The skills of a country’s workforce can have a powerful impact on its development prospects. Comparing the experiences of the manufacturing industry in Mexico and Turkey, this column shows the value of a public system of vocational education and training to which the government is strongly committed. Firms’ collective involvement in the system through an all-encompassing business association is also crucial for generating skills that facilitate both their long-term growth and their workers’ career progression.
Finding ways to improve education, training and skills is at the core of debates about development. For example, a variety of studies show the importance of middle-level technical skills for improving the performance of the manufacturing industry in developing countries, and for achieving longer-term and more equitable economic growth. But work on exactly what type of education and training systems can create such skills remains scarce.
In my research at the University of Cambridge, I compare the skill formation systems of Mexico and Turkey and their impact on manufacturing firms and workers in the automotive industry. How these skill systems function will have an important influence on the two countries’ development prospects. It also provides lessons to inform skill policies for development more generally.
Mexico and Turkey have had very similar development experiences, and both have been classified as the fastest growing economies after the BRICS. But while they have been upgraded from the low-income group to the upper-middle income group in the World Bank’s classification, they have been stuck there for a while now.
Despite such similarities, Turkey has been performing better than Mexico, especially since the 2000s. Part of the reason lies in the contrasting skill systems in the two countries. For example, according to the World Bank Enterprise Surveys, an ‘inadequately educated workforce’ has been a much bigger challenge for Mexican firms than for Turkish ones.
Source: OECD National Accounts
Source: OECD Productivity Dataset
The systems for generating the skills needed by manufacturing workers are very different in Mexico and Turkey. Both public commitment to and firm involvement in the vocational education and training (VET) systems are much lower in Mexico than in Turkey.
Although there is a public VET system at upper secondary level in Mexico, public spending and government control of the system have been low. Public commitment to the VET system has been much higher in Turkey, including both spending and control by the government. The Turkish government also spends much more per VET student than its Mexican counterpart.
Source: OECD Education at a Glance
Firms’ involvement in the VET system has also been very different in the two countries. In Mexico, firms get involved in the VET system at the individual level. They provide training within the firm, but firms’ collective involvement in the system has been very low and limited to the business associations representing large firms.
In contrast, in Turkey, firms get involved in the public VET system not only at the individual level, but also collectively. The country’s all-encompassing business association – known as the Union of Chambers and Commodity Exchanges of Turkey – has become a key partner in the VET system. It has had substantial impact on VET policies over the last two decades, which has helped to link the public programmes with firms’ needs.
Due to the variation in their national skill systems, Mexican and Turkish manufacturing firms have different strategies to generate the skills they need. As workers with the essential training are not available in the labour market, Mexican firms have to hire unskilled and untrained workers for tasks requiring low skills. These workers learn mostly on-the-job and develop skills for specific tasks.
In contrast, Turkish firms use the public VET system as the main resource for skill generation and hire the graduates of VET institutes. These workers come with some general technical training and develop some specific skills during their employment.
The different skill systems and recruitment and training practices have critical implications for both firms and workers in the two countries. This will affect their development experience.
In Mexico, there is substantial variation among firms in the level and content of training. This creates considerable inequalities, not only between firms, but also between workers employed in these firms. While larger firms focus on developing some general skills, training in smaller firms is highly specific to both firms and tasks. Moreover, firms whose workers have such specific skills are very restricted in adapting their production processes to technological change.
In Turkey, however, the profile of the workforce is less unequal between the larger and smaller firms. Furthermore, the firms have higher flexibility to adapt their workforce to changes.
The specific skill development in Mexico also creates major obstacles for workers’ career development and generates significant inequality. Promotion of workers with specific skills is more limited, and individuals with post-secondary and higher education degrees are employed for positions requiring higher skills. This creates substantial inequalities between individuals with higher and lower levels of education.
In contrast, Turkish workers have more opportunities for career progression as their training in a VET institute provides them with the necessary general skills.
This research shows that a public VET system with high government commitment and firms’ collective involvement through an all-encompassing business association is crucial for generating skills that facilitate both firms’ long-term growth and workers’ career development. Such a system can play a key role in promoting long-term and inclusive economic growth.