To make training effective requires new policies and new institutions, and to devise better policies and institutions requires new strategies and analytical techniques.
The analytical base for training policy and investments has traditionally included an assessment of skills demand, most often through a manpower requirements forecast, and a plan for expanding skills supply, generally through the establishment of public training institutions. Though useful in some respects, this kind of analysis overlooks the more dynamic aspects of the economic environment---among them, the incentives for employers and workers to invest in skills training. It also ignores the actual and potential contribution of employers and private training.
Needed instead is a general framework that identifies the key questions and the kinds of information needed to deal with both the economics of skills demand and the dynamics of training supply in the private and public sectors. That is one of the main conclusions of a four-year program of research and consultation on vocational and technical education and training by the World Bank's Human Resources Department.
To set up such a framework, policymakers should try to answer three crucial questions. What is the economic context of employment and skills demand? How extensive and effective are the various forms of training? Are current training policies and planning practices able to adjust training supply to a changing economic context?
Establishing market-oriented planning capacity should be the first objective of policy reforms. The analytical techniques of this approach should also be used to understand the economic context of training.
Traditional manpower requirement forecasts need to give way to a range of labor market analyses that produce information needed to guide private training decisions, identify impediments to competitive labor markets, improve the management of training systems, and determine the most appropriate roles for the government. Labor market signals and education and training qualifications become the key tools in planning. Strong analytical links between economic planning and training planning will help identify the effect of economic policies on incentives for investment in training. Where these incentives are distorted, this analysis helps determine an appropriate pattern of public intervention to ensure an adequate supply of skills.
What skills are likely to be needed over the medium term of, say, three to five years? For preemployment training, anticipating the need for skills is a matter first of anticipating structural shifts in the economy and then of forecasting the effect of these shifts on employment growth in different subsectors and industries. External factors include patterns of international trade and changes in the technologies of production. Growth trends in the economy as a whole, and in specific sectors and industries, provide important indicators of probable changes in employment patterns.
What kinds of jobs are likely to be available if rapid structural change leads to widespread dislocations of workers? In such a scenario the analysis must be extended to identify sectors and industries where the potential for labor absorption is highest in the near term. Once potential job openings are identified, their requirements for education and training must then be specified. Although this analysis cannot be precise, enterprise surveys and case studies of industries that are attracting new investment can indicate the demand patterns for skilled and unskilled workers in different regions. The potential for self-employment or small business development as mechanisms for productive redeployment of dislocated workers should also be investigated. Equally important is an analysis of the characteristics of displaced workers.
How do social and economic policies affect incentives for both individuals and employers to invest in skills training? The first step in understanding this is to catalog existing policies that affect employers and workers. This requires examining legislation, notably labor codes and regulations. The second step is to determine the actual effect of these policies, particularly how actively they are enforced. This can be done through surveys of employers and workers and assessments of the enforcement capacity of labor market institutions. The third step is to determine the likely benefits and costs of proposed policy reforms.
The key question here is whether prevailing training policies and planning practices enable training supply to adjust to a changing economic context. This analysis should take into account the following considerations.
Policy evolution. Before attempting reforms, it is advisable to know how existing policies and institutional arrangements emerged, if only to identify groups with special interests in training policies and institutions. Among the key questions: Why have present training policies been established? Were attempts made to change policies and institutional arrangements? Why did they succeed or fail? What roles have international assistance agencies played?
Training goals. For preemploy- ment vocational education and training, the principal issue is how much the training is justified by supply objectives. If preemploy- ment vocational education is overtly aimed at reducing youth unemployment, diverting youth from higher education, or reducing poverty, the analysis must assess how effective the training has been in achieving any or all of these goals. Under favorable economic conditions, the external efficiency of preemployment training may be high, with the achievement of social or other goals a byproduct of training closely linked to labor market demands in an expanding economy. The analysis should focus on the real contributions of training to these social objectives, seeking to separate them from the effects of employment growth.
Finance and provision. Several questions arise. What justifies current policies related to public finance and provision of training? Market imperfections? Externalities? Weak private and employer capacity? Equity concerns? Are these policies appropriate in the given economic context? Is cost recovery from employers and students encouraged?
Public policies on private training. The effectiveness of any public policy designed to encourage training by private employers should be evaluated. Are subsidies leading to repackaging of training that firms would otherwise provide without reimbursement? Are training funds being used effectively? Are training extension services reaching small and medium-size enterprises?
