Workforce Connections, a USAID funded project, has gathered and reviewed existing labor market assessment approaches and related tools from across the workforce and youth landscapes to develop a core suite of tools that can be used to conduct a labor market assessment (LMA). These pages present a distillation of the knowledge and experience gathered in an accessible, practical, and actionable format. These approaches balance quantitative and qualitative research; focus on the supply, demand, and matching of labor; are participatory; and can be customized to local contexts and priorities.
Module 1: Economic Context
Tools and approaches in this section help the user understand the key demographic, economic, and human capital trends in a country, and identify the economic sectors that may provide employment opportunities, now and in the future. Jump to the full Module 1.
Why are these tools and approaches important?
If we know in which sectors growth is occurring, or expected to occur, and if we understand the nature of the growth (i.e., export-driven, technology-driven) then we can offer estimates as to what the eﬀect will be on employment. That is, in which sectors, and for which occupations, might we see jobs created as a result of growth?
Approach 1a: Data Dashboard Tool
A LMA might make use of a dashboard as a data visualization tool to succinctly portray a country’s economic, demographic, and human capital trends. A broader picture of country dynamics useful for an assessment might include economic, human capital, and policy indicators. Jump to the full Approach 1a
Why is this tool important?
The process of putting together such a dashboard can help identify key data sources to be utilized in the LMA (as well as identify data gaps), and can also raise key questions that need to be answered in the assessment, such as how changes in sectoral GDP are aﬀecting the demand for skills.
How do I use this tool?
A dashboard can be used to present information that is valuable to many stakeholders to get a sense of the context in which the labor market system is functioning. Data are typically drawn from sources such as the World Bank, UN agencies (including the UN Comtrade database, the UNESCO Institute for Statistics, the United Nations Development Program, and the United Nations Department for Economic and Social Aﬀairs), the Observatory of Economic Complexity, the International Labour Organization, the International Organization for Migration, and the World Economic Forum, as well as regional development institutions, national statistical institutes, and relevant studies and reports.
The dashboard can be created as an initial step in a LMA via desk research, and shared with stakeholders at the beginning of the LMA to validate contextual findings and identify areas of inquiry, and/or be included in the final LMA product.
Approach 1b: Sector Selection Process
The Sector Selection Process provides a deeper understanding of the dynamics that are leading to growth and the ways in which skills are or can contribute to that growth. If the right skills are developed for the right people in the right market, a virtuous skills-to-investment cycle is generated. Jump to the full Approach 1b.
Why is this process important?
Selecting specific sectors to analyze in a LMA is key to forming a nuanced understanding of economic growth and employment opportunities in a given context. By identifying which sectors are the largest employers, which are the most competitive in export markets, and where there is the greatest potential for growth and employment among target populations, researchers and implementers can tailor their programs to achieve the best outcomes for growth and workforce development. The approach ensures that workforce development programs, regardless of their purpose, are geared toward market demand and employment trends.
How do I use this process?
The sector selection process can be a helpful complement to a Product Space Analysis (Approach 1c); the latter is employment-neutral and can only look at manufactured goods because of data limitations, whereas the sector selection method provides a look at services sectors, which are an increasingly important employer in many countries. Depending on the target population or skill level of interest of the assessment, it may also be important to look at informal employment. Learn more about the four steps to this approach.
Where can I find more information about this process?
Hausmann, R., & Hidalgo, C. A. (2014). The atlas of economic complexity: Mapping paths to prosperity. MIT Press.
Microlinks. (n.d.) Value Chain Selection
World Bank. (2011). “Sector Competitiveness Analysis Tools: A Reference Guide.” Finance and Private Sector Division, June.
Approach 1c: Product Space Analysis
Product space depicts a network map in which products are closer to one another if growth in their exports is correlated. Policymakers and implementers can use this map to look at the current export basket of a particular country and identify the products which, if it diversified into them, might send the country onto its optimal path of greater economic complexity and GDP growth. Jump to the full Approach 1c.
Why is this tool important?
An open source, multi-year export data set called the “Product Space” has yielded a relatively new measure called “economic complexity.” It combines information regarding “who makes what,” with a measure of how complex the products are. Economic complexity rankings have been shown to significantly outperform educational variables such as years of schooling and educational enrollment as well as the World Economic Forum’s Global Competitiveness Index, in predicting growth in income. For the purposes of a LMA or workforce development project, this tool, when combined with others, including Sector Selection, can help inform which sectors and/or skills requirements to focus on, and which to eliminate.
How do I use this tool?
To create or view existing product space maps, users should consult the Observatory of Economic Complexity website, which includes product space maps for 128 countries and for the years 1962-2014. Harvard’s Atlas of Economic Complexity oﬀers an alternative visualization tool.
Where can I find more information on this tool?
“The Atlas of Economic Complexity,” Center for International Development at Harvard University, Hausmann, R., & Hidalgo, C. A. (2014). The atlas of economic complexity: Mapping paths to prosperity. MIT Press.
Hidalgo, C.A. (n.d.). “The Product Space.” Hidalgo, C. A., Klinger, B., Barabási, A. L., & Hausmann, R. (2007). The product space conditions the development of nations. Science, 317(5837), 482-487.
Simoes, A. (n.d.) “The Observatory of Economic Complexity.”
Where can I find additional approaches and tools to understand the economic context?
Countless tools exist to analyze economic context, many of them gathered in the World Bank’s “Sector Competitiveness Analysis Tools: A Reference Guide.”
In particular, Workforce Connections uses an adaptation of the Boston Consulting Group’s growth-share matrix to analyze a country’s relative export performance in a “trade-share matrix,” and also analyzes sector GDP and investment trends, as part and parcel of a labor market assessment. Where data are available, Workforce Connections uses location quotient analysis, which quantifies how concentrated employment currently is in a particular industry or occupation in a region as compared to the nation, identifying what makes a particular region unique in terms of employment, in comparison to the national average.