Chapter 6. Strengthening the governance of skills systems

This chapter provides a framework of the policy dimensions required to govern skills systems effectively. It provides examples of how to better calibrate the interaction of the elements of good governance to create processes that are important for the effective functioning and accountability of skills systems. It advocates a whole-of-government approach to skills policies and highlights four policy dimensions relevant to pursuing such a goal: 1) promoting co-ordination, co-operation and collaboration across the whole of government; 2) engaging stakeholders throughout the policy cycle; 3) building integrated information systems; and 4) aligning and co-ordinating financing arrangements.

    
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Box 6.1. Key policy lessons on strengthening the governance of skills systems

Promote co-ordination, co-operation and collaboration across the whole of government. Skills-related policies are rarely the exclusive domain of one ministry or level of government. Higher levels of co-ordination, co-operation and collaboration have the potential to improve skills outcomes. The co-ordination of different policy areas is facilitated if there is a shared conviction that skills are a national priority. Governments should identify and engage with relevant stakeholders and encourage co-ordination between central and sub-national authorities. A good first step is to map all the policies and institutional actors that affect skills development and skills use. Co-ordination efforts should be supported by the right institutions. These institutions can take various shapes. However, it is important that they adopt a “life-course perspective” and put in place effective monitoring and evaluation mechanisms to assess the functioning of the skills system.

Engage stakeholders throughout the policy cycle. The need to engage stakeholders emerges from the complexity and the multiplicity of policy actions that need to be undertaken to improve a country’s human capital development and use. Policy makers dealing with complex policy choices need and benefit from stakeholders’ expertise and knowledge. Engaging stakeholders also enhances the political legitimacy of policy-making decisions. A first step towards engaging stakeholders is to map all the players in the skills system and identify how and to what extent they interact with each other. It is very important that engagement leads to something tangible in practice, and stakeholders must have opportunities to influence skills policy. However, it is critical that their involvement in decision making does not lead to the “capture” of public institutions by private interests.

Build integrated information systems. As skills systems evolve and become more complex, managing data and information becomes a key policy issue. Governments need effective information systems to collect and manage the data and information that governments and stakeholders produce, analyse and disseminate to ensure that policy makers, firms, individuals and others have access to accurate, timely, detailed and tailored information. Managing complexities requires significant managerial efforts in a number of areas, particularly in regard to accountability and privacy protocols. The first step toward building an integrated information system is to generate and collect all the relevant skills, labour market and learning data. Moving from data to information requires knowing who the end-users are and what their needs are, as well as what the existing information gaps are. A user-centred approach is needed in order to turn data into actionable information.

Align and co-ordinate financing arrangements. Governance and financing are inexorably intertwined. Efforts aimed to increase the level and efficiency of expenditures on skills need to be accompanied by strong institutional capacity. Financial arrangements should rely upon more flexible cost-sharing mechanisms that facilitate integration from multiple sources. Public funds ought to be allocated carefully to promote better policy outcomes and to ensure equitable access to skills development opportunities for all. A first step in prioritising skills investments and expenditures is to assess the financing gaps in the systems. Investment strategies ought to be defined in line with the medium-term strategic priorities of government. Resources need to be allocated in such a way that responsibilities and accountability mechanisms are matched with funding so that those with responsibilities have the capacity and funding to operate at the desired standard of service.

Introduction

Implementing reforms is challenging for governments. The complexity of this task increases when policies involve a wide range of actors and entities, such as different levels of government and stakeholders, and cut across multiple policy sectors (OECD, forthcoming[1]). When designing and implementing inter-sectoral policies, governments often face enormous political and technical challenges, including the need to co-ordinate across different levels of government, to engage with stakeholders, and to define the financial and information aspects of the reform, among others. Furthermore, inter-sectoral reforms are often associated with very complex redistributive trade-offs as they often concern the distribution and redistribution of resources across and between sectors as well as levels of government.

Across the spectrum of policy sectors, policies aimed at improving skills outcomes – skills policies – are a prominent example of complexity. The success of policies to improve the development and use of skills typically depends on the responses and actions of a wide range of actors, including government, students, teachers, workers, employers, trade unions, etc. In many regards, the policy area of skills policies is fundamentally different from other policy areas. On the one hand, investing in education and human capital formation is widely popular across different electoral and political constituencies (Busemeyer et al., 2018[2])) as the value and contribution of education to economic development and social inclusion is broadly recognised. On the other hand, as mentioned in Chapter 1, skills policies are much more complex than many other policies because they are located at the intersection of education, labour market, industrial and other policy domains. It is an inherently complex policy domain that plays a central role in paving countries’ development paths by, for example, easing the adoption of new technologies and moving up the value-added chain and by making countries more attractive to foreign direct investment.

Skills policies implicate a large, diverse number of government ministries, levels of governments and stakeholders. For instance, policy making in the labour market arena involves a different set of actors (trade unions, employers’ associations, etc.) than in the education arena (parental and student associations, teacher associations, educational institutions, etc.). Furthermore, policy making in the labour market arena usually tends to pursue more centralised approaches aimed at securing the integrity of national labour markets, whereas education policies are often provided and sometimes even financed on the sub-regional and local levels. Thus, both in terms of actor constellations as well as co-ordination efforts across different levels of government, implementing co-ordinated skills policies involves a high degree of complexity.

Governance is not likely to become any easier in the near future. Globalisation, technological progress and demographic change, among other factors, are putting pressure on skills systems, in OECD Member countries and other economies, increasing the need for a lifelong approach to learning. More specifically, as discussed in Chapter 3, these factors (or megatrends) require renewed political and financial commitments to skills policies in three areas: 1) inspiring a culture of lifelong learning and expanding education and training opportunities for the adult population to support their adaptability and resilience in the face of rapid change; 2) reducing inequalities in opportunities among children and schools to ensure that all young adults are equipped with the skills they need for successful careers, enabling them to embrace the impact of technology in a changing world of work; and 3) harnessing the potential of new technologies to expand learning opportunities and spur the development of skills for the 21st century.

As early childhood education and care (ECEC) services and initial vocational education and training (VET) are expanded to reach a greater share of the population and as learning opportunities are expanded to serve the adult population, governments face new challenges in areas where their field of action has been historically limited, increasing the number of actors involved and the complexity of governance arrangements. The expansion of ECEC forces governments to deal with complexities that surpass those encountered at the primary and secondary levels, such as strengthening new regulatory frameworks, managing relationships with providers, putting in place effective quality assurance mechanisms as well as facing political debates about the role of the family vs. the state and markets in providing early childhood education. Expanding educational opportunities in VET adds even more complexity because it requires co-ordination between policy making in the education system itself and actors in the labour market arena, such as businesses and unions. Similarly, adult education and further training entail establishing and managing relationships with employers and education providers and creating new financing and accountability mechanisms.

Current reform efforts addressing the skills system often play out in the context of a more general trend in OECD Member countries to decentralise and delegate the administration, and partly the financing of, social services (Gingrich, 2011[3]), implying that more policies and services will be designed and delivered with or by sub-central authorities, social partners and other stakeholders, whose actions are not always under the control of central authorities. As a consequence, designing governance systems that can ensure a co-ordinated approach to steering and priority setting and are sensitive to particular regional and sectoral needs is challenging.

In fact, the 14 OECD Skills Strategy Diagnostic Reports completed to date show that inherent difficulties in co-ordinating and aligning different policy sectors and actors is among the main challenges impeding more effective and efficient implementation of skills policies. Many of today’s skills challenges are rooted in poor governance arrangements across policy areas and levels of government as well as with stakeholders, inadequate information on skills and learning outcomes, and inefficient financing mechanisms. Government structures and bodies are usually designed to advance specific sectoral policies and do not co-ordinate actions across sectors.

This chapter provides a governance framework that could potentially serve as a reference point for ongoing debates about governance reforms in skills policies. It advocates a whole-of-government approach to skills policies and elaborates on four relevant policy dimensions.

A whole-of-government approach to skills policies

A whole-of-government approach aims to ensure that policies are coherent, mutually reinforcing (i.e. complementary to each other) and sufficiently flexible to be able to deal with new challenges. In doing so, it aims to strike a good balance between centralised steering and priority setting on the one hand and decentralised and flexible delivery of policies on the other. Good skills governance implicates not only the public sector but also the private sector. Therefore, the whole-of-government approach involves the appropriate stakeholders in decision making in order to ensure that policy decisions are perceived as legitimate by those concerned as well as to make use of the knowledge resources held by stakeholders distributed across different levels of government and policy sectors. Involving stakeholders is therefore likely to improve the effectiveness of implementation processes. Fulfilling the potential of the whole-of-government approach requires aligning a range of political, social, economic and administrative systems. The exact balance between centralised steering and particular regional and sectoral needs as well as the degree to which private actors are incorporated into decision-making processes is likely to vary across countries depending on political and institutional legacies. This chapter does not advocate a “one-size-fits-all” model in terms of governance regimes, but identifies critical dimensions of governance arrangements (see below) that can serve as a reference point to improve the effectiveness and efficiency of policy making relative to country-specific policy goals and targets (Box 6.2).

Box 6.2. What is a whole-of-government approach?

A whole-of-government approach aims to improve the horizontal and vertical co-ordination of government activity in order to improve policy coherence and the use of resources. A whole-of-government approach thus promotes and capitalises on synergies and innovation that arise from involving and engaging with a multiplicity of stakeholders, while also providing seamless service delivery to individuals and businesses. It requires government bodies, regardless of type or level, to work across portfolio boundaries in order to achieve shared goals and to provide integrated government responses to policy issues. Such an approach applies to both formal and informal working methods, and to the development, implementation, and management of policies, programmes and service delivery. A capacity to genuinely collaborate fundamentally enables a public administration to be more responsive to the needs of government and individuals.

The term “whole-of-government” is broad and applies to both central and sub-national (regional and local) levels and policy areas. More importantly, it also includes the relationship between government and external actors.

Source: Adapted from OECD (2011[4]), Estonia: Towards a Single Government Approach, OECD Public Governance Reviews, https://dx.doi.org/10.1787/9789264104860-en.

More concretely, the whole-of-government approach aims to pursue long-term skills policy agendas, establishing strong institutions that monitor and evaluate the implementation and outcomes of policy reforms, engaging stakeholders directly to share the ownership (or burden) of the policy reform within a framework in which the public sector remains accountable for the quality and accessibility of services, and, finally, at addressing asymmetries between the winners and losers of reform processes. The latter point – the redistributive implications of policy reform – can often become a major obstacle in the design and implementation of policy reforms. In order to prevent gridlock in the later stages of the implementation process, it is, therefore, crucial to involve stakeholders in earlier stages of the decision-making process. At the same time, public authorities need to remain in the “driving seat” so as to avoid the “capture” of public institutions by private interests.

