What Do We Know About Continuing What Do We Know About Continuing Vocational Education, Training and Work?Vocational Education, Training and Work?

Philip J. OPhilip J. O’’ConnellConnellThe The Economic and Social Research Institute, DublinEconomic and Social Research Institute, Dublin

Presentation to conference: Presentation to conference: Shaping the Future of the ESF Shaping the Future of the ESF –– ESFESF and Europe 2020, and Europe 2020,

Brussels, 23Brussels, 23rdrd and 24and 24thth June, 2010June, 2010

The ContextThe Context

►►International downturnInternational downturn►►Rapid increase in unemploymentRapid increase in unemployment

Almost 10% in EU 27 in April 2010Almost 10% in EU 27 in April 2010Over 10% in Over 10% in EurozoneEurozone

►►Fiscal crisis of StatesFiscal crisis of States►►Need to increase investment in human Need to increase investment in human

capitalcapitalSecure economic and social progressSecure economic and social progressRestore competitivenessRestore competitiveness

Unemployment rates, 2010Unemployment rates, 2010

0

5

10

15

20

25

NO NL AU LU CY SV MA DK Cz DE RO UK BE BU IT SW FI PL FR PO EL HU IE SK EE LT ES LV

Unemployment rates, EU 27, 2009Unemployment rates, EU 27, 2009

% All 8.9 Men 9.0 Women 8.8 Age < 25 years 19.6 25-74 years 7.6 Education Lower 2nd or below 12.8 Upper 2nd & post 2nd, non 3rd 7.1 3rd level 4.5

Several countries combine high unemployment Several countries combine high unemployment (>10%) with large deficits (>5%)(>10%) with large deficits (>5%)

BEBU

Cz

DKDEEE

IEELES

FRITCY

LVLT

LU

HUMANL

AU

PLPO

RO

SVSK

FISW

UK

NO

-20

-15

-10

-5

0

5

10

15

0 5 10 15 20 25

Active Labour Market ProgrammesActive Labour Market Programmes

►►From passive income support to active From passive income support to active assistance with labour market integrationassistance with labour market integration

►►Supply sideSupply sideJob Search AssistanceJob Search AssistanceTrainingTraining

►►Demand SideDemand SideEmployment schemes and incentivesEmployment schemes and incentives

►►More influence over distribution than size of More influence over distribution than size of unemployment unemployment

Impact of Impact of ALMPsALMPs for Unemployedfor Unemployed

International Research on impact of Active Labour MarketInternational Research on impact of Active Labour MarketProgrammes on participantsProgrammes on participants’’ job prospects is inconclusivejob prospects is inconclusive

►► Job Search AssistanceJob Search AssistanceEffective for many groups, low costEffective for many groups, low costMore effective with monitoring & sanctions?More effective with monitoring & sanctions?

►► Formal TrainingFormal TrainingInconclusive evidence, targeting is importantInconclusive evidence, targeting is important

►► Employment SubsidiesEmployment SubsidiesEmployment: some help LTUEmployment: some help LTUSelfSelf--employment: high deadweight and displacementemployment: high deadweight and displacement

►► Public Sector Job CreationPublic Sector Job CreationLittle evidence of any positive effectLittle evidence of any positive effect

ProgrammesProgrammes with strong market linkages with strong market linkages show positive effects on employmentshow positive effects on employment

Market Orientation

Labour Market Leverage

Weak Strong

Supply – Training

Weak or No Effect

Positive

- Employment and wages

Demand – Employment

No Impact on Employment

Positive

% of Enterprises Providing, % of Enterprises Providing, % of Employees Receiving, Training, 2005% of Employees Receiving, Training, 2005

0

20

40

60

80

100

Employees Enterpises

AvgeAvge Hours JobHours Job--related Training per Trainee, 2005related Training per Trainee, 2005

0

5

10

15

20

25

30

35

40

Training is Highly StratifiedTraining is Highly Stratified

►► People with higher skills or education are more likely to receivPeople with higher skills or education are more likely to receive e trainingtraining

►► The employed receive more training than the unemployedThe employed receive more training than the unemployed►► The unemployed receive more training than those not economicallyThe unemployed receive more training than those not economically

activeactive

►► Immigrants and members of minority ethnic groups tend to receiveImmigrants and members of minority ethnic groups tend to receiveless training than native and/or majority populationsless training than native and/or majority populations

►► PartPart--time workers, those on temporary contracts and older workers time workers, those on temporary contracts and older workers are less likely to receive training are less likely to receive training

►► Larger firms, and those that pay higher wages are more likely toLarger firms, and those that pay higher wages are more likely to train train their employees. their employees.

