Mercedes Mateo Diaz, Education Division Chief, Inter-American Development Bank

Mercedes Mateo Díaz is Education Division Chief at the IDB Group, where she leads an ambitious initiative to rethink education and strengthen the learning ecosystems to equip citizens with 21st-century skills. She coordinates the research, design and execution of innovative education projects. Her work covers different areas of international development and social policy, with a strong emphasis on inequality.


It is just over a year since the coronavirus was officially declared a pandemic by the World Health Organization (WHO). For a long time to come, we will continue to remember the dead, the sick, the after-effects of the disease, the serious economic consequences, and the personal and social impact on wellbeing and mental health. There will also be a lot of discussion about education: the catastrophic effects of school closures and their intergenerational impact. In fact, it is very possible that years from now, education will be the deepest and most lasting scar left by the virus.

According to UNICEF data, children in Latin America and the Caribbean have been out of school the longest. Nearly 60 percent of children in the region missed the school year, and 13 million children are not accessing distance learning. We know that the region already had a severe dropout problem, which the pandemic has exacerbated. A recent study states that the probability of Latin American children finishing school has fallen from 61% to 46%, returning to levels of the 1960s. But that’s not all. Youth unemployment is three times higher than for adults.

However, the connection between education and employment was already broken before the pandemic. For several generations, titles and diplomas were the currency used to exchange in the labour market. Today, the connection between this type of formal education accreditation and jobs has been disrupted. Signs of decline are not new, but the pandemic is probably behind the acceleration of this trend. Quite a body of evidence shows an apparent disconnect between what companies need and what the education and formal training systems produce in terms of skills distribution (Bassi et al., 2011; ManpowerGroup, 2018; King & Zaharchuk, 2016; Shidu & Calderon, 2014; Pew, 2016). Moreover, evidence also shows a shift in the relative importance of different types of skills, with a growing premium on the traditionally so-called “soft skills” (Deming, 2017; Heckman and Kautz, 2012; Edin et al., 2017). In 2012, Nobel Laureate James Heckman and Tim Kautz explained the importance of soft skills like perseverance, sociability, and curiosity in predicting success in life, and causally producing that success. David J. Deming also found that workers with high social skills work more efficiently by coordinating or trading tasks with others.

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A skills shortage

Today, education and training are not something that happens at a certain point in our life: it will happen during our entire life span. We used to structure the life cycle in blocks: we learned during the early years until the beginning of adulthood; then we had a productive phase where we worked; and finally, around the mid-sixties, we retired. This structure no longer applies. We need to be lifelong learners. Human capital development systems and investments need to adjust to this new reality.

Various estimates around the world signal a dramatic and growing shortage of skills in the labour market. This is not only due to the speed at which the market is transforming and adapting to technological change but to the difficulties formal education and training systems have to respond to these new needs. For example, only 55 per cent of leaders believe that their country’s current education system provides the right programs to ensure lifelong learning and skills development (King & Zaharchuk, 2016). Some analysts say that, by 2030, the world may be short of more than 85 million workers with the required skills, with about $8.5 trillion in unrealized revenue opportunities (Korn Ferry, 2018).

Jobs and occupations are changing quickly, and so are the required skills. Whereas many traditional jobs are disappearing, the emergence of new occupations is unprecedented. On the one hand, robots are taking over many essential, routine tasks. On the other, some estimates suggest that around 50% of the professions that will appear in the next few years are unknown today. According to Organization for Economic Co-operation and Development (OECD) estimates, about 14% of jobs in OECD economies are highly automatable, and another 32% could face substantial changes (OECD, 2019). Some data for the Latin American and Caribbean region indicate rates above 50% for those workers with occupations at high risk of automation (Bosch, Pages, & Ripani, 2018; World Bank, 2016; McKinsey, 2017; Plastino, Zuppolini, & Govier, 2018). These trends imply that, overall, in the coming years, probably about 35 per cent of skills for jobs will change across industries (World Economic Forum, 2016). Over the life cycle, individuals will need to change careers and occupations more often than before.

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Skills get outdated faster than ever. Exacerbating the issue, the rate at which professional skills become obsolete is increasing. For example, software engineers need to re-develop their skills every year or 18 months (Pelster et al., 2017). One in four people already experience a mismatch between the skills they have and the skills they need for their current job (World Economic Forum, 2017). Whereas the life of professional skills has been progressively declining (Kasriel, 2017), a recent IBM report shows that the training time required to close the capability gap increased from 3 days in 2014 to 36 days in 2018 (LaPrade, Mertens, Moore, & Wright, 2019). The rate at which skills relevancy expires implies heightened demand for upskilling and reskilling. Demand for management occupations has increased; jobs require higher levels of skills; and many new jobs require either high- or medium-level digital skills (Muro et al., 2017).

Finally, there is a growing disconnect between education requirements and job requirements. Students invest too much time, money and effort on degrees that might have a symbolic value, but that are not needed in practice for many of the jobs and occupations to which they will be applying. Today, many companies and governments are not requiring degrees for new hires. Apple, Google, IBM, Bank of America, and EY, and also the U.S. federal government no longer have degree requirements for applicants as long as they have the appropriate skills (White House, 2020).

Education unbundling

How is the market trying to solve the skills shortage? By breaking the business into pieces. It is called education unbundling. Education will be increasingly modular, constituted by smaller and autonomous, yet interrelated, processes. Until now for example, K-12 education was bundled, and educational trajectories were significantly rigid and predetermined. Something similar happened in higher education. In a world in transformation, if all you have as a tool are bundled services, then by the time you eventually achieve a curricular reform your skills needs might have already changed. The disruption starts when private initiative splits the bundle and begins to concentrate on specific processes of the production chain: digitalization of content; adaptation and personalization of learning; certification and accreditation of competencies, etc. At the end of the day processes are interrelated. Thus, when a change is generated in one of these processes, the other processes are also affected. For example, the development of tools to certify skills create a need to generate new content to develop those skills; and vice versa.

