# **I. Introduction**

Integrating youths into the labor market is a major challenge for developing nations, particularly in Africa (Filmer et al, 2014). Inactivity and under‐employment rates among youths are typically two to three times higher than the rates for older adults. With 75 million young people in the developing world who are unemployed and hundreds of millions who are underemployed, youth employment is one of the most pressing development challenges (World Bank 2013). In Sub‐Saharan Africa, youths living in urban areas appear to be the age group that has the greatest difficulty finding paid employment.

In Kenya, for example, unemployment is mainly a youth problem. According to the Kenya Economic Update (World Bank 2012), the labor market prospects for youth are more challenging than for adults. Youth unemployment is rampant compared to adults ‐ particularly in urban areas ‐ and the youth inactivity rate is two times higher than that of adults. A recent analysis of unemployment in Kenya by the United National Development Program (UNDP, 2013) showed that youth unemployment is more a pronounced issue among those younger than 25 years of age, peaking to 35 percent compared to an overall national unemployment rate of 10 percent, and in urban areas it is as high as 50 percent compared to a rate of about 30 percent in rural areas (for youths up to the age of 22).<sup>1</sup> Nine percent of youth between the ages of 15 and 24 are inactive, not at a school, being particularly at risk of being recruited into criminal activity.

Training programs aim to address the insufficient supply of relevant skills (technical, cognitive, and non‐cognitive), which is one of the main barriers preventing young people from finding work in developing countries.<sup>2</sup> Skills constraints mean that individuals lack the appropriate technical, cognitive, and/or non‐cognitive skills to respond to employers’ demand. Training programs represent a potential solution to this problem for individuals who have left the formal schooling system, unemployed job seekers, and youths transitioning from school to work who hold diplomas in subjects for which there is not enough demand. Lack of business and entrepreneurial skills is often a key constraint, especially for the poorest young people who want to become self‐employed. While training programs can increase the employability and productivity of young people, they can be costly and of limited use in situations where there are only limited job opportunities available for these workers after they have been trained.

Evidence from the World Bank’s enterprise surveys in more than 100 countries has shown that employers regard the lack of job‐relevant skills among workers as one of the binding constraints to firm growth. In Kenya, the availability of educated workers represents the obstacle that firms perceived to have increased the most between the 2007 and 2013 rounds of the enterprise surveys (World Bank 2014).

> 1Estimates are based on the Kenya Household Budget Survey 2005, the latest available in the country as of today.

> 2Training programs can also be designed to address other types of constraints limiting the supply of job-relevant skills to match labor demand, such as information asymmetries in the labor market, mobility and credit constraints, and in some contexts social constraints.

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