Adapting PES training policy to better service demand. Small scale study 2012

Transcription

1 Adapting PES training policy to better service demand Small scale study 2012

2 Table of contents Introduction The PES role in training in the context of the Europe 2020 agenda An interpretative model of training policy Training demand Training delivery: relevance of partnership in the training design Cooperation to integrate training and other policies Other factors influencing training policy Expenditure and participants in labour market training LMP expenditure and changes through the crisis period Training expenditure within active LMPs Training expenditure by direct recipient Activation through training Summary PES training policies links to demand and recent changes Questionnaire responses Links between training and demand Training in direct response to employer needs Recent changes to PES training policies Summary Practical examples of training linked to demand Overview of the six case studies Approaches to training Summary and conclusions...47 Annex: Case studies...49 Austria: New skills programme...49 Belgium (FOREM): Skill Centres...53 Belgium (VDAB): Talentenwerf...56 Finland: Productisation of Labour Market Training...61 Lithuania: New vocational training system...67 Poland: Tailor-made training on demand...69 This report has been prepared for the European Commission by the European Job Mobility Laboratory (EJML), which is a network of academics and labour market experts established to support the Commission s work on mobility issues by providing capacity for research and as a vehicle for testing and validating labour market interventions and experiences with policy makers and practitioners alike. The work of the EJML is supported by the European Union s Programme for Employment and Social Solidarity PROGRESS ( ), which is managed by the Directorate-General for Employment, Social Affairs and Inclusion of the European Commission. For further information see: The information contained in this report does not necessarily reflect the position or opinion of the European Commission. July

3 Introduction The Europe 2020 strategy 1, launched by the European Commission in 2010, lays out a 10-year plan to achieve economic growth and prosperity in the European Union. Two of the key priorities of the strategy are to promote smart and sustainable growth based on knowledge and innovation and an inclusive, high level and high quality of employment. These ambitions are dependent on a wide range of factors but one central issue that needs to be addressed is the level of skills in the labour force and how this can be improved and constantly developed, firstly to keep pace with technological change and ensure that Europe remains competitive in a global market and, secondly, to make labour markets more efficient by reducing persistent mismatches between the supply and demand for skills. Even today, in a post-crisis environment with low growth prospects, widespread austerity and almost unprecedented high levels of unemployment in countries all around Europe, there remain large numbers of vacancies in the job market which employers are struggling to fill because they cannot find workers with the right skills. Supporting increased mobility of workers is one way to help to reduce such skills mismatches but fundamentally there is a need to improve the basic skill set of the labour force and to provide training that meets the demand in the market. Over recent years, European employment policy has increasingly recognised the central role of public employment services (PES) as co-ordinators of support for people making transitions in the labour market. This support includes directing people to training that will help them get jobs. This can be through referral to labour market training programmes managed or co-ordinated by the PES themselves, by referring people back to the regular education system, or by providing the financial support to help people follow training offered by private providers. The delivery mechanism is not important, the common point is that the PES has a key role to play in guiding people towards the training that is most appropriate to the specific needs of each individual and which will give them skills that are actually in demand in the market. Too often, however, education and training systems have been criticised by employers for not providing the skills actually required in the workplace. There is also a perception that training programmes for the unemployed are not always well targeted and are perhaps provided for the sake of trying to do something positive rather than to meet a specific demand in the market and therefore genuinely improve job prospects. If Europe is to achieve the ambitious targets of the Europe 2020 strategy this needs to change training needs to be carefully directed to give people the skills that are actually in demand from employers, both now and in the future. As the main public providers of job-matching services, PES are already in a privileged position in terms of access to information on the skills supply amongst jobseekers and in demand from employers. By working more closely with employers and by coordinating with other relevant stakeholders (social partners, sectoral organisations, education institutions, etc.) PES can consolidate that knowledge and gain an unparalleled picture of the skill needs in the labour market and use this to identify training needs. This study aims to investigate how PES are adapting their training policies to better match employer demand and, in doing so, contributing to reducing skill mismatches in the labour market. The study starts with a resume of the role of PES within the current policy context of training (chapter 1) and a presentation of an interpretative model adopted for the study (chapter 2). It then uses two sources of information to give an overview of recent trends. Firstly (chapter 3), quantitative analysis of published data on expenditure and participants in labour market policies, including training, looks at 1 July