►► Those with the greatest need for training tend to receive lessThose with the greatest need for training tend to receive less

The Impact of Training: EmployeesThe Impact of Training: Employees

The evidence is mixed:The evidence is mixed:

►► Many studies find positive effects of training on wagesMany studies find positive effects of training on wagesUK, US, France, Sweden, Ireland UK, US, France, Sweden, Ireland ---- 33--10% 10%

►► Returns are usually higher: Returns are usually higher: General training (rather than specific)General training (rather than specific)Those with upper 2Those with upper 2ndnd than 3than 3rdrd level educationlevel educationThose with low propensity to trainThose with low propensity to trainIn subsequent jobsIn subsequent jobsWhen combined with high performance work practicesWhen combined with high performance work practices

►► Most find that controls for selection / unobserved Most find that controls for selection / unobserved heterogeneity eliminate estimated effectsheterogeneity eliminate estimated effects

The Impact of Training: EmployersThe Impact of Training: Employers

The evidence is sparse:The evidence is sparse:

►► Limited number of studies find that training enhances Limited number of studies find that training enhances productivity or other measures of corporate performanceproductivity or other measures of corporate performance

Returns may be divided equally between employers and workersReturns may be divided equally between employers and workersProductivity increases for employers, wage gains for employeesProductivity increases for employers, wage gains for employees

►► Irish research shows positive effect of training on turnover Irish research shows positive effect of training on turnover after 3 yearsafter 3 years

General training has positive effectGeneral training has positive effectspecific training has no effect specific training has no effect

The Information Deficit in CVETThe Information Deficit in CVET

►► Education/Training as investmentEducation/Training as investment►► 3 key decision makers3 key decision makers

Individuals/workers, organisations/firms, the stateIndividuals/workers, organisations/firms, the state

►► 3 information problems 3 information problems 1.1. What is needed? What is needed? 2.2. What is available What is available –– cost, qualitycost, quality

Individuals are not well informedIndividuals are not well informedProblem for small enterprises?Problem for small enterprises?

3.3. What are the returns?What are the returns?Individuals have a rough sense that CVET is goodIndividuals have a rough sense that CVET is goodEmployers have difficulty measuring returns to trainingEmployers have difficulty measuring returns to trainingStates also have difficulty establishing the returns to CVETStates also have difficulty establishing the returns to CVET

Enhancing the Information InfrastructureEnhancing the Information Infrastructure A A CCostost--effective role for national states and ESFeffective role for national states and ESF

►► Monitoring trends Monitoring trends LifeLife--long Learning long Learning CVET of workersCVET of workersLabour Market DemandLabour Market Demand

►► Collection/dissemination of informationCollection/dissemination of information►►Costs, feesCosts, fees►►Training contentTraining content►►CertificationCertification

►► Guidance services for unemployed, employed and Guidance services for unemployed, employed and employersemployers

►► Research on impact of training Research on impact of training –– individuals and individuals and organisationsorganisations

ConclusionsConclusions

Investment in CVET is a central part of response to crisisInvestment in CVET is a central part of response to crisis

Access to training is stratifiedAccess to training is stratifiedThose who need most receive leastThose who need most receive least

►► For the unemployed:For the unemployed:Labour market linkages are key Labour market linkages are key Training & work experience with strong linkages enhance job Training & work experience with strong linkages enhance job prospectsprospects

►► For Those at work:For Those at work:Some evidence that training increases:Some evidence that training increases:►►Wages & productivity Wages & productivity -- about equally?about equally?

Are we doing enough?Are we doing enough?

National States and ESF can play an important and costNational States and ESF can play an important and cost--effective role in bridging the information gapeffective role in bridging the information gap