1. 1 Skills for Knowledge Economy – why education quality matters in Ukraine? Olena Bekh, Education Specialist, ECSHD, World Bank January, 2008

2. 2 New Government Program The recently approved by the Cabinet of Ministers Government Action Program sets goals related to building competitive national economy very high. It envisages a number of steps to facilitate growth and increase competitiveness of the economy.

3. 3 New Government Program (continued) …And among these steps: - implementation of policies related to employment and labor market through elaboration and implementation of the State employment program, … proper labor market forecasting, creation of new jobs in the priority sectors of economy, improving the mechanism of the government order for training of specialists by higher and vocational education institutions, professional retraining and decentralized funding of improvement of professional skills, etc.

4. 4 New Government Program (continued) - modernization of the education system by planning to connect all schools to Internet and supply computers to all schools, improving curricula and contents of education; improving the system of resource allocation to education institutions; implementation of system of external assessments of student learning outcomes; reforming institutions of education; implementation of university autonomy and democratization of their work, etc.

5. 5 Context of implementation of current Government policies: In spite of the Ukraine’s economic growth in the last years, the demographic situation is not improving: the population is aging and shrinking By 2015, the share of young people entering the labour market in total population will go down from 30% till 23%. In the next 20 years. In spite of generally high education levels of population, relevance and structure of skills supply remains insufficient 60% of the youth is trained in higher education and 40% in vocational schools, while the demand structure in LM is the opposite.

6. 6 Skill shortages in Ukraine As many as 20 percent of Ukrainian firms see skills of available workers as a major obstacle to firm operation and growth. The employers become more selective, skill requirements increase. it takes significantly more time to fill a job vacancy in Ukraine than in most other transition economies, particularly a vacancy for skilled manual workers. This suggests that the Ukrainian economy suffers from severe skill shortages. Unfavorable demographic situation together with good growth perspectives provides better employment opportunities for the youth in the future, however, it raises demand for specific skills. Rigid labor market increases probability of shadow employment for the youth

7. 7 Skills’ mismatch in Ukraine Skills shortages coincide with unemployment, which implies that the many of the unemployed lack skills required by employers. Excess demand for some skills coexists with excess supply of other skills. In particular, there is excess supply of less skilled labor, both blue- and white-collar. Employers find it difficult to recruit workers with required skills, while the unemployed find it difficult to find a job because the skills they possess are in low demand. The skills mismatch negatively affects economic performance and social welfare. And in particular, it hampers firm growth and may limit job creation.

8. 8 http://www.worldbank.org/wdr2007 WDR 2007 on Quality of Education : “If quality is low or if what is learned is not relevant in the job market, unemployment rates can be high even for some of the most highly educated” (WDR - World Development Report - is World Bank’s most important and most widely circulated report)

9. 9 World Bank’s current support in Ukraine for improving skills’ policies Joint research by World Bank, EC Delegation and social partners to elaborate policy recommendations to the Government Labor Demand Survey 2007 BEEPS 2005 Transition from Education to Work 2007  International workshops:  Key Policy Challenges for Employment and Wages in Ukraine took place (April 27, 2007)  Improving Human Capital through Efficiency and Relevance of Education System (May 29, 2007)  Presentation of preliminary results of WB-EU research 2007 (October, 2007)

10. 10 Self assessment of skills (Transition from education to work - TEW survey) Almost 20 percent of firms in Ukraine report skills of available workers as a major obstacle to firm operation and growth (BEEPS, 2005). According to individuals’ own assessment of skills, primary weaknesses relate to abilities to use a computer and mathematics.

11. 11 But do most employees need these skills? Indeed, TEW survey respondents indicate that they frequently use mathematical skills and computers in their jobs.

12. 12 Do recent graduates work in the field of their education? About half of the school graduates do not work in the field of their education Between 60 to 70 percent of recent graduates find education to be useful in carryout out their work though. Interestingly though, vocational school graduates are only slightly more likely to report working in the field of their education (56 percent versus 54 percent).

13. 13 Some of the first findings from the recent surveys: Limited job and labor reallocation Labor demand is quite strong, particularly for less skilled manual workers But it is difficult to find workers with required skills  Unemployment has mainly structural character: the unemployed often lack skills required by employers Workers need to have information & incentives to invest in skills demanded by the market Educational system needs to be more responsive to labor market demands Skills shortages are more severe in Ukraine than in other countries in the region Especially in expanding and modern firms It is particularly difficult to find a skilled manual and service sector worker with required skills High demand for less skilled workers, but also for professionals Many jobs require little formal education And formal education obtained is not that relevant for the job actually performed

14. 14 Key priorities in modernizing Education system may include 1. Improve quality of education through reforming educational content, and in particular – to match curricula standards and occupational requirements improving the quality and skills of teachers greater use of standardized tests for monitoring and assessment of education outcomes ensure greater role of employers in provision of training; flexible education system 2. Reform of educational institutions, including through greater decentralization, autonomy, accountability and use of public-private partnerships 3. Assuring full use of the country’s innovation potential through government policy that creates incentives and funding both for greater innovation and for the increased application of scientific knowledge in economic and social affairs 4. Reform of the financing of education at the center of efforts to improve quality and reform educational institutions.

15. 15 Way out of poverty Because labor is the main asset of the poor, making it more productive is the best way to reduce poverty. Missed opportunities to acquire skills, good health habits and engage in the community and society could be extremely costly to remedy Human capital outcomes of young people (as the next generation of household heads) affect those of their children

16. 16 Ireland’s Experience: “Recent estimates suggest that improvements in labour quality, due to rising education levels, particularly in the 1980s and 1990s, accounted for almost 20 per cent of total growth in output.” Daniel O’Hare, 2007 Economic, Social and Research Institute, Medium Term Review 2001-2007)