Skills development for SMEs and Informality

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This expert meeting of the ESSSA initiative will provide a unique opportunity to share international experience in addressing the issue of skills mismatch as a way to contribute to more inclusive growth and good quality job creation across Southeast Asian countries.

Economy & Finance

Skills development for
SMEs and Informality
Anil Verma, Ph.D.
Professor & Director
Centre for Industrial Relations & Human Resources
and
Rotman School of Management
University of Toronto
September 2014

Traditional Approaches to Skill
Development in SMEs
Hire opportunistically
Employee referral
Family member
Help wanted sign in the window
Help wanted sign in the local media
Hire for minimum qualifications
Train on the job
Learn by doing – work experience

Innovative Approaches
• Hire from schools/colleges
• Hire for skills relevant to firm’ s growth
• Provide incentives to employees to learn
new skills
• Provide opportunities to learn new skills
• Connect with schools/colleges to access
ongoing training and skill development
• Connect with industry associations and
community organizations

Source: http://siteresources.worldbank.org/INTLM/214578-1103128720951/22795057/EPPNoteNo16_Eng.pdf

Industry Shared Approaches
Classroom
-Education
- Training
Internships
Job shadowing
Co-op Learning
Joint Projects
Essential
Job Skills

Matching Education to Skills
• Bring industry closer to education
• Industry-college linkages
• Mentorship
• Internships
• Special training
• Job shadowing

Source: http://www.essentialskillsontario.ca/sites/www.essentialskillsontario.ca/files/Industry_Shared_Final_0.pdf

Informality & Skill Development
• Sources of Informality
– Lack of literacy and numeracy skills
– Poor communication between SMEs and
regulatory authorities
– Complex regulatory requirements
– Poor enforcement of regulations
– Deliberate fraud to “save” costs
• The true cost of informality is persistent
cycle of poverty

Skill Development and Informal
SMEs
• Simplify registration and regulations for
SMEs
• Promote industry and community
associations that can foster best practice
• Create incentives for becoming formal
even as the cost of being informal is raised
through enforcement and missed
opportunities

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