1.
EminentPanelConference,Accra,August7th -9th,2020
Cost-Benefit Analysis of Skill Development
Interventions in Ghana
Charles Ackah and Kwadwo Opoku
Centre for Social Policy Studies, University of Ghana, Legon.

2.
Motivation of Skills Development Interventions
• About 59 percent of Ghana’s population is below the age of 24 years
(World Population Prospects, 2017).
• Only 52 percent of young people are working compared with adult
working population of 89 percent.
• Thus, there is a relatively high unemployment among the youth in
Ghana.
Barriers to the youth employment include low skill levels, lack of access to
finance, land, and social networks
• The employed youth usually work in temporary low-wage, low-
productivity jobs.

3.
Motivation
Youth unemployment rate in Ghana from 1998 to 2018

4.
Motivation
• Hence, the need for conscious policy interventions such as vocational
and apprenticeship programs for skills development for the youth.
• These interventions are expected to improve their employment
opportunities that could accelerate productivity growth for national
development.
• Low skill levels among the youthful population—for all the youth with
upper secondary education, only about 5.3% pursue TVET.

5.
Motivation
• This percentage is likely to be lower now given the current free SHS
policy that is biased toward general secondary education at the upper
level.
• Even with this limited number youths who graduate with TVET, only a
few would have opportunity for on-the-job training and hands-on
experience that would make them ready for work.

6.
Vocational Education

7.
Description of Vocational Training Intervention
• Vocational training for youth 17-19 years old
- Provide vocational Training to improve skill development at secondary level in
well-organized formal institutions for a period of 3 years.
About 100,000 students, representing about 20% of JHS graduates.

8.
Cost of Vocational Training
• Direct cost:
- Salaries for training personnel (government and individuals)
- Cost of management and monitoring of vocational training
- Cost of providing teaching material, equipment, building infrastructure, etc.
• Indirect cost:
- Opportunity cost (forgone earnings as unskilled workers)
- Drop out cost.

9.
Benefits of Vocational Training
• For a given three year program, a 17 year
old individual earns no wage until age 20.
• Upon graduation, the graduate earns a
higher wage than the equivalent JHS
graduate.
• We estimate this benefit of vocational
education to be GH¢44,000 discounted at
an 8% rate across the lifecycle.
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59
Annual
Wage
income
(GH
¢)
Age
Wage-Age Profile (GLSS 7 Data)
Vocational JHS

10.
Total costs, total benefits and cost-benefit ratio
Discount Benefit per Student (GHC) Cost per student (GHC) BCR
5% 77,394 36,132 2.1
8% 44,009 34,119 1.3
14% 19,032 30,819 0.6

11.
Apprenticeship

12.
Description of Apprenticeship Intervention
• Apprenticeship for unemployed youth in selected firms
- Government organizes and funds off-the-job education and training.
- Employers take responsibility for the supervision and training of apprentices
during their work placements.
• The aim is to enhance skills and prepare the youth for jobs and
careers.
• Also to create value for employers through improvement in
productivity.

13.
Cost of Apprenticeship Training
Direct cost:
- Per capita expenditure (borne by government) for the entire 3 years
duration—10% of government direct cost of TVET (GHC1,224.62)—for
monitoring, examination and certification of an apprentice.
Indirect cost:
- Opportunity cost of being an apprentice—wages forgone by working as non-
apprentice worker.

14.
Benefits
• Apprenticeships provide a benefit equal to
~GH¢13,000 for beneficiaries, using an 8%
discount rate over the lifetime.
• Apprenticeship programs also provide a
(cheap) source of labor to employers with
improved marginal profit equivalent to —
GH¢1,700 during the 3 year training
period
0
2000
4000
6000
8000
10000
12000
15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59
GH¢
Age
Apprenticeship No apprenticeship

15.
Total cost, total benefit and cost-benefit ratio
Discount Benefit per Trainee (GHC) Cost per Trainee (GHC) BCR
5%
28,613 6,536 4.4
8%
14,679 6,202 2.4
14%
5,653 5,615 1.0

16.
SUMMARY BCR TABLE
INTERVENTION Benefits (GHS) Costs (GHS) BCR
Vocational Training 44,009 34,119 1.3
Apprenticeships 14,679 6,202 2.4