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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 (

Byung Hee Lee (