level vacancies** Around the world, governments and businesses face a conundrum: high levels of youth unemployment and a shortage of job seekers with critical skills. How can a country successfully move its young people from education to employment? What are the problems? Which interventions work? How can these be scaled up? These are the crucial questions. In this report, we attempt to answer them. To do so, we developed two unique fact bases. The first is an analysis of more than 100 education-to-employment initiatives from 25 countries, selected on the basis of their innovation and effectiveness. The second is a survey of youth, education providers, and employers in nine countries that are diverse in geography and socioeconomic context: Brazil, Germany, India, Mexico, Morocco, Saudi Arabia, Turkey, the United Kingdom, and the United States. We started this research recognizing the twin crises of a shortage of jobs and a shortage of skills. In the course of it, though, we realized we needed to take into account another key shortage: the lack of hard data. This deficiency makes it difficult to even begin to understand which skills are required for employment, what practices are the most promising in training youth to become productive citizens and employees, and how to identify the programs that do this best. The state of the world s knowledge about education-to-employment is akin to that regarding school-system reform a dozen years ago, prior to groundbreaking international assessments and related research. We hope this report helps fill this knowledge gap. * Exhibit 1 ** Exhibit 2 Education to employment: Designing a system that works Executive summary 17 a Web designer 18 Exhibit 1 Exhibit 2 Only half of youth believe that their post-secondary studies improved their employment opportunities 39% of employers say a skills shortage is a leading reason for entry-level vacancies Students who believe their postsecondary studies improved their employment opportunities 1 % of respondents % of respondents Lack of skills is a common reason for entry-level vacancies Saudi Arabia Brazil India Private not for profit Private for profit Public selective % of employer respondents % of employers also reported a lack of skills caused significant problems in terms of cost, quality, and time or worse Germany Mexico Public open access 47 Ø % Turkey Morocco United States United Kingdom College grad Some college/aa Vocational Ø 50 Turkey India Brazil United States Mexico 12 Saudi Germany United Morocco Arabia Kingdom Ø 50 1 My post-high-school education improved my chances of getting a job. SOURCE: McKinsey survey, Aug-Sept 2012 SOURCE: McKinsey survey, Aug-Sept 2012 The report s findings include the following six highlights: 1 Employers, education providers, and youth live in parallel universes. To put it another way, they have fundamentally different understandings of the same situation. Fewer than half of youth and employers, for example, believe that new graduates are adequately prepared for entry-level positions. Education providers, however, are much more optimistic: 72 percent of them believe new graduates are ready to work (Exhibit 3). The same disconnect occurs with regard to education; 39 percent of education providers believe the main reason students drop out is that the course of study is too difficult, but only 9 percent of youth say this is the case (they are more apt to blame affordability). Why are the three major stakeholders not seeing the same thing? In large part, this is because they are not engaged with each other. One-third of employers say they never communicate with education providers; of those that do, fewer than half say it proved effective. Meanwhile, more than a third of education providers report that they are unable to estimate the job-placement rates of their graduates. Of those who say they can, 20 percent overestimated this rate compared with what was reported by youth themselves. Nor are youth any better informed: fewer than half say that when they chose what to study they had a good understanding of which disciplines lead to professions with job openings and good wage levels. Education to employment: Designing a system that works Executive summary 19 Exhibit 3 Exhibit 4 Stakeholders hold different views about the readiness of graduates for the job market Seven distinct youth segments exist Agreement that graduates/new hires are adequately prepared % of respondents Employers 1 Providers How well informed are you? Well informed Moderately informed Sizable and distinct segment not identified Disheartened (17%) I know enough to not care Well positioned (20%) I m focused and prepared Driven (18%) I m motivated because I know education matters Post-secondary segments Youth 3 45 Not well informed Disengaged (18%) I don t care to know much Struggling (26%) I want to know more Why didn t you attend postsecondary? Too cool (57%) I m not interested in attending postsecondary Care a little Too poor (43%) I d like to go to postsecondary, but can t afford Care to a lot High school only segments 1 Overall, employees we hired in the past year have been adequately prepared by their prehire education and/or training. 2 Overall, graduates from my institution are adequately prepared for entry-level positions in their chosen field of study. 