4 the period to see if there is any evidence of recent changes in the use of training, particularly as a crisis response measure. Secondly (chapter 4), analysis of PES own responses to a questionnaire including questions dealing directly with training policy allow a more up-to-date qualitative assessment of how PES perceive they are reacting to the acknowledged need to make training more demand-oriented. Finally (chapter 5), the study reviews six case-studies of current training programmes implemented by PES in relation to the interpretive model described earlier. The full case studies form an annex to the report. Chapter 6 includes a summary of the main findings. The PES role in training in the context of the Europe 2020 agenda Key priorities of the Europe 2020 strategy 2 are to deliver growth that is both smart, based on knowledge and innovation, and inclusive, based on a high level and quality of employment. These objectives are inextricably connected to developing skills throughout the labour force and ensuring, at one end of the skills spectrum, the highest possible capacity for innovation, at the other, the basic skills needed to participate in the world of work and, throughout, that all workers have the opportunity and support needed to develop their skills at any stage of their career and become better equipped to adapt to change. Whilst it is clearly a priority to improve the basic system of education and training to ensure that young people enter the labour market with the kinds of skills and competences that are more relevant to the needs of employers than they are today, it is equally important to ensure adequate support for those that slip through the net and to increase access to lifelong training. Public employment services have a key role to play in this respect, though one that is sometimes underestimated 3. Although few European PES actually provide training in-house, they all play a key role in identifying training needs, directing people to training and integrating training with other employment services. Indeed, in their response to Europe 2020 and considering their role in implementing the employment guidelines, the European PES network has noted that PES are important partners for adult learning 3. In the 2010 communication An Agenda for new skills and jobs 4, the European Commission identified four main areas where employment and skills policies need to act in order to meet the challenges of developing a smart and innovative economy: 1. improving the functioning and regulation of the labour market (reducing structural problems such as unemployment, discouraged workers, excessive segmentation and the gender gap); 2. strengthening skills (adaptability and capacity to contribute to technological and organisational change; reducing skills mismatches in the labour market; increasing the capacity of vocational guidance and anticipation of skills needs, increasing labour mobility); PES and EU2020: making the employment guidelines work, Adopted by Heads of PES in Budapest, Hungary on June An Agenda for new skills and jobs: A European contribution towards full employment, European Commission, Strasbourg, 23/11/2010, COM(2010) 682 final. July

5 3. promoting job quality and working conditions (increasing job quality, labour productivity and employment participation; facilitating flexible working careers and promoting new forms of work organisation); 4. stimulating job creation and labour demand (active policies, job creation, entrepreneurship and self-employment). The role of public employment services has changed in recent years and progressed from a largely passive and standardised approach to the provision of support for the unemployed to a far more proactive approach (both active and preventative) aimed at a wider group of people who are out of work and taking into account their individual needs. This personalisation of support applies to training as much as any other service provided by the PES and is dependent not only on organisational change but also on developing better relations with employers and other actors in the labour market. In this regard, for instance, the final report of the PES Working Group on New Skills for New Jobs stresses that PES need to construct a bridge between the labour market and education, creating the necessary condition for good interaction and efficient matching between labour market needs and individual skills. The prolonged and acute nature of the current crisis affecting European economies and labour markets has forced policy makers to call for more action in relation to the identification of skill needs and training. Despite persistent high unemployment levels there are still significant areas of skill shortages and vacancies that employers are struggling to fill. The latest Commission communication 5 on how to tackle the dire employment situation proposes three main lines of attack: a) supporting job creation; b) restoring the dynamics of the labour market; c) enhancing EU governance. The second point is particularly relevant here because it explicitly calls for strengthening the role of both PES and training measures. In particular, PES should become transition management agencies and provide individualised support to help workers in making sustainable and effective transitions throughout their careers. In order to ensure effective intervention (i.e. to provide guidance, training and other assistance relevant to labour market needs) PES need to gather and exploit up-to-date labour market intelligence and maintain close communication with employers and other labour market actors. The communication places particular attention to investment in skills and identifies three main actions that are fundamental to a more effective training system: a) better monitoring of skills needs; b) better recognition of skills and qualifications; c) better synergy between the worlds of education and work. PES can make a considerable contribution towards the anticipation and management of the demand for skills both as the owners of a key information on the characteristics of jobseekers, job vacancies and placements and as a bridge between the supply and demand of labour. In this context, it is also relevant to note that the European Commission has been actively supporting the development of instruments at EU level to improve the information available on skills needs. For example, the European Vacancy Monitor, which is already operational 6, and the European Skills Panorama, which was announced in the Agenda for New Skills and Jobs and should be online before the end of As PES develop into universal transition management agencies two clear changes are occurring. Firstly they are working with wider range of clients than before (workers, employers, inactive groups), and therefore with a greater variety of needs, and secondly they have to adopt a more demand-driven approach in order to ensure that the support they provide equips people adequately for the needs of the market. To 5 Towards a job-rich recovery. European Commission, Strasbourg, 18/4/2012, COM (2012) 173 final July

