4. Policies to spur adult learning in Latin America: Challenges and solutions

This chapter provides an overview of the challenges to policy makers, employers and individuals in spurring and designing effective adult learning systems in Latin America. The chapter looks, in particular, at the role of government, employers and individuals in the governance and financing of adult learning. It discusses the limits of existing approaches and provides examples of international best practices to improve the co-ordination and coherence across all actors of the adult learning system.

    

Lifelong learning policies aim to allow workers, particularly the most vulnerable, to acquire and maintain relevant skills. Unfortunately, however, most countries in Latin America and the Caribbean (LAC) lack a lifelong learning system with a clear national regulatory framework and a national strategy (OECD, 2018[1]; OECD, 2019[2]).

Governments are increasingly facing tight budget constraints making it difficult for countries to ensure financial support to training activities. Striking the right balance between public and private incentives to steer and foster adult learning and diversifying the sources of funding, by calling for all stakeholders, including the government itself, employers and individual workers, to contribute equitably to lifelong learning activities, could mitigate this problem.

Governments are, therefore, called upon to create effective mechanisms in which both the private and public sector play a joint role (Busso et al., 2017[3]). This is particularly relevant in Latin America, where many workers in the workforce need support to find high-quality formal jobs and adapt to the changing skill demands of the labour market.

Summary of the main insights

On average, LAC countries spend almost half the OECD average on active labour market policies (ALMPs). Boosting support to ALMPs is key to provide individuals with high-quality training opportunities

• With the exception of Colombia and Chile, public spending for training measures in LAC countries is well below the OECD average. For instance, in Argentina, spending in training is roughly half that of the OECD average, and in Brazil and Mexico, funding allocated to training has decreased considerably in recent years to very low levels.

One way to support training in Latin America has been to subsidise its supply through the creation of National Training Institutes (NTI). Their action, however, could be strengthened, as the take up of the training offer is low

• NTIs, national agencies tasked to supply and oversee training, are common across LAC countries. These are financed with a specific tax on the payroll of formal workers that ranges from 0.25% (Uruguay) to 2% (Colombia) but even when these investments are sizable, the effectiveness of their action could be strengthened.

• NTIs’ training reaches only a small fraction of employed workers. Evidence is that, in the region, less than 15% of employed workers accessed training provided by NTIs – the only exception is Colombia where up to 24% of workers were involved.

• In addition, evidence based on a survey of formal firms in the Bahamas, Colombia, Honduras, Panama and Uruguay, shows that, on average, less than 12% of firms makes use of public resources to finance their training initiatives, and when used, this funding generally goes to large firms.

Governments in Latin America are making important steps towards designing training interventions that respond to the skill needs of connected and digital labour markets

• In Mexico, 32 Digital Inclusion Centres (Puntos Mexico Conectado – Centros de Inclusión Digital) have been set up across the country, providing basic digital skills programmes. Peru passed the National Digital Literacy Plan to train individuals in information and communication technologies (ICT) skills, the use of computer tools as well as mobile devices. Around 107 online courses were made available also to teachers as part of the Educate Peru Programme with emphasis on developing digital skills to incorporate ICT use in the classroom. Brazil and Costa Rica have been devoting resources to finance the development of ICT skills in universities and graduate courses.

As digital technologies spread across the region, online learning offers a significant opportunity to leverage broadband networks to spread knowledge in a cost-effective way

• Massive Open Online Courses (MOOCs), academic courses offered on line often provided at no cost, aim at large-scale interactive participation from around the world can be powerful tools to spur learning in the region. These, however, face challenges of implementation and take up. According to the Survey of Adult Skills, a product of the Programme for the International Assessment of Adult Competencies (PIAAC), individuals who are more likely to participate in open education in Latin America, as across OECD countries more broadly, are mainly young, educated and skilled workers. This situation potentially leaves out the most vulnerable and the low-skilled most in need of receiving training. Efforts need to be put in reinforcing the ICT skills of disadvantaged groups and to create suitable options for them to use digital technologies for learning.

• MOOCs and online courses do not usually lead to a certification, a qualification or a title that can be used in the labour market to signal one’s credentials and skills. Micro-credentials are mostly unregulated and the validation of contents and of quality varies very much across the spectrum of available training options. This poses several challenges as the lack of a certification framework hinders the acceptance of MOOCs and online courses and their use as a signal for skills in the labour market.

The content of adult learning programmes in LAC countries needs to align with current (and future) skills needs in the labour market

• Data collection infrastructures should be developed to timely analyse labour market needs and for this information to feed into curricula revision. Skill Assessment and Anticipation (SAA) exercises are, sometimes, not well-aligned with the potential policy uses. For instance, the way skills are defined is not always useful for policy-making, providing an output that the policy maker does not understand and whose results are insufficiently disaggregated at the regional, sub-regional or sectoral levels for the policy makers to be able to use them.

Some countries in Latin America have implemented good initiatives to improve labour market and skills information to improve matching of skills demand and supply

• In Chile, the Public Employment Service uses information on labour demand, collected through interviews, surveys and roundtables, to align their training offer with labour market needs. In addition, the government runs an online portal called the National Employment Exchange (BNE), a free site where companies publish job offers and workers can submit CVs for consideration.

• In the Dominican Republic, the Ministry of Labour created a job portal that matches employers with potential workers. Candidates can register their information and apply to jobs. In September 2015, 11 000 businesses were listed on the platform and nearly 42 000 jobs posted.

• In Brazil, as part of the Pronatec programme, different ministries can submit requests to the Ministry of Education for creating specific training programmes that correspond to the identified skill needs. The Ministry of Education centralises these requests and co-ordinates the opening of funded training programmes with public and private training providers.

The direct involvement of employers in supporting training in LAC countries is substantial

• Some 30% to 50% of LAC firms in the manufacturing sector offered training through short, structured courses focusing on specific job-related skills. In addition, on average across LAC countries participating in the OECD Survey of Adult Skills (PIAAC), 63% of workers who participated in training report to have received funding from her/his employers for at least one learning activities. Mexico shows the largest share of workers receiving support from employers, above 80%. In Ecuador, instead, this is the lowest (around 60%) pointing to the fact that while many firms in the country engage in training (more than 73% of the total), the support provided by employers covers a relatively smaller share of their employees.

• The participation in training activities of firms of different sizes varies quite a lot. In particular, SMEs participate in training activities much less than larger firms in the region. Little can be said about the engagement of informal firms in training, though these represent the majority of businesses in LAC countries.

• Large variations in the number of people involved in training is recorded across countries. Evidence shows that firms in Latin America train between 49% (in Chile) and 78 % (in Ecuador) of their workers, though no information is available about the duration of the training nor on the training provided by informal firms (if any).

The size and the managerial quality of LAC firms matter a lot when explaining participation in training

• In Latin America, smaller firms are less likely to provide training to workers than larger firms. Data from the Survey of Adult Skills (PIAAC) show that only 40% of workers in SMEs participated in training, compared to 69% workers in larger firms. While a similar pattern can be found in all other countries participating in the OECD Survey of Adult Skills (PIAAC), in Latin America the gap in training provision between small and large firms is almost twice as high (approx. 30%) as the OECD average (17%). This gap, that in Mexico and Ecuador is even greater than 30%, is particularly worrying and represents a key challenge for Latin America, considering that SMEs account for more than 80% of employment and more than 90% of firms in Latin America.

More should be done to provide incentives to SMEs to adopt good managerial practices and leverage their human capital

• Recent estimates show that a 1% increase in the share of high-skilled workers could lead, on average, up to a 0.7% increase in productivity in large firms but no effect is observed for smaller firms. Part of the difference between how large and small firms are able to benefit from skilled workers could be explained by the differences in managerial skills across firms of different sizes.