Similarly, the nature of government policy affecting private training institutions should be assessed. A review of licensing, tuition control, and curriculum regulations for private schools is an obvious first step. The views of private school owners and managers should be considered. These can sometimes help identify policy constraints that are less than obvious. The effectiveness of existing subsidy programs for private schools should be examined.
Public policy toward nongovernmental organizations merits scrutiny. Do rules exist which limit their operations? Are positive policies---such as subsidies or incentives to participate in large development projects---effective?
Planning approaches. Current approaches to planning need to be assessed and new strategies considered. Are economic and training policy and planning well integrated? Are manpower requirements forecasts used to set targets for the education and training system? How are they developed? Are they accurate? If other approaches are used, what are they and how effective have they been?
The nature and quality of systems for collecting labor market information and monitoring training should have high priority in this part of the analysis. Labor market information comes from periodic labor force surveys, household surveys, and surveys of enterprises in specific sectors, industries, or geographic locations. It also comes from employment exchanges and from job vacancy advertisements. Because these sources generally vary in accuracy, timeliness, and comprehensiveness, several sources should be used to develop a picture of employment trends and current conditions. Information on training outcomes is most often obtained through tracer studies.
The capacity of various institutions to perform these functions should be assessed, and measures to improve the quality and the timeliness of information for planning and management should be identified. These institutions include the national statistical services and research institutes as well as formal labor market and training monitoring units within public ministries. Organizations charged with monitoring public employment, such as civil service commissions, should be included.
The initial conditions for policy development and the structure and pace of subsequent policy reforms will vary widely from country to country. The skills needs and incentives for investment in training in outwardly oriented industrializing countries, for example, will differ from those of largely agricultural societies, those with small modern sectors, and those with high levels of domestic protection. Institutional capacity for training also differs across countries in both the public and the private sector. Policy reform is thus more likely to be successful if it is based on policy strategies that take these varying factors into account.
Small, low-income countries. In economies where the modern sector is small, where economic policies distort the marketplace, and where private training capacity is weak, the central government must play the key role in financing and providing training. This applies to many low-income agricultural economies that face serious resource constraints. The immediate objective of training policy may be to build a small but strong base of training capacity by improving internal efficiency and training outcomes. If public training systems have been overextended, consolidation of programs could help generate the needed revenues. Stronger monitoring of labor markets and training supply and better institutional links between employers and trainers will be needed to enable the training system to respond to short-term skills needs. This is true in Togo, where the government is working to build a flexible private-public system responsive to the demands of the economy. The government of Togo set up a national training fund administered by a private-public management committee to allocate financial resources to public and private training projects that meet predetermined criteria.
Middle-income countries. In middle-income countries and in low-income countries with large industrial sectors where basic education is well established, attention should concentrate on other priorities, such as improving access and quality in secondary education. Training policy analysis and planning capacity must be further strengthened so that training managers can help formulate economic policy and can adjust training systems to more frequent changes in demand and incentives.
As distortions ease, incentives and technical support for the development of enterprise training capacity can be expanded and training improved. Such efforts are under way in Mauritius, where the government has launched a program to encourage public-private sector cooperation in training (see box 1). Policies that encourage private training institutions also help. Training services with cost-recovery features could be considered as a way of building training expertise in small and medium-size enterprises. Likewise, payroll levy financing can provide stable financing and can serve as a nexus for strengthening public-private cooperation.
Rapidly industrializing countries. In rapidly growing, outwardly oriented economies where incentives for private investment in training are not distorted, most job-specific skills training can be provided privately, as in Chile (see box 2). Governments may still provide training, especially for strategic technical skills, but workers and employers can assume a greater share of the financing. A range of options can be explored to increase the positive effect of market forces on training efficiency. The government can shift from routinely providing annual budgets to training institutions toward competitive purchase of training services from private and public training institutions. Schools and centers not essential for strategic skills development can be devolved to enterprises or employer associations for operation, and their subsidies can be reduced over time. The government, meanwhile, can continue to play a central role in quality control and monitoring, and in policy development.
See John Middleton, Adrian Ziderman, and Arvil Van Adams, Skills for Productivity: Vocational Education and Training in Developing Countries, Oxford University Press, New York, 1993. This volume draws on a comprehensive review of the research and evaluation literature and the experience of the World Bank, on specially commissioned studies, and on original research conducted in the Bank's Education and Employment Division.