Efficiency and Equity of VET David-Pascal Dion - European Commission Investment in human capital Thessaloniki April 2007

Introduction  I – Commission Communication on “Efficiency and Equity”  II – Efficiency and Equity aspects of VET  III – Measures to improve Efficiency and Equity of VET

I – Commission Communication on Efficiency and Equity (1)  A – Introduction  Contribution of human capital policies to the Lisbon Strategy  Mandate from the Joint Report and Spring Council 2006  No trade-off between efficiency and equity (inefficiency of inequity!)  Reproduction/reinforcement of inequities and costs of school failure: e.g. € per ESL  Lifelong and life-wide learning perspective and evidence-based approach

I – Communication on Efficiency and Equity (2)  B – What should be done?  Increase in overall performance and reduction in disparities  Key messages following a lifelong learning perspective 1.We should invest more in pre-primary education 2.We should avoid early tracking and encourage institutional autonomy with accountability 3.“Free” systems of higher education do not guarantee equitable access and participation 4.We need to develop a ‘culture of evaluation’

I – Communication on Efficiency and Equity (3)  C – How could it be done?  Role for the Member States 1.Council Conclusions 2.Committee of the Regions (and forthcoming European Parliament) Opinions  Role for the European Union 1.Follow-up through policy initiatives: Communications, recommendations… 2.Follow-up through PLAs and seminars

II – Efficiency and Equity of VET (1)  A – The life-cycle of education Age Rate of return Early Schools Higher Training childhood education & LLL Children from low socio- economic background Children from high socio- economic background

II – Efficiency and Equity of VET (2)  B – Initial VET  Presumably no trade-off between efficiency and equity 1.Efficiency  Lower returns than in general education (high costs for firms) but depends on quality of VET systems  Better transition to work but technological changes have reduced the need for specific practical skills (obsolescence) and enhances mismatch 1.Equity  Practical training better suited than academic education for some pupils  Lower levels of early school leavers and youth unemployment but higher older unemployment (obsolescence) and raising discrepancies between demand for more general vs. technical skills

II – Efficiency and Equity of VET (3)  C – Continuing VET  Possible current trade-off between efficiency and equity

III – Measures to improve Efficiency and Equity (1)  A – On-the-job training  Challenges and opportunities for employers and employees 1.Lack of proper incentives since investment by enterprises depends on profits and ROR 2.Consequently, incentive for firms to invest in the best educated and higher SEB (social capital?) 3.Lack of relevance of public training programs and of complementarity with the private sector 4.Consequently, low economic returns (high costs and small benefits in earnings or employability) 5.However, potential high social returns

III – Measures to improve Efficiency and Equity (2)  B – How to raise the participation?  New incentive and regulation schemes at industry level 1.Subsidies  Useful in case of underinvestment but usually targeted towards sectors in crisis  Difficulty to monitor and risks of deadweight losses and substitution effects 1.Tax incentives  Choice between tax levies or spending on training beyond a certain threshold  Useful if targeted towards low-skilled

III – Measures to improve Efficiency and Equity (3)  C – How to raise the returns?  Lowering of costs and increase in benefits 1.To reduce opportunity costs for elderly through intensive and modular courses 2.To raise benefits through quality assurance, formal certification or longer working lives  Raising relevance through partnerships 1.The “poaching” issue and the “prisoner’s dilemma” / “free rider” problem: All employers have an incentive in financing general training but any one employer prefers free-loading to reap the benefits of hiring a newly trained employee without having paid for it 2.Necessity to cooperate between stakeholders at sectoral or geographical levels to pool and mutualise the risks, respond to skills shortages and raise the offer for training in particular when targeted at disadvantaged learners

Thank you very much!!!