an enterprise skills survey which could be replicated in other countries as part of a regional approach to collect and analyze data within a common framework that would allow comparisons across countries.<sup>6</sup> Conducted in 2015, the Tanzania Enterprise Skills Survey elicited detailed information from firms about the educational and occupational composition of their workforce; workers’ technical and vocational training qualifications and non-cognitive competencies (such as teamwork, communication, language and IT skills) that many employers want; employer perceptions about skill gaps and constraints to operations, assessments of skills supply from education and training institutions, and their hiring and in-service training practices. The TESS survey instrument incorporates questions on firm characteristics and performance in line with the World Bank Enterprise Surveys, key questions in common with STEP employer surveys,<sup>7</sup> as well as some unique questions on employer strategies to address skills constraints and on their supply chain of skills and training providers. Drawing on these data, the study uses an analytic framework in which heterogeneous firms make optimizing decisions about the skill mix of their workforce given available skills supply and uncertain demand. Changing workforce composition takes time, and skill deficits arise in the short-term when the actual skills mix is inadequate, while the effect on productivity depends upon how employers respond.

Using this approach, the study addresses five broad areas of policy concern regarding enterprise skills in Tanzania’s formal sector:

- _Skill Profile_ : What is the educational and training composition of the workforce, and how do skills profiles vary across firms? Which factors shape employers’ skills demand most: firms’ productivity attributes or broader-based demand from international trade and technological change?

- _Skill Deficits_ : What do employers’ assessments of workforce education and training say about the adequacy and quality of skills supply, including the soft skills that many employers say they want?  Do these skill deficits pose significant obstacles to the operation of firms? If so, how are these deficits distributed across firms, and do they vary systematically across firms?

- _Skill Strategies_ : What strategies do firms rely on to address skill gaps – using high-skill expatriate workers, providing company-sponsored training, hiring new workers, or outsourcing professional services – and which ones are most effective?

> 6 A second enterprise skills survey is currently on-going in Zambia, which will also support the preparation of a new World Bank project and contribute to the regional framework of data collection on skills. The regional framework contributes to work being undertaken under the Partnership for Skills in Applied Sciences, Engineering and Technology (PASET). PASET was launched in 2013 to address the critical need to strengthen science, and technology capability in Africa to support its socio-economic transformation. PASET convenes African governments, private sector and educational institutions; development partners; businesses from outside the continent who are investing in Africa; and new country partners from other Regions.

> 7 World Bank’s Skills Toward Employment and Productivity (STEP) framework).

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