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The Growing Disconnect Between the Labor Market and Higher Education in Mexico

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In Latin America, there is growing evidence of a major disconnect between the skills being taught in our classrooms and the demands of the labor market. On the one hand, youth aged 18 to 24 are facing extremely high unemployment rates -- but at the same time, large numbers of positions go unfulfilled due to the lack of qualified applicants.

This fundamental paradox is the focus of a recent paper by Ernesto Garcia of the Mexican think tank Center for Research on Development (CIDAC), which asks: "What are companies looking for -- and not finding -- in young professionals?"

Garcia's statistics show that private firms primarily reject candidates for lack of knowledge or skills (over 70 percent) rather than a lack of experience (just over two percent) or an incompatible personality (about 25 percent). According to the employers surveyed, the primary barrier to greater youth employment is not age, but rather a more fundamental lack of capacity to meet the basic needs of the position.

Unfortunately, this means that there is no quick fix. Lowering the youth unemployment rate in a country like Mexico (where it stands at around nine percent, although half of those employed are in informal sectors) is a difficult task. The skills gap means that even if overall labor demand goes up, the dearth of skilled workers means new positions cannot be rapidly filled.

Not even belonging to the fortunate minority (about 20 percent of the population) that succeeds in graduating from university can guarantee an escape from these pressures. In Mexico, again, the results of the 2014 National Occupation and Employment Study (ENOE), from the national statistics agency, INEGI, indicate that only 40 percent of professionals work in a job related to their university major. The rest are either unemployed or employed in jobs that don't require higher education.

A lack of job availability can explain some of these numbers. But a major driver of this phenomenon is the obsolete nature of an education system that doesn't transmit applicable skills.

As Ernesto Garcia and his team point out in their study, "there is no doubt that the supply and demand market for skills is not working efficiently." That gap between what employers need and what potential employees can provide is alarmingly high -- as much as 26 percent. In other words, more than a quarter of firms can't find workers -- especially young workers -- whose skills fit the position profile, even after intensive rounds of interviewing.

The need to understand and address the roots of this massive gap becomes particularly apparent when we consider its damaging effect not only on overall levels of employment, but also on a country's productivity and broader economic development.

The common denominator in nearly all cases is an asymmetry in information between the education system and the labor market. The nature of the private sector is such that firms adapt far more quickly to technological and economic upheaval, while education institutions struggle to update the skills they impart. The inevitable delay in producing qualified graduates has an immediate, and unfortunate, impact in the labor market, as we have seen.

CIDAC's proposed solutions are thus -- very appropriately -- comprehensive and highly interrelated. Their primary policy suggestions include "fundamentally refocusing the education system on skills and not only diplomas," as well as policies to promote collaboration between universities and private companies, and to generate more and better data about what skills are most in demand and best compensated in the private sector.

The good news is that there are a number of relatively painless ways to start to reduce this gap. Doing so won't necessarily "require major changes at the institutional level, nor massive investments in educational infrastructure," the authors write, "but simply the generation and publication of sufficiently high quality information."

To this end, the report includes a short, accessible guide to what every potential college student should know before making a decision. It includes the duties of a good university -- like helping to develop a career plan, offering professional development opportunities, and offering detailed statistics regarding the career placement of its graduates. It also offers "16 questions that a university should answer" as well as "6 things you will need to do in college to get the job of your dreams -- or create your own."

Such information will be key to improving the school-to-work transition for students in Mexico as well as throughout Latin America. And, as the authors point out, transparency is central as well, arguing that "there need to be ongoing evaluations of every university, which feed into a public ranking." CIDAC's efforts to bring more such transparency to the sector are, themselves, an excellent start.