Executive Summary

A recent OECD publication on the training of adult workers noted that "...international comparisons suggest that many of the implications of theoretical models of training, like many of the findings of empirical studies for one or a few countries, do not easily generalise to a a broad cross-section of OECD economies (1999a: 160)."

• It is not sufficient to rely on theories about the way in which enterprise-training is expected to work.  No theory or set of expectations in this field is sufficiently reliable to permit a policy-maker to proceed without recourse to evidence.
• Evidence obtained from one country is not necessarily transferable to another. Both the level of participation in training and the outcomes from training seem to be particularly variable from country to country, possibly in response to the differences in the institutional arrangements, in the culture and in the prevailing economic conditions.

There are at least three useful sources of data already available about the continuing vocational training of educational workers in New Zealand:

• The 1996 Education and Training Survey is possibly the single most important resource on work-based training given its explicit focus.
• The New Zealand also participated in the 1996 International Adult Literacy Survey (IALS) a survey that the OECD utilised to make international comparisons about participation in training.
• The New Zealand Employers Federation survey of the training practices of members conducted in 1997 provides information about the firm's perspective on training - although the low response rate reduces its usefulness somewhat.

Although these surveys have already received some analysis, each contains further possibilities for assisting policy formulation.

It is not just countries that vary in the extent to which they provide training and the benefits they expect from it.  There is also variation between industries within countries, and enterprises within industries may also have different training needs. And, of course workers too may have individual training requirements.

Even given the uniqueness of the patterns of training in each  country, industry, enterprise, or worker there are some facts about enterprise-based vocational education and training that are (almost) universal.

A skilled workforce is becoming more important

We live in the age of the knowledge economy and global competition.  New Technology and organisational structures require a more skilled workforce. In western countries employment is shifting towards more skill-intensive occupations and industries. Earning differentials have also moved in favour of the better education and those with more skills despite higher levels of educational participation.  Workers are expected to be more flexible, both in their current employment and in finding alternative employment.  In order to take advantage of these opportunities, is is essential that there is both an awareness of the benefits of training and that training is provided efficiently.

At the same time, there are aspects of the labour market that do not sit comfortably with the picture of a rapidly increasing demand for skills. The number of part-time and casual jobs has been growing disproportionately. While employment has been  growing in high skill areas, some categories of low-skill work have also increased their employment share. Nor is it clear that people are changing their occupation more now than previously, or that enterprises faced with competition are those that provide the most training for their workers. And technology can sometimes remove the need for skilled workers instead of creating it.

Although there has almost certainly been overall growth in the demand for skilled labour that growth has not always been rapid or evenly distributed through the economy.

Governments have removed industrial training arrangements to provide industry with a competitive edge.

New Zealand governments have pursued policies of economic deregulation since the mid 1980s.  In particular, there has been an increased exposure of the domestic economy to global competition.  Better training and skill formation was expected to provide New Zealand enterprises with a competitive edge - the ability to improve productivity by working smarter or better. In this, New Zealand echoed developments in many other countries.

The institutional response was also similar to that of many other countries - the creation of a national system of qualifications that was flexible across learning environments, was portable, and met the needs of industry.  The New Zealand Qualifications Authority  oversaw the creation of the National Qualifications Framework in 1991. In 1992, the Education and Training Support Agency (now Skill New Zealand) was established, and a framework put in place for the creation of Industry Training Organisations (ITOs).  ITOs are responsible for setting national skills standards, developing training packages for employers, arranging delivery of on-and-off-job training, and assessing the competence of individual trainees.  Skill New Zealand's role was to support the ITOs and promote the establishment and implementation of national standards at the industry level.

Enterprise-based education and training is an important activity.

The OECD Employment Outlook June 1999 ranked New Zealand 6th highest out of 24 OECD countries in the level of participation in career or job-related training and 2nd highest in hours of training.  (International comparisons are difficult and other survey data suggest a slightly less positive, but still reasonable, view of New Zealand's performance in adult education and training). The Outlook estimated the New Zealand workers receive an average of 2,627 hours of work-related training and education during their working life - the equivalent or more than two years of schooling.

Workers with higher educational qualifications, in professional occupations, and in permanent full-time jobs usually receive more training that other workers

Training is not like other investments - it becomes the property of the person who is trained. If the enterprise pays for the training, then it runs the risk of the worker either expecting to be paid more or leaving to find a better job with another employer (selling what are now his or her new skills). On the other hand, the worker may not have the money to pay for the training, and even if they did, might feel put upon if asked to pay for the training regardless of its inherent value.

In practice, enterprises do pay for a great deal of training that is 'risky'. Although we identify a number of factors that make the investment in the skills of their workers by enterprises a little more secure, the literature suggests that more training would occur if ways could be found to help workers pay for part of their training in return for the benefits they receive from that training.

Research often find that there are substantial benefits for workers from participating in work-based education and training as well as for the enterprises that provide it.

It is not uncommon to come across research that says training increases a worker's wage by about 8%. It is the size of these effects that should make us suspicious. Most people would be lucky to get an increase in salary of this size from a full additional year of study - yet some research suggests that the same result can be obtained from a one or two week course at the workplace.

The truth is that it is very difficult to find out what effect training by itself has on wages because it so bound up in a package - and almost every bit of that package is leaning towards higher wages.  Where training is not universal, workers are selected for training either because someone thinks that they will benefit from it or the worker puts him or her self forward for training. Training is frequently part of a promotion - either recent or expected. And, of course, 'successful' companies may be more likely to provide training.  It is difficult to disentangle the effect of the training from the nature of the person, the job and the enterprise - despite the best efforts of statisticians. Similar concerns apply to the studies that are based on firms.

None of these reservations should be taken to imply that training does not help people to do their work better (faster, or more efficiently with fewer errors and less waste, or with a lower risks of injury to themselves or others, or they provide a better quality product or service) nor to deny that there are wage and productivity benefits. When asked about the training in surveys, worker soften say that they found it helped them to do their job better.

Although we know a great deal about some aspects of training, there is a great deal we don't know about the way in which skills are created.

Most training is not measured

Almost all the research on training is about formal training - learning that takes place during a time set aside from normal work. Many people, though, learn informally while they are working, by watching workmates, asking questions, or just trying to figure things out for themselves. Little is known about this type of training - expect that there is a lot more of it than formal training. For instance, we don't know how informal differs from formal training - whether informal training replaces formal training in some enterprises, or whether formal training is very different. Our ignorance adds a little uncertainty to what we think we know about formal training.

There are few studies that link the benefits of training with the costs of that training.

The crucial issue for the evaluation of training is not the size of wage or productivity effects - it is about the net value added by training after costs have been taken in account. Yet there is little information in the literature on training about costs. The absence of this information (which is probably not collected because it is not practicable to collect it) is regretable.

The expansion of training

The increased provision of industrial training is considered a priority by many governments. There are two approaches to expanding the provision of training. Te first is to provide more training to workers who previously received no training. This is a contested issue. There is a view that workers with a low probability of receipt of training receiver greater benefits from their training. If this true, efficiency and equity considerations coincide - it is more efficient to allocate training to workers who have none. The evidence in favour of this position, however, is not conclusive.

Alternatively, it is suggested that workers who receive training were selected for training because they were thought more suitable and that workers who received no training were less suitable. Such considerations suggest that if training provision is to be expanded, additional training should be directed at workers who already receive some.  Although this is an important policy issue, the literature is not sufficiently strong to provide a basis for decision making.