Since manufacturing’s share of GDP began to decline to its current levels of about 20 percent (17 percent in the United States), western governments have realized that economic growth relies not on an ever-greater output of goods, but on citizens with the skills to provide more sophisticated services. At the same time, as low-cost manufacturing has been off-shored, remaining industries have become increasingly high-tech, in turn demanding greater skills from their workers. In response, governments have accepted the need to ensure their populations are adequately trained, and they are increasingly prepared to pay for this.
Part of this training–education–has long been accepted as the state’s responsibility. Today, though, governments also know that as their populations age, what they learned at school decades earlier may not be what they need to keep at the forefront of their job now. Western governments have woken up slowly over the past two decades to the need for post-school workforce development. Unlike education, this is a messy area where compulsion is impossible and where it is possible for the state to spend a great deal of money to no visible effect.
The result is a wide variety of different approaches to workforce development and its funding, and in some countries one government’s policies have been entirely reversed by the next. Each policy can be positioned on a spectrum with laissez faire at one end and direct intervention at the other. In the middle lies what might be called “the provision of enabling infrastructure.” Perhaps because this is where it is possible to make the least long-term financial commitment for the greatest potential benefit, this is where most of the policies lie. Indeed, as will be seen later, some governments have been badly burned through direct intervention, and few like to make any funding too easily available.
In building the “enabling infrastructure” of workforce development, most governments try to balance stick and carrot, usually favoring the latter, for example in the provision of state loans or tax breaks for individuals. On a bigger scale, the state often attempts to remove friction from the training market by enabling communication between training providers and buyers, and by prodding each toward developing the skills that government predicts will be required in the future. Alternatively, they just reach for the stick and demand that companies or individuals have a certain level of qualification or other proof of competency (such as membership of a professional body).
Although much of this effort is recent, in many countries the longest-operating interventions by government continue to be in the traditional areas of apprenticeships, or training levies, based on the practices of medieval guilds.
Do Levies Work?
Levies are contributions by companies (usually belonging to a group) to a central fund. This fund is then shared out among the member companies for training. This is in recognition of the fact that the group of companies as a whole needs trained individuals and that it is invidious to expect any single organization to train them all. The employers may be in one location, in one sector, in a trade body, or the net may be cast wider. France has a fully centralized levy, with firms of 10 or more workers obliged to contribute 1.5 percent of payroll to a training fund. Operating since the early 1970s, this system is widely regarded as successful. It has indisputably led to an increase in training expenditure by companies—from 1.35 percent of wages in 1972 to 2.89 percent in 1989.
Researchers in the area of levies (especially Christine Greenhalgh), point out, though, that it is not clear who exactly benefits from the French system, and whether the benefits are equally spread. It is possible that the main beneficiaries are an expanding training supply industry (47,000 providers at last count) and the more mobile workers, who parlay their increased skills into larger salaries.
What is indisputable, however, is that French productivity per worker is higher than it is in the United Kingdom by some 20 percent. Although British governments have long sought to understand why, they have been unwilling to allow the establishment of a training levy. In one of her many bureaucracy-cutting measures, Margaret Thatcher abolished almost all of the United Kingdom’s Industrial Training Boards in 1982 and replaced them with a series of bodies, the latest incarnation of which, the Sector Skills Councils, share with their predecessors a voluntary approach to participation in training. This voluntarism rules out an effective levy in all but a few special cases.
Despite these differences in approach, the numbers of adults involved in continuing vocational training in the United Kingdom and France are very similar, about 35 percent of the workforce. However, not only is the training rather different–courses in France typically last much longer (54 hours versus 39)–so are the students. In France the base level of skills is appreciably higher than in the United Kingdom, where only some 70 percent to 75 percent of 15- to 19-year-olds are in education or training against more than 90 percent in France. In other words, it is possible to characterize vocational training in the United Kingdom as consisting of short-term fixes for the gaps in an inadequate education, while in France it is a more substantial investment in a well-schooled workforce. The fact that a levy is used to deliver this training may well be incidental.