Following the broad definition of skills policies in the OECD Skills Strategy, the policy areas to be studied cover not only education and training policy in the narrow sense but also labour market, industrial and tax policies to the extent that they have implications for the development and effective use of skills in the labour market and alignment with industry skill needs. After applying the OECD Skills Strategy approach to 11 countries, 4 main challenges have been identified as critical to adopting a holistic approach to skills policies. These challenges constitute the four policy dimensions introduced in this chapter and refer to the capacity to promote co-ordination, co-operation and collaboration across the whole of government, to effectively engage stakeholders throughout the policy cycle, to build integrated information systems to support the development and implementation of skills policies, and to design effective and efficient financing arrangements to ensure that sufficient and sustainable resources are available to skills systems. More specifically:

  • Promoting co-ordination, co-operation and collaboration across the whole of government allows governments to co-ordinate the design and implementation of skills policies across responsible ministries (horizontal co-ordination) and levels of government (vertical co-ordination) to ensure coherence. Skills policies should also be guided by a shared vision and be designed and implemented to be complementary to each other. Policies are complementary when they are mutually reinforcing, which is to say they generate better outcomes when combined and co-ordinated than when they are implemented separately or in piece-meal fashion (Trapasso and Staats, 2018[5]). Furthermore, co-ordination across different ministries and levels of government does not imply a centralised “one-size-fits-all” steering model, as co-ordination within a whole-of-government approach should be flexible enough to take into account particular regional or sectoral needs. The important point, however, is that individual ministries or agencies should not pursue their own policies without co-ordinating with other relevant ministries or agencies as appropriate.

  • Engaging stakeholders throughout the policy cycle helps to ensure that relevant actors in the private sector, such as trade unions, businesses, employers’ associations, etc., are meaningfully involved in the design, implementation, and evaluation of skills policies. Engaging stakeholders improves policy relevance, flexibility and sustainability as well as assists in the effective implementation of policies. There are many different ways in which the public and the private sectors can co-operate and interact concerning skills policies, and countries differ with regard to the forms and extent to which they engage with private actors. In any case, it is important to prevent private actors from abusing their involvement in public decision making for particularistic needs. Hence, governance regimes and forms of interaction between the public and private sector need to be designed in a manner that ensures that actors engage in collective problem solving rather than particularistic bargaining and lobbying.

  • Building integrated information systems that provide information and knowledge helps policy makers and stakeholders make decisions that lead to better skills outcomes. Information and data about skills needs, learning opportunities and good policy practices should facilitate evidence-based policy making. Yet, to achieve this result, in many countries the quality of information needs improving. Administrative data should be integrated into common – longitudinal – systems that are able to translate this into accessible and tailored information that can help partners to make informed skills choices. Information systems should become user-centred and should take advantage of recent technological advances. While building infrastructures for the collection and management of quantitative data, governance and accountability systems also need to tap into sources of qualitative data such as skill needs assessments from employers’ associations, school inspections or other qualitative assessments.

  • Aligning and co-ordinating financing arrangements can facilitate the allocation of resources towards investments with the highest social returns. Politically speaking, implementing funding formulas that direct resources to the localities with the greatest need may be difficult because wealthier regions might oppose this redistribution of resources. A whole-of-government approach can help to overcome these kinds of regional asymmetries better than an uncoordinated approach. Furthermore, it is important to adopt a long-term, strategic approach to financing skills, and to facilitate the resource allocation process, it is imperative to provide a clear framework that specifies which actors contribute with funding and to what extent. Again, skills policies are different from other policies because many of the benefits of present-day investments in education materialise in the long term only, i.e. usually after the end of the political mandate of today’s decision makers. Hence, in order to pursue a long-term strategy in skills formation, it is imperative to establish institutional frameworks that protect education and other skills investments against competing, short-term financial needs of other sectors.

This chapter elaborates on each of these four challenges and provides selected case studies to illustrate different arrangements countries may wish to consider to strengthen the governance of their skills systems. Governance arrangements and practices are partly the consequence of the unique historical, cultural and socio-economic circumstance of countries and societies. Therefore, there is no one-size-fits-all solution to the governance of skills systems. However, despite their institutional differences, countries can learn from each other and adopt modified versions of the successful practices implemented elsewhere. To this end, case studies of country-specific experiences can be an important source of inspiration and insights.

The challenge: Promoting co-ordination, co-operation and collaboration across the whole of government

Skills-related policies are rarely the exclusive domain of one ministry or level of government. Most commonly, skills issues lie in the sphere of action of a number of bodies within the public administration, and their policies and actions are inherently intertwined, requiring co-ordination along both the vertical and horizontal dimensions. The vertical dimension refers to the linkages between higher and lower levels of government, and the horizontal dimension refers to co-operation arrangements between sectors (e.g. ministries), regions or between municipalities.

For example, in Sweden, vocational education and training has traditionally been organized by each municipality. To stimulate the development towards a broad supply of education and training corresponding to the needs in the different regions, the Government altered the conditions and introduced a new state grant in 2017. The current state grant requires cooperation between at least three municipalities on the planning and supply of education and training at the regional level. Consultation is also required with the Public Employment Services and with the various actors responsible for regional development.

Even though policy co-ordination along the horizontal and vertical dimensions clearly creates added value, many countries struggle to achieve it. The main policy challenges that countries encounter in this regard are:

  • Putting skills policies at the top of the government agenda. The co-ordination of different policy areas is facilitated if there is a shared conviction that skills are a national priority. Even though investing in education is widely popular with voters and policy makers, educational investments that generate benefits primarily in the long term compete with public spending on other areas with more immediate short-term payoffs. Furthermore, education reforms often involve significant political costs, given the ideological and polarised nature of the political debates, the fact that most of the population has strongly held beliefs about which education model is best for their children, and the underlying conflicts of interest between some of the actors. The political challenge then is to keep education at the top of the political agenda despite these competing interests and to agree that improving the level of skills should be the main target of the policies.

  • Identifying and engaging with relevant stakeholders. Effective and politically legitimate governance of skills systems requires policy makers to engage with relevant stakeholders in the field. The challenge here is to identify the relevant actors while balancing out potential power asymmetries between highly organised special interest and the often weakly organised and more diffuse collective interests. Engagement with stakeholders needs to go beyond the classic tripartite bodies representing business, labour and state interests found in many countries. In the context of lifelong learning, the success of skills policies is increasingly influenced by and dependent upon a larger number of stakeholders, representing emerging sectors of the economy such as new tech firms and training providers as well as new types of employees (the self-employed and atypical workers), many of whom are not necessarily well represented by traditional institutions or entities. In developing an encompassing skills strategy, it is important to appeal to both the traditional and well-established associations in the economy as well as those representing newly emerging interests.

  • Encouraging co-ordination between central and sub-national authorities. The development of a whole-of-government approach to skills policies is in many countries hampered by the complexities of multi-level governance arrangements, which distribute policy-making authority unevenly across different policy sectors. For instance, in many countries, the authority for education policy is delegated to sub-national governments or divided between the central and regional governments. In contrast, labour market and lifelong learning policies are often the responsibility of federal/central agencies in order to ensure joint standards on national labour markets; but in other countries, the local governments are important in administering and financing these policies. In any case, oftentimes the policy-making authority for different elements of a comprehensive set of skills policies are distributed unevenly across different levels of government, turning co-ordination across these levels of government into a significant challenge for policy makers. Irrespective of which model is present in different countries and how responsibilities are defined between levels of government, the most effective mechanism to avoid growing disparities is for central government to remain responsible for defining common standards of the appropriate levels of skills for each level of educational attainment, and training models for all regions, and to evaluate the efficiency of the different actors and policies.

Good practices

With the view of enhancing their whole-of-government approach, some countries have targeted the improvement of both horizontal and vertical co-ordination efforts (OECD, 2010[6]). For instance, horizontal co-ordination has been facilitated by creating specific structures, such as inter-ministerial committees and commissions; or has involved creating fully-fledged ministries with broad responsibilities and powers that encompass traditionally separate sectors. Box 6.3 presents examples of dedicated bodies for the oversight of skills policies in Ireland, Norway and Germany.

Box 6.3. Country practices: Dedicated bodies for the oversight of skills policies

Ireland

Ireland adopted National Skills Strategy 2025 in January 2016. A key part of the Strategy is the creation of a new skills architecture. Within this framework, the country has created a National Skills Council (NSC) to oversee research, provide advice on the prioritisation of identified skills needs, and secure delivery of the identified needs.

The council includes a mix of private and public representatives. Four members are appointed from an enterprise/employer background. The chief executives of the main agencies active in higher education, VET and lifelong learning (Higher Education Authority [HEA], Further Education and Skills Service [SOLAS], Quality and Qualifications Ireland [QQI], as well as Science Foundation Ireland [SFI], and the enterprise agencies IDA Ireland and Enterprise Ireland) , as well as representatives of the Department of Education and Skills, the Department of Business, Enterprise and Innovation, and the Department of Employment Affairs and Social Protection and the Department of Public Expenditure and Reform, are also members of the National Skills Council. The chairs of the Council of Presidents of the Universities and Institute of Technologies are also invited to be members of the NSC.

Information is provided to the Council from three key sources: the Regional Skills Fora, the Skills and Labour Market Research Unit, and the Expert Group on Future Skills Needs.

The Regional Skills Fora help foster stronger links between employers and the education and training sector and facilitate orienting education and training providers towards labour market needs, at a regional level.

The Skills and Labour Market Research Unit in SOLAS provides a range of statistical reports including the National Skills Bulletin.

The Expert Group on Future Skills Needs carries out research, analysis and horizon scanning in relation to emerging skills requirements at thematic and sectoral levels.

Norway

Norway has adopted a National Skills Strategy for 2017–21. To oversee the implementation of the strategy, Norway has established a Skills Policy Council. The council is composed of members from the government, the eight main social partners, a representative from the regional authorities and a representative from the voluntary sector and adult-learning associations. The Minister of Education and Integration heads the council.

The council is tasked with the oversight of the implementation of the strategy. The council also discuss deliveries from the Future Skills Needs Committee (see Box 4.3 in Chapter 4 for more details) and provides input on new policy initiatives. In 2019, the Skills Policy Council will revise the National Skills Strategy.

Norway has also established a directorate for lifelong learning, Skills Norway, which is housed in the Norwegian Ministry of Education and Research. Its role is to co-ordinate the priority areas highlighted in the National Skills Strategy. Skills Norway is also responsible for international co-operation and acts as national co-ordinator for the European Agenda for Adult Learning, representing the sector and implementing the agenda.

Germany

Germany has a long tradition of corporatist decision making in the field of vocational education and training (see below). In 2004, a new type of alliance between government and business actors (employers’ associations) was established – the “Pact for Vocational Education and Training”. This pact was established as an alternative and in response to previous attempts by the government of the time to establish a training levy, which was largely opposed by employers. Instead, employers agreed with the government to expand learning opportunities for youth in firm-based traineeships, which should eventually segue into regular apprenticeship training. This initial version of the pact was heavily criticised by unions because of its largely voluntary character. Consequently, unions refrained from participating in this type of skills council.

In 2014, however, the pact was re-launched as the national “Alliance for Initial and Further Education”. A crucial difference between the new alliance and the old pact is that now, unions are involved as co-operation partners as well. The Alliance also involves a number of other stakeholders and actors such as the Federal Employment Agency, the KMK (a central institution that manages the horizontal co-ordination of education policy across Länder), the federal ministries for labour affairs, business and education as well as representatives of the Länder ministries for labour and social affairs. Thus, the Alliance indeed pursues a whole-of-government approach by aiming at consensual co-ordination of different stakeholders in the system. Furthermore, different from the largely voluntary previous pacts, it passed more binding decisions and recommendations, in particular, a commitment on the part of employers to increase the number of apprenticeship places by 30 000 on a yearly basis.

