OECD Skills Strategy Building an effective skills strategy for Spain: Effective Skills Systems

Diagnostic Workshop with StakeholdersCuenca, 24-25 November 2014

How to unlock Spain’s full skills potential?

skills.oecd

Better Skills, Better Jobs, Better Lives

Pillar 4: How can a country provide enabling conditions

for building an effective skills system?

Create formal systems for information sharing and planning across government

portfolios

Assess the interaction effects of policies across ministries and levels of

government.

By improving policy coherence:

By facilitating informed decision making:

Conduct ex-post and ex-ante evaluations of skills policies

Develop and disseminate timely, accurate and targeted information to support

policy design and the skills, training and career choices of stakeholders.

skills.oecd

Better Skills, Better Jobs, Better Lives

Pillar 4: How can a country provide enabling conditions

for building an effective skills system?

Create effective, efficient and equitable financing policies that reflect the

relatives costs and benefits to all skills system actors.

Set up financing policies that create strong incentives for all stakeholders to

maximise skills development, activation and use.

By establishing effective financing systems:

Foster strong linkages and collaboration among governments and stakeholders.

By fostering strong partnerships:

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Better Skills, Better Jobs, Better Lives

5

Linkages between Skill Development and Skill

Activation

Labour Market

ParticipationSkills Levels

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Better Skills, Better Jobs, Better Lives

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Financing and expenditure on Skill systems &

Employment & Skill Levels

Employment

Financing &

expenditure on

Skill systems

Skill Levels

• Create effective, efficient and equitable financing policies.

• Set up financing policies that create strong incentives for all

stakeholders to maximise skills development, activation and use.

skills.oecd

Better Skills, Better Jobs, Better Lives

Costs of education

• Lost earnings during education & up-skilling

• Tuition costs, books, materials

• Private costs of funding education (student debt – do financial

constraints have a big impact on skill development in Spain?)

• Public spending

Costs can be reduced by:

• Scholarships & Grants, Student loans

• Education Tax Breaks for students and employers

Returns come in the form of:

• Higher wages & profits

• Better employment opportunities, etc.

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Taxes affect the Costs and Returns to Education

skills.oecd

Better Skills, Better Jobs, Better Lives

Apportioning costs and returns through the tax system

• Personal income taxes lower costs and returns for individuals while they

have the opposite impact for government.

• Proportional personal income tax systems do not create a (direct)

disincentive to up-skilling, as costs and returns will be reduced in a

proportional way

• But higher personal income taxes make working, and therefore

education and up-skilling, less attractive.

• A higher degree of public spending on skill systems warrants a higher

level of personal income taxes and, possibly, a higher degree of tax

progressivity.

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Better Skills, Better Jobs, Better Lives

Financing Education in Spain: total spending on

education, primary to tertiary, is at the OECD average

• Overall skills spending is at the OECD average, while skills levels

in Spain are below average. Is there scope for efficiency gains in

the education system?

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skills.oecd

Better Skills, Better Jobs, Better Lives

Average tax wedge on workers in private sector earning 67% of

the Average Wage in Spain in 2013 is above the OECD average

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Employer SSC Employee SSC Income tax

OECD average at 32.3% compared to 37.2% in Spain (2013 data)

skills.oecd

Better Skills, Better Jobs, Better Lives

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Taxation and Skills Activation, Development and

Effective Use

Employment

Labour Tax Wedge

Skill Levels

Where taxes on labour are too high, it can be too expensive

to hire, and not rewarding enough to work, to up-skill or to

change jobs where skills are rewarded more.

skills.oecd

Better Skills, Better Jobs, Better Lives

Few employees receive employer funded training

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Better Skills, Better Jobs, Better Lives

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Low Skills – High (Youth) Unemployment

Poland

Estonia

Japan

S. Korea

Germany

Slovak Rep.

Czech Rep.

United States

Denmark

Spain

Austria

Canada

Italy

Norway

Sweden

NetherlandsFinland

Australia

France

Ireland

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• Countries with low skills tend to have higher

unemployment, especially among young people (also

because “insiders” are “protected”).

Source: PIAAC, OECD Employment Database

skills.oecd

Better Skills, Better Jobs, Better Lives

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Skills, Employment, flexibility of Labour Markets and

increased training opportunities

Employment

Labour Tax Wedge

Skill Levels

Where skill levels are low, it is harder for workers to find work at a given

wage level. Flexibility of the labour market allows tackling labour and skills

challenges. More and better training opportunities for workers will help!

skills.oecd

Better Skills, Better Jobs, Better Lives

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Skills & Taxation

Employment

Labour Tax Wedge

Skill Levels

Where skill levels are low, a high labour tax wedge

may make even more challenging to sustain high

employment levels. Is this a problem in Spain?

