CVET - Causes for possible underinvestment and incentives for enterprises and employees
Normann Müller
Do enterprises and employees invest less in continuing vocational education and training than would be economically prudent - and if so, why? BIBB researchers Normann Müller (project spokesman), Klaus Berger, Dick Moraal and Marcel Walter will be examining this question in the course of a research project.
In light of today's rapid technological change and the ageing of industrialised societies, there is no doubt that lifelong learning processes will be of increasing importance in the future. There is however frequent disagreement over who should be responsible for financing lifelong learning processes and the extent to which these parties should bear their cost. The project that is the focus of this report will concentrate on continuing vocational education and training (CVET) that leads to transferable skills. Education economists think that enterprises on the one hand and employees on the other invest less in such education and training than would be optimal in economic terms. This hypothesis has led to a lively political debate on concepts for financing CVET that serve to increase the incentives for enterprises and employees to invest in CVET.
In light of this, the planned project will first determine how important the possible causes for companies' and individuals' supposed underinvestment actually are. In the next stage, it will examine the experience gathered with financing models that have already been implemented and analyse experts' assessments of models that have only been proposed to date. The results will be interpreted in light of the findings from the foregoing analysis. The combination of these two objects of investigation - the causes for underinvestment and incentives for financing CVET - plus its two viewpoints - the individual's and the enterprise's - led to the following four work packages:
- Many concepts for advancing individuals implicitly assume that people behave irrationally in their decisions on continuing vocational training. Therefore, this work package will examine whether and to what the extent it can be assumed that bounded rationality in an individual's CVET decisions is a potential cause for underinvestment on the part of the individual. Work Package 1 will use personal interviews to examine whether an individual's willingness to undergo CVET can be explained by their perception of the training's utility or by constraints on the individual. The term 'utility' is very broadly defined in this connection. The utility aspects that reflect social and intrinsic motivations for action will be taken into account, alongside those utility aspects arising from the satisfaction of material needs and the need for security, recognition or meaning. Constraints arise from the individual's income and the amount of spare time they have. This work package will examine not only the question of whether the individual's continuing training behaviour is rational but also the structure of the decision logic - in other words, what meaning and importance certain factors have for specific groups of persons, such as persons who rarely participate in education programmes or older persons. At the same time, the analysis will also look at the role that the transparency of the CVET market, the quality of CVET programmes, and information concerning the utility of CVET programmes play in an individual's decisions.
- The focus of the second work package will be on the practical importance of poaching as a frequently-supposed reason for companies' underinvestment. In theory, poaching is a cause for underinvestment when the company paying for continuing vocational training views the training as a common-pool resource. On the one hand, it cannot be entirely ruled out that another employer might make use of an individual's knowledge and know-how sometime in the future since there is the possibility that another company could poach the individual. On the other hand, rivalry exists in the use of knowledge that is specific to the particular person since individuals generally work for only one company at a time. Such a situation initially gives rise to a negative incentive to invest for the company financing the training. This can lead to less human capital being produced - in other words, a decline in the number of employees receiving CVET - than would be desirable for society. This analysis will be conducted on the basis of data that will be obtained in a company survey. The specific question to be examined in this work package is whether the amount that companies invest in continuing vocational training is negatively affected by the possibility that other firms might benefit from it, measured as employee fluctuation in the companies examined.
- Work Package 3 will focus on experience gathered with financing models aimed at correcting the supposed underinvestment on the part of individuals. This work will revolve primarily around models that use government subsidies which are paid to individuals in order to create incentives to invest in one's own continuing vocational education. Such subsidies include education vouchers, learning accounts and education savings plan models. It is essentially planned to draft a summary that compares the features of different concepts and their effects, as documented by existing evaluations or as assessed by experts. The ability of the individual concepts to correct the supposed underinvestment by individuals will then be evaluated with the help of the findings from the first work package. Work Package 3 will also examine the question of how important flanking advisory services and certification regulations are.
- Analogously to Work Package 3, Work Package 4 will examine financing models aimed at solving the supposed underinvestment on the part of enterprises. Here attention will be directed to forms of inter-company collaboration (particularly in connection with the financing of CVET as laid down in collective wage agreements) that are to boost the incentives for enterprises to invest in continuing vocational training. The analysis will be limited to German and Dutch concepts. The concepts will be examined on the basis of the findings from the Work Package 2 with an eye to assessing their suitability for remedying the supposed underinvestment among enterprises. This work package will also examine the role that institutional conditions play in the emergence of specific concepts in Germany and The Netherlands.
The first two work packages are directly linked to the academic debates taking place in the field of education economics. The findings, however, will also be of direct interest to political decision-makers and social partners because they contain fundamental information needed for reaching decisions on the type and extent of government intervention and/or for the optimal elaboration of financing concepts to boost incentives for companies' and individuals' investment in continuing vocational training. By contrast, the primary aim of Work Packages 3 and 4 is not to advance the development of theories. Instead, they will be put to use in the application of the findings generated by the first two work packages. Thanks in particular to this linking of the work packages, these studies - which were conceived in part as secondary analyses - will provide added value for the political discussion
