# **III. DATA AND ANALYTIC FRAMEWORK**

This section begins by describing the survey designed to collect the data that have never been available before on enterprise skills. It is followed by a description of the analytic framework used to model firms’ choices of skill mix and strategies to mitigate skill deficits – the mismatch between needed and available skills – and to estimate their impacts on firm performance. In this analytic framework, firms are distinguished by whether they are high-skill or low-skill firms. The section concludes with a broad overview of the data, including simple pair-wise correlations between key skill variables and indicator measures of skills demand, and comparisons of high-skill and lowskill firms in terms of their labor productivity and job creation over the past two years.

# **Tanzania Enterprise Skills Survey**

The data needed to study the determinants and outcomes of skill shortages and strategies firms use to mitigate them are from the 2015 Tanzania Enterprise Skills Survey (TESS). Piloted by the Development Economics Vice-Presidency and Education Global Practice of the World Bank, TESS was designed to provide insights into the composition and demand for skills, and the relationship between skills (and skill constraints) and firm performance in selected economic sectors in five regions of Tanzania. The five regions include Dar es Salaam, the autonomous region of Zanzibar, and three mainland regions of Arusha, Mbeya, and Mwanza. The economic sectors are food, textiles and garments, fabricated metals, and furniture in manufacturing, and IT, hotels and restaurants, construction and transportation in non-manufacturing. Firms were classified into three sizes – small firms with 5-19 employees, medium with 20-99 employees, and large with 100 or more employees.

The survey included 424 enterprises stratified by sector, region and size, with between 40 and 76 enterprises in each sector. About half the sample (224 firms) is located in Dar es Salaam and the balance divided rather evenly across each of the remaining regions (each with about 50 firms). Overall, small firms make up 63 percent of the sample, medium-size firms 26 percent and large firms 11 percent. However, this firm-size distribution varies considerably across sectors and regions. Small firms are mostly found in textiles and garments, fabricated metals, furniture and IT, while large firms are more prevalent in food, construction, and transportation. Mbeya and Zanzibar are dominated by small and medium firms while Dar es Salaam and Arusha have most large firms.

TESS builds on the recently completed 2013 Enterprise Survey for Tanzania, retaining selected key variables on firm characteristics, firm performance and productivity, and adding an expanded module of questions on employment and skills. It elicited qualitative and quantitative information from firms about the education and occupational composition of their workforce, their perceptions about skill gaps in education as well as different cognitive, non-cognitive and technical skills and the constraints these pose for their operations, their strategies for addressing skill gaps including the hiring of new workers, use of foreign workers and outsourcing skills, and their in-house and 12