Training and Jobs
The Economist challenges our assumptions on just what works.
from The Jobs Letter No 41 / 3 July 1996
an essential summary
edited by The Jobs Letter
- IS TRAINING THE BEST WAY to get the jobless off the dole?
According to a feature in The Economist magazine, there is a growing body of research that shows that training schemes have failed to improve either the earnings or the job prospects of the unemployed.
The research indicates that the performance of training schemes in placing people in work is often over-stated, and appears to reflect the prevailing economic conditions, rather than overcoming them.
The Economist quotes examples of variety of countries within the OECD where researchers have compared groups of unemployed people who enter government training schemes with similar groups who do not. According to a1994 OECD report, in almost every case there was "...remarkably meagre support for the hypothesis that such programmes are effective." Examples :
- United States. The government runs $5 billion worth of training programmes aimed at the disadvantaged. A study of their largest programme, The Job Training Partnership, found that, for those under 21 yrs, training had no effect at all on whether they got a job, and may even have caused young men to lose earnings.
The second largest US programme is called Jobs Corps, and is for young people who agree to leave home for training in basic skills. The participants are more likely to graduate from High School and earn a bit more than their equivalents, but the study showed that the measurable benefit was due to the fact that Jobs Corps youths commit less crimes than their peers. This programme may succeed because it keeps young people occupied rather than because it equips them with marketable skills.
- Britain. In a paper for the London-based Employment Policy Institute, Peter Robinson of the London School of Economics argues that, after accounting for "deadweight" (programmes helping those who would have found jobs anyway) and "substitution" (finding work at other people's expense), hardly any benefit remains from Britain's training schemes.
The Youth Training programme for 16- and 17-year-olds enrols about 200,000 youngsters a year. A government evaluation in 1994 found that almost half of those who joined dropped out before the schemes ended. Unemployment rates of those who did finish, at 27%, were higher than for the age group as a whole.
Britain is now shifting its emphasis toward apprenticeships. These account for perhaps 20,000 places, and are based in the workplace. according to Ianthe Maclagan of a British charity Youthaid, these places are selective and therefore tend to serve the "ones who would have been okay anyway," For occupations such as engineering, which have traditionally hired apprentices, the government is subsidising something that would have happened anyway -- albeit not to the same extent.
Britain's other big training vehicles, Training and Enterprise Councils, are private companies that contract with the government to deliver training. But an evaluation in February by the House of Commons Select Committee on Employment found that only 27% of adults TECs courses had work; even the best courses reported a success rate of less than half.
- Australia. Of five Australian training programmes studied during 1989-92, only one could report that at least half of its participants were either working or studying three months after completion.
Australia is investing about A$10 billion over four years in job training. It is too soon to say whether the "Working Nation" scheme is succeeding, though "...it does seem to have helped to nudge the long-term unemployed to the front of the jobs queue through generous wage-subsidies." SkillShare, a non-profit organisation that trains disadvantaged workers for specific jobs at employers' request, is also promising.
- Sweden. Sweden's parliament commissioned three economists to study the country's long-admired "active labour-market programmes", including job-search assistance, training and relief work. The authors concluded in 1995 that while retraining might raise, slightly, the chances of employment, it does so at higher cost, and to less effect, than simple job-search advice.
- Germany. This country has the biggest and most comprehensive training scheme of all, the highly regarded "dual-education system" -- a scheme where most German 16-year-olds sign an apprenticeship contract with a local firm to work part-time, for below entry-level wages, in return for training at the firm. The rest of the time they go to a vocational school (eg, one school for the insurance industry, another for chemists, etc) run by the local government. When the apprentice-pupils finish, most get -- or used to get -- jobs either with their employer, or at least in their field. Part of the cost is borne by the apprentices themselves, in the form of reduced wages and forgone opportunities. The largest chunk of financing comes from businesses. The teachers who train the apprentices at work are paid by the firms themselves; examinations under the system are set up by local Chambers of Commerce.
The Economist reports that amidst high German unemployment (11.1%), this system is not proving to be any solution to joblessness. Almost half of Germany's unemployed are graduates of work-based apprenticeships; the problem is that once they have to be paid adult wages, many are too expensive to keep on.
Economist : "In this sense, one of the main benefits of the "dual-education system" is nothing to do with skills: it merely provides cheap labour -- but only for a short time. Germany's construction workers, for example, are probably better trained than British or Polish ones. But 90,000 German builders are now sitting at home, while twice as many foreigners toil on German building sites..."
German training programmes outside the dual-education system show the same gloomy results as everywhere else. The OECD reports research that evaluated four German training programmes for the unemployed. Result: "No type of training was found to have any significant impact on the flows out of either short- or long-term unemployment, nor on the flows into unemployment."
- So what does work ?
It seems a few hints about deportment and interview skills go a long way. A notable experiment in America compared one group of unemployed people who received job-search advice with another that got advice plus a place on a training scheme. There was no difference in employment or earnings between the two.
The Economist reports that other successful job training tend to be small, expensive and with strong links to local employers. Examples :
- In California, San Jose's Centre for Employment Training drew up individual plans for its participants, and then connected them to local employers with jobs to offer. Three years later, graduates were earning much more than similar workers.
- Australians in SkillShare who were referred directly to employers were far more likely to get and keep a job than their fellow SkillSharers.
- The bits of America's Job Training Partnership Act devoted to on-the-job training for people ready to work did quite well -- for example, training women to be licensed practical nurses in nearby hospitals.
- The Economist's advice :
-- Where government-supported training programmes have succeeded they have been either small and focused, concentrating on helping people search for work, or they have equipped people with basic skills.
-- The closer training is to general education (as in Germany), the more likely it is to succeed.
-- The skills that matter are more elementary than those taught in training schemes. If so, the priority should be to improve basic education and so reduce the numbers of hard-to-employ earlier in life.
-- Anti-unemployment policy would fare better by concentrating on lowering the costs of employment. This can be done through subsidy, lower taxes, deregulation or some mixture of the three.
-- Once in work, on-the-job training (as opposed to out-of-a-job training) brings clear improvements in productivity and wages.
-- if education and training are working as they should, expect no miraculous falls in unemployment until the costs of labour to employers, and the benefits of labour to workers "...have been shifted to levels the market will bear."
Source : "Training and Jobs : What Works?" The Economist 6th April 1996
Internet Bookmark : The full article is available from The Economist internet site at http://www.economist.com/issue/06-04-96/sf1.htm
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