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

Work?Work?

Philip J. O’ConnellPhilip J. O’ConnellThe The Economic and Social Research Institute, Economic and Social Research Institute,

DublinDublin

Presentation to conference: Presentation to conference:

Shaping the Future of the ESF – ESF and Europe Shaping the Future of the ESF – ESF and Europe 2020, 2020,

Brussels, 23Brussels, 23rdrd and 24 and 24thth June, 2010 June, 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 2010 Over 10% in EurozoneOver 10% in Eurozone

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

capitalcapital Secure economic and social progressSecure economic and social progress Restore 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 Several countries combine high unemployment (>10%) with large deficits unemployment (>10%) with large deficits

(>5%)(>5%)

BEBU

Cz

DKDEEE

IEEL

ES

FRITCY

LVLT

LU

HUMANL

AU

PL

PORO

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 assistance with labour market integrationintegration

►Supply sideSupply side Job Search AssistanceJob Search Assistance TrainingTraining

►Demand SideDemand Side Employment schemes and incentivesEmployment schemes and incentives

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

Impact of ALMPs for UnemployedImpact of ALMPs for Unemployed

International Research on impact of Active Labour MarketInternational Research on impact of Active Labour MarketProgrammes on participants’ job prospects is Programmes on participants’ job prospects is

inconclusiveinconclusive

► Job Search AssistanceJob Search Assistance Effective for many groups, low costEffective for many groups, low cost More effective with monitoring & sanctions?More effective with monitoring & sanctions?

► Formal TrainingFormal Training Inconclusive evidence, targeting is importantInconclusive evidence, targeting is important

► Employment SubsidiesEmployment Subsidies Employment: some help LTUEmployment: some help LTU Self-employment: high deadweight and displacementSelf-employment: high deadweight and displacement

► Public Sector Job CreationPublic Sector Job Creation Little evidence of any positive effectLittle evidence of any positive effect

Programmes with strong market Programmes with strong market linkages show positive effects on linkages show positive effects on

employmentemployment

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

Avge Hours Job-related Training per Trainee, Avge Hours Job-related Training per Trainee, 20052005

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 People with higher skills or education are more likely to receive trainingreceive training

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

economically activeeconomically active

► Immigrants and members of minority ethnic groups tend to Immigrants and members of minority ethnic groups tend to receive less training than native and/or majority populationsreceive less training than native and/or majority populations

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

► Larger firms, and those that pay higher wages are more likely Larger firms, and those that pay higher wages are more likely to train their employees. to train 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 Many studies find positive effects of training on wageswages UK, US, France, Sweden, Ireland -- 3-10% UK, US, France, Sweden, Ireland -- 3-10%

► 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 3 than 3rdrd level education level education Those with low propensity to trainThose with low propensity to train In subsequent jobsIn subsequent jobs When 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 productivity or other measures of corporate performanceperformance Returns may be divided equally between employers and Returns may be divided equally between employers and

workersworkers Productivity increases for employers, wage gains for employeesProductivity increases for employers, wage gains for employees

► Irish research shows positive effect of training on Irish research shows positive effect of training on turnover after 3 yearsturnover after 3 years General training has positive effectGeneral training has positive effect specific 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 – cost, qualityWhat is available – cost, quality

Individuals are not well informedIndividuals are not well informed Problem 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 good Employers have difficulty measuring returns to trainingEmployers have difficulty measuring returns to training States also have difficulty establishing the returns to CVETStates also have difficulty establishing the returns to CVET

Enhancing the Information InfrastructureEnhancing the Information Infrastructure A CA Cost-effective role for national states and ost-effective role for national states and

ESFESF ► Monitoring trends Monitoring trends

Life-long Learning Life-long Learning CVET of workersCVET of workers Labour Market DemandLabour Market Demand

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

► Guidance services for unemployed, Guidance services for unemployed, employed and employersemployed and employers

► Research on impact of training – individuals Research on impact of training – individuals and organisationsand organisations

ConclusionsConclusions

Investment in CVET is a central part of response to Investment in CVET is a central part of response to crisiscrisis

Access to training is stratifiedAccess to training is stratified Those 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 - about equally?Wages & productivity - about equally?

Are we doing enough?Are we doing enough?

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