International Conference on Economics, Finance & Business, London

BRIDGING THE SKILLS GAP: THE ROLE OF VOCATIONAL EDUCATION AND TRAINING IN SHAPING YOUTH EMPLOYMENT IN SRI LANKA

MAWELA LEKAMLAGE UDARI KUMUDUMALI PIYASENA, KAZUSHI TAKAHASHI

Abstract:

Youth unemployment is a major issue in any country, and realistic solutions are needed to resolve the unemployment since the consequences of joblessness are critical. Vocational education and training (VET) have been identified as one of the most effective solutions to improve the employability of young adults. Facing a high youth unemployment rate, Sri Lanka has established both public and private sector vocational institutions to enhance the technical skills to qualify the young for entry into the labor market. Nevertheless, the youth unemployment rate has continued to rise recently in Sri Lanka. Thus, an evaluation of the effectiveness of vocational education and training policy is required for policy development, but empirical evidence is still limited. To address the lack of empirical data, this study examines the impact of vocational training on full-time employment, monthly income, job security, job designation, job matching, and career development over the years of young adults who applied for Technical Colleges in Sri Lanka from 2015 to 2017. This study uses fuzzy regression discontinuity design (FRDD) to examine the impact of VET on the labor market outcomes of young adults in Sri Lanka. In fuzzy regression discontinuity, we evaluate heterogeneous impacts by types of programs that generate training-specific jobs and entrepreneurship. The overall results suggest that vocational training improves short-term employment outcomes, increasing the likelihood of immediate engagement in full-time work. However, VET graduates struggle to secure long-term permanent employment stability, with limited impact on permanent contracts, career advancement, and wage progression. The economic crisis further exacerbated job mobility and employment insecurity, leading to higher job turnover and a shift toward self-employment. The heterogeneity analysis reveals varied impacts across course categories. While Finance, Banking & Management (FBM) graduates experienced the most consistent employment gains, those in Building & Construction (BC) and Agriculture, Plantation & Livestock (APL) faced prolonged job search periods and greater job losses during economic downturns. Moreover, employment status differed significantly, with FBM and Electrical, Electronics & Telecommunications (EET) graduates more likely to enter the wage employee category. At the same time, self-employment increased among BC and EET graduates during the crisis but declined post-recovery. These findings underscore the need for stronger industry linkages, enhanced job security measures, and tailored VET curricula to ensure sustained labor market integration and long-term career progression for vocational graduates in Sri Lanka.

Keywords: Youth Unemployment, Vocational Education and Training, Labor Market Dynamics, Sri Lanka