What

Dimensions of Impact: WHAT

Investors interested in deploying this strategy should consider the scale of the addressable problem, what positive outcomes might be, and how important the change would be to the people (or planet) experiencing it.

Key questions in this dimension include:

What problem does the investment aim to address? For the target stakeholders experiencing the problem, how important is this change?

Youth in today’s workforce face deficits in the education and training they need to be employable and progress in their careers, a delayed transition from school to work, and, once they have entered the workforce, difficulty in securing jobs that pay a living wage and offer social protections.
Employer surveys consistently reveal concerns about the lack of certain types of skills among potential employees, especially soft skills such as communication and teamwork, noting the constraints this imposes on business performance (1, 2, 3). Indeed, learning assessments show a substantive lack of functional literacy and numeracy skills at multiple developmental stages (4).
In the context of this skills deficit, young people are taking longer to complete the school-to-work transition. Once young people do enter the workforce, their quality of employment may be informal or characterized by a lack of protections (5). Regarding the success of self-employment, the World Bank’s (2010) youth employment policy primer identifies the following as factors impeding success, at least on the supply side: a lack of job-relevant and entrepreneurial skills, job search barriers (such as lack of access to information or weak soft skills), and start-up and social constraints (6).
Investments can help develop youth and young adults’ employable skills (technical and non-technical) by:

  • offering increased and equitable access to quality technical and vocational education and training and to higher education (including by ensuring that training interventions target women and girls, youth and young adults with disabilities, and other marginalized groups); and
  • offering entrepreneurship skills training and small business assistance combined, where possible, with complementary services, such as access to finance (7).
    Investments can support transitions into work through apprenticeships or employability training, including by:
  • combining school-based education with on-the-job experience;
  • strengthening links between formal and non-formal structures; and
  • supporting accreditation of the knowledge, skills, and competencies acquired through informal education.
    Investments can address other barriers to accessing the labor market by:
  • improving access to information through Labor Market Information Systems;
  • providing job search functions and connecting youth to information and social networks;
  • improving access to transportation;
  • improving youth’s access to affordable finance (17); and
  • offering relevant business-development services, such as through business incubators or youth enterprise centers (17).
    Emerging best practices and a growing body of evidence also indicate that initiatives to strengthen medium and larger enterprises and foster their growth may well strongly increase youth employment. Such initiatives may focus on:
  • helping enterprises to strengthen their management capacity, competitiveness, and productivity;
  • helping enterprises to participate more intensively, consistently, and at higher margins in the value chains in which they operate; and
  • improving their access to finance.

What is the scale of the problem?

In low- and middle-income countries, nearly one in three young men and around half of young women aged between 25 and 29 are not working, whether they were formerly in school and have not entered the workforce or are neither in school nor employed (5). About 55% of workers aged 15–19 and about 40% of workers aged 20–29 are employed in the informal sector, where income inequality is higher than in the formal sector (5).
Moreover, a substantial minority of youth aged 15–19 are unpaid family workers, while a substantial minority of those aged 25–29 are own-account workers, meaning they are self-employed and have not continuously engaged employees to work for them (5). Despite reporting job-satisfaction scores and a sense of job security similar to regular employees’, own-account workers’ income ceases to increase and even falls slightly beyond age 22 (5). Finally, more than half of all working youth (aged 15–24, as defined by the International Labour Organization) are living in extreme or moderate poverty (8). Without action to give young people the education and skills they need to compete, more than a quarter of the population in low-income countries could still be living in extreme poverty in 2050 (1).

Who

Dimensions of Impact: WHO

Investors interested in deploying this strategy should consider whom they want to target, as almost every strategy has a host of potential beneficiaries. While some investors may target women of color living in a particular rural area, others may set targets more broadly, e.g., women. Investors interested in targeting particular populations should focus on strategies that have been shown to benefit those populations.

Key questions in this dimension include:

Who (people, planet, or both) is helped through investments aligned with this Strategic Goal?

Youth benefit from this strategy by gaining new skills, knowledge, and access to resources, ideally improving their employment opportunities, reducing the length of their job searches, increasing their wages, and raising their performance on-the-job.
Employers gain access to a more skilled workforce, ideally facilitating a more efficient hiring process and improving business performance.

What are the geographic attributes of those who are affected?

