The information society is all very well, but the trouble is ensuring everyone can be trained up for it, especially those who need it most. Countries still do not appear to invest enough in the education of under-skilled adults, although the extent of the problem is difficult to quantify and may be eased somewhat by the presence of informal training. Still, more needs to be done to encourage a more efficient sharing of the costs and benefits of training between employers and employees, thereby increasing the incentives to invest in human capital. Another, more intractable problem, is how to get training to those who need it most. As it is, vulnerable workers have fewer opportunities to acquire new skills. For this reason, some countries are experimenting with co-financing policies for individual investments in human capital, to help workers pay for training themselves when they are not supported by their employer. Despite these measures, without support from their employer, individuals often find training courses unaffordable, not only because of their direct costs but also because of time constraints.demand for skills; training; co-financing; time constraints

Andrea Bassanini

English

Research Papers in Economics

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SOLVING THE TRAINING DIVIDE 
Andrea Bassanini 
OECD Employment, Labour and Social Affairs Directorate 
 
Published on  
OECD Observer No. 240/241, pp.43-45, December 2003 
http://www.oecdobserver.org/news/printpage.php/aid/1189/Solving_the_training_divide.html 
 
Computers  are  everywhere,  except  in  the  productivity  statistics.  This  famous,  perhaps  over-
quoted, line from Robert Solow, the US economist, had everyone from MBA students to Nobel 
wannabes  and  policymakers  scurrying  to  their  databases  in  search  of  evidence  that  a  new 
economy was indeed being fashioned from the emergence of new technology. Some evidence has 
been uncovered that information and communication technology can, when combined with human 
capital, drive up firm-level productivity and performance, for instance. But regardless of whether 
one believes that all of this adds up to a new economy or not, part of Mr Solow’s point remains 
blatantly true: computers are everywhere. In fact, the development and spread of new technology 
in the workplace is not a myth, but a reality. Everyone’s skill set requirement has been upgraded 
as a result. 
But this raises another possible myth that demands our attention: that the new economy would lift 
everyone’s  potential,  however  educated  they  might  be.  This  is,  of  course,  a  contradiction: 
remember,  the  improvement  in  productivity  comes  from  combining  technology  and  human 
capital, particularly skilled labour. Yet, the world is full of unskilled labour too (anyone educated 
to  secondary  level  only,  with  no  higher  level  or  specific  skills  qualification,  is  defined  as 
unskilled).  So,  while  the  frontier  of  economic  possibilities  will  thankfully  always  expand,  it 
should  come  as  no  surprise  that  job  opportunities  for  the  low-educated  are  shrinking  almost 
everywhere. 
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Author manuscript, published in "The OECD Observer (2003) 43-45"  2
Take employment growth. This has been positive in the last 10 years in OECD countries, yet there 
has been a marked contraction of jobs that are typically held by low-educated workers (see graph). 
The cases of Germany and Italy stand out: in these countries net destruction of unskilled jobs has 
occurred  at  a  rate  greater  than  1%  per  year  since  1993,  despite  overall  positive  employment 
growth. Even in countries such as the United States, Luxembourg, the Netherlands, New Zealand 
and Spain, that have experienced fast employment growth (of the order of 1-1.5% a year or more), 
jobs for low-educated workers have grown much less quickly. 
 