6 facilitate these changes, PES have recognised that developing partnership and cooperation with other actors is a priority and have identified three areas for action: partnerships between PES and other actors at local level; cooperation with employers and providers of education/training services; and relationships (contractual or otherwise) with organisations equipped to provide specialist services 7. Putting the PES at the centre of a network of labour market actors is consistent with modern labour market theory (e.g. transitional labour market approach of Schmid, Auer, Gazier) in which the PES are described as a 'new' Public Employment System, thereby expressing the idea that the governance of labour markets is not achieved by a single Ministry or Public Agency, but through network formation. Through a collaborative approach PES should be better positioned to interpret and anticipate labour market trends, particularly at the local level. But this change does not happen overnight and requires organisational change investment in establishing new relationships with key players (employers, trade unions, other social actors, training institutions), a stronger customer orientation (both businesses and individuals), and new training delivery processes. Such developments provide the basis for a new approach to developing skills in the workforce. In this context, the next chapter proposes an interpretative model of training policy to support subsequent analysis. An interpretative model of training policy In reviewing the training policies of PES and any changes that may be occurring in order to make the training provided more demand-oriented it is necessary to take into account one strategic and three organisational issues (Figure 1). The strategic aspect concerns the resources available which affect the capacity of PES to deliver training to all people that need it and, to a lesser extent, the quality of that training. The level of resources available to the PES in each country depends on the relative commitment that the government makes to funding of active labour market policies in general and, within that budget, the relative priority assigned to training measures as opposed to other forms of intervention (e.g. subsidised employment or direct job creation measures). The issue of resources is clearly a fundamental limiter to PES in terms of what they can do but the three organisational aspects are much more open-ended and offer opportunities for alternative interpretation: The training demand: if demand is really to be the new driver of PES training policy, what kind of demand should be addressed? How is a representative picture of training demand to be built? The work process (organisational instruments used, parties involved and their relationships): if services are changing (targets, channels, mixes, partnerships), what elements are changing training-related work processes? In this respect, based on the literature, a basic question stands out: how is the delivery process to be handled (with special attention to the training design) and what are the main models for delivering training? Integration between training and other active and passive labour market policies: how are training interventions coordinated and integrated with other active and passive policies and with the functioning of the labour market in general? In this respect, it is necessary to consider the way in which cooperation with the various actors involved is handled, and hence the capacity 7 PES and EU2020: making the employment guidelines work, Adopted by Heads of PES in Budapest, Hungary on June July

7 to generate learning through daily practice and to ensure continuing improvement. Figure 1. Interpretative model of the main factors influencing PES training policy Although they may have an advisory role, PES ultimately have little power in determining the resources available for training since these are determined within the framework of government spending generally. Moreover, institutional and historical factors play a significant role in determining the level of spending on active labour market policies and the relative priority given to training. On the other hand, PES have a key role in the three organisational factors, given that they can play different roles, both in terms of their level of involvement at different stages of the process, and in terms of their responsibilities during the delivery process and coordination of partnerships with employers, training organisations and other relevant stakeholders. Before considering the information available on training policies and recent changes, it is worth examining these three dimensions further in order to highlight some practical aspects and implications. Training demand In assessing how to best contribute to the EU-2020 objectives, European PES have clearly identified a need to adopt a more demand-led approach towards managing services generally and training in particular 8. Training services that respond directly to existing or anticipated demand should, in theory at least, be more effective than traditional, standardised training products that may not give people the skills actually needed in the market. However, when taking the decision to tailor training to meet demand the first question has to be how to identify and define the demand that should be met. In practice, there are at least three different types of demand: The first is explicit demand for training from companies and individuals i.e. specific requests from employers who need people with particular skills or from individuals who want training in a specific area in order to help them take up a job. 8 Public Employment Services contribution to EU 2020, Draft output paper July

8 Secondly, it is essential to consider silent or implicit demand 9 for training from companies and individuals, which, for various reasons, is not expressed, but is nevertheless present and real: companies with employees who are about to lose their jobs and need retraining, small firms unable to identify their training needs, unemployed people discouraged from returning to the market, unemployed people who are strongly disadvantaged and not immediately employable, young people with no work experience who do not apply for training, etc. Lastly, there is the so called system demand, which is unrelated to the specific needs of individual businesses or workers, but stems from the local or national economic and social fabric via various channels and analytical instruments (the most commonly used are centralised analysis of vacancies, employers demand surveys and qualitative sectoral analysis of structural changes and perspectives, technological foresights). System demand differs from explicit and implicit demand because it derives from a top-down process rather than a bottom-up one. In other words, system demand is not submitted by a customer (business or individual), but is primarily the result of a research process. Analysis of system demand is a tricky area in relation to the provision of training, as it may be represented in widely different ways. However, system demand is crucial to orient overall training policy and it is no coincidence that the European Commission is supporting investment in this area through the new 'EU Skills Panorama' 10 which should help to identify emerging skills shortages at European level. Models for training provision refer to a prevalent definition of the skills demand, which becomes the model s driver and is, in turn, influenced by the methods and instruments available to assess that demand in the national/local system and the quality of the information provided. There needs to be, therefore, an investment in the identification / management of demand-related information (from businesses and employees, present and future, individual and system, represented by collective subjects and various stakeholders) in order to properly and continuously identify the current demand for training. How demand is identified has specific effects on both training provision and effectiveness. It is possible to formulate some examples in order to understand the practical impact of the different types of demand on training policy: Explicit demand: responding directly to the current demand of businesses is likely to create a flexible supply that varies over time, is highly exposed to cyclical fluctuations and tends to be pro-cyclical; in general it is it likely to be more focused on the present rather than the future because enterprises rarely 9 The difficulties that companies have to express demand are discussed, among others, in Cedefop, 2011, Learning while working, Success stories on workplace learning in Europe: 10 Towards a job-rich recovery. European Commission, Strasbourg, 18/4/2012, COM (2012) 173 final. In particular (p.14): Europe still does not have a comprehensive view of its skills needs. The EU Skills Panorama, to be launched by the end 2012, is the first step towards the converging of all existing anticipation tools. The Panorama will provide a single overview of European, national and sectoral findings on the short-term to medium-term prospects for jobs and skills needs as they evolve up to The Panorama will help identify emerging skills shortages in specific occupations across or within sectors. It will be a resource for skills observatories at national, regional or sector level and for education and career guidance practitioners, as well as employment and services advisors. Cooperation between EU bodies carrying out forecasts and surveys such as Eurofound and Cedefop will also be improved. By focussing more systematically their analysis on a country basis they will further nourish the understanding of the national development and inform the Europe 2020 structural reform agenda. Convergence of tools and instruments will remain the most important priority in order to govern skills needs more effectively. July