• Evidence from the World Management Survey shows that managerial quality in LAC countries stands below that of the OECD average and that firms are more poorly run than across OECD countries. The performance is especially low in countries such as Brazil and Colombia, while firms in Mexico reach OECD-average standards. This suggests that relatively few managers in the region follow the best management practices and many would benefit from receiving training in this area.

A range of market failures and barriers (i.e. lack of information, capacity and/or resources) lead to sub-optimal engagement in training, particularly in the case of SMEs

• Creating employer networks can be a solution to the lack of managerial skills in SMEs as these often provide leadership and management skills programmes, in addition to their role as facilitators of knowledge exchange and capacity building. Networks of employers have also the key advantage of pooling the resources of smaller actors together, creating a critical mass and economies of scale that SMEs can leverage to their own advantage.

Well-designed financial incentives steered by government intervention can be a useful tool to boost incentives but potential deadweight losses need to be minimised

• The design of financial incentives needs to consider the institutional context as well as the specific objectives that such policy intervention is meant to achieve. In the case of skill development policies, before introducing any intervention, the policy maker should carefully assess the reasons for any apparent under-investment in training and the best way to create (or restore) adequate incentives with minimum intervention.

• In addition, the efficacy of financial incentives depends on a range of framework conditions being in place in the country. For instance, while providing financial support to firms may be desirable to reduce the cost associated to their participation in training, doing so without setting up a solid skills information system that supports employers in making informed decisions on the choice of education providers or on the skills to be developed, may lead to considerable misuse of resources.

• Targeting financial incentives at employers rather than at individuals has the advantage that training is more likely to meet the specific needs of the firms and, therefore, to fill concrete gaps in labour market needs. One drawback, however, is that, by providing direct and unconditional support to employers through cash transfers, the government risks not being able to reach disadvantaged and vulnerable workers as employers have weaker incentives to provide training to those groups. Intermediate solutions can be found so that the financial incentives are designed to reach employers under the condition that these provide training also to disadvantaged workers. Funds can also be made conditional on supplying training to the unemployed to ensure their re-inclusion in the labour market.

Public provided training in Latin America

Public spending in training is generally low in Latin America

On average, LAC countries spend almost half than the average OECD country on active labour market policies (ALMPs) (Figure 4.1, Panel A). Wide differences exist between OECD and LAC countries when it comes to the focus, scope and configuration of ALMPs policies owing to their particular priorities (e.g. different social challenges) and to the different social and labour market challenges.

In terms of the operation of the labour market, two main differences have affected the functioning of Active Labour Market Policies (ALMPs). First, unlike in OECD countries, labour markets in emerging and developing countries are typically characterised by a growing labour force, low levels of unemployment (albeit high levels of underemployment and low job quality) and higher rates of informal employment (see Chapter 1). Second, labour market and social institutions in LAC countries often have relatively weak capacity to implement programmes compared with those in OECD countries. In emerging market economies such as Colombia, Costa Rica and Mexico the capacity of the public sector is weak, both in terms of human and financial resources, and corruption remains widespread and the rule of law weak (Kaufmann, Kraay and Zoido-Lobaton, 1999[4]). These factors hinder the effective implementation of policies. This may limit the effectiveness of government programmes in general, including that of ALMPs, which usually require large public implementation capacity (ILO, 2016[5]).

Among ALMPs, spending on training generally represents an important component of policy strategies that aim to improve the employability of individuals and thus enhance their future career paths (e.g. higher earnings or improved job quality) with positive aggregate spillover effects (e.g. increased productivity). Publicly provided training often targets disadvantaged individuals – including youth, women, disabled or older workers.

In OECD countries, training represents the main item of expenditure within ALMPs and expenditures are commonly targeted both to on-the-job and/or off-the-job training. The latter is usually directed at unemployed individuals but, in some cases, also used for the employed1 and training can be part of a broader strategy or comprised within a public works programme and include some form of income support (see Box 4.1 on a welfare programme boosting employment and job quality in Peru). One major difference between LAC countries and OECD countries is that, in the former, training is often of rather short duration and focused on the acquisition of basic skills (ILO, 2016[5]).

Figure 4.1. Spending on active labour market policies is below the OECD average

Source: OECD (2019[6]), “Public expenditure and participant stocks related to active labour market policies”, OECD.Stat (database), https://stats.oecd.org/Index.aspx?DataSetCode=LMPEXP.

However, the extent by which countries in Latin America allocate resources to training is rather heterogeneous. With the exception of Colombia and Chile, public spending for training measures in LAC countries is well below the OECD average. For instance, in Argentina, spending on training is roughly half that of the OECD average, and in Mexico and Brazil, funding allocated to training is almost non-existent (Figure 4.1). In Chile and Colombia, most expenditure on ALMPs are channelled into job-training courses and executed by the national training institutions (SENCE and SENA respectively), without a clear and holistic vision (OECD, 2018[1]; OECD, 2019[2]).

While the region has had a positive experience with a limited set of ALMPs, especially targeting younger workers (Box 4.1), policies to help adult workers transition from job to job are mainly absent and several commentators argue that those should be implemented (Busso et al., 2017[3]). Expanding the offer of training opportunities, which should also aim at including adults currently outside of the labour market, may therefore require spending more public resources on adult training.

Box 4.1. Peru: The role of workfare programmes in boosting employment prospects and job quality

From Construyendo Perú to Trabaja Perú

The programme Construyendo Perú, was introduced in 2007 as a workfare programme, to address employability issues and provide income support to unemployed individuals mainly heads of households, in situations of poverty and extreme poverty. The new programme aimed to: (i) provide individuals with access to temporary employment; and (ii) help them enhance their employability, thus improving their chances of reintegration into the labour market. To achieve this, the programme provided short-term jobs and skills development through the financing of public investment projects that required intensive use of unskilled labour. The programme had therefore two components. The first was the creation of temporary jobs in public investment projects (e.g. pedestrian accesses, irrigation canals, post-harvest infrastructure, retaining walls and educational and health infrastructure). The second component entailed providing two types of training to participants in parallel with the public investment projects. The more general type of training provided a range of soft skills development, including social skills, empowerment and a general knowledge of how to oversee the implementation of projects. The second training element aimed to develop technical skills that would be appropriate to the needs of the labour market in the region – rather than to the project in question. Although the general training was mandatory, in practice it was not enforced. The more tailored training was voluntary, with take-up disproportionately high among individuals with higher levels of educational attainment.

The training component was officially active from 2007 to 2010, and during this period the programme provided soft-skills training to close to 260 000 individuals and more tailored technical training to 27 000 (Macroconsult S.A., 2012[7]). Importantly, monitoring of the programme carried out by the Ministry of Economy and Finance (MEF) (Jaramillo, Baanante and Sanz, 2009[8]) revealed that by 2009 specific training had ceased to be provided by the programme. In practice, the specific training component was provided almost exclusively during 2007 and 2008, and even then it did not take place systematically. The training components suffered from additional implementation problems, which may have been the motivation for their cessation. For example, the MEF study points to important differences in the content and quality of the training provided in different districts. Moreover, the differences in duration of the short-term jobs created, meant that a number of individuals received training for a very short period of time.

In 2011, a new programme, Trabaja Perú, was created and replaced Construyendo Perú. Like its predecessor, Trabaja Perú co-finances public investment projects that aim to create temporary jobs for the unemployed and underemployed whose incomes fall within poverty or extreme poverty levels in both urban and rural areas. The aim of the programme, in addition to creating short-term jobs, is to develop productive capacities for the most vulnerable, thereby promoting sustained and quality jobs for this segment of the population. It therefore replaces all of the functions of Construyendo Perú, with the exception of the training components, which were removed from the objectives of the programme in 2012.

