TVET Financing and Employer’s Ownership in Skills Training for an Emerging Workforce

Abstract

The mismatch between the demand and supply of skills is a global concern. The private sector, being the principal user, has a critical role in skills training. However, in many developing economies, e.g., India, the role of the government is more prominent than the formal private sector. This tends to create a supply-driven TVET system, rather than a demand-driven one. The private-sector involvement is limited to private-sector training partners and does not really bring the employer’s skin in the game holistically for skill development.

Employer ownership of institutions to impart skills can be a key differentiator and provide competitive advantage for a country’s skill base. The moral hazard problem of employers (of “I train, you poach”) is a key impediment for employer ownership, one of the ways to address this moral hazard problem is the proposed “reimbursable industry contribution” (RIC). Other key methods for enhancing ownership can be by internships or on-the-job training (e.g., apprenticeships), technology contribution, gifting/sharing of machinery and equipment to vocational schools, first right on phased-out equipment and machinery (before being scrapped), providing experienced trainers, designing curriculum, and finally ensuring assessments are as per their needs.

Skills are the software of business and the industry its hardware. The hardware is only as good as the software makes it. The formal private sector understands this software best; it knows when to repair, how to update, and what its future requirements will be; hence, a more intensive and holistic role of the private sector in skill development is required.