How Are Corporations Making a Difference in Providing Middle Skills?

Learning Ecosystems and Leadership October 26, 2015

This article is part of a series on innovative solutions to tackle the main challenges of Latin American education (part 3 of 6). 

Demand for skills is rising fast in Latin America—much faster than the region’s education systems can handle. Latin American businesses are struggling to fill their open positions even as youth unemployment remains high. The private sector drives most of the demand for these skills—so does it also have a role to play in developing them?

Many education stakeholders argue that they do. Not only do corporations demand skills, but they know better than anyone what the shape of their industries will be in the coming years. At the same time, an increasing amount of career-related training is happening outside of the classroom. “Most of the skills that a labor force possesses were acquired on the job,” argues Harvard economist Ricardo Hausmann. “What a society knows how to do is known mainly in its firms, not in its schools. At most modern firms, fewer than 15% of the positions are open for entry-level workers, meaning that employers demand something that the education system cannot – and is not expected – to provide.”

It is becoming increasingly clear that a traditional four-year college is not always the best option for career-minded students, especially as their debt spirals upward. The so-called “middle skills” that are taught at vocational schools or in technical training programs are turning out to offer better job prospects at a more affordable price. Americans generally have access to a wide range of other postsecondary options—associate degrees, occupational certificates, industry certifications, or apprenticeships.

But in Latin America there are still few options for the majority of workers that don’t attend college. Technology is helping to address this issue, with a number of online startups that have begun providing low cost continuing education. In Brazil, the online test prep provider Descomplica (Uncomplicate) demonstrated the demand with over 150,000 students in its first year of operation. Others, like NextU and Mexico’s UTEL, provide Spanish language online coursework for students around the region.

Here, the private sector has an unmatched opportunity—and responsibility—to get more involved. In addition to startups, many traditional companies do their own on-site training in an ad hoc manner, while others have created entire universities and training courses. In this regard, Latin America is still behind the United States, where there are thousands of corporate universities. “More and more we are being asked to help companies build their internal capabilities,” according to David Altman of the Center for Creative Leadership, an education consultancy. “Big companies are calling them academies,” he told the Financial Times, “while others are saying they want to build their own internal capabilities.”

But there are some examples in Latin America. Tenaris University, created in 2005 by the global industrial conglomerate Techint Group, trains some 27,000 workers. McDonald’s University of Latin America, based in Brazil, provides leadership training for more than 70,000 people, while the Mexican banking leaders Bancomer launched its Universidad Bancomer to offer high school, undergraduate, and graduate coursework. According to Sumaq, a coalition of academic and corporate education institutions, over 40 percent of the top 100 companies in the region have created their own universities.

Another approach is for companies to help their employees finance a higher education, through scholarships, loans, or tuition reimbursement programs. A number of private sector surveys have found that over three-fourths of major companies in the United States provide some form of this assistance.

Again, in Latin America, the proportion is smaller, as a report by the Inter-American Development Bank (“Five Facts About Worker Training in Latin America and the Caribbean“) points out. The IDB finds that while in some countries private sector education and training is carried out by up to half of companies, in others it falls to as low as 25 percent. At the same time, even the companies that do provide such services don’t take advantage of the tax credits and other subsidies offered by regional governments.

For some firms, like Atento, the largest business process outsourcing company in the region, providing such programs is key to competitiveness. “We differentiate ourselves through our commitment to developing our employees,” says Mariano Castaños, Atento’s chief commercial officer for Latin America. “That’s why we are constantly investing in new ways of improving our training programs, which are used by nearly 160,000 people each year.”

Collaborations between companies, philanthropic groups, and multilateral institutions can also provide a major impetus for worker development. Earlier this year, Starbucks CEO Howard Schultz committed $30 million towards job training programs targeted towards the over five million young Americans that aren’t working or in school, bringing other major companies like Taco Bell, Target, and Macy’s on board as well. This is a model that can work in Latin America as well, where the IDB’s Multilateral Investment Fund created the New Employment Opportunities (NEO) program along with firms like Walmart, Caterpillar, and Microsoft. NEO will train over one million youth in the region over the next decade.

The ways in which the private sector can contribute to improving education and training in the “middle skills” are as diverse as the number of companies seeking to fill positions. Business is slowly but surely getting more involved—and we need even more of it in Latin America.

Gabriel Zinny is s an entrepreneur focused on education and the improvement of educational quality in the Americas. He tweets at @gzinny.

Gabriel Zinny will be a speaker at WISE 2015 at the Panel “Exploring Innovative Financing Models in Education”

Read Gabriel Zinny’s serie of article
The School to Work Transition in Latin America
Civil Society and the Skills Gap in Latin America