Training Returns Among Informal Workers: Evidence from Urban Sites in Kenya and Tanzania

Abstract

Training contributes to economic growth through raising productivity, enabling the use of new technologies and allowing workers to raise earnings through widening their skills base. This paper uses mixed methods to examine individual returns to off-the-job training, on-the-job training and informal training focussing on informal workers in the sectors of construction, micro-trade and transport in urban areas of Kenya and Tanzania. Based on a cross-section, the analysis shows that earnings are 21 pct. higher for workers with off-the-job training compared to being self-taught, whilst the premium for on-the-job or informal training by a family member is 16 pct. The qualitative data provide further insights into the reasons for variations in gains across the different types of training and illuminates the role of informal worker associations in facilitating training access. Formal training should be made affordable and tailored to worker needs so that it becomes a worthwhile investment for informal workers.