Source: ILO (2016[5]), What Works: Active Labour Market Policies in Latin America and the Caribbean, https://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---publ/documents/publication/wcms_492373.pdf.

National Training Institutes are important players in Latin America adult learning systems, but their effectiveness should be improved

One way to support training in Latin America is to subsidise its supply through the creation of National Training Institutes (NTIs). NTIs are public agencies tasked to provide and oversee the supply of government-funded training. SENAI in Brazil or SENCE in Chile (see Box 4.2 on the programmes promoted in Chile by SENCE) along with SENA in Colombia, INA in Costa Rica, INADEH in Panama, and SNPP in Paraguay are examples of NTIs funded by a specific payroll tax. In the case of Colombia and Mexico funding comes from general resources, and in Chile most training occurs through private providers that receive government subsidies.

These institutes were originally created in the mid-20th century to train active workers in technical skills in the framework of the import-substitution industrialisation model. At that time, training the unemployed, job seekers with low levels of formal education, or other vulnerable groups such as women was not a central objective of the institutes. The government was responsible for the regulation and provision of training, and the content of the courses was determined centrally (supply-driven contents). In the 1980s and 1990s these institutes and training models came into scrutiny and then reformed to better respond to the needs of the labour market and to include under their umbrella other segments of the population such as the unemployed and the youth in their target population (Ibarrarán and Rosas-Shady, 2009[9]).

The reforms led to different organisational changes across countries. Some NTIs, for instance in Chile, Paraguay, Uruguay, El Salvador, have been converted into training administrators – no longer providing training directly – but issuing tenders to public or private training providers to offer courses that meet the specific demand of the labour market. In many other countries, such as Colombia, Ecuador, Honduras, Dominican Republic, Mexico and Panama, instead, NTIs still operate as training providers (Alaimo et al., 2015[10]; Ibarrarán and Rosas-Shady, 2009[9]).

The amount of resources channelled to NTIs varies among countries (Table 4.1). NTIs are financed with a specific tax on the payroll of formal workers that ranges from 0.25% (Uruguay) to 2% (Colombia) and even when these investments are sizable, the effectiveness of their action could be strengthened (Busso et al., 2017[3]). Several challenges hamper the effectiveness of NTIs.

First, training is provided only to a small fraction of employed workers. Evidence points that, in the region, less than 15% of employed workers have access to training from NTIs – the only exception is Colombia where up to 24% of workers are involved in training supplied by NTIs (Busso et al., 2017[3]). Evidence based on a representative survey of formal firms in five countries, namely the Bahamas, Colombia, Honduras, Panama and Uruguay, shows that, on average, less than 12% of firms makes use of public resources to finance their training initiatives, and when used, these funding generally go to large firms (González-Velosa C., Rosas D. and Flores R., 2016[11]).2

The weak take up of public resources to promote on-the-job training is likely to reflect the insufficient coverage of NTIs programmes but also the low quality and the lack of relevance of the training provided (Crespi, Fernández-Arias and Stein, 2014[12]). This calls for the need to reinforce the mechanisms to ensure that training is targeted to the sectors and occupations more in demand in the productive sector.

Second, the monitoring of the quality of the training could be strengthened. Mechanisms to measure the results and the impact of programmes are generally lacking along with independent bodies in charge of quality assurance of the courses. This situation can create an environment of little or no accountability, leading to training that in some cases is of low quality or that may not be fully adequate to the needs of employees and employers alike (Crespi, Fernández-Arias and Stein, 2014[12]).

Table 4.1. Characteristics of NTIs
	Institute	Contribution (% of payroll)	Contribution (% of GDP)	Training system
Chile	SENCE	n/a	0.100	1
Colombia	SENA	2.0	0.367	4
Dominican Republic	Infotep	1.0	0.070	4
Ecuador	Secap	0.5	0.030	2
El Salvador	Insaforp	1.0	0.120	4
Honduras	Infop	1.0	0.190	1
Panama	Inadeh*	1.5	0.290	2
Paraguay	Sinafocal	1.0	0.000	4
Uruguay	Inefop	0.25	0.043	1
Note: Type of training systems: 1 = administrator, 2 = almost always administrator, 3 = frequently provides training, 4 = always provides training. *Inadeh was created by the Decree Law of 8 February 2006 and absorbed the former National Institute for Professional Training (Inaforp) and other training programmes, actions, resources, and initiatives under way. n/a = not applicable. In the case of Chile, it is not a payroll tax but an exemption of up to 1% of the tax on profits, based on the resources invested in training.
Source: Hunneus, C., C. de Mendoza and G. Rucci (2011[13]), “El estado del arte de la capacitación de los trabajadores en América Latina and el Caribe”, Technical Note, No. 346.

Box 4.2. Examples of challenges in the training programmes offered by SENCE in Chile

In Chile, SENCE is the national training and employment service institution that depends on the Ministry of Labour and is responsible for adult learning. SENCE concentrates the largest number of beneficiaries for training programmes, 77% of the total in 2016. The system is articulated around: i) tax credits for on-the-job training (Impulsa Personas - ex. Franquicia Tributaria), ii) training programmes targeted primarily at vulnerable groups (e.g. Más Capaz) and iii) employment subsidies. Recent evidence highlights how the system is fragmented, leading to a diversity of programmes with similar purposes and target populations, including within the same agency. Agencies lack a mechanism to co-ordinate with each other resulting in dispersion of unconnected efforts among different public agencies lacking coherence.

Impulsa Persona (ex-Franquicia Tributaria) is the main training programme administered by SENCE. In 2016, this programme reached approximately 8% of the labour force. Tax credits to firms who send their workers on training with certified institutions are equivalent to around 30% of SENCE public spending on training in 2016 (OECD, 2018[14]).

Several aspects of the programme could be strengthened. Impulsa Persona, for instance, benefits mostly large firms, which tend to employ more resilient, highly educated workers (Larrañaga et al., 2011[15]; Rodriguez and Urzúa, 2011[16]). The programmes also does not reach the self-employed, which have accounted for a large share of job creation in the latest years. Evaluation of the tax credit done by the National Productivity Commission has found the programme to be ineffective due to the short duration and lack of relevance of training programmes. The programme also lacks the requirement of certification of courses, and problems in the design of incentives for firms and the structure of suppliers and intermediaries, among others (Comisión Nacional de Productividad, 2018[17]; Bravo, García and Schlechter, 2019[18]). Most training programmes are fundamentally theoretical programmes; taught in classrooms, not in workshops or workplaces, and tend to measure their success by attendance and teaching hours rather than the gains in employability. Most do not include practical training or on-the-job training, and the skills acquired are not certified.

Màs capaz is the flagship programme for skills and employability development targeting the most vulnerable: youth, low-skilled workers and women. It represents another 30% of public spending allocated to SENCE in 2016. The programme provide short-term training, labour intermediation services and certification of competencies. In 2016, the programme reached around 5% of the target population. Evidence suggests that the programme works better for the unemployed than for the inactive (Brown et al., 2016[19]).

