Modernization in Vocational Education and Training in the Latin American and the Caribbean Region

Funding of vocational training

During the nineties, and specially in the last few years, the financing of Vocational Training has become a very important item on the public policies agenda of the Latin American region. Until the preceding decade it had not been a priority, for several reasons:

• Two large vocational training and/or technical education systems had become consolidated: a) that of Vocational Training Institutions (VTIs), with a tripartite regime and a financing mechanism via para-fiscal levy; and b) that of Technical Secondary Education (TSE) integrated into regular education systems, with their respective variants from one country to another, and their evolution in time. These two systems coexisted in most countries, with predominance by one or the other, according to the case. Both were (still are) financed with public resources, either through appropriations in national, provincial or municipal budgets in the case of TSE, or through para-fiscal levies in that of VTIs which –regardless of their source and of the greater or lesser participation by private agents (employers and workers) in their management– are official entities acting in the public sphere, that were created by the State through governmental and/or legislative acts (an atypical case, due more to historical or cultural-juridical reasons, but not invalidating this general picture, is that of the Brazilian "S System").
• Despite the fact that –as has always been the case– the direct effort of enterprises to train their manpower was obvious, the relative stability at the time of technological foundations, and of the organisational structure of the productive apparatus, turned training into a rather secondary activity, with a predominance of informal practices, that did not in general entail significant investments.
• Private offers already existed of technical education and occupational training, but their scope and incidence were limited, so that cumulatively their incidence was only relative, both in terms of investment and number of paying customers.
• The above supply was basically sufficient and adequate for the skilled labour needs of economies whose change dynamics were weak and that enjoyed the protection of tariff barriers against the competitive pressure of international trade. It was also sufficient to meet the populations’ demand for training and technical education services because, although demographic expansion was in full swing, demands for educational services converged upon general secondary courses, while at the same time the offers of VTIs and formal TSE systems abounded.

But as already pointed out, the situation changed drastically in the last decade. We need not dwell on the factors that caused the change: the internationalisation of trade, the acceleration of organisational and technological developments, the flexibilisation of labour markets, the emergence of lifelong education as a paradigm in the occupational itinerary of workers and in the processes of productive development, etc.

These factors have brought the training of human resources –and vocational training in particular– to the forefront of the agenda of development policies, which in turn has cast doubts about the capacity, relevance and importance of traditional public structures of training for work and has favoured the emergence of other offers, some of them already existing in a small scale, others quite novel and the result of economic, technical and social evolution.

Together with this questioning of the capacity of traditional, centralised public services to respond in an efficient, pertinent and timely manner to the needs of the productive apparatus and the demands of populations, came recognition of the emergence of a market of labour competencies with a variety of suppliers – some of them public but mostly private. They provided a decentralised offer: non-formal, private training bodies, expanding training services in firms and enterprises or at institutions financed by them, technological development centres combining innovation and transfer of technology through training, NGOs that provided training, etc.

This means that at the same time that a great amount of public resources continues to be poured into traditional systems, private investments grow in volume and diversity (unfortunately, there are no reliable studies to quantify them, even approximately). In any event, the economic drive does not seem to be lacking either by the State or enterprises and workers, in support of initial or ongoing training. Investments are made:

• By the State, in financing its TSE structures and –in the case of VTIs– in the application of resources from para-fiscal contributions.
• By enterprises, in in-house training, external contracting or other outsourcing mechanisms.
• By private training suppliers.
• By people who buy services in the private market.

We might draw the conclusion that the main problem in approaching the subject of financing of vocational training is not so much the volume or source of funding, but the rationalisation of this cumulative investment. This implies rationalising the supply of training, including quite naturally the reform of traditional structures.

This reform, however, is no internal matter of traditional systems: it pertains to their co-ordination and synergy with the new suppliers, and depends on the fact that they must link up with systems that had been relatively independent, like elementary and post-secondary technological education. In other words, we are saying that the problem of financing is subsidiary to that of institutional organisational arrangements, which in turn must be reconsidered by players.