Focusing on the Individual
If voluntary trades bodies cannot be relied on to provide training, as seems to have been the case in the United Kingdom, are policies aimed at the individual any more likely to be successful? The answer seems to depend on where the individual is. In the United States, individuals are more likely to take a direct role in their own professional development—training companies with offices in both locations report a far higher proportion of self-funders in America and of corporately financed individuals in Europe.
In Europe, tax breaks or loans are far less likely to be an efficient incentive for individual training—perhaps because they stack up poorly against often-generous state provisions for tertiary education, and partly because they tend to be poorly marketed short-term measures. When programs are allowed to become part of the learning landscape, however, they can be very successful. Launched in 1988, the United Kingdom’s Career Development Loan (CDL) last year provided more than 17,000 individuals with loans averaging over $7,500, and ranging up to $15,000.
CDLs, however, are perceived as complex, and are facilitated through banks. Determined to supply funding for training directly, widely and without bureaucracy, in September 2000 the Labour government introduced the Individual Learning Account (ILA). This was a break with tradition and a bold move into direct funding of training. It was also a spectacular disaster. Designed to make the idea of lifelong learning a reality, the ILA account aimed to provide free funding for all—up to several hundred dollars per annum. Learners did not access their funds directly; these went to participating educational providers when students signed up and as they progressed. The scheme appeared a success. A year after launch, 2.5 million students were signed up, but one month later, the scheme was shut down after fraud by a small number of the 9,000 learning providers led to an overspend of about $100 million. The crime ranged from claiming non-attending students were progressing (and receiving their funding) to inventing, registering and progressing completely fictitious students. Badly burned, the government dropped the scheme, and plans to launch an ILA 2 have been quietly shelved.
A Quiet Success Story: Apprenticeships
In the United States, Workforce Investment Boards have also come under fire for being too liberal with their allocation of training vouchers. There, the answer has been to impose a technological solution to enable a contemporary version of the traditional apprentice or journey worker.
Before the launch of the new IT apprenticeship scheme in February 2004, the U.S. Department of Labor (DoL) had enough evidence to suggest that the results of the investment of WIA funds (approximately $12 billion annually) were mixed at best, with some trainees being placed and others not. The measurement and tracking of the success of these workers was a real problem.
Part of the problem was the Byzantine arrangements for the delivery of funding. Owned by the DoL’s Employment and Training Administration (ETA), funding was distributed (via state governors) to Workforce Investment Boards (WIBs), bodies made up of local employers plus public workforce representatives. Each WIB had a different makeup, focus and way of deploying the funds.
The sums involved are not petty, ranging from $500 to $5,000 in vouchers, reclaimable against training at approved local colleges and learning providers, and eventually Washington demanded accountability and proof of success. Had the training helped the recipient gain employment or an increase in pay? Suddenly, the WIBs and the colleges were in the spotlight.
In the IT field–one of special national importance–the Computer Technology Industry Association (CompTIA) responded by developing the National IT Apprenticeship System (NITAS) for the DoL. This system tracks the student’s progress throughout learning and maps it to all relevant standards, showing progress against benchmarks, success criteria and, crucially, against targets. But like accredited learning, NITAS also maps the skills an individual learns on the job and details who mentored them and their comments. It also issues a certificate from the DoL confirming the individual as an apprenticed journey worker upon completion of the apprenticeship track.
Now everyone wins. By shifting the emphasis from the training received to the skills learned (in formal training or on the job), the system allows employers to see their apprentices gaining valuable skills for the job. Colleges and learning providers can now prove they are adding value, and most importantly, the individual gets a résumé validated by the system and authorized by the DoL to show that they are a skilled journey worker.
“I’ve been in this industry for 22 years,” said Neill Hopkins, CompTIA’s vice president of workforce development. “This is the most exciting thing I’ve ever worked on.” Usually government training schemes fail to convince one of three key parties—the individual, the college or the employer fails to get involved. In this case, convincing the employer is probably the toughest part. “The killer argument for employers is this,” said Hopkins. “You’re doing it already! Most employers look to take on staff and then train them in company-specific procedures and technologies. The DoL argument is this: Let NITAS organize the training, and in addition, you’ll get the whole learning program tracked and a record of on-the-job skills learned. This means that you can increase someone’s pay when they’ve shown they have the skills for the job, not when they receive their end-of-course certificate.”