Source: Ireland Ministry for Education and Skills (2016[7]), Ireland's National Skills Strategy 2025, https://www.education.ie/en/Publications/Policy-Reports/pub_national_skills_strategy_2025.pdf, OECD (2018[8]), Skills Strategy Implementation Guidance for Portugal: Strengthening the Adult-Learning System, http://dx.doi.org/10.1787/9789264298705-en; Dalbak, K. (2018[9]) Mandate of Official Norwegian Committee on Skill Needs, https://kompetansebehovsutvalget.no/mandate-of-official-norwegian-committee-on-skill-needs/; Allianz für Aus- und Weiterbildung, (2014[10]), Alliance for Initial and Further Training 2015–2018 ,www.aus-und-weiterbildungsallianz.de/AAW/Navigation/EN/Home/home.html.

Some countries have created bodies to address specific policy challenges. For example, in 2016, Latvia’s Cabinet of Ministers approved the Plan on Adult Education Governance Model 2016-20 with the overall objective of increasing participation in adult education and training to 15% by 2020, and created the Adult Education Governance Council (AEGC) to implement the plan. The objective of the plan was to develop a unified and sustainable adult-education system, to ensure the sharing of specific policies and responsibilities at the sectoral level, and to ensure access to high-quality adult education for the population regardless of their background (Box 6.4).

Box 6.4. Country practices: A dedicated body to boost participation in adult learning

In Latvia, the Adult Education Governance Council (AEGC) was created in early 2017 to implement and monitor the Plan on Adult Education Governance Model 2016-20. It was created to avoid the historical fragmentation of responsibility in adult education, and to establish a clear division of functions, information exchange and regular communications among the stakeholders involved. The AEGC is an inter-institutional body with representatives from sectoral ministries, municipalities, private companies, educational institutions, adult education centres and non-governmental organisations (NGOs), under the supervision of the Ministry of Education and Science. The State Education Development Agency provides the secretariat and the analytical unit functions of the AEGC.

The main functions of the AEGC are to: 1) review and approve priorities for adult education, taking into account labour market information and sectoral expert councils, labour force forecasts, and demand and supply disparities in the labour market; 2) determine the priority adult education target groups and sectors; 3) confirm the content of the training to be implemented, including the complementarity of the training between the different target groups; 4) decide on the principles for allocating funding; and 5) conduct a regular evaluation of the results of the implementation of adult education.

Prior to the new governance model, adult education in Latvia was provided in a fragmented way by several ministries, within the framework of their competences. The new model is oriented towards effective resource management (including financial resources), based on a transparent and coherent operation system taking into account regional needs and medium and long-term labour market forecasts, so as to offer adults high-quality education through the development of a coherent regulatory framework.

Source: Adapted from (OECD, 2018[11])Skills Strategy Implementation Guidance for Slovenia: Improving the Governance of Adult Learning, https://dx.doi.org/10.1787/9789264308459-en.

Governments can also create central oversight bodies to co-ordinate and oversee the training that horizontal and vertical co-operation requires. These bodies can include members of relevant ministries and public bodies and advise as to the content and provision of training, as seen in the example of the Directorate-General for the Qualifications of Public Servants in Portugal (Box 6.5).

Box 6.5. Country practices: A dedicated body to improve civil servants’ skills

Portugal has put in place a multi-dimensional governance framework of policies and institutions to improve the skills of civil servants. The Directorate-General for the Qualifications of Public Servants (Direção-Geral da Qualificação dos Trabalhadores em Funções Públicas, INA) is responsible for establishing a new model to co-ordinate and improve professional training in the public administration.

The legislation involves important governance aspects, as it creates two new bodies with consultative and co-ordinating roles to strengthen professional training in the public service. These are the General Council for Professional Training (Conselho Geral de Formação Profissional, CGFP) and the Commission for Co-ordinating Vocational Education and Training (Comissão de Coordenação da Formação Profissional, CCFP).

The CGFP is presided over by the minister in charge of public administration and includes the heads of relevant public services and agencies. Its role is to advise the government in the definition and ongoing improvement of professional training in the civil service. The CCFP has a co-ordinating role and involves the heads of services responsible for training in the public service at the national, regional and local levels.

Source: OECD (2018[8]), Skills Strategy Implementation Guidance for Portugal: Strengthening the Adult-Learning System, http://dx.doi.org/10.1787/9789264298705-en.

There are also possibilities beyond the creation of specific bodies. For example, requiring sign-off on policy proposals relating to skills by all skills relevant ministries, rewarding cross-government co-operation in performance agreements, engaging with strategic planning and programming processes. Finally, stronger governmental interaction can also be promoted by integrating budgets and adopting mechanisms to improve transparency and facilitate accountability and performance monitoring.

Regarding vertical co-ordination between levels of government, countries have found different ways to organise their skills systems, ranging from fully centralised systems where the central government funds, and is the sole provider of, education services to more decentralised systems characterised by higher degrees of responsibility attributed to both local authorities and private stakeholders. As countries move towards higher levels of decentralisation, the risk that each level of government and sector works in isolation increases. If the result is a silo approach to policy making, there is an increased risk that policies will not be well aligned, producing administrative frictions, inefficiencies in the implementation process and greater risk of inequalities. Hence, some federalist countries such as Switzerland and Sweden have devised means of horizontal co-ordination between sub-national governments in order to ensure a co-ordinated approach to policy making, while still allowing regional authorities to set their own priorities (Box 6.6).

Box 6.6. Country practices: Co-ordination mechanisms between central and local governments

The HarmoS-Konkordat in Switzerland

Switzerland has one of the most decentralised education systems among OECD Member countries. Local as well as regional (cantonal) governments are for the most part in charge of providing and financing education with the federal government only retaining a limited role for quality assurance. The high degree of decentralisation in the governance of education has led to the development of quite significant differences regarding the institutional design of education systems across the 26 Swiss cantons. For example, in the German-speaking part of Switzerland, the dual apprenticeship training model is the predominant type of VET, whereas school-based VET is more common in the French- and Italian-speaking parts.

Responding to perceived problems regarding the comparability of educational degrees as well as concerns related to mobility and permeability between and across the different cantonal education systems, Switzerland passed a constitutional reform in 2006. This reform required the cantons to co-ordinate with each other to achieve a harmonisation of central aspects of cantonal school systems, in particular with regard to regulations concerning compulsory education, the duration and goals of individual educational levels and the recognition of educational degrees. For that purpose, the EKD (the Swiss Conference of Cantonal Education Directors) passed an inter-cantonal agreement in 2007 – the HarmoS-Konkordat, which came into force on 1 August 2009.

Following this date, individual cantons were obliged to decide whether they would subscribe to the regulations of the agreement, i.e. become a full-fledged member. In the case the number of member cantons did not pass the critical threshold of 18 cantons (out of 26) until 2015, the federal government was empowered to act unilaterally to achieve co-ordination of education. At the 2015 deadline, 15 cantons had joined the Konkordat, whereas 11 stayed out (most of them in response to popular referenda rejecting membership). Thus, the HarmoS-Konkordat did not become formally obligatory for the whole of Switzerland, but given that the majority of cantons adhere to the agreement, it has a de facto harmonising effect on the whole of Switzerland.

The example of the HarmoS-Konkordat shows the challenges, but also the potential of co-ordinating education policy horizontally and vertically, in particular in systems with a long history and tradition of decentralised educational governance.

Decentralised governance and central steering in Sweden: The reform of the Swedish Schools Inspectorate

At the beginning of the 1990s, Sweden started a comprehensive process of decentralisation and privatisation of its school system (Lundahl, 2002[12]). A first step in this process was to delegate governance and financing competencies from the national level to the level of municipal local governments. Secondly, the government allowed independent (private) schools to be established. Since these schools are still financed with public funding, this effectively established a voucher system, increasing the range of options to choose from for students and parents (Baggesen Klitgaard, 2008[13]).

In such a decentralised system, a central challenge is to achieve some degree of co-ordination and coherence through central steering while maintaining the autonomy of local governments and independent schools. For that purpose, Sweden established a national schools inspectorate within the National Agency for Education in 2003. The Swedish Schools Inspectorate (Skolinspektionen) was formed as a separate agency in 2008. The agency is responsible for supervision and quality assurance with regards to pre-schools, compulsory schools, upper secondary schools and municipal adult education. The primary aim of the Swedish Schools Inspectorate is to contribute to school improvement and development. The overall goal is a school system where all children have equal rights to a good education and knowledge in a secure environment. The latter is important because the Swedish Schools Inspectorate does not only scrutinise schools, but also provides advice and consulting in order to support individual schools.

Source: Schweizerische Konferenz der kantonalen Erziehungsdirektoren (2015[14]), Bilanz 2015. Harmonisierung der verfassungsmässigen Eckwerte gemäss Artikel 62 Absatz 4 BV für den Bereich der obligatorischen Schule: Verabschiedung und Veröffentlichung, https://edudoc.ch/record/117954/files/pb_bilanz2015_d.pdf; Baggesen Klitgaard, M. (2008[13]), “School Vouchers and the New Politics of the Welfare State”, https://onlinelibrary.wiley.com/doi/pdf/10.1111/j.1468-0491.2008.00410.x; Lundahl, L. (2002[12]), “From Centralisation to Decentralisation: Governance of Education in Sweden”, https://10.2304/eerj.2002.1.4.2.

In short, promoting co-ordination, co-operation and collaboration across the whole of government improves governments’ ability to design and implement skills policies that are coherent and complementary1 while minimising the transaction costs that result from co-ordination. Improving the alignment of policies across ministries and levels of government promises to deliver a more effective and cost-efficient way to deliver policies and services relative to the specific policy goals and targets that countries set for the long-term development of their skills strategies.

Policy recommendations for promoting co-ordination, co-operation and collaboration across the whole of government

In light of the findings and practices above, the following policy recommendations can help countries promote co-ordination, co-operation and collaboration across the whole of government (Box 6.7).

Box 6.7 Policy recommendations: Promoting co-ordination, co-operation and collaboration across the whole of government
  • Map the skills system. Skills policy actions need to involve a large number of ministries, government entities, and levels of government as well as private stakeholders. Co-ordination should involve sub-central authorities that are responsible for designing and delivering skills policies. A good first step is to map all the policies and institutional actors that affect skills development and skills use. It is very important that the mapping is complete and that it does not overlook important actors, including those who may not be very visible or are marginalised.

