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2016 London Conference on Employer Engagement in Education and Training

22 July 2016

Financing skills for work in Education 2030: the contribution of the private

sector

Borhene Chakroun

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OVERVIEW

I. TVET on the Global Policy Agenda

II. Engaging Employers in TVET Financing

III.Case studies

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I. TVET ON THE GLOBAL POLICY AGENDA

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17 Sustainable Development Goals (SDGs)

EDUCATION AND TRAINING IN THE CONTEXT OF

THE SUSTAINABLE DEVELOPMENT GOALS

SDG 4 : Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all

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SDG TARGETS RELATED TO TVET

By 2030, SDG 4 calls on Member States to: • Ensure equal access to affordable and quality TVET

programmes (target 4.3)• Substantially increase the number of youth and adults with

relevant skills for employment, decent jobs and entrepreneurship (4.4)

• Eliminate gender disparities in education (4.5)• Ensure that all learners acquire the knowledge and skills needed

to promote sustainable development (4.7)

SDG 4 : Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all

G.J. Kim ASEAN+3 Forum on Dual Learning Systems and TVET Financing, 23 - 25 May 2016, Seoul, Republic of Korea

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SDG TARGETS RELATED TO TVET

SDG 8 calls on Member States to: • By 2030, achieve full and productive employment and decent

work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value (target 8.5)

• By 2020, substantially reduce the proportion of youth not in employment, education or training (8.6)

SDG 8: Promote inclusive and sustainable economic growth, employment and decent work for all

Over

view

of t

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ew U

NESC

O TV

ET

Stra

tegy

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6-20

213 Priority Areas

1. Fostering

Youth Employme

nt and Entrepren

eurship

2. Promoting Equity

and Gender Equality

3. Facilitating Transition to Green

Economies and

Sustainable Societies

To enhance the relevance of their TVET systems and to equip all youth and adults with the skills required for employment, decent work, entrepreneurship and lifelong learning, and to contribute to the implementation of the 2030 Agenda for Sustainable Development as a whole

Goal: To support the efforts of Member States

II. ENGAGING EMPLOYERS IN FINANCING TVET

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TEN KEY POLICY AREAS OF TVET REFORM HAVE BEEN IDENTIFIED FROM INTERNATIONAL EXPERIENCE

1. Enhancing responsiveness of TVET provision2. Changing Perception of TVET 3. Reforming Qualifications Frameworks and building new learning

pathways 4. Establishing Post-Secondary TVET5. Empowering learners: Learner-centred pedagogies6. Work-based learning: Apprenticeship/in-service training7. TVET teachers and trainers8. ICT In TVET 9. Good governance and partnerships10. Financing TVET

Source: UNESCO, 2015 & CEDEFOP, 2015

• Co-funding and co-management of TVET institutions;

• Establishing alliance for workplace learning amongst business representatives, educational leaders, social partners, and employment offices;

• Analysing and disseminating data and projections on skills needs and gaps in established and emerging sectors (Sector councils and Panels);

• Providing mentoring/job shadowing/career advice and business connections/networks

• Growing emphasis is being placed on private sector accountability and the broader corporate social responsibility (CSR) agenda, whereby companies voluntarily bring social and environmental concerns into their operations.

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Growing Role of Employers

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• Training levies are important tools to provide a pool of funding which can contribute to the advancement of human capital.

• The potential of this type of fiscal instrument is especially important for countries that have unstable public budgets.

• The review of the existing literature has pointed out that the vast majority of the research work undertaken has followed a qualitative approach.

• The need for Forecasts of the potential amount of resources that could be raised by this type of tax.

TRAINING LEVIES AS POLICY MEASURE TO REINFORCE EMPLOYERS INTERVENTION IN TVET

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Despite the potential of training levies to contribute to skills development, the existing literature has also pointed to some distortions that it could create.

Levies could raise the cost of employing people,

Leading employers to either reduce the number of workers they employ,

Compensate for the additional cost by paying lower wages

Detrimental effect for small size entreprises

Source: Johanson, 2009 & Dickinson and Marsden, 2013

POTENTIAL DISTORTIONS OF THE LEVIES

Levy base Country

Company profit tax Jordan, Egypt (suspended)

Levy on foreign workers Bahrain, Marshall Islands

Payroll Belgium, Bulgaria, Cyprus, France, Greece, Hungary, Italy, Ireland, Netherland, Poland, Romania, Spain, United Kingdom, Algeria, Morocco, Tunisia, Singapore, Barbados, Bolivia, Brazil (for SENAI, SENAC and SENAT), Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Jamaica, Nicaragua, Paraguay, Peru, Uruguay, Venezuela, Benin, Burkina Faso, Central Africa, Chad, Côte d’Ivoire, Guinea, Malawi, Mali, Mauritania, Mauritius, Namibia, Nigeria, Senegal, South Africa, Tanzania, Togo, Zimbabwe

Fixed amount per worker Slovenia

Value product Brazil (SENAR), South Africa Agricultural Training Fund (SETA)

Social security fund PanamaSource: adapted from UNESCO (2015).