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The market is also increasingly focusing on training for skills instead of training for specialized tasks. And in this context, the transferability of skills is key. Companies want people to be trained to generate new connections between dots that were previously disconnected. Companies want people who can respond to unpredictable situations ; use and understand human emotions to solve problems and conflicts; and who can generate new ideas. We are also beginning to understand that the capacity to solve a problem by a musician when she composes a symphony is very similar to the ability of an engineer to deal with a construction challenge (Van Broekhovena et al., 2020). It requires being open to new ideas, employing divergent thinking, and maintaining a sense of flexibility. These attitudes, disposition, skills, and knowledge are all transferable from one situation to another, and the market is responding to that.

If we train for skills, we can open the door to new ways of learning and different, more flexible alternatives and education trajectories. You can learn on the job; we know that. But this is now not just an option, but an imperative. Companies want to know what you can do, not just what you know. Traditional diplomas provided a bold general certificate of knowledge, a black box. This is why we are seeing an increasing combination between diplomas and specific certificates that provide, in a short period of time, the training you need to perform a job. They respond to a reality in which technical skills get very quickly outdated. And we are seeing a growing supply of services that can adjust very quickly to the shifting needs of a market that is moving at the pace of technological change. Changing the curriculum for K-12 or a four- or five-years’ degree is a gigantic task. Creating or adapting the content of a few-months-long program to the needs of the industry is quite easy.

Finally, unbundling has important implications in terms of the diversification of supply, which is accompanied by a progressive digitalization of education services.

But we are also seeing important changes in consumers’ behavior. Not only supply but also demand will become increasingly sophisticated. Students will be more demanding and will expect concrete returns on their investments both in terms of employment and salaries. The signals sent by the market are very powerful and easily perceived by job seekers. Not only the industry but also individuals are becoming increasingly skeptical about the value of degrees. This is a huge issue for K-12 and higher education institutions. They will need to rethink what they offer, given that the amount of time and money students spend is quite significant and has been on the rise for the last decades. Teachers, as consumers of training, are also different. The pandemic has somehow changed their mindset and approach to professional development. They are now more open to it and effectively are asking for more training in, for example, digital skills.

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An opportunity for filling the skills’ gap?

Is unbundling bad or good news for equality and for improving education and economic opportunities for Latin American and Caribbean countries? I will venture to say that it can contribute to close not only the skills gap but the socioeconomic divide. Part of the reason is that it will take longer to close the skills gaps with traditional education and training systems, and it will probably be unfeasible. That is why, in an extremely pragmatic move, the private sector has progressively transitioned to the unbundling of services. When you create modules, you can easily customize services. Then every company and every individual can take what they specifically need instead of the whole package or bundle. We generate efficiencies not only in terms of time for design and adaptation, but also in terms of financial investments needed to bridge the gaps.

The question is not necessarily whether traditional and formal degrees will be completely overthrown and replaced by certificates, bootcamps and micro-credentials. They will most likely coexist. But traditional education needs an extensive revamping. Will the next generations need a higher education degree to succeed in the labor market? Most likely not—if by higher education degree, we mean the traditional version of a three-to-five-year university certificate or BA. However, this still seems to be more true in some industries than others, and in some countries more than others. In countries like Chile, Colombia or Mexico, the premium placed on educational attainment is incredibly high when we compare the salaries of those with a secondary education degree with those holding a tertiary education degree (OECD, 2019). Employment prospects do not necessarily improve for those with upper secondary education; that, combined with the very remote possibility for a low-income student to attend and complete a long and costly university degree, might be part of the reason why they drop out at the rates we are seeing.

An updated version of higher education that includes a diversified supply of services will continue to predict higher earnings, particularly in a context that requires workers to upskill. That will be necessary to prevent massive displacements by automation of those who perform low-skilled, routine, and predictable tasks. So, we need to make sure students continue with their learning trajectories. For many, the difference between a low-income and a middle- to high-income job could be a matter of more digital skills (Muro et al., 2017). If people do not need a college degree to access better jobs, that could be extremely good news—not just for a market begging for more upskilled and reskilled people, but also for social mobility and prosperity of those individuals in search of better economic opportunities.

The market is progressively readjusting, and we will see the balance between different education and training services emerge in the coming years. This is not something that will happen in 2050. This is happening today. This is a wakeup call for traditional formal education and training systems to adapt to a world in transformation. And in that call for action, this K-12 Digest special issue is precisely a reflection of what the public and private sectors can learn from each other. It is a strong case for collaboration, based on the experience of the 21st Century Skills Coalition. Only by strengthening the ecosystems with effective public-private partnerships can we bridge the massive skills gaps that we face. And only if the Latin American and Caribbean region bridges the talent gap, its countries will be able to prosper, innovate, and compete globally.

About Mercedes Mateo Díaz

Mercedes Mateo Díaz has contributed to the areas of institutional reform, female labor force participation, early childhood, socio-emotional and digital skills and social cohesion. She holds a PhD in political science from the University of Louvain. In 2004, she was a postdoctoral research fellow with the Belgian Scientific Research Foundation (FNRS) and honorary researcher until 2007. From 2002-2004, she was a Marie Curie Postdoctoral Fellow at the Robert Schumann Center of the European University Institute.

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