by Gabriela Ramos
Chief of Staff, OECD
Skills are the foundation upon which Mexico must build future growth and prosperity. Mexico, being one of the youngest populations among OECD countries, has a strong demographic advantage and thus a unique window of opportunity. But it also faces common challenges to bring the skills of its population up to the requirements of the global digital economy.
The time to act is now. Mexico needs to boost the development, activation and use of skills to drive further innovation and inclusive growth while dealing more effectively with longstanding, but increasingly urgent issues, such as improving equity and reducing informality. To this end, the aim of current educational reform in Mexico is a must to provide quality education to all the individuals.
However, challenges remain. According to the 2015 Programme for International Student Assessment (PISA) data many youth in Mexico are not developing high levels of skills with a very high share of students performing poorly in mathematics (56.6%), in reading (41.7%) and in science (47.8%). In addition, due to high drop-out rates only 56% of 15-19 year-olds complete upper secondary education, far below the OECD average of 84%. Similarly, on tertiary level only 16% of the population aged 25 to 64 years old in 2015 had attained tertiary education, which is significantly below the OECD average of 36%. To these outcomes, we should add the fact that young people connect with informal labour market, reinforcing the precariousness of their job opportunities. Therefore, despite recent progress, Mexico still remains in a low-skill equilibrium.
Indeed, Mexico tends to specialise in low value-added activities linked to informal employment arrangements, which are estimated to account for 52.5% of all employment. Workers in the informal economy are, on average, less likely to: receive training, participate in high performance workplace practices that make more effective use of their skills, and find themselves employed in precarious and low quality jobs. Therefore, demand-side barriers which discourage employers from hiring formally should continue to be addressed, as well as the high cost to firms for hiring low income workers, a complex tax system, and heavy labour market regulations. Targeted support will be also needed if young people and women are to enter and remain engaged in the labour market. Over one in five young people are currently neither in employment, education, or training (NEETs), risking becoming permanently marginalised – from the labour market, from education, and from society. Given the differences between boys and girls not in employment or in schools, special emphasis should be placed on women’s conditions, and to sustain their involvement with high quality jobs. Mexico cannot be losing the talent of half of its population.
More needs to be done to improve the use of skills in the workplace. There are significant skills mismatches with a quarter of workers (26%) over-educated and just under a third (31%) under-educated for their current job. Companies and educational institutions need to co-operate to reduce these mismatches at source, while firm-sponsored training could help the low-skilled. At the same time boosting innovation and research are critical if Mexican firms are to continue improving productivity, move up the global value chain, and increase the demand for higher skills. But in 2013, Mexican businesses invested the equivalent of just 0.2% of GDP in R&D. That’s not just well short of the OECD average but well below Korea’s 3.3% of its GDP investment in R&D during the same time period.
Making this all happen in practice requires concerted government action. Mexico has undertaken a number of reforms aiming to enhance the quality of teaching, raise productivity, stimulate innovation and improve integration into global value chains. Actually, one of the positive pieces of news is that productivity has increased recently as a result of recent reforms, particularly in the telecommunications market.
It is necessary to improve effectiveness of government institutions, and formal collaboration arrangements across ministries. The National Productivity Committee is good news in this sense – but much remains to be done. Yet governments cannot achieve better skills outcomes alone. Success will depend on the commitment and actions of a broad range of stakeholders. The help of employers, trade unions, students and trainers is needed. These are the people who, each and every day, invest in skills, set skills in motion and put them to work.
Best practices of other countries
Countries that are most successful in mobilising the skills potential of their people share a number of features: they provide high-quality opportunities to learn throughout life, both in and outside school and the workplace; they develop education and training programmes that are relevant to students and the labour market; they create incentives for, and eliminate disincentives to, supplying skills in the labour market; they recognise and make maximal use of available skills in workplaces; they seek to anticipate future skills needs and they make learning and labour market information easy to find and use.
