Methods to Anticipate Skills Demand

Feb 2016
In Latin America and the Caribbean and in more advanced economies there is evidence that suggests an imbalance between the skills of the workforce and the skills demanded by the productive sector. If this skills mismatch is large and persistent it leads to significant economic and social costs: economies cannot use their human capital efficiently and many individuals cannot access good quality jobs. Correcting these imbalances is not easy; a number of frictions that are prevalent in the labor and education markets limit the capacity of households and education providers to provide skills in line with the requirements of the private sector. In light of this, governments around the world have developed tools that intend to anticipate skills demand in the labor market in order to inform the decision making of households, businesses, training providers and policy makers. A wide variety of tools have been developed, ranging from quantitative econometric models to more qualitative methods such as roundtables and focus groups. This report provides a description of the existing methodologies; an analysis of their objectives, strengths and weaknesses; and a description with illustrative examples. The report stresses the fact that an effective system to anticipate skills demand usually combines a variety of methods and surmounts challenges that are not only technical but also institutional. Systems to anticipate skills demand should not only focus on generating quality data but also on building processes to ensure that the information is effectively used in decision making.