Source: OECD (2018[14]), OECD Economic Surveys: Chile 2018, https://dx.doi.org/10.1787/eco_surveys-chl-2018-en; Larrañaga, O. et al (2011[15]), Informe Final. Comisión Revisora Del Sistema de Capacitación e Intermediación Laboral, https://www.undp.org/content/dam/chile/docs/pobreza/undp_cl_pobreza_InformeFinal_211011_doc2.pdf; Rodriguez, J. and S. Urzúa (2011[16]), An Evaluation of Training Programs Financed by Public Funds in Chile; Comisión Nacional de Productividad (2018[17]), “Formación de Competencias para el Trabajo en Chile”, https://www.comisiondeproductividad.cl/estudios/formacion-de-competencias-para-el-trabajo-en-chile/; Bravo, J., A. García and H. Schlechter (2019[18]), “Mercado Laboral Chileno para la Cuarta Revolución Industrial - Clapes UC”, Documentos de Trabajo, No. 59, http://www.clapesuc.cl/investigaciones/doc-trabajo-no59-mercado-laboral-chileno-para-la-cuarta-revolucion-industrial/. Brown, C. et al. (2016[19]), Primer año del Programa + Capaz. Evidencia sobre Inserción laboral de Egresados.

Initiatives to align skill supply to the demand of Latin America in the era of digitalisation and automation

In a context of rapidly changing skill demands in the labour market, it is crucial to equip workers with the ICT skills needed for the digital transformation. While digitalisation has been slow in making its way in Latin America [see Chapter 1 and (OECD/IDB, 2016[20])], new digital technologies are certainly going to reshape future labour market and societal demands. LAC governments are also already making important steps towards the design of training interventions aimed at responding to the skill challenges that more connected and digital labour markets will soon bring about. Several programmes to enhance general and specialised ICT skills have been deployed in the region.

In Mexico, for instance, 32 Digital Inclusion Centres (Puntos Mexico Conectado – Centros de Inclusión Digital) were set up across the country, providing basic digital skills programmes. The aim of the initiative is to bridge the digital divide and enhance broadband internet access for all. Centres are operating in each state of Mexico and the initiative targeted to marginalised areas with high poverty rates. In terms of the content, the “Puntos México Conectado” programme aims to provide digital literacy, programing, coding, innovation and entrepreneurship courses free of charge to enable a greater digital inclusion and generate better-informed and more community-involved citizens. Similarly, the programme wants to promote the creation of more efficient and productive micro, small and medium enterprises throughout the country. In addition, the programme has also been used to bridge gender gaps and encourage young girls to approach ICT skill development. As of now, 54% of the enrolled students are young girls.

In 2012, Peru passed the National Digital Literacy Plan. This plans aims to train individuals in ICT skills, the use of computer tools as well as mobile devices. Around 107 online courses were made available also to teachers as part of the Educate Peru Programme with emphasis also on developing digital skills to incorporate ICT use in the classroom. At the end of the programme, over 25 000 teachers had received training on line and approximately 2 000 taking courses on integrating ICTs in the classroom. In addition, the Peruvian PRONABEC (the public agency in charge of granting scholarships) provides grants to graduate and college students to engage in ICT-related careers in national universities and abroad and the national Council for Science and Technology (CONCYTEC) finances postgraduate studies and research in ICT.

In similar ways, both Costa Rica and Brazil have been devoting resources to finance the development of ICT skills. Costa Rica’s state universities, for instance, offer ICT training courses for the general population, particularly its vulnerable segments (e.g. the elderly and disabled).3 In Brazil, the programme Science without Borders sponsors graduate studies and research abroad for Brazilians supporting, also, foreign researchers to carry out research in Brazil’s priority development areas.

As digital technologies spread across the region, online learning offers a significant opportunity to leverage broadband network access to spread knowledge across the economy in a cost-effective way.

Online learning can take many forms. It can be delivered as traditional university-style courses online, or as informal training related to specific work skills or lifetime learning activities. One advantage of online learning relative to traditional learning is that this provides opportunities for individuals in remote areas to access relevant material, irrespective of their location and, potentially, at a cheaper cost.

Massive Open Online Courses (MOOCs), academic courses offered online often provided at no cost, aim at large-scale interactive participation from around the world. From an operational point of view, MOOCs avoid the cost of setting up expensive training boot camps whose effects are limited in time. Second, their flexible structure allows learners to go through the materials at their own pace, while motivating them to collaborate on common learning objectives.

However, despite the tremendous possibilities offered by the use of digital technologies for learning, challenges emerge. In the context of LAC countries, in particular, the potential availability of technical solutions to connect students to learning opportunities face the challenge that not all students will be ICT-proficient and able to access these training opportunities. According to Survey of Adult Skills (PIAAC) data, in fact, individuals who are more likely to participate in open education in Latin America, as across OECD countries more broadly are mainly young, educated and skilled workers (Figure 4.2). Evidence also suggests that open courses are mostly used by those who combine work and formal education and to a lesser extent by those who are only employed. Much needs to be done by policy makers and training providers to make online training truly available to the low skilled.

Second, MOOCS and online courses do not usually lead to a certification, a qualification or a title that can be used in the labour market to signal one’s credentials and skills. Across many OECD countries (and more so in Latin America where online courses are still in their infancy), micro-credentials are mostly unregulated and the validation of contents and of quality varies very much across the spectrum of available training options. This poses several challenges to the use of MOOCs and online courses as the lack of a certification framework hinders their acceptance.

Figure 4.2. Open education in Latin America

% of each category

Source: OECD calculations based on OECD (2017[21]), Survey of Adults Skills (PIAAC) (2012, 2015, 2017) (database), http://www.oecd.org/skills/piaac/.

Tools and initiatives to assess and respond to future skill needs

Information about the quality of adult learning programmes in Latin America is rather scarce. Some evidence, however, seems to point out that Latin America, education and training systems may not be oriented to economic development (Alaimo et al., 2015[10]) and that strengthening the alignment of training content to employers’ needs would be required.

There are several ways to ensure this alignment. In first instance, the content of adult learning programmes has to be responsive to current (and future) skills needs in the labour market. For this, governments need to build data collection infrastructures to timely analyse their labour market and systems and for this information to feed into curricula revision.

The most common approaches used by governments and ministries include the development of medium-term occupational forecasts or of assessments of current skill needs that draw from labour market information (usually labour force surveys) or vacancy surveys.

Several challenges lie ahead of the policy maker when trying to develop effective tools to assess, anticipate and respond to skill demands. One major risk, for instance, is that the Skill Assessment and Anticipation (SAA) exercise may not be well aligned with the potential policy uses. For instance, the way skills are defined has to be useful for policy making, providing an output that the policy maker can understand and whose results are sufficiently disaggregated at the regional, sub-regional or sectoral levels for the policy makers to be able to use them.

However, skills are difficult to measure and there may be no strict correspondence between how skills are understood in the skills development process (e.g. formal education credentials) and what is required in the labour market (e.g. specific occupations). Skill needs are commonly approximated by measuring which occupations are, or will be, in greater or lesser demand as they mirror economic projections. Given the need for planning in the education system, skills are also frequently approximated by qualifications (e.g. technical/vocational, university), fields of study (e.g. law, medicine, economics, catering) or, to a lesser extent, by measuring specific cognitive or non-cognitive skills (e.g. numeracy, literacy, soft skills, etc.) (OECD, 2016[22]).

Bearing these challenges in mind, some countries in Latin America have implemented good initiatives to improve labour market information.

In Chile, for instance, the Public Employment Service (PES) uses information on labour demand, collected through interviews, surveys and roundtables, to align their training offer with labour market needs. In addition, the government runs an online portal called the National Employment Exchange (BNE), (www.bne.cl.) a free site where companies publish job offers and workers can submit CVs for consideration. In addition to offering job matching, the BNE portal also contains links to programmes, training and career guidance. Mexico has several programmes to link students, teachers and jobs. The “Circuito conectados contigo” portal (“Circuit connected to you”) helps companies match with both students and teachers.4 In 2013, the “Total Uni” portal was launched to help high school students to connect to jobs in the labour market (Total Uni) (www.totaluni.com).