The OECD Skills Strategy provides countries with a framework for developing co-ordinated and coherent policies that support the development, activation, and effective use of skills. In Norway, our collaboration clearly demonstrated the value of a whole of government approach to tackle the country’s longstanding skills challenges. The diagnostic and action reports fed into policy measures to improve career guidance and outreach to low-skilled adults – and served as the foundations for the new National Skills Strategy to be launched this year. Portugal used our project to build broad stakeholder engagement in defining the key skills challenges facing the country as it emerged from the worst economic crisis of its history. This year we will be using our shared diagnosis to help design concrete actions to provide adult education and training across the country. Korea has built on the results of its diagnostic report and ongoing OECD support to engage actively with a wide range of stakeholders on critical issues such as youth employability and lifelong learning.
Mexico finds itself in a context with many other countries moving at a high speed. The digitalisation of the economy and the rapid pace of change require not only a good knowledge basis, but also lifelong learning and the flexibility to adapt skills to changing conditions and demands. The future of work and the capacity to anticipate the evolving needs of the markets, due to the rapid technological progress, is a common challenge that all countries are trying to address. Mexico has been participating in the OECD Skills Strategy project to work with us to advance the best practices of other countries that have been able to improve their outcomes in this field.
Mapping Mexico’s skills challenges together
Since March 2016, we have been working closely with Mexico in applying the OECD Skills Strategy framework as part of a collaborative project to build a more effective national skills strategy. The National Project Team established by the Mexican government to oversee this process is co-ordinated by the National Productivity Committee (NPC) and includes representatives from Ministry of Finance, Ministry of Education, Ministry of Labour, Ministry of Economic Affairs and the National Council for Science and Technology (CONACYT). The CNP has been critical in this process, as it embodies the spirit of partnership across government ministries and with key sectors of the economy and society as well as focuses on the nexus between productivity, inclusive growth and skills.
The results of this work are published in the OECD Skills Strategy Diagnostic Report: Mexico that sets out 8 skills challenges for Mexico. These challenges were identified in the course of several rounds of discussions with the National Project Team, technical meetings with Mexico’s leading experts and input from over 100 stakeholders such as employers, trade unions, education providers and experts including from other International Organizations, gathered during two interactive workshops held in June 2016 and September 2016 in Mexico City.
Mexico’s 8 skills challenges
So what are the main skills challenges facing Mexico today?
With regard to developing relevant skills, the report concludes that Mexico should focus on:
• Improving the foundation skills of students in compulsory education
• Increasing access to tertiary education while improving the quality and relevance of the skills developed in tertiary education.
When it comes to activating its skills supply, Mexico will need to tackle the challenges of:
• Removing supply and demand-side barriers to activating skills in (formal) employment.
• Boosting the skills activation of vulnerable groups.
Mexico could make more effective use of the skills it already has by:
• Improving the use of skills at work.
• Supporting the demand for higher skills to boost innovation
Finally, Mexico could strengthen the overall governance of the skills system by:
• Supporting collaboration across government and stakeholders to achieve better skills outcomes
• Improving public and private skills funding.
Building a shared road-map for action
As the first OECD country from Latin America to embark upon a National Skills Strategy country project, Mexico has demonstrated its commitment to leveraging international comparative data and good practice to tackle its own skills challenges. Equally, this analysis of Mexico’s skills system will be of great interest to many other countries around the world.
Throughout this initial diagnostic phase, we have witnessed first-hand a strong commitment to improving Mexico’s skills outcomes across government, employers and trade unions, as well as education and training providers.
The true test lies ahead, in designing concrete actions to tackle the skills challenges facing Mexico. Government cannot achieve better skills outcomes alone, so moving from diagnosis to action will require a whole of government and a whole of society approach.
The OECD stands ready to contribute to Mexico’s ongoing efforts to achieve its ambitious goals in designing and implementing better skills policies for better jobs and better lives.