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International Workshop 6-8 th June, 2005. Institutional Dynamics of Vocational Training System in Korea: Systems, Innovations and Results. Jin Ho Yoon Byung-Hee Lee. Table of Contents. Introduction Historical Evolution of VTS in Korea Features of the Reforms in the VTS

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Institutional dynamics of vocational training system in korea systems innovations and results

International Workshop

6-8th June, 2005

Institutional Dynamics of Vocational Training System in Korea:Systems, Innovations and Results

Jin Ho Yoon

Byung-Hee Lee

Table of contents
Table of Contents

  • Introduction

  • Historical Evolution of VTS in Korea

  • Features of the Reforms in the VTS

  • Evaluation on the Reforms in the VTS

  • Conclusion

1 introduction
1. Introduction

  • Government-led training system

    - government’s directive intervention in training

    through expanding public training centers or

    imposing the obligation of training to large firms

    - focused on the mass supply of the semi-skilled workers for economic development

    cf. state-driven and demand-led system (ILO, 1998)

    developmental skill formation system (Ashton et al., 1999)

    -> limited explanation focused on the industrialization era

  • Recent reforms in VTS since the mid-1990s

    - review the reforms of VTS during the last decade

    especially, look at the institutional logic on its reform,

    evaluate on the achievements and limitations of its reform

2 historical evolution of vts in korea
2. Historical Evolution of VTS in Korea

  • Training policy combined with industrial policy

    - training policy was considered as one of the key manpower policies needed to implement the economic development plan

    - With the shift of industrial policy towards heavy and chemical industries,

    the large firms were mandated to conduct training for new recruits,

    otherwise pay training levy

    cf. levy – exemption scheme

  • Weakening the government-led training system due to the economic development

    - government couldn’t create new demands for skills by industrial policies

    - dramatic change in the demand for training

    because of the trend toward higher education, intensified competition, the activation of union movement…

    - the lack of flexibility of government’s regulation on training system

3 features of the reform in the vts
3.Features of the Reform in the VTS

  • Employment Insurance System, in 1995

    (Unemployment Benefit Program + Employment Stabilization Program +

    Job Skill Development Program)

    - combination a social safety net with active labor market policies

    to make the labor market flexible

  • JSDP is the most important program to support training

    - funded by the insurance premium paid only by employers

    (0.1 – 0.7% of the total wage bill according to firm size)

  • The major changes in VTS by JSDP

  • - role of training policy was expanded

  • (employer-provided training + self-directed training for employees +

  • training for the unemployed)

  • - focus of training shifted from initial training to further training

  • - levy-grant scheme

  • Transforming toward facilitating voluntary training in the private sector

    but government interventions still exist.

4.1 Quantitative Expansion of Training

Training Participation rate of the insured workers : 27.1%(’04)

Proactive training for the unemployed when faced with mass unemployment

- considerable expansion of training for the unemployed right after the financial crisis

Employer-provided training increased considerably

- the number of employer trained by employers increased 12.9 folds from 1994 to 2004

But self-directed training for employees is still small.

4. Evaluation on the Reforms in the VTS

4.2 Effect of Training Program for Employer

  • How government intervention in training affects training investment for firms?

    - Question : whether training subsidies stimulate corporate training investment?

  • Constructing panel data on 644 companies covering 1999-2001

    • by merging two sets of data :

    • - Data on training subsidies obtained from the Employment Insurance Database

    • - Data on training expenditures obtained from corporate financial statements

  • Estimated Results

    • - newly subsidized firms increased training expenditure more drastically

    • compared to the firms with no change in subsidy status

    • - when formerly subsidized firms stop receiving training subsidy,

    • their investment in training tended to drop.

    • - the amount of per capita training subsidy significantly boosted

    • per capita training expenditure.

  • Training levy-grant scheme might be one of the successful institutional

    arrangement to cope with the under-investment in training

  • 4.3 Effect of Training For the Unemployed

    • How quickly training participants are reemployed compared with the untrained unemployed?

    • Follow-up survey of both treatment group (the trained unemployed) and

      comparison group (the untrained unemployed)

    • Estimated results

      - training participation raised the reemployment likelihood

      - but the contents of training such as training provider, training occupation do not have any significant relationship with the reemployment likelihood

    • Training for the unemployed deters from leaving the labor market

    4.4 Inequality in Training Opportunities

    • The main beneficiaries of the JSDP are large firms

      - training participation rate : large firms(1000+) 97.7%, small firms(50-) 2.9%

    • JSDP is inevitably focused disproportional on large firms

      because training subsidy can only be received when training is actually conducted

    • disadvantaged workers have relatively less opportunities for training

    • JSDP is not able to resolve inequalities in training opportunities

      because who is trained is decided by only employers

      and they tend to choose high-skilled workers for training

    4.5 Inability to Cope with the Labor Market Flexibility

    • Increase flexibility in labor market

      - increase of non-standard workers, employment adjustment, rise in the hiring of the experienced workers

    • Trade-off between employment flexibility and employer-provided training

      - The higher turnover rates and employment of temporary workers lead to lower training investments by firms

    • Analysis results

      - workers who quit jobs have less opportunities for in-company training

      - JSDP gives training after they lose their jobs

    • JSDP is disproportionally focused on employer-provided training

      - The system of subsidizing training only by individual employer is not able to

      cope with the trend of weakening corporate training investments by labor market flexibility

    V conclusion
    V. Conclusion

    • Reforms in the VTS have been implemented in the direction of facilitating training in private sector

      - contributed to expanding corporate training investments and training for the unemployed

    • There are still many problems

      - JSDP is a system in line with internal labor markets,

      therefore has innate limitation of being focused on regular employees of large firms

    • Needs to create a new institutional environment to facilitate voluntary training in the private sector rather than simply curtailing government intervention

      - Partnership of stakeholders might be able to overcome the problems such as training inequality and weakening trend of training due to labor marker flexibility

    • New efforts

      - training consortium, sectoral skill councils, regional active labor market policies…

    Thank You

    Jin Ho Yoon ([email protected])

    Byung Hee Lee ([email protected])