9 have an explicit perception of future needs (especially SMEs) and because longterm scenarios tend to affect education more than training; System demand: analysis of strategies for economic and professional development within sectors and within territorial areas may create more stable and anti-cyclical investments, with a supply more capable of catering for future demand (e.g. new occupations, new sectors, the green economy, etc.). On the other hand, an institutional-bureaucratic approach to system demand (without an active and sustained participation from relevant actors and timely updates) could generate a rigid and inward-looking supply that is insensitive to actual (and future) demand. Ideally, assessment of demand would take into account all three types but, as should already be apparent, they are liable to present different results that may be difficult to reconcile, particularly when there are inconsistencies in terms of time, quantity and quality. It is important, therefore, to consider what type of demand is considered pivotal, how the PES can handle the demand and, more generally, the knowledge about skills. Training delivery: relevance of partnership in the training design Regarding the second organisational dimension (the work process), training actions can be initiated, planned and implemented (and also evaluated) in different ways that can impact on the capacity of the training to generate real improvements in workers' skills. In this context, co-operation between different actors can be crucial in the design of training. In any field of action, the interaction of different actors to achieve a single goal through cooperation not only contributes towards producing better end results but benefits individual actors through mutual learning. In training design the relationship between training and work is essential to ensure an actual increase in skills and, therefore, for the effectiveness of the training 11. For example, cooperation between training providers and businesses is generally low or non-existent when courses are on abstract themes that have little to do with the work. On the other hand, cooperation and mutual learning are generally high when training is personalised, delivered on the job, with a congruous alternation of theory and practical learning aimed at improving work performance. This type of training, which responds to the specific demands of individual employers, or better still (in terms of efficiency) groups of employers, implies a significant investment from the PES in terms of co-ordinating between the employers, training providers and other actors in order to create the right environment and opportunities for an integrated training process. European PES each have their own established procedures for managing training and it is interesting to see the extent to which these involve cooperation in training design and delivery and whether this is changing in response to the agreed objective of providing a more demand-led service. Cooperation to integrate training and other policies Regarding the third dimension concerning integration between training and other labour policies, it is clear that transition management requires effective and extensive use of training not only to give those out of work the skills they need to find work, but also to confront the impacts of business restructuring and technological change. In 11 The importance of training set and of network contribution is supported among others in Cedefop, Learning while working, Success stories on workplace learning in Europe, Luxembourg: Publications Office of the European Union, 2011 July

