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Public Policies for Financing Workers' Training

This presentation explores the distribution of continuing training and market-type mechanisms, investigates under-investment in workers' training, and suggests public policies for addressing these issues. The Italian case is examined to understand the effects and challenges related to post-schooling training. Strategies for reducing inequality and increasing efficiency in training programs are discussed.

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Public Policies for Financing Workers' Training

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  1. Public policies for financing workers’ trainingAndrea MontaninoMinistry of Economy and Finance, Rome(andrea.montanino@tesoro.it)CEDEFOP, 26-27 April 2007

  2. Outline of the presentation • Distribution of continuing training and market-type mechanisms • Under-investment in workers’ training? • Which public policies for continuing trainining? • The Italian case

  3. Post-schooling training has several beneficial effects: • On worker’s productivity and therefore on wage level and its trend • On labour market participation • On probability to loose a job • On labour mobility • On job satisfaction

  4. It depends on: Level of education achieved Firm size Firm sector Working contract Distribution of continuing training is unequal Rationale from the firm point of view but: market-type mechanisms may increase inequality and end up with under-investment in training

  5. Coordination failure: quality, quantity and returns of training are difficult to measure If worker wants to pay: Liquidity constraint Legislative constraint If firm wants to pay: Only private returns considered Turnover Who decides the quantity and quality of training?

  6. Reduce under-investment from a social point of view Reduce inequality Trade-off between efficiency and equality? Market failure and the role of public policies

  7. Demand-led policies Co-financed by private entities (either firms or individuals) Avoid displacement effects on private investment Support both collective and individual demand Which public policies for continuing training?

  8. Ex-ante planning by social partners Co-management of training activities by social partners Involvement of many workers Based on firm’s training needs Mainly directed to “internal labour markets” Policies for collective demand: characteristics

  9. Reducing constraints, especially in SMEs Facilitating coordination between workers and the firm Implement major skill upgrading Policies for collective demand: aims

  10. Key role of the single worker Not strictly linked to current job No ex-ante planning (or limited and very general) Mainly directed to “professional labour markets” and “secondary labour markets” Policies for individual demand: characteristics

  11. Reduce liquidity contraints Increase transparency on training activities and improve quality Select workers out of the “internal labour market” Policies for individual demand: aim Those two types of policies shall be designed in order to complement each other

  12. Three main tools: ESF National Funds Co –managed financial resources by social partners Financial resources come from a compulsory contribution of 0.3% of gross wages – solve the free riding problem The Italian case: the financing

  13. Resulting from subsequent legislative steps, not an unique design Often in competition and not complement tools Therefore: limited role of public policies - high share of labour force out of public policies The Italian case: the model

  14. The model of Co-managed Funds • Private management of public resources (compulsory payments) • Strong role of social partners (compulsory co-management) • Lean rules (no rules?) A. MONTANINO

  15. Problems • Financial flows • Training supply • Complementarity or competition among Co-managed Funds? • Complementarity or competition among Co-managed Funds and State-managed funds? A. MONTANINO

  16. To conclude: • There is space for financing workforce training but design of policies is crucial to: • increase complementarities among policies and enrol the greatest share of the workforce; • make best use of (scarce) financial resources

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