  • Build the right institutions. Not only is there a need to co-ordinate many different entities and actors, but this co-ordination also needs to be meaningful and supported by the right institutions. Countries could pursue different options here such as establishing: 1) an inter-ministerial committee (reflecting a more top-down, bureaucratic approach); 2) a council involving stakeholders, which may be more inclusive, but could run the risk of taking more time to make decisions or fall prey to particularistic interests; or 3) a body of voluntary horizontal co-ordination actors among regional bodies with guidance from the central level. Independent of its concrete shape, a government could put in place one co-ordinating institution that connects all relevant government actors and stakeholders to ensure better co-ordination between actors along the horizontal as well as vertical dimensions. For example, a country can create an agency to take charge of skills policies or a national council to co-ordinate different policy areas. Such entities could assess the impact of all policy reforms on skills outcomes (skills proofing of policies). In doing this, it would be important to adopt a “life-course perspective” on skills development, i.e. to pursue policies that ensure smooth transitions for individuals between the different stages of education and employment. Above and beyond formal co-ordination between government agencies and stakeholders, co-ordination can also happen informally, for instance, when ministerial cabinets engage in a continuous policy dialogue across different policy portfolios.

  • Improve monitoring and evaluation processes. It is paramount that policy co-ordination yields tangible benefits to justify the efforts made to build a coherent and complementary skills policy framework. To achieve this result, governments can monitor and evaluate their programmes to assess the functioning of the skills system and its capacity to generate high skills equilibria. A good skills system must produce evidence about its impact, and transform the evidence into knowledge that can be disseminated and used to ensure that skills policies are both effective and efficient relative to country-specific policy goals and targets.

The challenge: Engaging stakeholders throughout the policy cycle

The need to engage stakeholders emerges from the complexity and the multiplicity of policy actions that need to be undertaken to improve a country’s human capital development and use. First, policy makers dealing with complex policy choices need and benefit from the expertise and knowledge of stakeholders, allowing for more effective forms of policy making. Second, engaging stakeholders also enhances the political legitimacy of policy-making decisions, which is important as complex policy decisions often involve a number of trade-offs and political costs.

Achieving a better skills system that generates good policies and outcomes is a societal goal. It cuts across many aspects of life in society. Its achievement thus requires more than a focus on results and better information or new technologies. It requires a wide range of actors and stakeholders, such as governments, businesses, trade unions and other non-governmental organisations, professional associations, post-secondary and higher education institutions, as well as the general public, to come together to pursue a common strategy towards this goal. No single partner is in a position to attain this complex goal unilaterally. As a result, government actors and societal stakeholders need to work together in order to develop and implement skills policies that spur the development of relevant skills and promote the effective use of those skills

In this regard, it is important to ensure that the involvement of stakeholders in decision making does not lead to the “capture” of public institutions by private interests. Well-designed governance frameworks are needed to incentivise private actors to take into account collective concerns in their decision making. However, to improve the effectiveness and efficiency of skills policies, as well as to ensure more equitable skills outcomes, stakeholders must also be able to influence skills policy. These stakeholders include students, education institutions, trade unions, business associations, the unemployed, those employed in non-standard work, small- and medium-sized enterprises (SMEs), etc. as well as voters and the general public who eventually are asked to foot the bill for higher levels of investment in skills formation via their taxes.

Rather than being the passive object of lobbying efforts, governments willing to strengthen the governance of skills systems need to engage with stakeholders proactively. But engaging stakeholders in skills systems can prove difficult for a variety of reasons. The key challenges to stakeholder engagement are:

  • Building stakeholders’ trust. A first, structural obstacle to public dialogue is lack of trust. This issue is particularly important in countries without a strong legacy of social partnership and stakeholder involvement in policy making. Powerful “path dependencies” affect and constrain the way governmental and societal actors perceive and regard each other. Stakeholders may have had negative experiences interacting with the public sector, potentially perceiving the public sector as largely impervious to their concerns and proposals. Vice versa, public authorities may be wary of stakeholder involvement fearing that private actors abuse and misuse public resources to further particularistic goals. Overcoming this mutual lack of trust requires a genuine effort on the part of both sides. Furthermore, government officials and authorities may continue to be ambivalent about their new role in a system that opens policy making to stakeholders. On the one hand, governments need to actively reach out to societal stakeholders to enhance the legitimacy and responsiveness of skills policies. On the other hand, they may fear that the engagement process could open the floodgates to unsustainable or unrealistic demands from stakeholders.

  • Engaging stakeholders takes time. Another issue negatively affecting stakeholder engagement is the amount of time needed to build effective dialogue. The numerous actors within the skills system need to establish common institutions and processes that structure the process of stakeholder engagement and facilitate the creation of a shared narrative about skills needs and policy responses. This requires collaborating with stakeholders on a regular basis and providing them with actual opportunities to contribute to policy making. As there is positive feedback between “voice” and “loyalty” (Hirschman, 1970[15]), being durably involved in a public policy dialogue may positively affect the systemic endowment of social capital and trust in government. Allowing stakeholders to actively contribute to and shape policy making increases the “stake” they hold in the joint effort of devising a co-ordinated skills policy. On the other hand, engaging stakeholders increases the effectiveness of public policies in particular during the implementation phase, contributing to a win-win scenario that raises the overall co-ordination capacity of the system.

  • Resourcing adequately. Stakeholder engagement needs to be properly resourced. Building public dialogue requires human resources and funds, especially if the public sector needs to play a pro-active role in engaging those groups that are not currently represented in traditional policy dialogues. Government policies providing resources to stakeholder engagement and mobilisation should focus on societal interests that are facing inherent difficulties getting organised (diffuse societal interests shared by many) rather than strengthening already well-organised special interests. Resources need to be allocated on a permanent basis to secure the sustainability of policy dialogue and should be made contingent on stakeholders complying with minimum standards regarding their internal organisation (e.g. decision making should be based on democratic procedures). Conversely, discontinuity of resources, and then of policy dialogue, will negatively affect the level of trust in the system. This, in turn, will make policy dialogue more difficult and even more resource-intensive in the future.

  • Resolving conflicts of interest. Finally, some skills reforms can improve the welfare of some groups of stakeholders, while negatively affecting others. Even though the process of stakeholder engagement could and should strive to find consensual solutions to policy problems, there may be instances where policy solutions involve difficult trade-offs. Government actors cannot stay completely out of these political conflicts but should remain a neutral arbiter to the greatest extent possible in order to ensure that stakeholders, in general, remain committed to the collective effort. Increasing the input from and involvement of empirical research may help to reduce potential conflicts of interest, as evidence-based policy making can contribute to developing a foundation of objectivity shared and recognised by all involved.

Good practices

Innovative ways of engaging stakeholders throughout the policy cycle are already being used in different countries. Instead of solely focusing on holding policy consultations, for instance, some economies are already targeting the development of more continuous and sustainable conversations with stakeholders about the strategic direction of skills policies. For instance, Austria, Germany (Box 6.8), the Netherlands (Box 6.9), or the Scandinavian countries, who have a long tradition of corporatism and social partnership, have developed a set of institutions and deliberative councils that regularly involve major stakeholders in decision-making processes. In contrast, other countries with a more liberal pluralist institutional framework of interest mediation such as Canada, the United Kingdom or the United States, have engaged with stakeholders in a more open and ad hoc manner (OECD, forthcoming[1]).

Both approaches have value, but it is increasingly clear that the current and future challenges in co-ordinating skills policies require a new approach to the involvement of stakeholders and therefore also a very different role for government actors. Actively seeking advice from stakeholders and encouraging collaboration between state and societal actors require very different approaches to interest mediation than the traditional public consultation model. Instead of being the passive object of lobbying efforts, government officials must be prepared to convene, facilitate, enable and partner with various groups and interests within a given country to find consensus regarding societal goals and the accompanying public policies and programmes (Lenihan, 2012[16]). At the same time as they are engaging with private actors, government actors need to make sure the collective concerns remain at the top of the government’s agenda. This also requires that governments retain an independent capacity to intervene in and direct policy-making processes.

In short, the public sector should facilitate a process of public debate that is centred on stakeholders. In fact, the difference between stakeholder consultation and stakeholder engagement, or dialogue, is simple, but powerful. Engagement gives all the participants a sense of control over the process and its results. In exchange, it asks everyone to take ownership of the issue, along with some responsibility for its solution. This can have a dramatic effect on the tone and dynamic of the whole process. If the stakeholders are an essential part of designing a solution, they will assume some ownership of, and responsibility for, that solution.

Box 6.8. Country practices: Involving major stakeholders in decision-making processes

Both employers, as well as unions, have historically been highly involved in the governance of vocational education and training in Germany. The institutional foundations for the modern-day system of dual apprenticeship training were laid down in the 1969 Law on Vocational Education and Training (Berufsbildungsgesetz, BBiG). Over the course of the 1970s, the central institutions in this system – in particular the Federal Institute for Vocational Education and Training (Bundesinstitut für Berufsbildung, BIBB) were established. The BIBB is the central gate-keeping institution in the system of VET governance. It is in charge of collecting statistical information about the VET system as well as conducting research on future skills needs. Furthermore, it manages and organises the process of reforming and updating training regulations.

Training regulations are formally passed as ministerial decrees but are based on a process of collective decision making, involving actors from different federal ministries, Länder governments as well as employers’ and professional associations and unions. Decision-making processes aim at achieving consensual solutions between the different stakeholders involved. When the institutional framework was relatively young, this consensus-oriented approach led to a lengthy decision-making process. In the case of metal and electrical occupations – which are central to Germany’s export-driven economy – this lasted more than 15 years. Consequently, starting in the 1990s, government actors put more pressure on stakeholders to speed up the decision-making processes. Nowadays, due to policy learning, the process of reforming previous training regulations or creating new occupational profiles in emerging sectors of the economy takes about one to two years. From 2006 until 2015, 130 training occupations were reformed or modernised through this process, while 19 new training occupations were created.

In Canada, Future Skills was launched in spring 2018 as part of the Government’s plan to ensure that Canada’s skills development policies and programs are prepared to meet Canadians’ changing needs. Future Skills will examine major trends that will have an impact on national and regional economies and workers, identify emerging skills that are in demand now and into the future, develop, test and evaluate new approaches to skills development and share results and best practices across public, private and not-for-profit sectors to support broader use of innovative approaches across Canada. Future Skills will include the Future Skills Council and the Future Skills Centre. The Future Skills Council, staffed by technical and subject matter experts from the public, private and not-for-profit sectors, will consult and gather perspectives on how technologies and other emerging trends are creating new opportunities for Canadians. It will then advise the Minister of Employment, Workforce Development and Labour on national and regional skills development and training priorities. The Future Skills Centre will be run at arm’s length from the Government of Canada by the Ryerson University, the Conference Board of Canada and Blueprint ADE. It will partner with and fund projects that are led by groups such as provincial and territorial governments, Indigenous governments and for-profit and not-for-profit organisations to help Canadians make informed training decisions by identifying emerging in-demand skills required now and in the years to come.

Source: Busemeyer, M. (2009[17]), Wandel trotz Reformstau: Die Politik der beruflichen Bildung seit 1970, http://www.mpi-fg-koeln.mpg.de/pu/mpifg_book/mpifg_bd_65.pdf\; Bundesministerium für Bildung und Forschung (2018[18]), Berufsbildungsbericht 2018, https://www.bmbf.de/pub/Berufsbildungsbericht_2018.pdf; Bundesinstitut für Berufsbildung (2017[19]), Ausbildungsordnungen und wie sie entstehen; Government of Canada (2019[20]) Future Skills, https://www.canada.ca/en/employment-social-development/programs/future-skills.html.

