The Challenge

Around the world, the competencies of job seekers do not always meet the standards demanded by private sector firms. This skills gap in the labor market can have significant negative consequences on the economy, including lower productivity, weaker innovation, and higher income inequality. For governments, this underscores the importance of identifying current and future skill needs in order to plan public training programs that align with market demand. Without such foresight, education and training systems risk producing workers whose profiles do not match the evolving needs of employers.

Ecuador illustrates these challenges. Its economy faces limited growth, underemployment among youth and women, and a large informal sector. At the same time, firms struggle to find workers with the technical and soft skills required to boost productivity and competitiveness. For policymakers, the priority is not only closing the existing skills gap, but also building the capacity to anticipate demand so that public training systems can prepare workers accordingly. By doing so, the government can strengthen the match between labor supply and demand, foster inclusive growth, and support the country’s long-term economic development.

The Research

In collaboration with IPA and the Ecuador Ministry of Labor, researchers carried out a survey to assess firms’ demand for skills and the barriers they face in hiring workers. The survey covered 2,570 firms in Quito and Guayaquil through an online questionnaire, including 1,414 firms surveyed in person by IPA. The surveys collected information on firm background and characteristics, identified skills gaps that hinder employment, and gathered employer perspectives on training needs and workforce readiness. These insights provide the government with evidence to better anticipate labor market demand and align public training programs with the skills required by firms.

Results

Firms in Quito and Guayaquil contend with both external and internal gaps when looking for workers to hire, highlighting issues in Ecuador’s labor market. In the two cities, 41 percent of the firms had challenges filling vacant positions; the primary difficulty stemmed from candidates’ lack of work experience and technical skills. Moreover, the principal deficiencies that workers had were effective and clear communication, working in a team, and specific technical competencies.

While training was a strategy to boost skills, this was mostly done by large firms, who accounted for 90 percent of trainings; many firms that didn’t train candidates were hindered by budgets. Overall, researchers recommend that strengthening the government’s job training agency’s scope could improve the needs of the labor market while implementing both technical and socioemotional skills development programs could mitigate the existing barriers.

The survey also included additional questions on the presence of human mobility workers in the labor force and the barriers to their integration. This study is forthcoming.

Implementing Partner