Instead of directly funding individuals, the U.K. government has in place a variety of initiatives, of which the most pervasive is probably the Modern Apprenticeship (MA), begun 10 years ago. This unspectacular but successful scheme provides young people at work with training, which is monitored, tracked and recorded in a variety of ways. A quarter of a million people between 16 and 24 are currently enrolled on MAs, which take between one and four years to complete.
Although government-funded MAs are effective, British employers appear wedded to the much more costly policy of employing and then training graduates at their own expense. For example only 3,000 people joined the IT profession last year via apprenticeships, in comparison with 60,000 in Germany. This predisposition toward employer-funded apprenticeships in Germany is not something employers take lightly: More than 70 percent of apprentices leave their first employer within five years. Generally, though, training and education is a part of German life. In 2000, 86 percent of 18-year-olds were in education or training, compared with just 56 percent in the United Kingdom. The result: 30 percent of the U.K. workforce has low skills, compared with just 17 percent in Germany.
Linking Supply and Demand
The most ambitious intervention a government can make is to attempt to provide an end-to-end channel of communication between the supply and demand of training, aiming both to remove inefficiencies and to retain influence on the training decisions made.
The South African government is attempting this, with its scheme of 25 Sector Education and Training Authorities (SETAs). Like the 25 British SSCs, these are targeted at uniting employers with training providers within particular verticals, but unlike the SSCs, they are backed up by a levy. All but very small employers pay a 1 percent payroll levy, which they can reclaim against training, if it meets certain conditions. The training must fit within a coherent workplace skills plan, put in place with the assistance of a trained skills development facilitator, and be delivered by a SETA-approved provider. Some SETAs go further and require that training be mapped against a skills framework they provide, which is in turn mapped to nationally approved qualifications. Unsurprisingly, there have been complaints that the system is too administratively intensive, and despite some spectacular successes in helping the unemployed back to work, the system is due for review and slimming down in April 2005.
When all else fails, a government can always reach for the stick: Compulsion is something they understand. Thus it sometimes seems as if western governments want to extend the principle of compulsory schooling into adulthood. While grown-ups cannot be forced to go to college, it is possible to force their employers to report on their skills, which amounts to considerable pressure to train them. The international quality standard ISO 9001 was revamped in 2000 and now includes resource management as one of its five core activities—and this includes the production of employee skills plans and reporting on them. As ISO 9001 is frequently used by governments as a first hurdle for suppliers, this is a substantial motivator to take training seriously. A more straightforward method is to require skills management reports directly. The U.K. government now asks its IT suppliers to sign up to its Code of Best Practice, which requires evidence of skills development among staff.
On the bigger scale, the Bologna process has led to increased transparency between academic qualifications across Europe. At the same time Europass, a pan-European qualifications and competencies passport has recently been gathering momentum. Together, these indicate that eventually we can expect a European standard on skills, and with it an EU directive that employers are required to show evidence of staff development.
In the face of the need to develop their economies, it seems that governments have tried just about everything in terms of corporate education, and nothing has worked everywhere. Purely voluntary schemes seem unlikely to work anywhere, but requiring companies to pay for training–as with the French and South African levy systems–does not necessarily produce the desired results, nor are levies easy to administer. Generally, however, whether it be in the shape of NITAS, Europass or the South African SETA system, governments are increasingly driving training by a combination of stick and carrot, relying on traditional solutions such as apprenticeships, underpinned by modern technology.
Donald Taylor is an executive director of InfoBasis Limited, a leading provider of skills management software. Involved with learning and IT since programming PDP-11s in the 1980s, Donald now works with private and public organizations to help them understand the value of human capital and accurate reporting on skills. For more information, write to email@example.com.