The progressive disappearance of low-skilled jobs may seem like progress, and indeed fewer 
mundane tasks is part of the promise of a knowledge society, but it makes for rather gloomy 
employment prospects for the less-educated, who stand to fall behind in terms of employment 
performance and wealth. In the OECD area as a whole, the employment rate of workers with 
lower secondary education or less fell by 0.3 percentage points each year during the 1990s, in 
spite of growing employment rates for the other groups. In effect, to add to a digital divide, there 
is a skills divide opening up in the OECD area. 
The  downward  trend  of  the  employment  rate  of  the  low-educated  reflects  the  pace  of 
technological change, and in fact has been sharper in countries where technological change is 
faster. For instance, in Sweden, business R&D expenditure soared from less than 1.9% of GDP in 
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the late 1980s to about 2.7% by the late 1990s, while the employment rate of the low-educated 
slumped by 13 percentage points between 1991 and 2001. On other hand, in the Netherlands, a 
country that recorded a fall in the growth of business R&D intensity in the same period, the 
employment rate of the low-educated grew by about 10 percentage points, thanks also in part to a 
boom in part-time jobs. 
But overall, low-skilled job opportunities are dwindling. Economists have different views on what 
to  do  about  this.  Some  think  that  nothing  should  be  done, as  markets  will  take  care  of  any 
problems as people respond to new incentives and upgrade themselves. Others emphasise the need 
for  government  to  assure  better  adult-oriented  education  and  training,  particularly  as  fast 
technological change and rapid turnover of technologies can make skills learned at school become 
quickly obsolete. Moreover, with the workforce ageing and working life lengthening, education 
beyond the schooling received in youth will become all the more important. The problem is how 
to go beyond rhetoric and identify what can be done to improve adult workers’ skills. 
Countries still do not appear to invest enough in the education of under-skilled adults, although 
the extent of the problem is difficult to quantify and may be eased somewhat by the presence of 
informal training. Still, more needs to be done to encourage a more efficient sharing of the costs 
and benefits of training between employers and employees, thereby increasing the incentives to 
invest in human capital. 
Another, more intractable problem, is how to get training to those who need it most. As it is, 
vulnerable workers have fewer opportunities  to acquire new skills. On average,  only 16%  of 
workers with less than upper secondary education participate in formal adult training, which is 
less  than  half  of  that  of  workers  with  tertiary  degrees  (35%).  Similar  inequalities  are  found 
between  older  workers  and  prime-age  workers,  skilled  and  unskilled,  women  and  men,  and 
immigrants and natives. Very large gaps are also found between small and large firms; the 2003 
OECD Employment Outlook showed that the probability of being offered training was 30% lower 
for a worker in a small firm than for a similar worker in a large one. Similar gaps emerge as 
regards involuntary part-time workers (with respect to full-time workers) and temporary workers 
(with respect to workers in permanent jobs). 
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Are certain workers unwilling to be trained or could it be that firms find it less profitable to train 
them? This question is fundamental for policy, since in many countries, particularly in Europe, 
policies are first and foremost designed to increase the incentives of firms to train. Most of these 
policies  seem  to  be  effective  in  raising  the  amount  of  training  provided  by  firms,  but  are 
nevertheless skewed to train workers that are already in a good position in the labour market 
because of their lower training cost. Experience in some countries, such as the Netherlands, shows 
that  it  is  very  difficult  to  target  incentives  to  train  specific  groups,  since  they  can  generate 
undesired substitution between different disadvantaged groups, such as older unskilled workers 
replacing younger unskilled workers, and the like. 
Moreover, while our studies show that older workers do not seem to be willing to do training 
beyond what is offered by their own employers, mainly because they would have to pay for it 
themselves and there is not enough time left before retirement to recoup the cost of that training, 
most other categories of workers wish they could get more training. For instance, in cases where 
training is not provided by employers, some 5% more women than men say they would pay for 
their own training, provided they could afford it. Even more striking, the share of workers that do 
not  receive  training  from  their  employers  but  would  like  to  is  20%  greater  in  the  case  of 
involuntary part- time or temporary workers than in the case of full-time workers. So, for certain 
groups  of  individuals,  the  supply  of  training  falls  short  of  employee  wishes,  and  sometimes 
dramatically. And policies to encourage employers to increase their overall training investment 
would do little to alter this situation. 
For  this  reason,  some  countries  are  experimenting  with  co-financing  policies  for  individual 
investments in human capital, to help workers pay for training themselves when they are not 
supported by their employer. For instance, experiments with publicly-funded training vouchers in 
the Geneva canton of Switzerland have been effective, particularly in increasing training among 
immigrants. Similarly, many countries have introduced so-called individual learning accounts, 
which are bank accounts that benefit from special tax treatment or are publicly funded, and which 
individuals can co-finance and draw on to pay for future training. 
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Despite  these  measures,  without  support  from  their  employer,  individuals  often  find  training 
courses unaffordable, not only because of their direct costs but also because of time constraints. 
On average about 20% of the workers of OECD countries say they did not do further training 
because of lack of time. Some training courses may require long breaks from work, sometimes up 
to several months. Many OECD countries have responded by providing statutory or contractual 
training leave schemes that guarantee employees the right to return to their jobs after completing 
the training course, with the study period usually being partially subsidised by the government 
through loans or grants. 
Some countries have also facilitated access to training and education on a part-time basis. For 
instance, in the Australian technical and further education colleges it is possible to study part-
time, at distance and on weekends, and access requirements also take into account previous work 
experience. As a result, in Australia, 12% of the enrolees in the formal education system are aged 
35 and over, which is three times the OECD average. 
There is no shortage of initiatives to help improve skills and so the job prospects of less-educated 
workers. And the returns from training are estimated to be quite high. Most studies find a positive 
and  persistent  effect  of  training  on  earnings.  For  instance,  one  study,  by  Loewenstein  and 
Spletzer, estimates that for the United States one week of employer-paid training of newly hired 
workers leads to 1.4 percentage point higher wage growth in the two years after hiring and that 
17% of the average wage growth in the same period can be explained by training. And Booth and 
Bryan estimate that in the United Kingdom, one week of accredited formal training leads to higher 
wages at subsequent employers. 
The  effect  of  continuous  training  on  employment  security  is  less  well  established,  though 
evidence points to a greater probability of finding a new job quickly in the case of involuntary 
employment loss if the worker has previously received training. 
The key to closing the skills divide seems to be a matter of finance to assure training. By co-
financing  learning  between  employees,  employers  and,  where  needed,  government,  and  by 
creating the conditions where such co-financing becomes efficient, the number of unskilled that 
risk being left behind would be greatly reduced. 
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References 
OECD (2003), Employment Outlook, Paris. 
Loewenstein, M. A. and Spletzer, J. R. (1999), “General and specific training: evidence and implications”, 
in Journal of Human Resources, Vol. 34, No. 4, pp. 710-733. 
Booth, A. and Bryan, M. (2002), “Who pays for general training? New evidence for British men and 
women”, IZA Discussion Paper No. 486, April. 
Ok, W. and Tergeist, P. (2003), “Improving Workers’ Skills: Analytical Evidence and the Role of the 
Social Partners”, OECD Social, Employment and Migration Working Papers, No. 10. 
 
 
 
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General and specific training: evidence and implications”,

Improving Workers’ Skills: Analytical Evidence and the Role of the Social Partners”, OECD Social, Employment and Migration Working Papers,

Who pays for general training? New evidence for British men and women”, IZA Discussion Paper No.

Solving the Training Divide

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Solving the Training Divide

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