Employment Creation Potential, Labor Skills Requirements, and Skill Gaps for Young People: A Methodological Framework

This paper presents a methodological framework for assessing the extent to which youth unemployment can be addressed through employment creation in industries without smokestacks in individual countries, as well as the skill gaps in the youth population that need to be addressed for this potential to be reached. There are two components to the method: (i) estimating skill demand, and (ii) identifying skill gaps in the target youth population. On the labor demand side, the framework seeks to identify the skills required for a sector to reach its employment potential. On the supply side, the methodology ultimately aims to answer the question: Do the skills to meet the demand in the sector exist in the population; and if not, where are the gaps? On the demand side, we first present a number of methods to estimate potential employment in a sector that make use of measures of labor force intensity for a sector, such as labor-value added ratios and employment elasticities. We also present an alternative global value chain-based approach that considers how future employment in a sector may be greater than projected employment in a sector. This approach, however, requires the extensive use of surveys and indepth sectoral research. The framework has a strong emphasis on the occupational requirements of sectors, and, based on the assessment of potential employment in the sector, we then present methods for determining the occupational requirement profile of the sector. A skill requirement profile is then obtained using this occupational profile. This profile relates the set of occupations required for the sector to reach its employment potential to a measure of skill such as education.