In the Dominican Republic, the Ministry of Labour created a job portal that matches employers with potential workers. Candidates can register their information and apply to jobs. In September 2015, 11 000 businesses were listed on the platform and nearly 42 000 jobs posted.5

In Brazil, as part of the Pronatec programme, different ministries can submit requests to the Ministry of Education for creating specific training programmes that correspond to the identified needs. The Ministry of Education centralises these requests and coordinates the opening of funded training programmes with public and private training providers. The training opportunities under the Pronatec programme are therefore, in principle, restricted to areas of identified needs. However, OECD (2018[1]) finds that in practice the training offered under Pronatec generally does not correspond to skill needs, but mainly reflects the capacities and preferences of training providers. In addition, Brazil has a publicly certified platform for CVs managed by the National Centre of Scientific Research, the CNPQ (Lattes platform) (http://lattes.cnpq.br/). It is often used by university graduates. In September 2015, the site hosted nearly 1.2 million CVs.

Although some countries in the region have made good efforts in setting up information systems, job market information can be made more accessible and used more effectively in combination with career guidance and mentoring to support students (and adults more generally) in their training decisions.

Private-sector supported training in Latin America

Information on employers’ engagement in adult learning provision is limited, especially when it comes to internationally comparable data. While previous studies shows that on-the-job training positively impact both workers’ wages and firms’ productivity and innovation (Almeida, Behrman and Robalino, 2012[23]), in Latin America, as in most other countries, too many employers are hesitant to provide on-the-job training.

Several challenges lie ahead and market failures make employers and employees to invest sub-optimally in job-specific training (OECD, 2017[24]). Available evidence6 suggests that firms very rarely supply training in transferable skills in particular. Employers are in many cases reluctant to provide such training, fearing that workers could leave the firm in search of a premium for their newly acquired skills somewhere else. Conversely, employers have greater incentives to provide job-specific skills training that are immediately useful in production.

According to Flores Lima, González-Velosa and Rosas-Shady (2014[25]), and based on the World Bank Enterprise Survey, between 30% to 50% of LAC firms in the manufacturing sector offered their workers training through short, structured courses focusing on specific job-related skills. This is a relatively large share of firms, especially when compared to other developing countries in different areas of the world. However, the average figures mask great heterogeneity across firms of different sizes, with SMEs participating in training activities much less than larger firms in the region.

Large variation in the number of people involved in training is also recorded across countries (Figure 4.3). Evidence shows that firms in Latin America train between 49% (in Chile) and 78% (in Ecuador) of their workers, though no information is available about the duration of the training nor on training provided by firms in the informal sector, which represent the vast majority of firms in LAC countries.7

In addition, the highly skilled workers are more likely to benefit from these courses and get more out of them: the share of workers that receives training is higher for skilled than for low skilled workers (Flores Lima, González-Velosa and Rosas-Shady, 2014[25]).

Figure 4.3. Incidence and intensity of on-the-job training in formal firms in Latin America

Note: Data refer to 2017 for Argentina, the Plurinational State of Bolivia, Colombia, Ecuador, Guatemala, Peru and Uruguay; to 2016 for El Salvador, the Dominican Republic and Honduras; to 2010 for the Bolivarian Republic of Venezuela, Chile, Costa Rica, Mexico and Panama and to 2009 for Brazil.

Source: Adapted from the World Bank. (2009[26]), World Bank Enterprise Survey, 2009-2017, https://microdata.worldbank.org/index.php/catalog/enterprise_surveys.

Results from the OECD Survey of Adults Skills (PIAAC) offer some additional insights to assess the involvement of firms in workers’ training. On average across LAC countries participating in the survey, 63% of workers report to have received funding from their employers for at least one learning activities. Mexico has the largest share of workers participating in training activities in the region, with about 80% participating in training. Ecuador has the lowest share (around 60%) pointing to the fact that while many firms in Ecuador engage in training (more than 73%), training covers only part of their employees and that inclusiveness could be strengthened.

Figure 4.4. Employers’ investment in training could be improved

% of participants who have received funding from their employer for at least one learning activity

Note: Data on employer spending refer to formal or non-formal job-related adult learning.

Source: OECD (2019[27]), Priorities for Adult Learning dashboard, http://www.oecd.org/employment/skills-and-work/adult-learning/dashboard.htm.

The size and managerial quality of LAC firms help to explain participation in training

SMEs are less likely to provide training to their workers

In Latin America, smaller firms are less likely to provide training to workers than larger firms. Data from PIAAC show that only 40% of workers in SMEs participated in training, compared to 69% workers in larger firms. While a similar pattern can be found in all other countries participating in the Survey of Adult Skills (PIAAC), in Latin America the gap in training provision between small and large firms is almost twice as large (approx. 30%) as the OECD average (17%).

This gap, that in Mexico and Ecuador is even greater than 30%, is particularly worrying and represents a key challenge for Latin America, considering that SMEs account for more than 80% of employment and more than 90% of firms in the region.8 By engaging less in training, SMEs are potentially missing great opportunities for growth and development.

Management quality is generally low in the region

Evidence for Latin America shows that the positive relationship between training and firms is likely to hold especially when firms have developed adequate managerial skills to allow returns from investment in human capital to materialise in productivity gains. At the firm level, high skill use is associated with higher productivity. What happens inside the workplace – the way work is organised and jobs are designed as well as the management practices adopted by the firm – is a key determinant of how skills are used (OECD, 2019[28]). In particular, it has been argued that better skill use and managerial skills are important in explaining the differences in productivity among firms and countries and go hand in hand with firms’ productivity, workers’ engagement and innovation (Bloom and Van Reenen, 2007[29]). Measure of management practices in large firms in the manufacturing sector are estimated to explain between 20% to 50% of the total factor productivity (TFP) gap between different countries.

Evidence from Flores Lima, González-Velosa and Rosas-Shady (2014[25]) shows that an increase in the proportion of skilled workers increases the productivity of manufacturing firms with more than 100 employees. In particular, it is estimated that a 1% increase in the share of high-skilled workers could lead, on average, up to a 0.7% increase in productivity in large firms.

Figure 4.5. SMEs are less likely to provide training to their workers

Percentage point difference in the participation rate between workers in SMEs and large enterprises

Source: OECD (2019[27]), Priorities for Adult Learning dashboard, http://www.oecd.org/employment/skills-and-work/adult-learning/dashboard.htm.

Managerial skills are, however, relatively low in many LAC firms. Evidence from the World Management Survey (Figure 4.6) shows that managerial quality in LAC countries stands below that of the OECD average and that firms are more poorly run than across OECD countries. The performance is especially low in countries such as Colombia or Brazil, while firms in Mexico reach OECD-average standards. This suggests that few managers in the region follow the best management practices and many would benefit from receiving training in this area. Interventions aiming at adopting more effective managerial practices in the region could lead firms to better utilise existing skills and reap the productivity gains, increasing returns to training for all.

Figure 4.6. Management score, average 2004-2015

Source: Adapted from the World Management Survey (2015[30]), World Management Survey 2015, https://worldmanagementsurvey.org.

A coherent approach is needed: The role of a whole-of-stakeholders approach

Boosting the participation of individuals and firms in adult learning calls for a holistic approach and for the recognition that the different actors that are involved in adult learning may respond differently to specific sets of incentives. Failure to engage each actor of the system with targeted interventions can hinder the overall participation and promote an unequal participation in adult learning (OECD, 2019[31]).