As there are many different stakeholders, there are also several different ways to engage with stakeholders. For one, the public sector can engage with stakeholders in informal and bilateral meetings. Informal meetings are particularly useful if a government wants to assess existing differences among stakeholders, before embracing a given reform. However, while engaging in informal deliberation with stakeholders, government actors need to pay attention to maintaining the overall transparency of the deliberation process in order to maintain its public legitimacy.

Furthermore, co-operation can be achieved in more formal ways, such as through the creation of specific institutions or councils that guarantee the continuity of the dialogue among the main stakeholders. While designing the institutions and deliberative forums, it is important to pay attention to the potential trade-off between the number of stakeholders involved and the effectiveness of decision making. If the number of stakeholders and bargaining partners is too large, the deliberative process runs the risk of becoming too cumbersome, which could effectively lead to a rather superficial and ineffective involvement of stakeholders. Government actors can prevent this situation by encouraging stakeholders to organise themselves before participating in the deliberation process, i.e. by appointing spokespersons for a particular sector or group of stakeholders. However, the concomitant danger in this situation is that the number of stakeholders drops too low, triggering concerns about the broadness of the group of stakeholders involved. There is no simple solution to these trade-offs as countries differ widely with regard to the number and kinds of societal stakeholders they have. Governments should be aware, however, of the challenges related to the organisation and involvement of societal actors in public policy making.

Lastly, the government can also be pro-active and participate in existing fora created and managed by stakeholder organisations/entities. Besides promoting skills policy dialogue, this methodology has the advantage of demonstrating to stakeholders that their perspectives matter to the government. It is not only a matter of governments engaging stakeholders but also about ensuring that governments themselves are willing to be engaged. In addition, this pro-active approach can be important when stakeholders are particularly weak and marginalised due to their lack of organisation, fiscal or administrative capacities (including lack of organised representation) that negatively affect their ability to engage with policies and dialogues.

In several OECD Member countries, there are mixed bodies in which public authorities and private sector representatives co-operate to improve skills policies, among others. It is the case of the Netherlands, for example, where the Social and Economic Council (SER) plays a key role in advising the national government in matters related to skills development and use (Box 6.9). The SER is independent of the government but partnered with the OECD and the Dutch government when an OECD National Skills Strategy Project was conducted in that country, between 2016 and 2017 (OECD, 2017[21]).

Box 6.9. Country practices: Advising the government in matters related to skills development

The Social and Economic Council of the Netherlands advises the Dutch government and parliament on key points of social and economic policy. It also undertakes activities arising from governance tasks and self-regulatory matters and functions as a platform for discussions of social and economic issues. The council consists of independent Crown-appointed members, employers, and employees.

Established in law by the Social and Economic Council Act (Wet op de Sociaal-Economische Raad), the SER is the main advisory body to the Dutch government and the parliament on national and international social and economic policy. The SER is financed by industry and is wholly independent of the government. It represents the interests of trade unions and industry, advising the government (upon request or at its own initiative) on all major social and economic issues.

The SER also has an administrative role. In addition, it helps the government enforce the Works Councils Act (Wet op de ondernemingsraden).

Source: SER (2019[22]), “What does the SER do ?” https://www.ser.nl/en/SER/About-the-SER/What-does-the-SER-do ; OECD (2017[21]), OECD Skills Strategy Diagnostic Report: The Netherlands 2017, http://www.oecd.org/publications/oecd-skills-strategy-diagnostic-report-the-netherlands-2017-9789264287655-en.htm

In recognition of the centrality of stakeholders in the policy cycle, the Australian government has developed a public sector toolkit of good practices for effectively engaging them in policy design and delivery. This toolkit identifies key elements for success and common challenges and is applicable across policy areas (Box 6.10).

Box 6.10. Country practices: A government toolkit to engage stakeholders in policy design and delivery

The government of Australia has produced a toolkit that helps the public sector engage stakeholders in different policy domains, including skills policies. The toolkit identifies the key elements of effective engagement:

  • Involve the right people. To identify the right stakeholders, it should be clear why there is a need to engage them and what the scope of the engagement will be. Who needs to know? Who has an interest? The answers will ultimately determine the composition of the target group of stakeholders. What are the risks of not engaging particular stakeholders?

  • Use a fit-for-purpose approach. There is no one-size-fits-all approach to engaging stakeholders — each interaction should be tailored. Stakeholders have different expertise, objectives and capacity to engage with government. Don’t assume that what worked for one situation will work for another. Often a mix of approaches will be needed and you may need the flexibility to adjust your approach quickly.

  • Manage expectations. Stakeholders should have a clear understanding of how their contributions will be used, and the degree of influence their input will have as approaches to policy design and implementation are formulated. When stakeholders’ expectations cannot be met, anger, frustration or cynicism may result, which will affect the current and future relationship with the government. The purpose of the engagement and the role of participants, including how their input will be used, need to be clear from the beginning.

  • Use the information. Engagement is not just about collecting information. It involves a process of responding to information to shape and improve the quality of the initiative. Information from stakeholders may also indicate whether the engagement approach itself needs to change. Greater organisational benefits will flow if you share lessons learned from engagement across the agency, particularly where your agency regularly engages with the same set of stakeholders on a variety of issues.

The toolkit also assesses common challenges to stakeholder engagement. These include: 1) the purpose of the engagement may not be clear; 2) stakeholders may have limited capacities and resources (time, people and money) to engage with the government; 3) government may have limited experience and skills to implement effective stakeholder engagement; 4) unfocussed dialogue may cause stakeholders to highlight a range of issues that are important to them but not related to the government initiative that is the object of the engagement; and finally, 5) failure to review and evaluate may negatively affect the capacity to assess the results of the approach. The engagement plan should include review points throughout the policy design and implementation, with the flexibility to adjust the approach if needed.

Source: Department of the Prime Minister and Cabinet (2013[23]), Cabinet Implementation Unit Toolkit, https://www.pmc.gov.au/sites/default/files/files/2014%2011%2014-%201%20Planning%20-%20Final.rtf.

A good example of how to involve stakeholders in policy cycles is provided by the “Next Generation Engagement” sector partnerships in the United States. This methodology gives centrality to the private sector and individuals. Stakeholders identify policy issues and define solutions that guide the policy actions of the public sector – which did not participate in the policy dialogue. Stakeholders are also involved in the implementation of policy action so that they also develop a strong sense of ownership towards their policy proposals (Box 6.11).

Box 6.11.Country practices: Involving stakeholders in policy cycles at the sub-national level

In the “Next Generation Engagement” sector partnerships in the United States, the stakeholders are fully empowered, and policy agendas are based on industry-determined priorities, not public programmes. Public partners from workforce development, economic development, education and others work together to convene and support Next Gen Sector Partnerships. Since Next Gen Sector Partnerships are organised around the topic that interests business leaders most (i.e. what it takes to ensure that their company thrives) they should be sustainable over time. Over 50 next generation partnerships exist across the United States, with concentrations of them in Colorado, California, Oregon, and Arizona; more are emerging in Montana, Texas, Hawaii and Louisiana; and interest is increasing in at least a half dozen other states.

Below are some examples of this kind of partnership:

  • The Gallatin Valley Manufacturing Partnership in Bozeman, Montana is designing a nine-day manufacturing curriculum module to be offered in local high schools throughout the region. The curriculum was developed by a team of manufacturers working with education partners and will be taught by guest instructors from regional manufacturing companies. It includes guest speakers, field trips to local manufacturing companies, and classes offered by Gallatin Community College.

  • The East Bay Advanced Manufacturing Partnership in California created a customised education pathway for their top, critical occupations, which quickly became the common framework for multiple high schools and junior colleges called upon the Workforce Board to align curriculum.

  • A new Northeast Louisiana Healthcare Partnership has engaged nearly 40 healthcare organisations (large hospitals and small rural clinics) in building a real career pathway system that improves advancement from a certified nursing assistant (CNA) to a licensed practical nurse (LPN), including new certificate add-ons along the way. This partnership is also developing process and legal agreements for an acute care network that allows large hospitals to use under-utilised bed space and skilled nursing staff in rural hospitals.

  • The Kingman and Mohave Manufacturers Association in Arizona created a freight-sharing programme that allowed for regional manufacturers to co-ordinate shipments, saving on transportation costs. Member manufacturers also helped create a shared training space in a member company’s facility, co-funded a mobile training unit for upskilling existing workers in rural manufacturing facilities, and significantly expanded existing manufacturing-related apprenticeships.

  • The Lane County Technology Collaborative, a sector partnership convened by the local workforce board in Eugene, Oregon, brings together over 30 technology companies to collectively tackle shared issue areas. In its first six months, the Collaborative successfully secured a direct flight from Eugene to Silicon Valley. Members cite this as a powerful early win that allowed them to get to the harder issues at stake: improving technology education in the K-12 system, and creating a new computer science curriculum in local colleges.

Source: Next Generation Sector Partnerships (2019[24]), “Next Generation Sector Partnerships - What Are Next Gen Sector Partnerships?” http://www.nextgensectorpartnerships.com/aboutnextgenerationpartnerships/.

Policy recommendations for engaging stakeholders throughout the policy cycle

In light of the findings and practices above, the following policy recommendations can help countries engage stakeholders throughout the policy cycle (Box 6.12).

Box 6.12. Policy recommendations: Engaging stakeholders throughout the policy cycle
  • Identify and engage all relevant stakeholders in the skills system. A first step to engaging stakeholders is to map all the players in the skills system and identify how and to what extent they interact with each other. Once this mapping exercise of stakeholders is completed, governments should engage all appropriate actors in working to achieve meaningful skills reforms. While doing so, they should keep in mind the trade-off between the extent of stakeholder engagement and the effectiveness of collective deliberation. In addition, public authorities should put in place a structure (body, entity, taskforce, etc.) able to engage with stakeholders in a pro-active fashion, including by participating in fora organised by stakeholders.

  • Provide stakeholders with the opportunity to play a role in policy design, policy implementation, monitoring and evaluation. Governments should take advantage of the knowledge accumulated by stakeholders, who can be empowered in addition to being consulted, to the best of their capacities, to actively participate in the design of skills policies. Importantly, for stakeholder engagement to become a common practice, there is a need for sustainable funding, specialised resources, venues, etc. Government policies aimed at improving organisational capacities should pay attention to and strive to balance out inherent power asymmetries in the system of interest mediation. Continuity and sustainability in stakeholder engagement are needed to generate mutual trust and to give credibility to the public authorities involved in the public dialogue.

  • Build trust. It is very important that engagement leads to something tangible in practice. Stakeholders need to see that at least some of their recommendations are actually implemented by public authorities and that monitoring and evaluation are used as a learning process rather than a way to sanction poor outcomes. By proving the centrality of stakeholders, public authorities may improve the level of trust in the skills system and attract even more actors to engage. Eventually, the changes implemented on the basis of the public dialogue should generate positive incentives for stakeholders to improve their skills performance. At the same time, stakeholders can contribute to building the trust of government actors by demonstrating their willingness to take into account collective concerns rather than simply pursuing their particularistic goals.

