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CEI Human Development Forum Dr. Dieter Dohmen FiBS – Institute for Education and Socio-Economic...
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CEI Human Development Forum Dr. Dieter Dohmen FiBS – Institute for Education and Socio-Economic Research and Consulting Prague, November 10, 2006 Financing Further Professional Training - an Overview about Models and Experiences [email protected]
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Transcript of CEI Human Development Forum Dr. Dieter Dohmen FiBS – Institute for Education and Socio-Economic...
CEI Human Development Forum
Dr. Dieter DohmenFiBS – Institute for Education and Socio-Economic
Research and Consulting Prague, November 10, 2006
Financing Further Professional Training -
an Overview about Models and Experiences
Content
1. Introduction: Some snapshots on training participation
2. Modes of and experiences with financing further professional training- Private funding and tax exemption- Training loans- Saving accounts- Individual Learning Accounts- Vouchers- Training funds/payroll taxes
3. Summary and Conclusion
Summary of snapshots
Participation rates are very different among countries and
- are higher in Northern than Southern and Eastern Europe
- Are increasing with education levels, i.e. are higher for tertiary graduates than for upper secondary and lower secondary graduates
- Are least for 55-64 and slightly higher for 25-34 year olds than for 35-44 year olds
=> There appears to be a strong link with education, socio-economic background, income and returns
Private funding
Private funding - Advantages those with higher income (except professional training, since participation depends on it
- (unless other financing opportunities are available)
Tax exemptions
Effects depend on tax system- Progressive taxes again favour those with higher income since they gain more from tax deducations
Net costs are less for people with higher income
Tax exemptions
Effects depend on tax system- Progressive taxes again favour those with higher income since they gain more from tax deducations
Net costs are less for people with higher income
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Taxable income
Net costs for individuals
Tax reduction if costs are € 1.000
Tax exemptions
Effects depend on tax system- Progressive taxes again favour those with higher income since they gain more from tax deducations
Net costs are less for people with higher income- Flat taxes are fairer since the reduction is the same independent from income (unless you don‘t pay taxes)
Tax deductibility is the major mode for co-financing professional training in Germany -> indicates the progressive relation between income and participation
Taxes exemptions don‘t reduce the liquidity constraint
How to overcome them?
Training Loans
- Training loans are usually not provided by the market (or only for certain target groups)
- Human capital does not provide any security, i.e. interest rates would be very high
- State guarantees are required, to keep interest rates at acceptable levels
- Even if, take-up rates are usually very small, as e.g. the British experience shows for SMEs and individuals
- Risk-aversity could be a problem, particularly for low-income and/or lowly educated groups
Saving accounts
Means to save money regularly on a bank account especially for training
- Takes time and foresight (if you are to save especially for training)
- Appears no instrument for costly programms, since time requirement is to high (e.g. it takes more than 6 years to finance € 10.000, if interest rate is 10 %)
Individual Learning accounts
ILAs were applied e.g. in the UK- State topped-up £ 150 if people paid £ 25 on a bank account
- Funds to be disbursed at registered institutes- Goal: 1 mln accounts within 2 years (in fact: 2.6 mln/1yr)
- budget line of £ 1.5 mln exceeded by far- 22% of the participants had no training the year before;
- 91% said their expectations were outstripped- 54 % were more interested in training than before- 7.000 new institutes were established- Programme closed down after one year for “misuse“ and quality problems
Vouchers
- Can be applied to companies as well as individuals- State co-funding for training- Trainee selects training institute and delivers the voucher
- Institute gets reimbursed by the state/funding agency- USA: GI-Bill for war veterans for re-training and integration
- Belgium: SMEs receive up to 400 vouchers of up to € 30; 50 % of the costs are to be SME co-funded
- Germany: training vouchers for unemployed people- Vouchers were applied in many developing countries- Problems: information and advice, limited usage by low-educated people, fraud (to some extent)
Training funds/payroll taxes
2 different modes: revenue generation and levy-grant or levy-exemption scheme
- are applied in many countries (e.g. France, Malaysia, Netherlands)
- Crucial question: net-impact on company training? - Gross numbers are often promising, but net effect often low
- Experience appears to be less promising as expected (but room for debate)
- SME pay but don’t apply for refunding - Revenue generation funds tend to establish bureaucracies
- However, sometimes it seems to have had an starting effect (e.g. Taiwan)
Summary and Conclusion
- No instrument is without problems!- However, some modes appear to be performing better than others (e.g. ILAs/Vouchers)
- While others favour “normal” participation patterns (tax exemption in progressive tax systems)
- => Success and “failure” of a model depend on the relationship between design and environment
- Important co-factors: information, advice and quality assurance
CEI Human Development Forum
Dr. Dieter DohmenFiBS – Institute for Education and Socio-Economic
Research and Consulting Prague, November 10, 2006
Financing Further Professional Training -
an Overview about Models and Experiences