10 this respect malfunctions in the system for generating and upgrading skills can reduce the wealth of the economic and social fabric in several ways: Skill losses: workers leaving employment run the risk of losing their skills or seeing them diminish due to inactivity; workers changing jobs may unintentionally leave behind consolidated skills, leading to waste in the system. Skills not required by the market: investment in training in areas where the demand for work or opportunities for self-employment are insufficient or nonexistent is another form of waste in the system; Unrecognised, informal skills: a worker with an extensive array of informal skills may find it hard to manage a career and have proper access to training to improve skills. There are risks for companies too. An extensive array of unrecognised informal skills complicates the management of professional knowledge, transferral to young people, continuing improvement and the use of appropriate training. Moreover, non-recognition of these skills creates problems for professional and geographical labour mobility, because it is more difficult to for potential employers to appreciate the skills of affected workers. The new vision for a competitive European economy hinges on the capacity of the labour force to continuously adapt to change. In their new role as transition management agencies, PES will have to support workers through careers with more transitions than in the past and this implies a risk of skills loss. So in managing the process there is a balance to be struck between training to provide new skills and avoiding too much waste by not using making best use of existing skills. The final impact of training therefore depends not only on delivering the training needed by the market but also on how training is used in relation to other active measures that can influence the labour market behaviour of both individuals and businesses, particularly on a local level. From the above, it is not easy to investigate the role of the PES role in training polices generally because their action is affected by a large number of relationships and interdependences. The study therefore focuses on the following signals of PES involvement in strategic fields of integration: 1) cooperating to build a representative picture of the demand for training, 2) cooperating to design and improve training through learning processes 3) cooperating with partners on other actions relevant for policy integration in the national / local context. Other factors influencing training policy: technical infrastructure and national tools It is not practical to cover all the complex institutional and organisational factors that influence training policy within this study but it is important, nevertheless, to mention National Qualification Frameworks (NQFs). By defining the link between skills, qualifications and occupations, NQFs provide a basis for dialogue between education and vocational training, support the certification of training results, and facilitate analysis of how employer needs (usually expressed in terms of occupations) translate into concrete training needs (programmes needed to provide the specific qualifications/skills required for the occupations in demand). The quality of the NQF in each country impacts on the action of the PES. For example, only an accurate NQF which defines skills that are universally accepted by the stakeholders in the labour market can enable proper recognition of informal skills. This is because informal skills are, by definition, related to on-the-job learning and can be described and recognised effectively only if there is a shared vocabulary that links knowledge, skills and workplace conduct with the ability to reach certain levels of work performance. If this vocabulary exists and if it translates into recognised certification, July

11 workers can more easily move from one job to another, or receive training for skills in a job close to their current profession, or be referred to appropriate refresher/update courses. If the vocabulary is not appropriate, if it is not recognised by major players in the local area and if it is not used to certify skills, there is an increased risk of providing unsuitable training without bridging the actual training gap, or of not being able to integrate training policy with the labour market (i.e. converting training inputs to placements). A European level review of NQFs undertaken by Cedefop (European Centre for the Development of Vocational Training) highlights how the process of harmonising these instruments is still far from being concluded 12. In other words, at the present time, training policies cannot use the same operational background in different countries. These national differences are also relevant for labour force mobility in Europe. Seen from a European perspective, a common system of skills recognition is crucial to support labour mobility and ensure full recognition of the skills of workers in transit, regardless of where they have been acquired. Furthermore, by the same token, training programmes can be recognised, thus reducing the mismatches generated by poor descriptions of skills and waste stemming from unrecognised skills. It is precisely for these reasons that the European Union's strategy for strengthening skills systems supports the development of a number of shared instruments 13 that are a fundamental prerequisite for an effective training system and more generally for upgrading and strengthening the skills of the workforce. Expenditure and participants in labour market training This section provides a quantitative assessment of the commitment that EU Member States make to active labour market policies (ALMP) in general and the relative importance of training as opposed to other forms of active measure. The analysis investigates whether there is any evidence of more priority being given to training, and in particular to training organised with employers, in response to the crisis. Analysis is based on data from the Eurostat Labour Market Policy (LMP) database, which collects information on publicly funded interventions for the unemployed and other disadvantaged groups from national administrative sources 14. LMP data are classified into three main types of intervention and nine detailed categories: Services (category 1) - Labour market services aiming at providing information and guidance about job opportunities, stimulating an active job search, matching services, etc. Note that the category as a whole also includes the administrative costs and general overheads of the PES. Although these should be separated from the costs of jobseeker services in a sub-category, there are a number of countries which have not yet managed to do so which means that data on relevant service costs cannot be used for cross-country comparison or aggregated with the costs of LMP measures to give an overall picture of ALMP efforts. Measures (categories 2-7) - interventions that aim to improve employability or to incentivise the provision or take-up of employment, including selfemployment. There are six different categories of LMP measure, including training. 12 A bridge to the future. European policy for vocational education and training , Cedefop, European qualifications framework (EQF), European credit system for VET (ECVET), European quality assurance framework for VET (EQAVET), Europass July

12 Supports (categories 8-9) interventions providing financial support aimed at sustaining out of work income (mainly unemployment benefits) and early retirement for labour market reasons. Labour market policies have conventionally been grouped as active or passive policies, though the distinction between the two is becoming increasingly blurred as many passive benefits are being coupled with increasing requirements for recipients to take active steps to find work. Indeed, the recent Employment package recommends further steps in this direction. In the Eurostat classification, the group of LMP measures corresponds to the conventional understanding of active policies (ALMP) and the group of LMP supports to passive policies. More recently, elements of LMP services covered in category 1 of the Eurostat database particularly individualised support for job-search activities are also being considered as an important element of active policies but, as noted above, the data do not yet allow these to be taken into account in a comparable way so that when discussing ALMP below we refer always to LMP measures (categories 2-7 of the Eurostat classification). LMP expenditure and changes through the crisis period According to the latest available figures, which refer to 2010, total expenditure on LMP at the European level amounted to around 2.2% of EU-27 GDP ( July