The challenge: Building integrated information systems

Strong information systems that collect and disseminate relevant information regarding skills development and use are critical to ensuring that governments and stakeholders are able to make informed choices leading to better skills outcomes.

But putting in place integrated information systems is complex; the main challenges associated with doing so are:

  • The multiplicity of data sources. Skills are used and developed at multiple stages of life. A comprehensive and effective information system should be able to collect data from early childhood education and care, primary, secondary and post-secondary education, social services and the workforce. It should also be able to collect and process information from both qualitative and quantitative sources. Ideally, information systems are capable of tracing individuals’ education and employment careers throughout different stages of the lifecycle. These longitudinal data systems require significant efforts in terms of data collection and linkage since data originates in different bodies. They may also trigger public concerns about data protection, which need to be taken seriously. Moreover, schools’ data systems are not always integrated across regions or cities, and their compatibility with wage records and other state-provided services is not guaranteed. Special attention needs be taken when collecting data on disadvantaged populations, who can be under-represented in standard surveys.

  • The multiplicity of end-users. Information systems should be designed to satisfy the information demand of a large and heterogeneous number of agents. The type of information and the level of aggregation vary depending on the user as well as the country context, as some countries without a strong tradition in the collection of education-related data often lack a commensurate “user culture”. Students and their families may need programme or school-level information. In contrast, most of the time policy makers and researchers need individual-level data that allows them, for example, to identify heterogeneity in the effects of a particular intervention or to target certain programmes or services to specific groups of individuals. The targeting of programmes and services in particular regions often triggers conflict about the distribution and redistribution of scarce resources (as discussed above). Hence, information systems and research evidence based on these data can contribute to pacifying distributional conflicts by showing the effectiveness of targeted measures. Furthermore, most users have limited capacities to deal with and process large amounts of complex data. Therefore, it is imperative to produce information that is tailored to multiple end-users’ needs and to disseminate it in a way that is understandable and easy to assimilate.

  • Management of complexities. Overseeing the functioning of integrated information systems is complex, and requires significant managerial efforts in a number of areas. The system needs to be maintained, and data-sharing agreements need to be signed and updated as necessary. Its correct functioning requires appropriate funding, and clear responsibility and accountability mechanisms are needed to build trust among stakeholders. The overseeing body needs to define a set of procedures and rules and have concrete plans to execute them. Furthermore, privacy issues need to be managed with extreme caution. Protecting confidential information should be a top priority, and sound security practices must be implemented to avoid data misuse and potential data breaches. Finally, procedures and policies need to be aware of the risk of negative side effects of setting up large-scale information systems, such as “teaching to the test” practices or the wholesale delegation of public responsibilities to private business actors whose primary interest is in making a profit.

Good practices

As skills systems evolve and become more complex, managing data and information becomes a key policy issue. Improving data-system capacity and disseminating relevant information on skills at all levels has the potential to contribute to a better design of skills policies and to reduce skills mismatches and shortages by better aligning education and training decisions with labour market demand, such that the end result is improved skills use, employability, productivity and competitiveness (ILO, 2017[25]). In this regard, it is important to design information systems that are sensitive to both quantitative (statistics) as well as qualitative information (e.g. input from stakeholders).

Effective information systems collect and manage the data and information that governments and stakeholders produce, analyse and disseminate to ensure that policy makers, firms, individuals and others have access to accurate, timely, detailed and tailored information. Relevant data and information include, among others, the results of skills assessment and anticipation exercises, information on learning outcomes (including tracer studies that assess student labour market outcomes at a specified time after graduation, normally between six months and five years), labour market intelligence, information on where to access learning opportunities, as well as information from evaluations of public policies.

Policy makers and a broad range of stakeholders, including students, families, employers, trade unions as well as education and training institutions have strong needs for quality and accessible information to make better and more informed decisions.

Better and more integrated information systems can help policy makers to evaluate current policies and to monitor whether current investments and programmes are serving individuals effectively and raising the level of skills of the population. For example, policy makers may be interested in analysing the results of skills assessment and anticipation exercises or tracer studies (ILO, 2017[25]; OECD, 2017[26]) and learn about skills gaps and trends to better anticipate future skills needs. An accurate assessment of under-supply or over-supply of skills in strategic sectors of the economy can help policy makers steer education and training policies to sectors with more skills imbalances and to better design financial incentives and mechanisms to incentivise skills investments in those areas (OECD, 2017[27]). Furthermore, quantitative and qualitative information about changing skill requirements can help improve and further develop the curricula of general education and more specific training programmes.

Students, parents and career counsellors also need reliable information for career choices purposes. For example, information about expected employment and earnings following graduation in specific institutions and degrees can help them set better expectations and make more informed career-related decisions (Leventoff, Wilson and Zinn, 2016[28])). Likewise, education and training institutions may need information on the main trends in skills needs to align programme offerings to labour market demand, as well as employment statistics to monitor the performance of their graduates. Finally, employers and firms may also benefit from information on the availability of skills in their productive areas and the main trends in skills supply and demand to adjust their production inputs and processes accordingly.

Recognising the need to build integrated information systems, the states of Illinois, Indiana and Maryland in the United States provide examples of information systems that have developed with the purpose of improving the linkages between education and workforce data (Box 6.13).

Box 6.13. Country practices: Developing information systems to improve the linkages between education and workforce data

In the United States in recent years, Illinois state agencies responsible for economic and workforce development and education have come together to ensure stronger linkages between education and workforce data. Indiana and Maryland each have legislation establishing the membership and duties of governance councils for management of information systems. These bills aim to ensure that longitudinal data systems help answer policy questions that are important to stakeholders by requiring participation from stakeholders across the education and workforce spectrum.

Illinois

As part of the effort to strengthen data used to promote training in high-demand sectors and occupations, the office of the governor and seven state agencies teamed up to create the Illinois Longitudinal Data System (ILDS).This federated system matches data from multiple agencies for specific tasks, while keeping data stored in individual agency databases and leaving agencies to administer separate intake systems. Agencies with responsibility for initial and higher education as well as for labour market outcomes share data through the ILDS. Linked datasets can assist government and qualified third parties with performance management and reporting, research and analysis, and consumer information initiatives. The ILDS uses an identity resolution system at Northern Illinois University to match data and return information to agencies. To ensure privacy and security, ILDS is aligning security protocols across agencies. ILDS also developed a standardised vetting process for external researchers to access data with agency approval.

Indiana

Indiana’s cross-agency council is legislatively mandated to oversee the state’s longitudinal data system, the Indiana Network of Knowledge (INK). Among its duties are implementing a detailed data security plan, ensuring compliance with privacy laws, establishing INK’s research agenda, creating policies to respond to requests from state and local agencies, the general assembly, and the public, and developing public access to aggregate INK data. The governance committee must include representatives from the Department of Education, the Department of Workforce Development, the Commission for Higher Education, private colleges and universities as well as the business community.

Maryland

Similarly, Maryland Senate Bill 275 established the Governing Board of the Maryland Longitudinal Data System (MLDS) Center. The board includes members representing K-12, higher education, and labour; five members appointed by the governor, one of whom must be a data systems expert; and three at-large positions filled by a workforce development professional, a teacher, and a parent. The board’s responsibilities include providing general oversight and direction to MLDS, establishing its research agenda, approving the annual budget, ensuring adherence to relevant privacy laws, creating an annual report to the governor and General Assembly, and setting policies for the approval of research requests from the legislature, state and local agencies, and the public. Since the bill’s passage, the Governing Board has emerged as a model for transparency. The Governing Board holds public quarterly meetings and makes meeting agendas and minutes available on MLDS’s website.

Source: Leventoff, J., B. Wilson and R. Zinn (2016[28]), Data Policy Toolkit. Implementing the State Blueprint, https://careertech.org/resource/data-policy-toolkit, Peña, C. (2017[29]), From Patchwork to Tapestry Collaborating to Maximize Data Utility, https://www.nationalskillscoalition.org/resources/publications/file/WDQC-Tapestry-Brief-final-web-compressed.pdf.

Further examples of comprehensive information systems in the governance and use of education-related data analyses are the Estonian Education Information System (EHIS) and the Danish DREAM system (Box 6.14). These systems effectively incorporate data from different programmes and bodies, use it to feed back into systems to improve quality and relevance for those learning and training, and provide monitoring and performance evaluation to ensure efficacy and preserve security while performing these longitudinal data analyses.

Box 6.14. Country practices: Comprehensive information systems in educational governance

The Estonian Education Information System

Estonia has attracted international attention recently because of its strong performance in the 2015 Programme for International Student Assessment (PISA). Estonia is also renowned for its pioneering role in the use of digital technology in public administration and government affairs. Bringing together these two strengths, Estonia has established the Estonian Education Information System (or EHIS), which is a comprehensive database on education-related data from students, teachers as well as educational institutions, study materials and curricula. While other countries also collect data on some of these aspects, the added value of EHIS is to bring together these different data sources into one comprehensive information system. Furthermore, the system can be used and accessed by different stakeholders – students, teachers and educational institutions. It also helps governmental authorities monitor the performance of the system as the system is integrated into the accountability and monitoring framework for education in Estonia.

The Danish DREAM system

In Denmark, the DREAM project group acts as an “independent semi-governmental institution” to produce a set of simulation and projection models for different spheres of the economy, from population demographics via education to the labour market. Making use of the extremely rich data sources available in Denmark, in particular, the Danish registry data on the whole population, these models provide robust estimations regarding the most important development trends in the Danish economy. The microsimulation model SMILE (simulation model for individual lifecycle evaluation) is part of a set of models in the DREAM system. It draws on data from seven different data sources made available through Statistics Denmark, which allows for robust and precise estimates on the trajectories of individual life courses, in particular, educational and employment decisions.

Being able to model these kinds of decisions early on enables policy makers to identify emerging skills shortages, in particular across sectors of the economy or regions of the country. It also helps policy makers design governance and financing frameworks in such as a way as to ensure that educational institutions provide the skills needed in the labour market. Lastly, the DREAM models alert researchers to emerging inequalities in educational and employment trajectories, which can be mitigated with focused policy responses.

Source: e-estonia (2019[30]), “Estonian Education Information System”, https://e-estonia.com/solutions/education/estonian-education-information-system/; DREAM (2019[31]), “The Danish Institute for Economic Modelling and Forecasting, DREAM”, http://www.dreammodel.dk/default_en.html.

Policy recommendations for building integrated information systems

In light of the findings and practices above, the following policy recommendations can help countries build integrated information systems (Box 6.15).

Box 6.15. Policy recommendations: Building integrated information systems
  • Mobilise data. The first step to building an integrated information system is to generate and collect all the relevant information on skills, labour markets and learning data. Due to the multiplicity of sources, this task is complex. The information is generally spread across multiple state bodies and stakeholders; therefore, mobilising data and information can be difficult, slow and costly. Governmental efforts should be aligned towards establishing longitudinal data systems covering early childhood services, primary and secondary education, post-secondary education as well as workforce programmes and social services. The great challenge is to be able to match data from different programmes and to ensure that disadvantaged populations are well-represented. Furthermore, ideally, efforts to collect data on skills policies should be harmonised across countries in order to allow for cross-country comparisons. This is crucial in order to better understand how political and institutional contexts shape the dynamic of skills formation systems.