Barriers to the participation of individuals in adult learning, for instance, usually relate to their lack of motivation, financial and time constraints or limited awareness of the potential benefits of participating in training. Those barriers, however, can affect different groups of individuals in different ways. High-skilled workers, for instance, may be more prone to engage in training than low-skilled workers are as they are usually better informed about the potential benefits of life-long learning and face fewer financial constraints. Low skilled workers, on the other hand, may face stronger barriers to participate in adult learning as they lack adequate ICT skills or face more pressing time constraints.

Similarly, the incentives needed to boost the participation of firms in adult learning may differ from those required to engage individuals. While some firms, for instance, may see training as a means to fill narrow skill gaps that are hindering productivity growth, individuals might prefer to engage in training that ensures the development of portable and more transversal skills. Likewise, the training needs of workers employed in firms of different sizes may also be very different and, as such, the strategies pursued by firms to fill those gaps and the incentives needed to engage them effectively in adult learning.

Making sense of the variety of different actors and of the differences in the motivations to participate in adult learning represent an important challenge for the policy-maker who needs to strike the necessary balance between different sets of incentives while boosting participation for all.

How to balance public and private investment and involve employers in supplying training activities

As mentioned above, there are many reasons why employers should invest in developing the skills of their workforce. By keeping employees’ skills up to date, for instance, firms can adopt or introduce new technologies in their workflow and remain competitive, increasing productivity and profits.

However, a range of market failures and barriers such as the lack of information, capacity and/or resources mean that the amount of investments in education and training by employers could be sub-optimal, particularly in the case of SMEs. This is why government intervention may be justified and needed (OECD, 2017[24]).

Policy intervention aimed at fostering employers’ engagement in training may require acting along three different axes.

First, it is well known that the returns from adult learning are generally difficult to measure and, as such, employers may be hesitant to finance training directly or to grant time off to workers to participate in learning activities. As a consequence, governments should be providing more robust information and guidance to firms as this is crucial to raise awareness about the benefits of training amongst employers and help them identify their own skills needs and potential funding opportunities (i.e. tax incentives, levies or subsidies) that could be leveraged to provide training to their workers.

Second, given that much of adult learning takes place at work and in the firm, policy intervention should be aimed at building the capacity of employers to provide truly relevant training to their workers and to understand and plan on what skills will be needed in the future. Employers, especially those operating in small firms, lack the resources to carry out sophisticated workforce planning exercises and to provide training accordingly. Governments, therefore, can act in both cases by supporting and targeting specific firms with subsidies to build skills development capacity and reduce training costs while also strengthening their efficacy.

Third, and more generally, policy makers may consider setting up well-designed financial incentives to boost engagement in training, trying to strike the right balance between the support to firms and individuals, on the one hand, and the prevention of potential deadweight losses, on the other. These three aspects are analysed more in detail below.

Providing information and guidance to employers is crucial, especially in the case of small and medium enterprises

Often times, employers are not aware of the importance of training nor have a clear understanding of how to develop the skills of their workforce to benefit from technological change and innovation. As a consequence, many employers may be reluctant to invest in training as they might not be able to clearly identify the positive returns to such investments and fear the possibility that other employers would poach their most skilled employees.

Providing concrete evidence of the benefits stemming from job-related learning activities on productivity and employee retention and workers engagement can act as a powerful incentive for employers to engage in training (OECD/ILO, 2017[32]).

In this context, government intervention can help a great deal by setting up tailored guidance, information campaigns and other initiatives focused on raising awareness of the benefits of training investment and better skills use, disseminating good practice and sharing expert advice are key.

This support is especially important for SMEs which, in many instances, lack the capacity to assess their skills beyond the very short-term and to plan relevant training activities to help the development of their business (Ellis, 2003[33]).

Two intertwined challenges emerge. On the one hand, as mentioned, managerial quality is relatively low in LAC countries and especially in SMEs. On the other hand, SMEs lack sufficient resources to address skill challenges individually. Providing targeted coaching to employers to help them develop managerial skills to identify their own firm’s skill needs and develop an appropriate training offer is crucial.

Creating employer networks can be a solution to both challenges as these often provide leadership and management skills programmes, in addition to their role as facilitators of knowledge exchange and capacity building. Networks of employers have, in fact, the advantage of pooling the resources of smaller actors together, creating a critical mass and economies of scale that SMEs can leverage to their own advantage (and that would have been impossible to create if small employers had to act individually).

Skillnet Ireland, for instance, is an example of enterprises joining forces to deliver adult learning. It is based on the premise that groups of employers in the same sector or region would have similar training needs and, therefore, that they would be interested in sharing the cost of training delivery. Skillnet, funded through training levies, currently consists of 66 learning networks, which include over 15 000 companies, most of which (94%) are SMEs in the agricultural or services sector. In 2017, over EUR 30.2 million were invested in 6 000 upskilling and training programmes for almost 50 000 people (OECD, 2019[34]).

In Australia, the Industry Reference Committees (IRCs) also play an important role in assessing and anticipating changing skill needs of different economic sectors. Each year the IRCs develop an “industry skills forecast” (ISF)9 to identify skills gaps, emerging skill needs and associated training needs for the whole industry sector, leading to an assessment of whether there is a need to update training packages (OECD, 2018[35]). In doing so, IRCs consult widely with key industry stakeholders to develop the ISFs and disseminate precious information to all firms in the sector.

In other countries, government-supported management training programmes are available to employers, often with a focus on SMEs. A good example is the United Kingdom, where eight innovative projects to develop leadership and entrepreneurship skills in SMEs received government support as part of the UK Futures Programme (OECD, 2019[28]).

Similarly, the French Occupation and Skills Observatories (Observatoires Prospectifs des Métiers et des Qualifications: OPMQ), jointly funded by employers’ organisations and trade unions, carries out skill planning activities benefitting all firms in the economy. These activities encompass the mapping or listing occupations in high demand, as well as surveys and analyses on skills management, training and recruitment needs, and the creation of certification schemes.

The government, through its subsidiaries and agencies can also support directly firms in developing a response to skill challenges. An interesting example of this type of initiatives is the Joint Purchase Training (Yhteishankinoulutus) in Finland. This programme, offered by the PES, aims at supporting employers who want to retrain existing staff or set-up training activities for new recruits. The programme helps employers identify the training needs, select the appropriate candidates for training and help them participate in the procurement and planning of that training (i.e. find an education provider who can deliver the tailored training). This programme also helps building a positive learning culture in the company that can further foster training participation.

Similarly, in Flanders (Belgium), the government-funded Centres for Adult Basic Education send “ambassadors” to companies to review work-based learning opportunities and discuss the benefits of providing these opportunities within the company. They then aim to find ways to give more room to work-based learning, in particular for the low skilled (OECD, 2019[28]).

In many countries, social partners are also heavily involved in the adult learning system and they play a key role in building the capacity of employers to train for the future. In Germany, for instance, the initiative Securing the Skilled Labour Base: Vocational Training and Education (CVET) (Fachkräfte sichern: weiterbilden und Gleichstellung fördern) supports employers in increasing adult learning participation and gender equality at work. Funding is provided for five types of activities: i) creation of staff development structures (i.e. training centres), particularly for skill upgrading; ii) creation of interlinked CVET structures for SMEs; iii) initiate dialogue across branches of industry; iv) strengthen the ability of business stakeholders to promote equality of opportunity; and v) develop work time models and career pathways adapted to phases in a worker’s life. Companies receive coaching and training to analyse their staff’s skills and training needs and they learn practical ways of implementing/creating staff development structures and on how to work with partners (OECD, 2019[31]).