DIVERSE LEVY BASE

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We identified three main types of scheme:

1. Revenue-generating schemes

2. Levy-subsidies schemes

3. Levy-exemption schemes

DIVERSE SCHEME

Country Rate (%)

Revenue generating Payroll tax exemption Levy grant Trainingcost

reimbursementBahrain 1.0–

3.0P      

Brazil 1.0–1.5

P      

Côte d’Ivoire

1.6   P    

France 1.5   P    Honduras 1.0 P      Hungary 1.5     P  Ireland 0.7 P     PJordon 1.0       PKenya 1.0       PKorea 0.5   P    Malawi 1     P PMalaysia 0.5–

1.0      P

Mauritius 1 P     PMorocco 1.6 P      Nigeria 1.25       PPanama 15 n.a.      Singapore 1.0       PSouth Africa

1.0     P  

Tanzania 2.0     P  Turkey n.a. P      Source: Cambridge Econometrics’ elaboration based on Dar et al. (2003) and UNESCO (2015). 

GLOBAL LANDSCAPE

‘S’ SYSTEM IN BRAZIL 

SENAI – the national training scheme SENAC – a training fund which is commerce-specific SENAT – a fund specifically for transport training SEBRAE – a training scheme focused on servicing small businesses SENAR: a training scheme for rural areas.SENAI, SENAC and SENAT all impose a 1 per cent payroll levy on all industrial enterprises, while SENAI charges an additional 0.5 per cent for companies with more than 500 employees. SENAR applies a 2.5 per cent tax on the sale of agricultural goods, while SEBRAE imposes a 0.3 per cent levy across all sectors.Source: Cambridge Econometrics elaboration based on Muller and Behringer (2012).

PROCESS FOR ESTIMATING REVENUE

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the amount of revenue which could be raised for training purposes by means of a training levy will mainly depend on the following two elements:

1. the (%) rate at which the levy is set; and

2. the base to which the rate is applied, such as: payroll (headcount or wage bill); turnover; output; contract value; product value, production costs; or profits.

HOW TO ESTIMATE THE REVENUE

Factor Rationale Relevant variables to categorize each dimension

Economic context Economic contextual factors directly affect the participation of firms in the schemes.

National wealth (gross domestic product – GDP), sectoral value added, productivity, average wages, sectoral employment (number of jobs), etc.

Labour market structure

Labour market factors seem to have an impact on TVET (albeit a slight one);

Employment rates also affect the levy base since an increase in the proportion of individuals who are participating in income-generating activities will increase the levy base;

Educational attainment levels of the population also influence the revenue raised. In principle, more skilled workers will be more productive and obtain higher remuneration, which eventually affects the levy base.

Unemployment rates, labour participation rates, educational attainment level of the population, expenditure on labour market training as percentage of GDP, etc.

Institutional setup Institutional factors such as the size of the informal sector directly affect the outcomes and disbursement of the training funds. The size of the informal sector could also help to explain a low amount of revenue raised.

Relative weight of the informal economy and the relative weight of the public sector over the total economy.

Source: adapted from UNESCO (2015).

KEY FACTORS IMPACTING THE REVNUE

III. CASE STUDIES

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SUMMARY OF COUNTRIES RESULTS

Country TVET system Key stakeholders Main issues

Dominican Republic

1% tax on payroll0.5% tax on employee bonuses

INFOTEP, trade unions and employer federation

Size of the informal economy – it accounts for more than half of total employment

Cyprus Human Resource Development Levy (0.5% of employees emoluments subject to a cap)

HRDA, trade unions and employer federation

Rapid rise in external (EU) training funds

Senegal Fixed contribution (3% of eligible payroll)

FFFPT, ONFP, Others

Rapid increase in available funding 

APPROACHES FOR ESTIMATING REVENUE

RESULTS FROM CASE STUDIES

Dominican Republic

Senegal

Cyprus

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1. Stakeholders Platform (Dominican Republic)

2. Prioritisation (Senegal)

3. Planning (Cyprus)

USE OF RESULTS

THANK YOU!