Public policies for Public policies for financing workers’ financing workers’ trainingtraining

Andrea MontaninoAndrea MontaninoMinistry of Economy and Finance, RomeMinistry of Economy and Finance, Rome

(andrea.montanino@tesoro.it)

CCEDEFOP, 26-27 April 2007EDEFOP, 26-27 April 2007

Outline of the presentationOutline of the presentation

Distribution of continuing training and market-Distribution of continuing training and market-type mechanismstype mechanisms

Under-investment in workers’ training?Under-investment in workers’ training?

Which public policies for continuing trainining? Which public policies for continuing trainining?

The Italian caseThe Italian case

Post-schooling training has several Post-schooling training has several beneficial effects: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

Distribution of continuing training is Distribution of continuing training is unequalunequal

It depends on: Level of education achieved Firm size Firm sector Working contract

Rationale from the firm point of view but: market-type mechanisms may Rationale from the firm point of view but: market-type mechanisms may increase inequality and end up with under-investment in trainingincrease inequality and end up with under-investment in training

Who decides the quantity and quality of Who decides the quantity and quality of training?training?

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 consideredTurnover

Market failure and the role of public Market failure and the role of public policiespolicies

Reduce under-investment from a social point of viewReduce inequality

Trade-off between efficiency and equality?

Which public policies for continuing Which public policies for continuing training?training?

Demand-led policies Co-financed by private entities (either firms or

individuals) Avoid displacement effects on private

investment Support both collective and individual

demand

Policies for collective demand: Policies for collective demand: characteristicscharacteristics

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: aimsPolicies for collective demand: aims

Reducing constraints, especially in SMEs Facilitating coordination between workers and

the firm Implement major skill upgrading

Policies for individual demand: Policies for individual demand: characteristicscharacteristics

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: aimPolicies for individual demand: aim

Reduce liquidity contraints Increase transparency on training activities

and improve quality Select workers out of the “internal labour

market”

Those two types of policies shall be designed in order to Those two types of policies shall be designed in order to complement each other complement each other

The Italian case: the financingThe Italian case: the financing

Three main tools:• ESF

• National Funds

• Co –managed financial resources by social partners

Financial resources come from a compulsory contribution of Financial resources come from a compulsory contribution of 0.3% of gross wages – solve the free riding problem0.3% of gross wages – solve the free riding problem

The Italian case: the modelThe Italian case: the model

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 model of Co-managed FundsThe model of Co-managed Funds

A. MONTANINO

Private management of public resources (compulsory payments)

Strong role of social partners (compulsory co-management)

Lean rules (no rules?)

ProblemsProblems

A. MONTANINO

Financial flows

Training supply

Complementarity or competition among Co-managed Funds?

Complementarity or competition among Co-managed Funds and State-managed funds?

To conclude: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