Most strategic documents[1] According to the NRF, the overarching strategic framework for education and VET development is ensured by the Employment and Social Reform Programme (Ministry of Labour and Social Policy, 2016) and the Economic Reform Programme (Ministry of Finance, 2018). For the formulation of its vision for economic and social development, North Macedonia relies on sectoral strategies, which in the area of human capital development include the Education Strategy for 2018–2025 (MESRM, 2018), the Employment Strategy 2016–2020 (Ministry of Labour and Social Policy, 2015), and the Youth Employment Action Document 2016–2020 (Ministry of Labour and Social Policy, 2015b). Additional strategic documents have been developed to address adult education, i.e. Adult Education Strategy 2017–2020 and Lifelong Learning Strategy 2017–2020.
mapping out the development trajectory of North Macedonia count on education and training as a future-oriented driver of human capital development, but as a means of remedying the shortcomings of past policies that have led to the exclusion of large segments of the population from the benefits of decent work.

However, the national Torino Process report is rich in information about long-standing structural and policy-related weaknesses in education and VET in particular that may complicate the pursuit of these commendable goals and diminish their prospects of success. Examples include sub-standard teaching and learning environments, limited professional development opportunities and incentives for teachers and school leaders, outdated study programmes, etc. The combined effect of these challenges is an education and training system that does not deliver on expectations, limits the employability of graduates[2] NRF C.1.1.
, and compromises the competitiveness and innovation potential of the nation.

Over the past few years, the government's economic policies have aimed at job creation and demand for human capital. Employment programmes and fiscal and investment stimuli have shifted the profile of job opportunities away from low-skilled jobs towards employment requiring higher and medium-level skills and have boosted demand in some, but not all, key sectors of the economy. However, economic growth and the associated employment gains are fuelled by public subsidies, which may put strain on public budgets and lead to fiscal difficulties and a reassessment of policy commitments. In turn, this reshapes or even stalls demand for human capital in key sectors at short notice, rendering obsolete the longer-term policy planning of authorities and the education and training choices of prospective workers.

The ETF assessment establishes that there are large disparities in the distribution of demand for human capital across regions of the country and sectors of the economy, some of which are booming while many more are stagnating or even declining in terms of opportunities for work. This may affect the well-being and employment outlook of certain segments of the population, and it has a considerable impact on the chances for well-being and prosperity of people from vulnerable socioeconomic backgrounds, from smaller urban and rural areas and, as noted before, of young people. Social and economic disadvantage seems to be the reality for many people of working age and/or who are potential beneficiaries of VET, which in turn has an impact on their education choices and chances of employment.

The ETF analysis in this assessment establishes that educational attainment is a strong predictor of long-term unemployment and economic inactivity, especially among young people. In 2017, some 56% of the population of working age in North Macedonia was unemployed or inactive. Four out of five jobless people with basic or no education were also long-term unemployed, and those with basic or no education accounted for well over half the inactive population in the country. Overall, a quarter of unemployed people had incomplete basic or no formal education in that year. The national report notes that these people are also the most exposed to poverty and exclusion.

Conscious of the urgent need for change, the authorities of North Macedonia have traditionally prioritised the growth of educational attainment of the working age population. As a form of long-term remedy, secondary education and VET were subject to a range of reform measures including becoming compulsory in 2008. In that year, North Macedonia also singled out the promotion of lifelong learning (LLL) and adult education and training (AET) as a primary response to the long-standing challenge of underdeveloped human capital.

Although these priorities are highly relevant, the assessment finds that the policy interventions in both the formal and the AET segments of human capital development are not as effective or coherent as they could or should be. The introduction of compulsory secondary education, for example, was not accompanied by support measures for teachers. This has in turn had a significant impact on internal quality assurance, leading stakeholders to distrust information about the achievement of students. At the same time, less educated and socially disadvantaged adults are practically excluded from opportunities to upgrade their skills and knowledge through AET, for structural and content-related reasons.

North Macedonia, like many countries in South Eastern Europe, and indeed other regions of the world, struggles with youth unemployment. The assessment finds several very important areas in which policy decisions need to be made: youth unemployment is persistent, acute (the rate of unemployment is much higher than in other countries in the region) and, at the time of this assessment, does not appear to respond to the education and training young people receive. Between 2010 and 2017 an average of 51.3% of young people in the country were unemployed, and the gap in unemployment between adults and young people has widened since 2010 with young people more than twice as likely to be unemployed as adults. Remarkably, unemployment in North Macedonia appears to disproportionately affect the younger working age cohorts, who happen also to be better educated than older workers.

The analysis establishes that a secondary education degree (general or VET) is a strong predictor of difficulties with employability across age groups, stronger than a higher education qualification or low educational attainment, which in turn suggests that VET may be failing in at least one aspect of its public mission, namely to ensure that young people are employable and ready for a professional future. In other words, youth unemployment in North Macedonia is not only a labour market challenge, but also an educational challenge, which can be addressed through improvements in education and training.

The government of North Macedonia has focused discussion about solutions to this issue mainly on remedial measures to support secondary school and higher education graduates, for example through a wide-reaching youth guarantee programme. However, there has been little talk of preemptive measures to reinforce the employability of young people still in formal education. There are shortcomings throughout the education and training system that limit the capacity of formal education to combat youth unemployment in North Macedonia. As far as VET is concerned, these include low responsiveness to external demand, weak management of human resources, limited career guidance for students, and biased classroom assessment.

To address the challenge of low educational attainment more effectively, the ETF recommends actions in both formal education and beyond formal schooling.