3 Overall, I think I was adequately prepared for an entry-level positions in my chosen field of study. Care a little Care a lot How much do you care about educational and career options? SOURCE: McKinsey survey, Aug-Sept 2012 SOURCE: McKinsey survey, Aug-Sept the education-to-employment journey is fraught with obstacles. In building our fact base, we began to think of the education-to-employment system as a highway with three critical intersections: (1) enrolling in postsecondary education, (2) building skills, and (3) finding a job. There are significant challenges at each intersection. At the first (enrollment), cost is the top barrier, with 31 percent of high-school graduates indicating they did not continue their education because it was too expensive. Among those who do enroll, 46 percent are convinced they made the right choice in their selection of institution or field of study. At the second intersection (building skills), about 60 percent of youth say that on-the-job training and hands-on learning are the most effective instructional techniques, but fewer than half of that percentage are enrolled in curricula that prioritize those techniques. At the third intersection (finding a job), a quarter of youth do not make a smooth transition to work; their first jobs are unrelated to their field of study and they want to change positions quickly. In emerging markets, this number rose to as much as 40 percent. 20 3. the education-to-employment system fails for most employers and young people. Examples of positive outcomes in education to employment are the exception rather than the rule. Based on our survey data, we identified three distinct groups of employers.only one of them, accounting for less than a third of the cohort (31 percent), is successful in getting the talent it requires. What distinguishes these employers is that they reach out regularly to education providers and youth, offering them time, skills, and money. Of the two other segments, the first is minimally engaged (44 percent) and struggling the most to find the right workers, while the second (25 percent) is somewhat engaged but largely ineffectual. As for young people, the system is not working for most of them, either. We asked youth a combination of attitudinal and behavioral questions to understand how they thought. On the basis of their answers, as well as their current employment status, we divided them into seven segments five for those with postsecondary education and two for those without (Exhibit 4). Only two of the seven segments have a positive experience in the job market. They succeed when most do not because they actively manage their decisions about their education and career. The remaining segments range from those who have become disheartened ( I know enough to not care ) to those who are disengaged ( I don t care to know more ) and those who are struggling ( I want to know more ). Each of the employer and youth segments we identified has different outcomes and motivations; each requires a different set of interventions. We also found that the concentration and mix of these segments can vary significantly by country. 4 Innovative and effective programs around the world have important elements in common. Two features stand out among all the successful programs we reviewed. First, education providers and employers actively step into one another s worlds. Employers might help to design curricula and offer their employees as faculty, for example, while education providers may have students spend half their time on a job site and secure them hiring guarantees. Second, in the best programs, employers and education providers work with their students early and intensely. Instead of three distinct intersections occurring in a linear sequence (enrollment leads to skills, which lead to a job), the education-to-employment journey is treated as a continuum in which employers commit to hire youth before they are enrolled in a program to build their skills. The problem, then, is not that success is impossible or unknowable it is that it is scattered and small scale compared with the need. 5 creating a successful education-to-employment system requires new incentives and structures. To increase the rate of success, the education-to-employment system needs to operate differently, in three important ways. First, stakeholders need better data to make informed choices and manage performance. Parents and young people, for example, need data about career options and training pathways. Imagine what would happen if all educational institutions were as motivated to systematically gather and disseminate data regarding students after they graduated job-placement rates and career trajectory five years out as they are regarding students records before admissions. Young people would have a clear sense of what they could plausibly expect upon leaving a school or taking up a course of study, while education Education to employment: Designing a system that works Executive summary 21 institutions would think more carefully about what they teach and how they connect their students to the job market. Second, the most transformative solutions are those that involve multiple providers and employers working within a particular industry or function. These collaborations solve the skill gap at a sector level; by splitting costs among multiple stakeholders (educators, employers, and trainees), investment is reduced for everyone an incentive for increased participation. Agreements such as nonpoaching deals can also boost employers willingness to collaborate, even in a competitive environment. Finally, countries need system integrators (one or several) responsible for taking a high-level view of the entire heterogeneous and fragmented education-to-employment system. The role of the system integrator is to work with education providers and employers to develop skill solutions, gather data, and identify and disseminate positive examples. Such integrators can be defined by sector, region, or target population
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