Skills Gap: Using young adults’ (aged 15–24) literacy as a proxy for foundational skills, low- and middle-income countries exhibit the greatest deficit (4). Sub-Saharan African countries have the highest percentage of low-proficiency readers (around 60%), followed by Latin America and the Caribbean (about 40%) and South Asia (about 30%; 4).
Quality of Employment: Data from the International Labour Office’s school-to-work transition survey (SWTS) reveal high percentages of youth and young adults employed in the informal sector in low- and middle-income countries: 90.7% in sub-Saharan Africa, 75.4% in the Middle East and North Africa, 72.9% in Latin America and the Caribbean, 54.3% in Eastern Europe and Central Asia, and 90.5% in Asia and the Pacific (8).
Self-employment: SWTS data also show high percentages of youth and young adults engaged in self-employment. While self-employment is the main form of employment in sub-Saharan Africa, it is less common in Eastern Europe and Central Asia and in the Middle East and North Africa (5). Asia and the Pacific, Latin America and the Caribbean, and some Central Asian countries have rates of self-employment somewhere in the middle (8). For example, in Asia and the Pacific, own-account and family workers constitute 40% and 12% of the total working population, respectively (8).
Unemployment: The Middle East and North Africa exhibits the highest youth unemployment rate in the world, expected by the International Labour Organization to exceed 30% by 2019 (8). The unemployment rate is especially high for women in this region: as of November 2018, 5.7% of female youth in Arab States were employed, compared with 38.5% of male youth (Employment-to-population ratio, ILO modelled estimates, Nov. 2018).

Contribution

Dimensions of Impact: CONTRIBUTION

Investors considering investing in a company or portfolio aligned with this strategy should consider whether the effect they want to have compares to what is likely to happen anyway. Is the investment's contribution ‘likely better’ or ‘likely worse’ than what is likely to occur anyway across What, How much and Who?

Key questions in this dimension include:

How can investments in line with this Strategic Goal contribute to outcomes, and are these investments’ effects likely better, worse, or neutral than what would happen otherwise

Strong evidence links employment to reduced risk of depression and overall improved mental and physical health (11, 12). However, most research has instead examined the negative consequences of unemployment, and most of the evidence is limited to high-income countries. Unemployment depreciates human capital and has a significant and negative influence on health, happiness, crime levels, and socio-political stability (13). An analysis of Northern Swedish workers connected youth unemployment with poorer mental health 21, 30, and 42 years later (14). Finally, another study found that unemployment creates a negative feedback loop: the long-term unemployed, unsurprisingly, have a harder time finding a job than the short-term unemployed (15).

How Much

Dimensions of Impact: HOW MUCH

Investors deploying capital into investments aligned with this strategy should think about how significant the investment's effect might be. What is likely to be the change's breadth, depth, and duration?

Key questions in this dimension include:

How many target stakeholders can experience the outcome through investments aligned with this Strategic Goal?

This strategy can benefit the approximately 59.3 million youth (aged 15–24) who are unemployed worldwide and the 59.8 million youth in low- and middle-income countries who are working but still in poverty.

How much change can target stakeholders experience through investments aligned with this Strategic Goal?

A systematic review showed that employment interventions have a greater effect in low- and middle-income countries than in high-income countries (9). Findings from another meta-analysis found that programs targeting disadvantaged youth seem to be more effective than programs targeting youth generally (10). The following are average effects of various interventions on employment, most relatively small and positive but significant: skills-training programs (0.06 standardized mean difference), entrepreneurship promotion (0.18 standardized mean difference), and subsidized employment (0.11 standardized mean difference). Skills-training programs also have a small and positive effect on income (0.12 standardized mean difference), as does entrepreneurship (0.14 standardized mean difference; 9).

Risk

Dimensions of Impact: RISK

Key questions in this dimension include:

What impact risks do investments aligned with this Strategic Goal run? How can investments mitigate them?

Execution Risk: Some solutions could benefit an unintended demographic in a given country or context, perhaps benefiting upper-middle classes or private schools, for example, and deepening inequalities. To mitigate this risk, investors should collect data and indicators to verify the demographic served by the investee or fund.
Poor access to electricity and other resources in low-income countries can present challenges for some technological solutions. Investors should make sure such solutions fit the geography or demographic to be served.
Endurance Risk: Employability training must meet labor-market requirements to be effective, and such requirements vary widely by geography. Employability programs therefore risk providing participants with skills that might not be applicable to their immediate environments. To mitigate this risk, validation tests are required when entering a new region to ensure that services are relevant and in demand. Additionally, a strong sense of the local education system and its capacity is important to understanding the labor pipeline, including whether local entities are investing in corporate training, internships, or vocational training.
Evidence Risk: Efforts to assess impact may be hindered if a startup lacks the capacity to monitor and evaluate all of their outcome metrics. For example, a startup offering employability training to a local entity may be unable to collect information from that entity to accurately capture the impact of their solution. Inability to measure impact metrics or reliance on a third party to monitor progress introduces the risk for error. To mitigate that risk, investors should carefully consider the type of indicators investees provide and require metrics that better relate to the intended outcome of their solution.
External Risk: Factors beyond employability and vocational training can prevent youth from learning properly (e.g., cultural barriers to women working), thereby limiting the strategy’s expected impact on workforce entry. To mitigate this risk, investors should carefully understand the context in which a solution will be implemented, evaluating whether the offer fits the market and the intended impact.

What are likely consequences of these impact risk factors?

Poorly designed or executed products and services, including those poorly tailored to the needs of the intended stakeholders, will not be used. Employers that are then discouraged from using the products and services or that find offered solutions ineffective may be less open to considering such solutions in the future—and may even be less likely to offer work-based learning opportunities or jobs at all.