  • Improve data processing and information dissemination and tailoring. Data per se is worth little. Moving from data to information requires knowing who the end-users are, their needs, and what the existing information gaps are. It also requires administrative and research capacities to analyse the wealth of data. At this stage, working in close collaboration with end-users is critical. Policy makers, researchers, employers, workers, students and their families have different information needs. Hence, data, as well as research findings based on these data, should be presented in such a way that users can easily and effectively use it to improve the educational and employment decisions they face. A user-centred approach is needed in order to turn data into actionable information as well as to justify and legitimise the large-scale data collection efforts in the first place.

  • Enhance management and evaluation processes. There is a need for a specific formal or informal institution or body that supports the functioning of the information system. Information systems are dynamic by definition. For example, users’ needs change, new data sources become available, new security protocols need to be adopted, and new data-sharing agreements need to be signed with external entities. Also, the performance and efficacy of the system need to be constantly monitored. The overseeing body should preferably include representatives from educational institutions, business and industry as well as workers and unions. This is not only needed to ensure a multi-sectoral approach but also to build trust among stakeholders and users. In this way, building information systems can complement and mutually support government efforts to engage stakeholders (see above). The body should have specific protocols or rules to define and allocate authority, define and execute procedures. Moreover, appropriate funding is needed in order to ensure proper functioning. Finally, strict security and privacy protocols are needed to avoid data misuse and leakages that could harm the system’s reputation.

The challenge: Aligning and co-ordinating financing arrangements

Skills will likely be the main driver of future productivity improvements. Furthermore, facilitating investments in developing the right skills and using them more effectively will undoubtedly help countries achieve sustained and inclusive growth. Getting incentives right is important for encouraging investment in skills as well as for steering those investments in ways that better match skills supply with demand.

The importance of skills investments is heightened in the context of megatrends, such as ageing, digitalisation and globalisation, which will create pressure for countries to rethink the balance of skills investment over the life course, with more emphasis on lifelong learning, which is a domain in which governments have historically had limited leverage. Governments and stakeholders have been talking about the need to promote and further develop opportunities in lifelong learning for a long time, but the actual efforts to follow up have been quite limited. Hence, improving financial incentives for both workers as well as employers to devote more resources to lifelong learning is imperative.

Despite the importance of skills, investments in skills are at risk of being crowded out by other, more short-term oriented demands on public spending. Furthermore, a strong institutional capacity is necessary in order to collect, allocate and use financial resources effectively, and to ultimately realise the expected benefits. Therefore, a co-ordinated and coherent approach to financing skills is a key policy area supporting the governance of skills systems.

Governments need to ensure that skills systems are equipped with strong governance arrangement to facilitate the financing of skills policies. However, putting in place an effective and efficient financing arrangement is difficult. The main challenges are:

  • Diversifying sources of funding. Promoting the development and use of skills, especially in the context of lifelong learning is costly and may require that the costs and benefits of skills investments are more equitably shared between governments, individuals and the private sector (OECD, 2017[32]). – with country-specific differences in how exactly this balance is achieved. In a context of increasing pressure on state budgets, financial arrangements will increasingly rely upon more flexible cost-sharing mechanisms that facilitate integration with resources from private households and employers on the one hand and public budgets both at the central and at the sub-central level on the other. Investments in human capital create both public (societal) and private individual benefits (in terms of higher wages and/or increased productivity); hence a sharing of costs between public and private actors is justified to some extent, although politically contentious in many cases as it involves redistributive trade-offs between the different groups of stakeholders. Finding the right mix of public versus private funding requires an assessment of the benefit to each party as well as co-ordination efforts to align the incentives of public and private actors. Furthermore, the relative mix between public and private sources of funding might vary across sectors. For instance, investing in early childhood education and care could be recognised as a public good as it is deemed to be particularly effective in mitigating educational inequalities in the early stages of the lifecycle. On the other hand, investments in skill formation at higher levels (post-secondary and higher education as well as lifelong learning) are usually associated with concrete and immediate pay-offs in the labour market and could, therefore, justify a larger involvement of private actors (households and employers).

  • Finding appropriate resource allocation and budgeting mechanisms. Public funds ought to be allocated carefully to promote better policy outcomes. However, prioritisation and budgeting procedures can be complex. Sound mechanisms to prioritise skills investments and allocate public funds to execute them need to be responsive to a country’s skills needs; should assess the cost and benefits of such investments; and generate trust among individuals and stakeholders. Optimal investment of resources often involves reallocation of funds that have a limited impact; when this implies the transfer of funds between ministries or the elimination of policies, although inefficient, may be popular or benefit certain stakeholders, political costs and conflicts of interest will arise. Public budgets should also be aligned with multi-year planning, prioritisation and goal-setting functions of the government. The processes in place should ensure that the systems meet these objectives in a sustainable manner. In this regard, it is crucial to ensure that governments’ commitments to adequate levels of investments in education and skills are protected against short-term pressures from other policy areas.

  • Ensuring equity in funding considerations. Government spending on skills investments is justified by the externalities that arise when the population reaches higher levels of skills. As mentioned above, finding the right mix of public versus private funding requires an assessment of those potential benefits and a co-ordination effort to align the incentives of public and private actors so that country-specific balances in cost-sharing are widely recognised as fair, and not preventing individuals from pursuing educational goals. These assessments include equity considerations, which require skills investments to be fairly distributed among the population. Urgent needs, such as adult upskilling or reskilling policies, or remedial interventions targeting disadvantaged populations, can be justified not only on the grounds of efficiency from future benefits but also on the grounds of equity. Market-based systems often fail to provide solutions that are considered fair. In such cases, equity calls for governments to finance skills policies to address this issue, such as ensuring equitable access to skills development opportunities for all, and designing mechanisms to distribute the benefits of human capital formation across the population. Distributing resources on the basis of need may require hard political choices as it might entail the redistribution of resources from privileged to underprivileged regions and educational institutions. Co-ordinating and justifying these efforts with a sound strategy of evidence-based or at least evidence-informed policy making should help to assuage these conflicts (see the discussion above).

  • Providing commensurate resources. Evidence collected in the OECD National Skills Strategy Projects and other OECD assessments shows that there is often an imbalance between policy responsibilities and resource allocation. This may cause, in turn, a disconnection between policy design and policy implementation. Typically, responsibilities are scattered over many different ministries, bodies or agencies, operating at different levels and with different organisation cultures (Rees, Penny and Hall, 2008[33]). Also, some responsibilities are delegated to agents in the private sector, such as NGOs, or to hybrid bodies or organisations, such as public-private partnerships (PPPs). In this complex environment, resources need to be allocated in such a way that responsibilities are matched with funding so that those with responsibilities have the capacity and funding to operate at the desired standard of service.

Good practices

Skills policies traverse sophisticated financial environments, and finding optimal financial arrangements to promote the acquisition and efficient use of skills is complex. Skills can be acquired through different means, at different costs, and at all stages of life; returns to skills investments are highly heterogeneous and are difficult to predict and measure; and a number of market failures, such as asymmetries of information and credit constraints, surround the processes of skills development and use. These complexities, along with the positive externalities associated with higher levels of skills have provided a strong rationale for governments to regulate and steer skills systems, and to find the best financial mechanisms to boost the acquisition of skills and make better use of them in the economy (OECD, 2017[27]).

By setting the right financial incentives, government policies can have a significant effect on the participation of employers as well as students and workers in initial and further education and training. For instance, measures directed at the supply side of skill formation systems could target public subsidies at particular courses or fields of study or make subsidies contingent on educational institutions meeting particular performance goals regarding labour market outcomes. On the other hand, measures directed at the demand side of skill formation encompass, for example, subsidies to students, workers or the unemployed as well as individual firms.

Some countries provide examples of well-developed governance systems that help to ensure that skills financing is aligned and co-ordinated. For instance, in order to boost the demand for specific skills in the economy, Ireland’s Skillnet programme (Box 6.16) creates networks of employers who fund training through a targeted levy.

Box 6.16. Country practices: Creating networks of employers who fund training

The Skillnet training networks in Ireland are groups of private businesses in the same sector and/or region that have come together to carry out training-related activities that may not be possible if each firm were to act on its own.

There are currently 65 Skillnet training networks active in Ireland. These are all funded through a mixture of government funding and the National Training Fund (NTF), which is financed through a levy on employers of 0.9% of reckonable earnings of employees in certain employment classes. The NTF levy was introduced with a rate of 0.7% in the year 2000. Because the scheme was introduced simultaneously with a 0.7% reduction in employer social security contributions, it encountered little resistance from employers (although it also means that awareness of the direct contribution to the NTF is relatively low) (Marsden and Dickinson, 2013[34]).

An example of such a network is Wind Skillnet, which has carried out extensive training needs analysis with its member companies, working closely together with the Irish Wind Energy Association and taking guidance from leaders in the Irish wind industry. Wind Skillnet has developed a suite of courses that meet the requirements of trainees in the wind industry. The courses cover a range of topics including turbine operation, maintenance and productivity, finance, planning, grid connection and wind monitoring.

A survey of employers suggested that half the training undertaken through the Skillnets would probably not have been undertaken in the absence of the programme and that the vast majority of employers would not have found training of similar quality (Frontline, 2015[35]). According to Marsden and Dickinson, one of the greatest advantages of the Skillnets model is that it reduces the administrative costs of training, which is particularly helpful for SMEs. Skillnets are also tasked by the government to target training “towards areas suggested as appropriate by government policy and the ongoing evidence-based analysis by Forfas and the Expert Group on Future Skills Needs” (Frontline, 2015[35]).

Source: OECD (2017[27]), Financial Incentives for Steering Education and Training, Getting Skills Right, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264272415-en; Skillnet Ireland (2018[36]), “Skillnet Ireland – Home”, http://www.skillnets.ie; https://www.iwea.com/learning-hub/green-tech-skillnet.

As a further example, the Swedish model of Higher Vocational Education (Box 6.17) is structured to tie funding closely to employer demand throughout the process of programme development, helping to ensure labour market relevance and a return on skills investment.

Box 6.17. Country practices: Tying funding closely to skills needed by employers

The aim of the Swedish model of Higher Vocational Education (HVE) is to provide a form of education that develops the highly skilled professionals most in need in the labour market. Typical HVE programme length is between six months and two years. Completion of a one-year programme results in a Higher Vocational Education Diploma. Completion of a two-year minimum programme results in an Advanced Higher Vocational Education Diploma.

Employers are the main stakeholders in this model, and their involvement is four-pronged. First, employers work together with providers to translate specific skills needs into a programme proposal. Second, they back the funding application that the training institutions submit to government (to the Swedish National Agency for Higher Vocational Education): no funding can be obtained without clear proof of employer demand. Third, once the programme is approved, each provider has to set up a steering committee for the programme, including representatives from employers and industry. This steering committee is responsible for the implementation of the programme, including admissions, the syllabus and quality assurance. Finally, nearly all programmes (except those of very short duration) contain a workplace learning component (Lärande i Arbete, LIA), which is seen as one of the main success factors behind the Swedish model of Higher Vocational Education.