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Ejercicio 7.1: Sistemas eficientes de competencias

The average tax burden on low-income jobs in the private sector in Spain is

above the OECD average.

Why are employers not hiring the vast pool of unemployed workers? Is the tax

burden too high? Are skills of workers insufficient? Are wages too high? Are

economic circumstances too uncertain for employers to hire? Are labour market

rules too rigid? Are their other factors that contribute to the high unemployment

rate in Spain?

Please be as detailed as possible in your response.

The average tax wedge (personal income taxes, employee and employer social security contributions)

paid by low-income workers in the private sector earning 67% of the average wage (2013 data)

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Employer SSC Employee SSC Income tax

OECD average at 32.3%

How to unlock Spain’s full skills potential?

skills.oecd

Better Skills, Better Jobs, Better Lives

Towards an effective skills system in Spain

Cooperation between different stakeholders is crucial

for developing an effective skills system in Spain

skills.oecd

Better Skills, Better Jobs, Better Lives

The balance between skills supply and demand

varies at the local level

skills.oecd

Better Skills, Better Jobs, Better Lives

Unemployment rate, TL3 regions, Spain 2012

skills.oecd

Better Skills, Better Jobs, Better Lives

• Inject flexibility into the implementation of employment and skills policies

• Promote partnerships that can develop place-based responses to structural adjustment and local economic development

• Building capacities so policies can be adapted to local needs –leadership is critical

• Building a strong evidence base - data availability and sharing – creating the “glue” for successful partnership working

• Need to ensure the right level of governance (e.g. corresponding to travel to work areas)

Examples: Action Plan for Jobs (Ireland); Job Creation unit (Japan); Workforce Investment Boards (United States); VDAB (Belgium), Entrepreneurship Centre (Quebec, Canada); Workforce Planning Boards (Ontario, Canada); Four Party Associations (Korea)

Getting collaboration right at the national and local level

skills.oecd

Better Skills, Better Jobs, Better Lives

• Using industry representatives as trainers

• Better linking employers to the employment and training system in an advisory role

• Stimulating local networks among employers (particularly for SMEs) and creating employer ownership

• Cluster and sector-based approaches can be used to better connect the education system to the world of work

Examples: Employer Ownership Pilots (UK); Career Pathways (US); Regional niche sectors (Quebec, Canada); Higher Vocational Education system in Sweden; Talent Houses (Belgium); Strategic clusters in Bucheon (Korea)

How to create better partnerships with employers -

lessons from other OECD countries

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The map above shows regional variations in the supply and demand of

skills, classifying regions into a high-skills equilibrium, low-skill

equilibrium, skills deficit, and skills surpluses.

How can partnerships at the national and local level be strengthened and

better match the supply of skills to demand? Do employers need to be

more involved in the system?

Please be as detailed as possible in your response.

Balance between the supply and demand of skills, TL2 regions, Spain, 2009

Ejercicio 7.2: Sistemas eficientes de competencias

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Ejercicio 7.3: Sistemas eficientes de competencias

Many ministries and levels of government jointly contribute to building an effective

skills system. Spanish sub-national governments have a prominent role, for

example, in expenditure on education.

How well do you think different ministries and levels of governments collaborate to

improve the skills system in Spain? What more could they do to ensure policy

coherence?

Please be as detailed as possible in your response.

Total expenditure in education by sub-national governments

as a % of total government expenditure on education

Note: Source: Eurostat and OECD

National accounts

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Ejercicio 7.4: Sistemas eficientes de competencias

Many stakeholders jointly contribute to building an effective skills system.

Do you think that employers and trade unions are engaging effectively in the skills

system?

In your experience, what concrete areas would benefit from stronger engagement from

employers and trade unions? (e.g. vocational education and training, higher education,

continuous education and training, etc.)

What are some of the concrete barriers to more effective employer engagement in

these areas?

Please be as detailed as possible in your response.

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Ejercicio 7.5: Sistemas eficientes de competencias

Learning and labour market information is critical to: informing the education, training,

career and mobility choices of individuals; the curricula and seat allocations planning of

tertiary institutions; and the human resource and training planning of enterprises and

trade unions. This could include information about the labour market outcomes of

graduates by level and field of study, information about high demand occupations and/or

current skills shortages, and information about projected skills shortages.

Is the learning and labour market information available in Spain accessible, timely, and

sufficiently detailed? What more could be done to improve leaning and labour market

information in Spain?