What Do We Know About Continuing Vocational Education, Training and Work? Philip J. OConnell The Economic and Social Research Institute, Dublin Presentation to conference: Shaping the Future of the ESF – ESF and Europe 2020, Brussels, 23 rd and 24 th June, 2010

The Context International downturn International downturn Rapid increase in unemployment Rapid increase in unemployment Almost 10% in EU 27 in April 2010 Almost 10% in EU 27 in April 2010 Over 10% in Eurozone Over 10% in Eurozone Fiscal crisis of States Fiscal crisis of States Need to increase investment in human capital Need to increase investment in human capital Secure economic and social progress Secure economic and social progress Restore competitiveness Restore competitiveness

Unemployment rates, 2010

Unemployment rates, EU 27, 2009

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

Active Labour Market Programmes From passive income support to active assistance with labour market integration From passive income support to active assistance with labour market integration Supply side Supply side Job Search Assistance Job Search Assistance Training Training Demand Side Demand Side Employment schemes and incentives Employment schemes and incentives More influence over distribution than size of unemployment More influence over distribution than size of unemployment

Impact of ALMPs for Unemployed International Research on impact of Active Labour Market Programmes on participants job prospects is inconclusive Job Search Assistance Job Search Assistance Effective for many groups, low cost Effective for many groups, low cost More effective with monitoring & sanctions? More effective with monitoring & sanctions? Formal Training Formal Training Inconclusive evidence, targeting is important Inconclusive evidence, targeting is important Employment Subsidies Employment Subsidies Employment: some help LTU Employment: some help LTU Self-employment: high deadweight and displacement Self-employment: high deadweight and displacement Public Sector Job Creation Public Sector Job Creation Little evidence of any positive effect Little evidence of any positive effect

Programmes with strong market linkages show positive effects on employment

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

Avge Hours Job-related Training per Trainee, 2005

Training is Highly Stratified People with higher skills or education are more likely to receive training People with higher skills or education are more likely to receive training The employed receive more training than the unemployed The employed receive more training than the unemployed The unemployed receive more training than those not economically active The unemployed receive more training than those not economically active Immigrants and members of minority ethnic groups tend to receive less training than native and/or majority populations Immigrants and members of minority ethnic groups tend to receive less training than native and/or majority populations Part-time workers, those on temporary contracts and older workers are less likely to receive training Part-time workers, those on temporary contracts and older workers are less likely to receive training Larger firms, and those that pay higher wages are more likely to train their employees. Larger firms, and those that pay higher wages are more likely to train their employees. Those with the greatest need for training tend to receive less Those with the greatest need for training tend to receive less

The Impact of Training: Employees The evidence is mixed: Many studies find positive effects of training on wages Many studies find positive effects of training on wages UK, US, France, Sweden, Ireland % UK, US, France, Sweden, Ireland % Returns are usually higher: Returns are usually higher: General training (rather than specific) General training (rather than specific) Those with upper 2 nd than 3 rd level education Those with upper 2 nd than 3 rd level education Those with low propensity to train Those with low propensity to train In subsequent jobs In subsequent jobs When combined with high performance work practices When combined with high performance work practices Most find that controls for selection / unobserved heterogeneity eliminate estimated effects Most find that controls for selection / unobserved heterogeneity eliminate estimated effects

The Impact of Training: Employers The evidence is sparse: Limited number of studies find that training enhances productivity or other measures of corporate performance Limited number of studies find that training enhances productivity or other measures of corporate performance Returns may be divided equally between employers and workers Returns may be divided equally between employers and workers Productivity increases for employers, wage gains for employees Productivity increases for employers, wage gains for employees Irish research shows positive effect of training on turnover after 3 years Irish research shows positive effect of training on turnover after 3 years General training has positive effect General training has positive effect specific training has no effect specific training has no effect

The Information Deficit in CVET Education/Training as investment Education/Training as investment 3 key decision makers 3 key decision makers Individuals/workers, organisations/firms, the state Individuals/workers, organisations/firms, the state 3 information problems 3 information problems 1. What is needed? 2. What is available – cost, quality Individuals are not well informed Individuals are not well informed Problem for small enterprises? Problem for small enterprises? 3. What are the returns? Individuals have a rough sense that CVET is good Individuals have a rough sense that CVET is good Employers have difficulty measuring returns to training Employers have difficulty measuring returns to training States also have difficulty establishing the returns to CVET States also have difficulty establishing the returns to CVET

Enhancing the Information Infrastructure A C ost-effective role for national states and ESF Monitoring trends Monitoring trends Life-long Learning Life-long Learning CVET of workers CVET of workers Labour Market Demand Labour Market Demand Collection/dissemination of information Collection/dissemination of information Costs, fees Costs, fees Training content Training content Certification Certification Guidance services for unemployed, employed and employers Guidance services for unemployed, employed and employers Research on impact of training – individuals and organisations Research on impact of training – individuals and organisations

Conclusions Investment in CVET is a central part of response to crisis Access to training is stratified Those who need most receive least Those 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 prospects Training & work experience with strong linkages enhance job prospects 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- effective role in bridging the information gap