Effective financial incentives to encourage employers participation in adult learning

There are several and important reasons for allowing the market (and not government intervention) to steer education and training decisions. When the correct incentives are in place, the choices of individuals and firms usually minimise costs and lead to greater benefits for society (OECD, 2017[24]). However, when certain pre-conditions are lacking, market failures can emerge and, as such, an inefficient allocation of resources and sub-optimal outcomes.

Among the risks associated to allowing training decisions to be determined solely by the market is that of insufficient participation in training as some groups of individuals may lack sufficient incentives to engage or firms may under-invest due to uncertainty, myopic behaviours or asymmetries of information.

In those cases, well-designed financial incentives aligned with government priorities can be useful tools to boost incentives to participate in training. There are important caveats however, when implementing financial incentives and benefits as well as drawbacks should be considered (Table 4.2). As with any policy intervention, a key challenge is to ensure the effectiveness of the incentives while minimising potential deadweight losses.

A few considerations are important. The design of financial incentives needs to consider the institutional context as well as the specific objectives that such policy intervention is meant to achieve. Before introducing any intervention, the policy maker should carefully assess the reasons for any apparent under-investment in training and the best way to create (or restore) adequate incentives. This means, in other words, that the policy intervention (the financial incentives) needs to be well targeted to address the specific challenge at hand. To complicate things, financial incentives come in different shapes and forms. These can be training or wage subsidies, tax incentives (direct tax cuts, tax credits) or levy schemes/training funds. Within this wide array of options, some types of financial incentives will be better suited to address the lack of motivation to participate in training while others, for instance, will be more efficient in spurring the development of transversal and portable skills in firms. The choice of the specific type of intervention is, therefore, crucial to achieve sound results with minimum deadweight loss and waste of public funding.

In addition, the efficacy of financial incentives depends on a range of framework conditions being in place in the country. For instance, while providing financial support to firms may be desirable to reduce the cost associated to participating in training, doing so without setting up a solid skills information system, helping employers make informed education decisions on the choice of education providers or on the skills to be developed may lead to considerable misuse of resources.

If the objective is to fill emerging technical skill gaps in the labour market, the government may consider promoting financial incentives that directly target employers. These can come in the shape of tax credits to invest in training or direct subsidies to promote learning in the firm.

Targeting financial incentives at employers rather than at individuals has the advantage that training is more likely to meet the specific needs of employers and, therefore, to fill gaps in labour market needs. One drawback, however, is that, by providing direct and unconditional support to employers through cash transfers, the government risks not being able to reach disadvantaged and vulnerable workers as employers have weaker incentives to provide training to those groups (OECD, 2017[24]).

Table 4.2. Benefits and drawbacks of training levies and tax incentives for firms
Financial incentive	Benefits	Drawbacks
Training Levies	Promote direct employers engagement and make them pro-active players of the adult learning system by giving them responsibility in training decisions. They bear a direct link with current labour market demands as this is an employer-driven strategy where firms are able to shape the training choices.	It requires firms to understand well their skill needs. This may be difficult to achieve for smaller firms that do not always have a good view of their own needs. These measure need to be accompanied by support and guidance to smaller firms. Larger firms are usually more likely to use these schemes and to benefit from it than SMEs. Identifying the adequate amount to be invested in the levy may be difficult in practice and this may lead to deadweight losses.
Tax-incentives for firms	Promote the pro-active engagement of firms that are benefiting from it by providing financial incentives firms to invest in training and to decide on what skills would be best for them to invest in. Incentives can be targeted to specific skill areas that are in need in the overall labour market and/or to disadvantaged groups of individuals. Tax incentives usually have a lower administration costs than other strategies as they leverage the pre-existing national infrastructure for tax collection.	Since the incentives are usually designed by the government, tax incentives are more effective when there exist a robust labour market intelligence system at the country level that can support the design of the policy intervention. Deadweight losses can emerge if tax incentives are not well targeted and if, for instance, they reach disproportionately those employers and firms that would have provided training anyways (usually larger and more competitive firms). It is important that the policy maker carefully target the incentive to firms with suboptimal levels of training or that face more pressing financial constraints (e.g. SMEs).

Solutions can be found so that the financial incentive is designed to reach employers under the condition that these provide training to most disadvantaged workers. The Training Grant for Employers in Estonia, for instance, covers between 50% and 100% of the training expenditures (with a cap) incurred by the employer. The exact amount of the incentive, however, depends on the age, educational level and employment history of the participant- where larger cash transfers are provided to those employers targeting disadvantaged individuals (OECD, 2019[28]).

Funds can also be made conditional on supplying training to the unemployed to ensure their re-inclusion in the labour market. An example among the numerous subsidies for employers to train the unemployed is the Individual Job Training (Individuele Beroepsopleiding – IBO) in Flanders (Belgium). This programme allows employers to hire a jobseeker and, with the help of the public employment service, to train her/him in the workplace over a period of one to six months, following a jointly established training plan.

Tax incentives (e.g. reductions/exemptions in social security contributions) are another alternative commonly used in both OECD and LAC economies to encourage employers’ investments in training. In Chile, tax incentives are available to train workers even before they are hired (Impulsa Persona ex Franquia Tributaria: Pre contrato). These training activities can last for up to two months. The objective of the programme is to develop or improve the skills of future workers in order to increase their employability, but there is no obligation for the employer to hire the individual at the end of the training. Other examples of subsidies to train unemployed in LAC countries are the many Jóvenes Programmes (see Box 3.2) that are currently targeting vulnerable youth.

As part of Impulsa Personas, Chilean firms also receive a tax credit on the costs incurred in providing training or Recognition of Prior Learning (RPL) up to a maximum of 1% annual wages. Similarly, in Argentina, firms can receive tax credit when their workers participate in any type of learning (i.e. formal basic education, professional training, RPL, or on-the-job training). Due to the predominance of the NTIs as instruments to provide training, the take up of tax credit has been low in the region (Alaimo et al., 2015[10]).

Tax incentives and subsidies for SMEs have been used in different countries and some of those examples can inspire LAC countries

Tax incentives can be especially important tools to engage SMEs in training and, therefore, a suitable solution to overcome the weak participation in adult learning of smaller firms in many LAC countries. A number of different approaches can be used. In particular, tax incentives could be.designed to help SMEs overcome cost barriers (e.g. Chèque Formation in Wallonia, Belgium; Profi!Lehre and Weiter!Bilden in Austria; Consortium for HRD Ability Magnified Program (CHAMP) in Korea). Other approaches, instead, specifically seek to help SMEs grow and become more competitive through skills investments (Industry Skills Fund in Australia, KMO Portefeuille in Flanders, Belgium) (OECD, 2017[24]).

The Formação-Ação in Portugal, for instance, focuses on a particular barrier to SME growth, namely management skills which is particularly important also across many SMEs in LAC countries. In particular, Formação-Ação combines classroom training, action in the company and individualised consultancy, with a view to developing the skills of managers and consequently increasing the competitiveness of SMEs. The programme covers specific thematic areas going from the implementation of management systems, the internationalisation of the firms and investment management. The Formação-Ação training activities are reimbursed up to 90% to companies, excluding the remuneration of teaching staff employed in supplying the training.

Subsidies and grants can also be used to target SMEs and help them engage in training. In Latvia, the training support for enhancing the competitiveness of enterprises covers 80% instead of 60% of the costs of general training and 45% instead of 35% of the costs of special training when the firm is an SME. While in Poland, the grants awarded through the National Training Fund cover 100% of the costs of lifelong learning for micro-enterprises, compared to 80% for all other firms.

