A Conceptual Framework for Labor Market Delivery Systems in Low- And Middle-Income Countries. Seeking Efficiency, Scale, and Impact

This paper presents a conceptual framework to guide the development of labor market delivery systems suitable for low- and middle income countries. Case studies show that in most countries labor market programs are characterized by high fragmentation (in financing, delivery agencies), poor or absent targeting criteria, limited or absent tracking of beneficiaries’ outcomes, and limited information for people and firms to exercise choice. The result is a suboptimal use of resources and limited quality assurance. In this context, we conceptualize labor market delivery systems as a set of functions that are delivered on three levels: (i) a delivery chain used to deliver individual programs; (ii) functions that enable coordination and synergy of multiple programs at the local level, typically performed by a designated territorial labor market agency (iii) and a set of governance functions, supported by common IT systems, that help regulate and assure quality, typically (but not always) provided by a central government agency. The paper then discusses these functions and gives select examples, especially from developing countries. At the center of the approach are territorial labor market institutions that help correct some of the market failures, by closing information gaps, avoiding cream skimming by providers, monitoring program implementation, and, in advanced cases, becoming true gateways to individual programs. While in many countries public employment services play this role, the paper argues for a more flexible approach to consider a broader range of institutions for such roles, considering that labor intermediation is just one of many potential interventions that workers may need. The framework is intended as a tool for policymakers and practitioners to map out functions against their institutional landscape, identify gaps, and propose reforms that can help deliver labor market programs more effectively.