Funding Mechanisms for Financing Vocational Training: An Analytical Framework

Abstract

Vocational training is a vital component of the drive to enhance productivity, stimulate economic development and competitiveness , to reduce the incidence of unemployment and to lift disadvantaged groups out of poverty. However, training provision in many countries is underfinanced and fragmented and, as a consequence, fails to meet the skill needs of the economy and of society as a whole. A central theme of this paper is that the system of training finance (and, in particular, its constituent financing mechanisms ) has a twofold purpose. Not only does it supply funding for the various elements of the national training system but, if appropriated fashioned and executed, can play a central role in leading to a more efficient, competitive, market oriented national training system. Thus the paper emphasizes the central role that financing strategies can (and should) play in enhancing the effectiveness and efficiency of training systems, through incentives, greater competition amongst training providers and the integration of private and public provision.

This paper is addressed not only to an academic audience, but also to policy makers and practitioners of vocational training, who must deal with the adaption of the national training system to meet national and social needs , in the face of ongoing technological change, globalization and increased international competition.

This paper draws extensively on Ziderman (2003, 2010), providing both an update and broadened regional coverage.