Another set of programmes is open to firms of all sizes, but provides larger subsidies to SMEs. For example, the Crédit-Adaptation in Wallonia (Belgium) offers EUR 6-7 per training hour to large firms, and EUR 9-10 to SMEs. In France, employers with fewer than 250 employees receive an additional EUR 1 000 subsidy if they take on an apprentice.

In Finland, training offered as part of the Joint Purchase Training covers 30-50% of the costs, depending on the size of the company. The idea behind this programme is to support SMEs in building the capacity to identify their training needs and, eventually, to actually deliver the training. The Joint Purchase Training (Yhteishankintakoulutus), in fact, supports employers who want to retrain existing staff or set-up training programmes for newly recruited staff. Offered by the PES, it supports employers to define their training needs, select the appropriate candidates for training and find an education provider to deliver the tailored training. The PES also part-finances the training. There are different types of training that can be targeted to specific needs: i) Tailored Training (TäsmäKoulutus) for employers who want to retrain their staff due to technological or other changes in the sector (min. training duration 10 days); ii) Recruitment Training (RekryKoulutus) for employers who cannot find employees with the skills needed and want to hire, then train new staff (training duration 3-9 months); and iii) Change Training (MuutosKoulutus) for employers who have staff that has become redundant and help them transition to other job opportunities (training duration 10 days to 2 years).

In Japan, several programmes provide greater subsidies to SMEs, including: Career Keisei Sokushin Joseikin (which covers half the training costs of SMEs, compared to just a third for large firms); Career-up Josei-kin (which provides larger wage subsidies and higher ceilings on training costs for SMEs); and the Subsidy for Securing and Developing Skilled Construction Workers (which covers 90% of the cost of training for SMEs, compared to 50% for larger firms).

Another approach is to provide more flexibility and/or simpler procedures for SMEs. For example, in the Canada Job Fund Agreements, employers can apply for up to CAD 10 000 in government contributions toward the direct costs of training, such as tuition and training material – and they are required to contribute, on average, an additional 1/3 to these training costs. However, small businesses, with 50 or fewer employees, can benefit from more flexible funding arrangements, such as the possibility to count wages as half of their employer contribution or contribute a minimum of 15% (OECD, 2017[24]).

Training levies can be a good alternative to incentivise adult learning investment in Latin America

Levy systems are another option through which countries incentivise employers to contribute to the financing of adult learning (UNESCO, 2018[36]; OECD, 2019[28]). Training levies are a way to pool resources from employers and allocate them for expenditure on training. They are a form of collaborative solution, but differ from those that were discussed above in that, generally, they do not involve a government subsidy. Training levies can emerge either as a result of government political will (establishing the legislative framework for the levies to work) and/or from the initiative of social partners.

Levies ensure that employers contribute to adult learning and so that they are pro-actively engaging in upgrading the skills of their workforce and make them more competitive (Dar, Canagarajah and Murphy, 2003[37]).

Many OECD countries and partner countries and economies use levies systems, with vary levy rates (Box 4.3) and the size of employers’ contributions varies significantly across countries, sectors, firm size or funds.

In Latin America, a good example of revenue-generating levy is Brazil’s S–system (Sistema-S). Training provided through S-system is financed by a 1-2.5% levy on enterprises’ payroll that is collected by the social security system. Importantly, the Brazilian Ministry of Labour sets the training priorities that will set the goals of the training institutions supplying the training. The S-system covers different sectors going from industry and telecommunications (SENAI) to commerce (SENAC) and transport (SENAT). Moreover, there are specific institutes focussing on training for entrepreneurs and SMEs (SEBRAE, financed through several other funds), and for rural areas and social inclusion by providing literacy programmes (SENAR) (OECD, 2006[38]).

Box 4.3. Different designs and examples of training levies

The three major types of training levy schemes are i) revenue-generating (or revenue-raising) schemes, ii) levy-grant (or levy-rebate) schemes and iii) levy-exemption or train-or-pay schemes. However, in practice, countries often have hybrid schemes.

• Revenue-generating schemes: Employers contributions are used to finance publicly provided training, such as vocational schools. This type of training levies therefore do very little to incentivise employers to provide training to the workforce. Small firms are usually exempt from paying this tax. A typical example of this scheme is the SENAI scheme in Brazil.

• Levy-grant schemes: Levies are collected by training funds that focus on certain types of skills. Levy contributions are returned to firms that have to finance workers’ training that meets the funds’ criteria. The grant can sometimes even be larger than the levy paid. This creates an incentive for employers to provide training in pre-decided areas and skills. However, the disadvantage of this scheme is the high administrative costs for the firms, especially smaller ones. Examples of the schemes can be found across various OECD countries, notably France, Italy, Korea, the Netherlands and Poland.

• Levy-exemption schemes: Also known as cost-reimbursement schemes or “train-or-pay” schemes, under which a tax is imposed on employers, but which is reduced by the amount that enterprises spend on allowable training activities. This scheme has a lower administrative burden than the levy-grant scheme, but it assumes that firms know what their (and society’s) training needs are. Moreover, it may subsidise training that employers would also have provided without the levy-exemption.

Although companies themselves pay the training levies, the real financial burden may fall on the employees, through lower net-of-tax wages. Who “really” pays for the training depends on how likely firms and workers are to adjust their behaviour based on changing training costs, and the bargaining power of different stakeholders such as trade unions. Moreover, another drawback of levies is that, in practice, large employers tend to benefit disproportionately from them. This is often because small firms lack the capacity to determine their training needs, to plan such training, and to file applications for cost reimbursement or grants. Examples of this scheme can be found in Australia, Belgium, Canada, Greece, Spain and the United Kingdom.

Source: OECD (2019[28]), Getting Skills Right: Future-Ready Adult Learning Systems, https://dx.doi.org/10.1787/9789264311756-en; OECD (2017[24]), Financial Incentives for Steering Education and Training, https://dx.doi.org/10.1787/9789264272415-en; Dar, A., S. Canagarajah and P. Murphy (2003[37]), Training Levies: Rationale and Evidence from Evaluations, http://documents.worldbank.org/curated/en/705121468779070378/Training-levies-evidence-from-evaluations.

References

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Notes

← 1. ALMPs play a key role in helping unemployed finding jobs in developed OECD countries, however, in Latin America skills development programmes for unemployed are less prevalent.

← 2. These results are based on the Survey on Productivity and Human Resources Training in Establishments (Encuesta de Productividad y Formación de Recursos Humanos en Establecimientos - EPFE), collected between 2011 and 2013. In every country except Colombia, surveys were representative at the national level. In Colombia, sampling was designed to make the survey representative at the sectoral level for three specific sectors: manufacturing, commerce, and services. Results presented in (González-Velosa C., Rosas D. and Flores R., 2016[11]) refer to the manufacturing sector.

← 3. Examples include the National University’s Informatics Assistance and Training Institute (ICAI), the National Technical University’s Centre for Communication and Information Technologies (CETICS)1 and Costa Rica University’s Integral Programme for the Elderly.

← 4. www.sems.gob.mx/en_mx/sems/programa_circuito_conectados_contigo.

← 5. http://ovi.mt.gob.do/empleateya/home/.

← 6. The available data generally come from small-scale international surveys that may not be very representative of the varied landscape of adult learning in Latin America.

← 7. In addition, these statistics refer only to formal firms and are susceptible to over-estimate overall training participation as informal employment is not here measured.

← 8. Notice, however, that large firms still contribute nearly 70% to the region’s gross domestic product (GDP) (OECD/CAF/UN ECLAC, 2016[39]).

← 9. Despite their name, however, the ISFs are not forecasts but rather qualitative snapshots of current and future skill needs in the industry.