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Skills training that works

A major test of a new approach to skills training for unemployed youth is underway in Palestine – one that uses a results-based contract to motivate a focus on securing sustainable employment, rather than just on completing a training course.

By Social Finance
Published 25 November 2021

Hands-on life support training, part of the nursing employment project, implemented by Education for Employment-Palestine and Juzoor for Health & Social Development with support from the Finance For Jobs Youth Employment Development Impact Bond (F4J DIB)

By Anna von Griesheim and Dalia Zileviciute (Social Finance) and Jalil Hazboun (Finance for Jobs Consulting Services)

Unemployment in Palestine is stubbornly high, especially for educated youth and women, in part due to a mismatch between skills required by employers and those available among young graduates. This mismatch exists despite limited job opportunities overall; a situation made worse by Covid-19 in a country that relies heavily on tourism to its holy sites. 

A better match between skills and employer needs would increase both employment and private sector productivity. Social Finance and the World Bank thus proposed a Development Impact Bond for skills training and employment readiness services that would better match training to employer needs. The Impact Bond is now in its second year of implementation with support from Finance for Jobs (a Palestinian Ministry of Finance project financed by the World Bank and implemented by DAI Global), four investors, and a dedicated performance management company, Finance for Jobs Consulting Services. A World Bank blog recently highlighted the early successes, including how the inherent adaptability of the Impact Bond delivery model enabled it to quickly and effectively reprogramme its training when Covid-19 struck.

Since the World Bank blog was published even stronger results have been achieved, with over 200 young Palestinians now in new employment. Crucially, over 60 of the early trainees have now been in sustained employment for more than six months. This is the key measure of success for the programme, as it is the point at which an employee becomes less likely to leave their place of work, and is an indication of employer satisfaction.

While this is a tiny number compared to overall needs, the point of the programme was to trial a new approach at a very small scale, and to demonstrate that it could readily be scaled up to tackle much larger employment needs.

The investors pre-financing service delivery through the Impact Bond are EBRD, the Palestine Investment Fund, Semilla de Olivo (a Palestinian diaspora Fund based in Chile), and FMO (the Dutch entrepreneurial development bank). The investors pay for a portfolio of employment services, including skills training, and are repaid if – and only if – independently verified results are achieved. Incentives to achieve tangible employment are strong: the Impact Bond is structured so that the investors make a significant loss unless they meet ambitious targets for the number of trainees achieving sustained employment status.

The programme also emphasises female employment specifically, which is incentivised through a payment premium. To date more than half of those achieving sustained employment status have been female.

Since its launch in May 2020 the key elements driving the success of the programme are: 

  1. Job-focused selection of training providers: Providers are contracted for their ability to get trainees into jobs, with a focus on their connections with employers (mainly private sector), and the number of sustained jobs they commit to securing. This approach differs in two key ways from traditional training programmes:  

  • The criterion for selecting providers is the number of sustained jobs secured, rather than the number of people trained; 
  • The sectors for which training is provided are not decided in advance, but are based on which training providers can offer the most sustained jobs for a competitive price, while providing added value to targeted youth. Indeed, in using this approach we found that the most promising sectors – for example, healthcare - turned out to be quite different from those identified by initial surveys. 
  1. Demand-driven consortia: Providers work in consortia with prospective employers from the inception of the programmes to tailor their services (skills training, mentorship, on the job training, etc.) to employer demand, so that the service offering reflects the types of skills that are required for available jobs. 

  1. Flexible and iterative implementation: Close collaboration between employers and service providers not only produces better -designed employment programmes, but also generates continuous insights to improve future training offerings for new cohorts.  

  1. Data driven decision making: Data to inform training and employment support is at the core of this programme, enabling timely and effective responses to implementation issues to maximise sustained employment outcomes. 

  1. Independent verification: Rigorous and independent verification of jobs achieved, undertaken by one of the Big Four global accounting firms, ensures an objective measure of the proportion of trainees who achieve sustained employment that makes it unusual relative to more traditional skills training programmes.   

Youth in Materials Quality Assurance training, implemented by Palestinian Construction Industries Union (PCIU), with support from the Finance For Jobs Youth Employment Development Impact Bond (F4J DIB).

How the model works in practice can be seen through a couple of examples: 

  • Variation in sectors and skills training: providers work across a wide range of sectors and target a variety of jobs, including health, education, construction, business administration and marketing, furniture manufacturing, etc, reflecting broad demand from employers. Therefore, while the focus on employment outcomes is the common thread linking all service providers, the sectors in which they work, how they achieve employment outcomes, and what skills are prioritised is flexible and contextualised. 

  • Adaptation to Covid-19: this Impact Bond is a powerful example of the power of adaptive management and flexibility incentivised by outcomes-based funding – funding that is contingent on the achievement of independently verified outcomes, rather than inputs or activities. Training providers began training programmes in May 2020 at the height of the Covid-19 pandemic, a time of unprecedented uncertainty, especially for the job market. Due to the emphasis on adaptability, providers were able to tailor their skills training to sectors where there was still high demand for jobs, such as the health sector given the need for trained health professionals during the pandemicThey also adapted the modality of training delivery, through online teaching and mentoring, for example.  

So far, the Impact Bond approach to skills training and employment support has proven to be a highly effective way of securing sustained employment for young Palestinians, especially women. There is now interest in replicating it at larger scale, both in Palestine and elsewhere in the world. 

 

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