Illustrative Investment

Based in Brazil, Digital House provides coding school services intended to help students build careers in fields such as software development, data science, artificial intelligence, and analytics. The offered services include intensive, face-to-face, and practical courses that match students with the new generation of talent and professionals in the technological world, enabling them to learn new skills by practicing and experimenting. Digital House received investments from the Rise Fund and other investors. The organization has 10 units in three Latin American countries.
LabourNet is a social enterprise that supports informal workers through training, employment, and entrepreneurship in India, where 81% of those working are in the informal sector. LabourNet has one of the largest geographic footprints of workforce-development companies operating in India and has partnered with government, corporations, and schools. Acumen and the Michael and Susan Dell Foundation invested in LabourNet, which has training centers in more than 143 livelihood centers and 598 schools.
Laboratoria helps young women access better employment opportunities in Peru by teaching them coding and connecting them with businesses and organizations in need of their talent. This offers women from underprivileged backgrounds access to better jobs and living standards. The Inter-American Development Bank invested in Laboratoria. More than 1,000 women have graduated from the Laboratoria program, more than 80% of whom are working in technology.
Laqsh provides vocational training courses to students from lower socio-economic backgrounds in India. The company’s platform provides skill training in information technology (IT), IT-enabled services (ITES) and the retail sector, vocational education, and lectures on emerging technologies from industry experts and regular industry visits, which enable eligible students to nurture their soft skills and obtain good placements. The education impact investor Gray Matters Capital invested in the organization, among others. Laqsh serves students from 469 schools across 11 states in India.

Draw on Evidence

This mapped evidence shows what outcomes and impacts this strategy can have, based on academic and field research.

NESTA: 3
Interventions to improve the labour market outcomes of youth A systematic review of training, entrepreneurship promotion, employment services and subsidized employment interventions

Kluve J, Puerto S, Robalino D, Romero JM, Rother F, Stöterau J, Weidenkaff F and Witte M, 2017. Interventions to improve the labour market outcomes of youth: a systematic review of training, entrepreneurship promotion, employment services and subsidized employment interventions. 3ie Systematic Review 37. London: International Initiative for Impact Evaluation (3ie).

NESTA: 3
The labor market impacts of youth training in the Dominican Republic

Card, David, Pablo Ibarrarán, Ferdinando Regalia, David Rosas-Shady, and Yuri Soares. “The labor market impacts of youth training in the Dominican Republic.” Journal of Labor Economics 29, no. 2 (2011): 267-300.

NESTA: 3
Differential effects of active labour market programs for the unemployed.

Sianesi, Barbara. “Differential effects of active labour market programs for the unemployed.” Labour economics 15, no. 3 (2008): 370-399.

NESTA: 3
Generating Skilled Self-Employment in Developing Countries: Experimental Evidence from Uganda

Blattman, Christopher, Nathan Fiala, and Sebastian Martinez. “Generating skilled self-employment in developing countries: Experimental evidence from Uganda.“ The Quarterly Journal of Economics 129, no. 2 (2013): 697-752.

NESTA: 3
Evaluating the women entrepreneurship training programme: a South African study

Botha, Melodi, G. H. Nieman, and J. J. Van Vuuren. “Evaluating the women entrepreneurship training programme: a South African study.“ International Indigenous Journal of Entrepreneurship, Advancement, Strategy and Education 2, no. 1 (2006): 1.

NESTA: 3
Business training and female enterprise start-up, growth, and dynamics: Experimental evidence from Sri Lanka

De Mel, Suresh, David McKenzie, and Christopher Woodruff. Business training and female enterprise start-up, growth, and dynamics: Experimental evidence from Sri Lanka. The World Bank, 2012.

NESTA: 3
Impact Evaluation of a Youth Job Training Program in the Dominican Republic: Ex-Post Project Evaluation Report of the Labor Training and Modernization Project

Ibarrarán, Pablo, David Rosas Shady, and Yuri Soares. Impact Evaluation of a Youth Job Training Program in the Dominican Republic: Ex-Post Project Evaluation Report of the Labor Training and Modernization Project (DR0134). Inter-American Development Bank, 2006.

NESTA: 3
Can skills training increase employment for young women? : the case of Liberia

World Bank. 2015. Can skills training increase employment for young women? : the case of Liberia (English). Washington, DC : World Bank Group. http://documents.worldbank.org/curated/en/343811468266115466/Can-skills-training-increase-employment-for-young-women-the-case-of-Liberia

Each resource is assigned a rating of rigor according to the NESTA Standards of Evidence.

Define Metrics

Core Metrics

This starter set of core metrics — chosen from the IRIS catalog with the input of impact investors who work in this area — indicate performance toward objectives within this strategy. They can help with setting targets, tracking performance, and managing toward success.

Additional Metrics

While the above core metrics provide a starter set of measurements that can show outcomes of a portfolio targeted toward this goal, the additional metrics below — or others from the IRIS catalog — can provide more nuance and depth to understanding your impact.