13 Table 1). The largest part of this expenditure (1.4% of EU-27 GDP) was devoted to LMP supports, which cover financial assistance aimed at maintaining and supporting out of work income and early retirement ( passive policies); 0.6% of EU-27 GDP was spent on LMP measures to support employability, which include training activities, and 0.25% on LMP services which cover services for jobseekers (mostly) provided by the PES together with all other costs of the PES 15. Expenditure on LMP varies considerably between Member States, ranging (in 2010) from more than 3% of GDP in Ireland (4.0%), Spain (3.9%), Belgium (3.8%), and Denmark (3.4%), to less than 1% in Slovakia, Greece and Cyprus (all around 0.9%), Lithuania (0.8%), the Czech Republic and the United Kingdom (0.7%), Romania, Bulgaria and Malta (between 0.5% and 0.6%). Total LMP expenditure as a percentage of GDP remained relatively stable between 2006 and 2008 but increased substantially in 2009 by more than a third (34%) compared to the previous year - as the numbers of unemployed swelled as a result of the economic and financial crisis. Expenditure then stabilised with little change in Category 1 includes services for jobseekers in sub-category 1.1 and all other costs/overheads of the PES in sub-category 1.2. The relative size of sub-category 1.2 varies between countries depending on the range of competences of the PES (e.g. in some countries it includes costs of administering unemployment benefits whilst in others these are borne by separate organisations). Unfortunately the breakdown between the two elements is incomplete in several countries so that it is not possible to quantify the active element of this expenditure (i.e. services for jobseekers). July

14 Table 1. Public expenditure on labour market policies by broad type of intervention as % of GDP, 2006 and 2010 Countries are ordered by total expenditure in LMP services (category 1) LMP measures (cats. 2-7) LMP supports (cats. 8-9) Total LMP (cats. 1-9) (a) (a) (a) (a) Ireland Spain Belgium Denmark Netherlands Finland France Austria Germany EU Portugal Sweden Italy Hungary Latvia Luxembourg Slovenia Estonia Poland Slovakia Greece Cyprus Lithuania Czech Republic United Kingdom Romania Bulgaria Malta (a) 2010 data include 2009 data for the UK (categories 1-7) and EL (all categories). These figures are included in EU27 aggregates. Source: Eurostat (online data code: lmp_expsumm) The majority of the change in 2009 can be attributed to the rising costs of providing unemployment benefits as expenditure on LMP supports rose by 45%. However, it is important to recognize that expenditure on services and measures also rose significantly. Figure 2 shows, for the EU as a whole, how the different components of LMP expenditure changed in comparison to the unemployment rate during the period. The first chart (on the left) shows LMP expenditure expressed simply as % of GDP; in 2009 expenditure on all components increased in response to the rising unemployment rate, but the low weight of services and measures in comparison to supports makes their changes almost unnoticeable. In the second chart (on the right) the different weights are eliminated by showing expenditure on each component as an index compared to their value in Here, it is possible to see that expenditure on all components changed in a more or less similar fashion, though there are still some notable differences. In 2009 the increase in expenditure on supports exceeded the change in the unemployment rate. This is likely to be the result of a number of factors firstly because category 8 in the LMP database includes supports for short-time working which were widely used in countries such as Germany. Here, money is spent to try and keep people in work and out of unemployment. Secondly, due to the high inflow to unemployment during the period the proportion of unemployed who were eligible to receive insured benefits was higher than normal (because the proportion who were long-term unemployed and had exceeded the entitlement period was lower than it would be in a more stable July

15 period). The slight decline in expenditure on supports in 2010 then probably reflects reduced spending on short-time working and an increase in the numbers of long-term unemployed, some of whom will become ineligible for unemployment benefits and will have to resort to other forms of social assistance. The increase in expenditure on services is indicative of increased expenditure by PES, for example as staff numbers were increased to cope with rising caseloads. Expenditure on LMP measures also increased significantly but by less than the other components. Unless budgets for ALMP increase automatically in response to client need there is always likely to be a lag between rising unemployment and increased expenditure on LMP measures since changes have to be supported by policy decisions at government level, which are usually taken only periodically. The lower rate of change could also be indicative of budget constraints affecting PES. Figure 2. LMP expenditure by main type of intervention in relation to the unemployment rate, EU-27, LMP expenditure expressed as % GDP (left chart) and converted to an index 2006=100 (right chart). Sources: LMP expenditure: Eurostat, LMP database (lmp_expsumm). Note 2010 figures include 2009 data for EL (all types) and UK (services and measures). Unemployment rate: Eurostat, LFS (lfsa_urgan - total aged 15-64). Between 2006 and 2010 total expenditure on LMP (measured in constant prices) increased in all countries except Malta, Germany and Sweden (Table 2). The scale of increase varied from extremes of more than +550% in Estonia to less than +3% in Denmark. Elsewhere there notable increases of nearly 130% in Ireland and more than 50% in Latvia, Hungary, Lithuania, Slovenia, Spain, Romania, Greece, and Slovakia. The observed changes derive from different combinations of the three main components of LMP expenditure. In general, an increase in total expenditure was associated with increased expenditure on LMP supports but there were exceptions in Cyprus, Poland and Denmark even though the unemployment rate rose over the same period in all of these countries. Expenditure on supports doubled or more in Estonia (almost 9 times the 2006 value), Ireland, Latvia, Lithuania, Spain, Romania and Bulgaria. Expenditure on LMP measures also increased in the majority of countries (20 July