The providers of Higher Vocational Education are autonomous in the sense that they decide which applications for courses to submit – although they need to abide by the rules set by the national agency. In practice, a wide range of organisations can provide HVE programmes, including higher education institutions, municipalities, county councils and private providers. There are no requirements for staff to have formal teaching qualifications, which allow practitioners to teach. The teacher must, however, possess good or very good knowledge and experience in their given field.

Source: Tomaszewski, R. (2012[37]) , “The Swedish Model of Higher Vocational Education”; OECD (2017[27]), Financial Incentives for Steering Education and Training, Getting Skills Right, , http://dx.doi.org/10.1787/9789264272415-en.

The model of dual apprenticeship training in countries such as Austria, Germany and Switzerland also aligns financial incentives for youth and employers to participate in training that responds to the needs of the economy (Box 6.18).

Box 6.18. Country practices: Aligning financial incentives in dual apprenticeship training

Vocational education and training, according to the dual apprenticeship training model, combines practical training in a workplace setting with theoretical education in vocational schools or colleges. Dual apprenticeship training is particularly common and institutionally well developed in the collective skills formation systems (Busemeyer and Trampusch, 2012[38]) of continental European countries such as Austria, Denmark, Germany, the Netherlands and Switzerland, and its popularity is increasing in other countries such as Ireland, Norway and the United States. Countries differ with regard to the exact distribution of training costs among employers, individuals (households) and the state. Broadly speaking, the dual apprenticeship training model implies that some training costs are shouldered by employers themselves, who pay wages to apprentices during their training period. In this regard, the dual apprenticeship model in the collective skills formation system is different from apprenticeship training provided by external providers, as is common, for instance, in Australia and the United Kingdom.

This has important implications regarding the alignment of financial incentives. In employer-provided training, employers have a strong incentive to invest in skills that they themselves require of their future workforce. In provider-provided training, in contrast, external providers ideally have such an incentive as well, but their financial incentives might be different as providers specialise in training popular with apprentices (but not necessarily needed by employers) or government agencies doling out subsidies. Hence, financial incentives for employer-provided skill investments are better aligned in training arrangements where employers themselves provide and pay for training rather than external providers.

The state supports firm-based training in dual apprenticeship training models by investing in vocational schools or vocational colleges. Labour market actors – employers and unions – have a strong influence on the process of reforming and updating existing occupational profiles (see above, Box 6.8). State actors largely follow these priorities by setting up and paying for theoretical education in schools. Furthermore, more recently, the model of dual training is increasingly spreading to the higher education sector (Graf, 2018[39]). As a consequence, vocational colleges and other institutions in tertiary VET are expanding, some of which are publicly funded, others privately funded, depending on the country and regional context. As employers are involved in the selection of students at these institutions, the financial incentives of educational institutions and employers are well-aligned in these cases as well since there is a direct connection between the supply of skills via the education system and demand from labour market actors.

Lastly, the cost-sharing arrangements in dual apprenticeship training also involve a contribution from private households and individuals. On the one hand, individual apprentices receive a wage during their training period, but, on the other, the wage level typically remains significantly below the level of a skilled worker. Since occupational labour markets for skilled workers are well regulated in countries with a strong tradition in apprenticeship training, there is a strong financial incentive for apprentices to stay committed to their training and to graduate in order to become a certified skilled worker. For employers, keeping apprentice wages at a comparatively low level increases the incentives to participate in apprenticeship training. Since the productivity of apprentices comes close to the level of skilled workers during the later stages of training, employers can (partly) recoup their training expenses this way. Again, the financial incentives of employers and apprentices are well aligned.

Source: Busemeyer, M.R. and C. Trampusch (2012[38]), The Political Economy of Collective Skill Formation, https://global.oup.com/academic/product/the-political-economy-of-collective-skill-formation-9780199599431?cc=fr&lang=en&#, Graf (2018[39]), “Combined modes of gradual change: The case of academic upgrading and declining collectivism in German skill formation”, http://dx.doi.org/10.1093/ser/mww044.

The Korean system of higher education financing provides another illustrative example (Box 6.19). Faced with a strong increase in student numbers, which led to an over-supply of university graduates in the labour market, the Korean government has reformed the system of financial incentives for the higher education sector. Universities that perform well in a comprehensive evaluation based on qualitative and quantitative information are allowed to maintain and accept a higher number of students, whereas poorly performing universities are obliged to cut student quota. This sets strong incentives for universities to perform well.

Box 6.19. Country practices: Reforming higher education governance and finance

In the wake of its transition to democracy, Korea has seen a strong increase in its number of higher-education students since the 1990s. Even though this educational expansion has contributed to and fueled Korea’s economic development, the over-supply of higher education graduates increasingly leads to skill mismatches in the labour market. Furthermore, the expansion of tertiary education has been accompanied by a steep increase in tuition fees, raising equity concerns.

As a consequence, the Korean government has passed a number of reforms aimed at slowing down the pace of educational expansion, while at the same time aligning financial incentives in order to improve the overall quality of the system. The comprehensive “University Structural Reform Plan” (2015) aims to reduce the admission quota for universities in order to mitigate the problem of over-supply of higher education graduates. However, the admission quota reduction goals affect universities to different degrees, depending on the results of an evaluation process, which includes both quantitative as well as qualitative information. The university evaluation proceeds in three stages, i.e. it is not focused on performance in the short term, but rather aims at a medium- to long-term assessment. The catalogue of evaluation criteria includes a range of issues such as the educational environment, academic management, student support and educational outcomes. Regarding the latter, the evaluation includes criteria that measure employment outcomes of graduates of a particular institution, establishing a direct connection between the education system and the labour market.

As a general rule, universities that receive a more positive evaluation are less pressured to reduce student quotas.

Source: Byun, H. (2018[40]), The Evaluation of Higher Education Restructuring in Korea: Problems and Suggestions for Improvement, http://www.cshe.nagoya-u.ac.jp/publications/journal/no18/12.pdf; OECD (2009[41]), OECD Reviews of Tertiary Education: Korea 2009, https://doi.org/10.1787/9789264049055-en.

As mentioned earlier, it is crucial to ensure that governments’ commitments to adequate levels of investments in educational and skills are protected against short-term pressures from other policy areas. Box 6.20 illustrates Chile’s main mechanism for school financing, which provides additional funding to schools serving vulnerable students and sets transparent and predictable funding rules for school providers.

Box 6.20. Country practices: Formula-driven school grants

In Chile, the main mechanism of public financing is in the form of school grants from the state to school providers (municipalities, for instance), who directly manage the funds. The basic school grant (Subvención de Escolaridad) results from multiplying a basic amount updated yearly by the monthly average student attendance and an adjustment factor by level and type of education. The basic grant is complemented by a range of more specific allowances and grants to acknowledge that the cost of providing quality education varies depending on the characteristics and needs of students and schools. For instance, the Preferential School Subsidy aims to level the differential cost incurred by schools tending to vulnerable students. Complementary financial transfers include allowances directly given to education staff.

Chile’s system of formula-driven school grants provides a transparent and predictable basis for school providers. Unlike many other countries around the world, school financing is based on objective criteria (number of students being the most important one, but with adjustments for other factors affecting schools’ per-student costs), and not the result of negotiations between the government and public and private school providers. The existence of a clearly defined and objectively measured formula as the basis for allocating resource imposes a hard budget constraint on providers and creates the conditions for basic spending discipline, an important feature in a system with many school providers. The formula also accommodates the needs of a diverse network of service providers. Finally, resource allocation is not inertial and responds to new policy priorities: when a new policy requires additional resources, the budget changes accordingly.

Source: OECD ( (2017[42]), “Funding of School education in Chile”, in OECD Reviews of School Resources: Chile 2017, https://doi.org/10.1787/9789264285637-6-en.

Policy recommendations for aligning and co-ordinating financing arrangements

In light of the findings and practices above, the following policy recommendations can help countries align and co-ordinate financing arrangements (Box 6.21).

Box 6.21. Policy recommendations: Aligning and co-ordinating financing arrangements
  • Mobilise and diversify resources. Transforming traditional front-loaded education systems into lifelong learning systems is likely to require increasing the amount of resources available for education and training at all life stages. This might require diversifying the sources of funding from public to mixed public-private arrangements. Different countries will pursue and achieve different balances in funding between public and private sources. Effective and equitable skills policies reflect these country-specific differences while also minimising the risk that unequal distributions in financing responsibilities effectively prevents disadvantaged groups from pursuing their skills goals. Reducing the barriers for non-state skills investments is critical to encourage participation in training, to mobilise the commitment of employers to skill formation and to boost investments in education and training. Governments should use financial incentives to steer skills investments more broadly (OECD, 2017[27]), and explore co-financing partnerships with the private sector, such as public-private partnerships or tri-sector partnerships. Countries with well-established dual apprenticeship systems are examples of such cost-sharing arrangements, where the public sector pays for the acquisition of cognitive skills in education in vocational schools, and firms pay for on-the-job training.

  • Assess financial needs and identify priorities. A first step in prioritising skills investments and expenditures is to assess the financing gaps in the system. Once gaps are identified, an investment strategy ought to be defined in line with the medium-term strategic priorities of government. Above and beyond defining abstract long-term goals, these strategies should define short-term intermediary goals that help to shore up commitment among policy makers to follow through with long-term plans. Policies for financing skills development and use should be evaluated on the basis of two criteria: efficiency and equity. Efficiency requires a comprehensive assessment of the costs (including opportunity costs) and benefits of skills investments. Financial efforts should be directed towards investments with higher expected rates of returns. But efficiency also requires finding the optimal cost-sharing mechanisms to finance skills investments. Some skills investments may be efficient without being fair. Others can be fair without being efficient. A sound strategy and prioritisation exercise should balance equity and efficiency of skills investments and should prioritise spending on marginalised groups and on investments with the highest return. Countries will differ with regard to how exactly the balance between efficiency and equity is achieved. Promoting efficiency in the allocation of fiscal resources does not aim to identify a one-size-fits-all approach to skills policy, but rather to achieve the best results given a certain level of fiscal resources and country-specific policy goals. Such an approach could identify whether certain types of spending (i.e. on teacher or star faculty salaries) indeed pay off in terms of higher levels of educational performance.

  • Match funding with needs. Allocating resources so that responsibilities are matched with funding requires a clear view of who does what in the skills system and what roles and functions are adequately covered and what are not. Identifying financing gaps allows governments to assess areas or functions that are under- or over-funded. A top priority should be to secure the finance needed to provide essential education and training services. Further efforts should be allocated in implementing sound monitoring and evaluation systems, which in addition to boosting transparency and accountability facilitate the provision of commensurate resources to the agents in the system.

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Note

← 1. The notion of policy complementarities goes beyond that of coherence and refers to the mutually reinforcing impact of different actions on a given policy outcome. Policies can be complementary because they support the achievement of a given target from different angles. Policy complementarities should also promote the most efficient allocation of resources, taking into account best practice technology (Aziz and Wescott, 1997[43]).

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