Putting people first: Education reforms are set to help assure future growth

A raft of structural reforms, aimed at improving competition and efficiency, is being implemented in Mexico in an effort to boost the economy. The impact of these reforms – 11 in total – is expected to be felt increasingly across a number of economic sectors, especially in energy, telecoms and financial services, with taxation, transparency, competition and labour among the areas specifically targeted. Although the full benefits have yet to materialise, the economy is poised for a considerable boost as changes are implemented. While the 2015 mid-term election results allow the current administration to focus on implementing the reforms without political opposition in Congress, capacity constraints – including financial and human capital – could delay implementation.

Skill Sets

Mexico’s future growth depends heavily on its management and development of skills needed in the workforce. The success of the reforms will also depend on the country’s ability to meet the rising demand for an increasingly skilled labour force. Recent reforms to the energy sector, in particular, are increasing the need for highly skilled labour in a number of fields including engineering, chemistry, geology and physics. For the first time since 1938, recent reforms allow for private and foreign investment in Mexico’s oil and gas fields. This radical change is expected to lead to an influx of capital and technology that will boost production and bring about a broad-based increase in employment. The creation of jobs is anticipated not just in extraction-related activities and other areas directly related to oil, but also in information services, training, health care, housing, education and manufacturing. With new oil companies and service providers expected to enter the country as the sector opens up, competition for skilled workers is expected to grow in coming years as the need for trained professionals rises. Meanwhile, roughly half of current employees (some 20,000 workers) with Pemex, the state-owned energy company that held a monopoly over the sector for decades prior to the reform, are expected to retire over the next 10 years, resulting in an anticipated shortage of qualified labour. According to a report published by the Manhattan Institute for Policy Research, the creation of 500,000 jobs in Mexico is expected by 2018 with an additional 2.5m new jobs being added by 2025.

Changing Demand

According to the OECD, the percentage of employers reporting recruitment difficulties in Mexico decreased considerably from 82% in 2007 to 42% in 2011. However, the rate remains high, which indicates that more needs to be done to ensure adequate education and training to meet the changing skills requirements of the labour market. Despite recent reforms to the education sector, the system struggles to deliver on the skill sets that are required by the changing economy. According to the World Economic Forum’s “Global Competitiveness Report 2014-15,” Mexico ranked 87th out of 144 countries on higher education and training. On the quality of math and science education, Mexico ranked 128th out of 144 countries. Mexico’s low performance in these areas is a concern, given the growing need for more skilled workers to fill the jobs created by recent reforms. Increasing enrolment also remains a challenge. At 56%, Mexico has the lowest enrolment rate among 15-19 year-olds of OECD member states. Meanwhile, only 12% of 20-29 year-olds participate in higher education. Improving the education system and increasing enrolment will be key to ensuring sufficient availability of adequately trained workers to meet the changing demands of the market as the reforms are implemented.

Mexico’s spending on science and technology also remains low, with combined public and private R&D spending at 0.4% of GDP in 2014. Nevertheless, the state has pledged to expand research and development with a 20% increase for the National Council for Science and Technology as well as a 12% increase for the country’s overall science budget. The goal is to boost investment on R&D to 1% of GDP by 2018.