16 of 27); it doubled or more in Estonia, Latvia, Hungary, Cyprus, Slovenia, and Poland, but it also decreased in four countries (Romania, Italy, United Kingdom and Bulgaria) where total expenditure increased over the period as well as in the three countries where total expenditure declined. For LMP services, the picture is more fragmented; expenditure reduced in eleven countries, sometimes quite significantly (e.g. Latvia and Slovakia), whilst it increased in others, in particular Estonia (+248%), Denmark (+140%) and Sweden (+72%). Reductions in expenditure on services occurred mostly in smaller countries so that at EU level there was still a substantial increase (23%) over the period. Overall, the changes observed at EU and national level demonstrate how the level of unemployment has been an important driver of LMP expenditure over the crisis period but, at the same time, they also highlight the variety of policy approaches adopted by Member States. LMP expenditure, and the components thereof, often moved in different ways in countries confronted with similar shocks in unemployment. This reflects differences in social priorities, financial constraints and institutional structures. Table 2. Changes in LMP expenditure in constant prices (2000), (%) LMP services (category 1) LMP measures (cats. 2-7) LMP supports (cats. 8-9) Total (cats. 1-9) Estonia 247,7 164,9 885,2 556,3 Ireland -26,2 41,3 215,5 129,6 Latvia -50,4 135,7 103,9 94,9 Hungary -9,4 151,3 85,3 91,7 Lithuania -14,6 17,4 256,1 86,3 Slovenia 18,6 99,2 93,5 84,3 Spain 28,7 5,2 111,2 76,9 Romania -19,1-66,2 138,5 73,9 Greece -13,8 43,8 76,2 65,5 Slovakia -36,0 79,4 97,5 58,3 Italy -20,1-18,6 85,2 46,5 Czech Republic -7,1 48,9 69,2 44,0 Luxembourg 30,0 18,9 50,9 37,8 Cyprus 11,9 416,0-3,0 27,6 United 8,5-11,6 64,6 27,0 Kingdom Portugal -5,4 35,0 19,7 21,7 EU27 23,0 11,7 21,9 19,2 Belgium 13,5 42,3 6,6 16,9 France 27,4 24,0 6,7 14,0 Austria 11,9 27,4 5,3 11,5 Bulgaria -22,7-71,1 194,9 10,3 Finland 2,0 18,7 5,7 9,2 Netherlands 8,3 4,5 7,4 6,7 Poland 17,1 99,4-42,8 5,9 Denmark 140,1 14,3-16,3 2,8 Malta 54,6-37,4-5,2-0,1 Germany 41,4-5,8-21,8-11,5 Sweden 72,3-15,8-41,1-14,6 Note: 2010 data include 2009 data for EL (all types of intervention) and UK (services and measures) Source: Eurostat, LMP database (expsumm) The extent of the differences can be seen in Figure 3 which shows the sensitivity of expenditure on LMP measures (left chart) and supports (right chart) to changes in the unemployment rate over the period As expected, the sensitivity is generally positive but the extent to which additional unemployment influences LMP expenditure varies between countries. For example, in Ireland and Spain expenditure on LMP supports increased (as a % of GDP) two or three times more than in the Baltic countries, which experienced similar increases in unemployment. At the same time, July