The problem can be approached in many ways, and each way will appear differently in the various national contexts. In Latin America there are several possibilities that we enumerate below in a purely exploratory fashion. Different models could be derived to deal with the matter of financing in the more systemic context of national offers of occupational training:

A. Subsistence of systems of public financing of training at enterprises, with resources obtained through levies or para-fiscal contributions with specific allocation. Allocation is not always direct and exclusively for vocational training; sometimes it covers areas like the re-adaptation of workers laid off as a result of industrial restructuring or State modernisation, which include occupational retraining, managed now by new agents, like Labour Ministries.

B. Subsistence of the model of public financing of training at enterprises through formal TSE systems. The new aspect of this is the growing importance of decentralised administrations (federal states, provinces, departments, municipalities) in the financing of this service, either with their own resources or with transfers from the national budget, pursuant to decentralisation policies.

C. Emergence of systems of tax incentives, whereby enterprises recover their expenditures when they file in their tax returns. Such is the case of Chile, where enterprises that spend on training can get back their expenses when they pay their income tax, up to a ceiling of 1% of the total payroll.

D. Emergence of a number of permutations, particularly in VTIs, using mechanisms to open and flexibilise procedures. For example Brazilian enterprises can have exemption agreements with SENAI so that instead of paying in to that institution, they can use directly part of their contribution. But this must be authorised by SENAI, and that part can only be used to contract courses with it. In Colombia, enterprises can co-finance in-house training plans with SENA, and get reimbursements equivalent to 50% of their para-fiscal contributions.

In various ways, some promising financing strategies are becoming apparent in the region, as they seem to fit in with new socio-economic and institutional developments. There are three main aspects:

• The setting up of alliances or associations of the State with private executing or intermediary agents, to support training. In this way enterprises taking advantage of tax exemptions (the Chilean case), VTIs, managing authorities of TSE or official agencies in charge of training programmes targeting special populations, as well as Labour Ministries, Social Solidarity networks, and others, are free to contract training services with a wide range of suppliers. This breaks away from the prevailing merging of financing and execution of training services, and promotes the autonomy of regulating, financing and executing bodies. In summary, it entails a radical reshaping of the traditional scheme of public and private domains in occupational training.
• The diversification of State agents in vocational training: they are no longer confined to Ministries of Education and VTIs; new players have entered the field, like Labour Ministries, Social Welfare Secretariats, or Solidarity Funds, that have become public financing sources. This has been aided by the tendency to engage public and private agencies, with which the traditionally large investments to launch training services seem no longer necessary; advantage is taken instead of private initiatives and resources, whether profit or non-profit making.
• Greater participation by firms and enterprises as investors and/or executing agents in the training of their workers.

All this has led to the creation of veritable training markets, in which multiple public and private suppliers compete with each other. This trend is very favourable to stimulate the relevance, flexibility and efficiency of training, but there is a risk that market mechanisms, as well as greater leadership by enterprises, may result in a training offer aimed at those who can pay, or at meeting the more immediate needs of enterprises; or in low quality offerings, lacking sufficient added value or the cumulative knowledge of the training delivered by institutions.

For that reason, and owing to the need of injecting rationality into these markets, shaping them in consonance with the strategic need of providing integral training for the labour force, it is essential that the State should adopt an extremely active attitude, although completely different from is traditional role: it need no longer be the financing agent and supplier of training, but should instead play the following roles:

• Financing all training endeavours for the supply of basic, across-the-board skills, that in an open market private agents can hardly be expected to fulfil.

• Organisation, regulation, technical assistance and quality control of the training offer as a whole.

• Creation and promotion of truly integral training systems of occupational training, incorporating the already described diversity of suppliers and financing sources in a synergic way.

All this implies deep changes in the institutionality of training, in concrete terms in VTIs. But it also emphasises that it is important that those changes should be guided and conducted by a public institutionality that –although renewed– may ensure compliance with strategic goals for national development, and provide attention to vulnerable population groups, in linewith solidarity and social equity principles.

 

 

The Inter-American Centre for Knowledge Development in Vocational Training (ILO/Cinterfor)
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