Dear governments and aid agencies: Please stop hurting poor people with your skills training programs

Here is an incredible number: From 2002 to 2012 the World Bank and its client governments invested $9 billion dollars across 93 skills training programs for the poor and unemployed. In lay terms, that is a hundred freaking million dollars per program.

Unfortunately, these skills probably did very little to create jobs or reduce poverty.

Virtually every program evaluation tells us the same thing: training only sometimes has a positive impact. Almost never for men. And the programs are so expensive—often $1000 or $2000 per person—that it’s hard to find one that passes a simple cost-benefit test.

You might think to yourself: That’s not so bad. Nobody hurt the poor. Plus the trainers and the firms probably benefited. So it’s not a total loss.

If you think this, I urge you to transfer to an organization where you can no longer affect the world. I can think of a couple UN agencies with excellent benefits.

Because when you take billions of dollars a year (because the World Bank is hardly the only spender on skills programs) and you spend them on vocational bridges to nowhere, you have denied those dollars to programs that actually work: an anti-retroviral treatment, a deworming pill, a cow, a well, or a cash transfer. You have destroyed value in the world.

I know what some are thinking: skills program just have to be more market-driven, or on-the-job, or linked to firms, or targeted to the right people.

Maybe. And these might pass a cost-benefit test if you can make them cost much less. But I want you to ask yourself: do you want to run programs that are hard to get right, or hard to get wrong?

Because if you want to create work for unemployed people, and reduce extreme poverty, there are in fact programs that are hard to get wrong.

It gets better. Currently, about two billion people live in countries that are deemed fragile or have high homicide rates. Jobs and incomes in these countries will probably mean less crime, and maybe even a decrease in other kinds of violence. Especially if they are targeted to the highest-risk men.

If you’re thinking to yourself “hey, I would like to read 20,000 more words on this, preferably in dry prose,” well do I have the paper for you. I have a new review paper with Laura Ralston: Generating employment in poor and fragile states: Evidence from labor market and entrepreneurship programs.

It is a draft for discussion, and comments and criticisms (in emails, blog comments, and prank calls) will be integrated over the coming months.

Fortunately the paper includes a 4-page executive summary. And, even better, an abstract!

The world’s poor—and programs to raise their incomes—are increasingly concentrated in fragile states. We review the evidence on what interventions work, and whether stimulating employment promotes social stability.

Skills training and microfinance have shown little impact on poverty or stability, especially relative to program cost. In contrast, injections of capital—cash, capital goods, or livestock—seem to stimulate self-employment and raise long term earning potential, often when partnered with low-cost complementary interventions. Such capital-centric programs, alongside cash-for-work, may be the most effective tools for putting people to work and boosting incomes in poor and fragile states.

We argue that policymakers should shift the balance of programs in this direction. If targeted to the highest risk men, we should expect such programs to reduce crime and other materially-motivated violence modestly. Policymakers, however, should not expect dramatic effects of employment on crime and violence, in part because some forms of violence do not respond to incomes or employment.

Finally, this review finds that more investigation is needed in several areas. First, are skills training and other interventions cost-effective complements to capital injections? Second, what non-employment strategies reduce crime and violence among the highest risk men, and are they complementary to employment programs?

Third, policymakers can reduce the high failure rate of employment programs by using small-scale pilots before launching large programs; investing in labor market panel data; and investing in multi-country studies to test and fine tune the most promising interventions.