Payroll taxes for financing training in developing countries

In most developing countries, the major programs of vocational training and manpower-skill development are financed from general revenues. Increasingly, however, earmarked payroll taxes are employed to finance training. This paper summarizes international experience with these payroll taxes, drawing the distinction between the more traditional revenue raising schemes on the lines of the Latin American model and the newer levy-grant schemes. Drawing upon experience of payroll taxes in advanced economies it discusses the incidence of these taxes in developing countries and presents an economic rationale for their growing use, as part of a reverse social security scheme. The paper concludes that the desirability of using payroll taxes to finance training, compared to other alternatives available to developing country governments, is likely to be contingent upon the stage of a country's development.Public Sector Economics&Finance,Economic Theory&Research,Environmental Economics&Policies,Tertiary Education,Labor Standards

Israel's vocational training

Eighty percent of the trainees headed for Israel's labor force go to full-time vocational secondary schools that devote a third to a half of the curriculum time to general studies. Students tend to come from a higher socioeconomic level than those in other training programs. The rest of Israel's vocational students are evenly divided among the Ministry of Labor's remaining three programs: the apprenticeship schools; the industrial schools; and the full-time training courses. Of the four types of training in Israel, vocational school is by far the most expensive. This paper confirms an earlier study that the apprenticeship system was the most cost-effective. However, to conclude that vocational training schools are not cost-effective is to ignore part of the picture. The goals of the vocational secondary school in Israel extend beyond those of providing usable labor market skills. In any cost-benefit evaluation of vocational schooling, these goals would have to be given more weight.Teaching and Learning,Gender and Education,Primary Education,Vocational&Technical Education,Girls Education

General training under asymmetric information

One widely accepted conclusion in the human capital literature on training is that firms will finance only firm-specific training because it is non-transferable to other firms. Firms will not be willing to finance training in general (transferable) skills. In this paper it is argued that a recruiting firm will possess only limited knowledge of the training level in general skills acquired by workers in other firms. Hence a worker with transferable skills who changes employer can expect to suffer a cut in wages for a transition period while his level of productivity is being evaluated and recognized. Such a worker has no incentive to move as long as the present value of the loss in earnings is greater than the present value of the loss incurred in remaining with the training firm at a wage below the market-level for his skill. This result may have some important policy implications in countering the effects of market imperfections. It also suggests that training certification, in facilitating inter-firm mobility, discourages on-the-job training by firms.ICT Policy and Strategies,Labor Standards,Tertiary Education,Primary Education,Agricultural Research

Shared investment in general training : the role of information

The major premise of this paper is that potential recruiters do not possess much information on the extent and type of workers'on-the-job-training. Workers taken for trained might turn out to possess no, or very little, general training. Also, a worker recruited for a given job may possess the wrong type of general training. All this imposes substantial information-based costs on firms that recruit rather than train. These costs include opportunity costs, actual expenses and increased exposure to risk. As a result, a recruiting firm will offer lower wages and place a lower value on a recruited worker with general training than the firm that trained him.Tertiary Education,Primary Education,Labor Standards,Teaching and Learning,ICT Policy and Strategies

Vocational schooling, occupational matching, and labor market earnings in Israel

The authors conducted a comparative analysis of the earnings of workers in Israel who had last attended vocational schools and those who had last attended academic secondary schools before entering the labor force. Their findings suggest that Israel may provide an example of an educational system in which vocational schooling is economically effective. Vocational schooling in Israel has proven more cost-effective than general academic training. In particular, vocational school attenders who later worked in occupations related to their course of study earned more. Their wages were up to 10 percent more a month than their peers who studied at academic secondary schools and those who attended vocational schools but found employment in other occupations not related to their field of study. These results reinforce similar findings in recent research on vocational schooling in the United States. A caveat is necessary to temper the generally positive findings concerning vocational schooling in Israel. While vocational schooling is cost-effective compared with other forms of secondary schooling, it does not compare favorably with other forms of training for skilled trades, such as apprenticeships and factory-based vocational schools. Another factor is the national consensus in Israel favoring education designed to equip young people for the social and cultural role of integrating the country's heterogenous, largely immigrant population.Teaching and Learning,Gender and Education,Health Monitoring&Evaluation,Education Reform and Management,Primary Education

Many paths to skilled employment : a reverse tracer study of eight occupations in Colombia

The authors use the reverse tracer study technique to identify alternative training paths for selected skilled and semi-skilled occupations in Colombia. The study, confirming earlier research for the United States, shows that workers pursue many different training paths to acquire the skills they need in a given occupation. The authors provide an occupational training map format to analyze these training paths. They conclude that strong public intervention that narrows the effective range of available training should be discouraged; such intervention will not only reduce choices but will also lead to a less flexible and efficient training system. A reduction in training alternatives is the result of the manpower requirements forecasting approach to planning for the provision of national vocational education and training - yet that approach is still popular in the planning ministries in developing countries. The more training options available to workers, the better they can arrange their own training packages.Tertiary Education,Teaching and Learning,Primary Education,Labor Standards,ICT Policy and Strategies

Does a woman's education affect her husband's earnings? Results for Israel in a dual labor market

A recent focus on decision-making within the household has opened a new field of research into the economic of marriage and the family. Recent research indicates that in the United States, at least, a wife's education has a positive effect on a husband's earning capacity - a focused instance of the economic benefits of association. Even if education did not get women jobs or improve their ability to function as housewives and mothers, it is not wasted. In Israel, however, the authors found that the wife's educational level increased a husband's earnings in the primary sector (in which workers have good jobs, with good pay, security, and fringe benefits) but not in the secondary sector (in which workers have low paying, unstable, generally unattractive jobs). These new findings are consistent with the general implications of the dual labor market model.Environmental Economics&Policies,Banks&Banking Reform,Economic Theory&Research,Health Economics&Finance,Health Monitoring&Evaluation

A New Model for Equitable and Efficient Resource Allocation to Schools: The Israeli Case

This paper sets out a new budget allocation formula for schools, designed to achieve a more equitable distribution of educational achievement. In addition to needs-based elements, the suggested composite allocation formula includes an improvement component, whereby schools receive budgetary allocations based on a new incentive measure developed in this paper (Improvement in the Educational Achievement Distribution, or IEAD). The development of the budget allocation formula is demonstrated utilizing Israeli data. Large scale, nationwide data sets relating students’ academic achievement to student background variables, teacher profiles and school characteristics, were analyzed to identify appropriate needs-based formula components and to estimate their weights. The results are compared with the funding formulas currently used in Israel.school finance, formular funding, needs-based funding, schools resource allocation, Israel

Funding mechanisms for financing vocational training: An analytical framework

The paper provides an account of innovative financing mechanisms which have been adopted in many national training systems. These mechanisms aim at correcting shortcomings of conventional training finance systems in order to better meet labor market needs, improve both the quality and relevance of training provision and to contain training costs. Directions of change include a greater diversification of funding sources for skills development (including cost sharing and training levies, mainly based on company payrolls), budgeting public training centres through objective funding formulas, encouraging more and higher quality enterprise training, the development of private training markets, increased competition between public and private training providers and the establishment of independent national training funds. Autonomous national training authorities, with broad powers and sizeable stakeholder representation, can be effective in both coordinating and steering national training systems