17 Denmark and Sweden reduced expenditure on supports while Italy, Hungary, Portugal, Greece and other countries with broadly similar employment difficulties increased expenditure in relation to GDP. For LMP measures (active policies) the link between changes in unemployment and expenditure are more diverse, even though the scale of the changes is relatively minor. Among countries with the highest increases in unemployment, Ireland and Latvia increased expenditure on LMP measures significantly, whilst Estonia, Lithuania and Spain increased it much less. On the contrary, among countries with a similar decrease in the unemployment rate, Germany slightly reduced expenditure on active policies while Poland increased it. Similar discrepancies can be seen throughout the range of changes in unemployment. Figure 3. Changes in expenditure on LMP measures (left chart) and LMP supports (right chart) in comparison to changes in the unemployment rate, Sources: LMP expenditure: Eurostat, LMP database (lmp_expsumm). Note 2010 figures include 2009 data for EL (all types) and UK (services and measures). Unemployment rate: Eurostat, LFS (lfsa_urgan - total aged 15-64). In conclusion of this analysis of total LMP expenditure, two points are apparent. Firstly, commitments to LMP generally - observed in terms of expenditure - vary considerably between countries. As an important element of active labour market policies, the commitment to training is inevitably impacted by the overall level of spending. Secondly, although unemployment levels have clearly been the main driver of LMP expenditure overall, the extent to which countries have increased or decreased spending on the active and passive components of that expenditure varies considerably. This reflects a combination of different priorities and constraints on the national policy mix, which have to be taken into account also when considering training separately. Training expenditure within active LMPs At EU level in 2010, LMP measures (categories 2-7), which include training, accounted for just over a quarter (26%) of total LMP expenditure. When measured in constant prices, expenditure on active measures has increased by around 12% since 2006, though total LMP expenditure has increased by more (19%) so that the share accounted for by measures has reduced slightly. The increase in expenditure on LMP measures between 2006 and 2010 was common to all countries except Romania, Italy, United Kingdom, Bulgaria, Malta, Germany and Sweden, with the highest increases being observed in some of the new Member States (Cyprus, Estonia, July

18 Hungary, Latvia, Poland, Slovakia and Slovenia), all of which, however, started from low spending levels. Within the group of LMP measures, the Eurostat classification by type of action recognizes six categories of intervention (nos. 2-7) 16. At EU level, training is by far the most important category of active measure, accounting for 39% of expenditure in 2010 (Figure 4), a share that has remained fairly stable over the period. In decreasing order of importance, the other categories of active measure are: employment incentives (25%); supported employment and rehabilitation (14%); direct job creation (13%); start-up incentives (8%) and job rotation and job sharing (<1%). Figure 4. Expenditure on LMP measures by category, 2010 (Millions of Euro) Note: 2010 figures include 2009 data for EL (all types) and UK (services and measures). Sources: LMP expenditure: Eurostat, LMP database (lmp_expsumm). Investment in LMP training varies enormously between countries, not only in terms of the total resources devoted to it, but also in the use of training in relation to the other LMP instruments (Figure 5). However, before considering in detail differences between countries in terms of training expenditure it is necessary to bear in mind the definitions applied in the LMP methodology which have some impact on coverage within the training category. Firstly, in cases where there is a policy to encourage unemployed people to return to regular education, the costs of which are covered by the education budget, then training costs included in the LMP may be lower than expected. Secondly, although income support paid to trainees - either as a specific training allowance or as continued unemployment benefits should be included in the training category, there remain some cases where amounts spent on continued unemployment benefits for people in training cannot be separated from regular unemployment benefits and remain in category 8 and are therefore counted as LMP supports. Thirdly, the LMP data deal only with interventions that are specifically targeted at the unemployed or other disadvantaged groups. As a result, apprenticeship schemes are normally excluded from the LMP data because they are considered to be part of the regular offer of education and training open to all young 16 Eurostat, LMP Methodology Revision of June July

19 people. The exception is when specific support is provided to promote apprenticeship amongst particularly vulnerable or hard-to-place groups (e.g. incentives for employers to take on people without basic qualifications). This means that in some cases where the regular apprenticeship scheme is managed by the PES (e.g. Ireland, Malta, Slovenia) and possibly considered locally as part of labour market policy, the costs will appear in LMP category 1 as part of general PES costs and not as training expenditure. This avoids major inconsistencies in the training category compared to other countries where apprenticeship is handled by another organisation (e.g. the Ministry of Education) and is considered as education rather than labour market policy. Figure 5. Expenditure on LMP measures by groups of categories, 2010 Note: 2010 figures include 2009 data for EL and UK. Sources: Eurostat, LMP database (lmp_expsumm). In 2010, training represented a particularly important share of expenditure on activation measures in Austria, Portugal and Finland (all 60-80%) and still the major part in Malta, Ireland, Germany, and Italy (all over 50%). On the other hand, Hungary, Luxembourg, Greece, Poland, Bulgaria and Slovakia all spent less than 10% of their ALMP budget on training (Figure 5). The figures demonstrate quite different patterns of spending. Some countries devote relatively few resources to training and instead prioritise measures based on incentives to create or take up regular employment, including self-employment (Greece, Slovakia, Luxembourg, Romania, Cyprus, Sweden, and Spain). Other countries prioritise spending on direct job creation (where public money is used to create non-market jobs - e.g. public works, community jobs) or subsidies to support employment for the disabled and others with reduced working capacity (Czech Republic, Netherland, Hungary, Denmark and Bulgaria). Poland spends almost equally on incentives and subsidies, while Italy, Germany and Malta dedicate a high proportion of resources to both incentives and training. Commitment to training and changes through time Overall, the commitment to training for the unemployed and other disadvantaged groups in each country depends on a combination of the total amount spent on active labour market policies (LMP measures) and the proportion of that spent on training as opposed to other types of measure. As has been shown above, both the amounts spent and the relative importance of training vary considerably between countries and July