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This presentation was prepared for the Diagnostic Workshop with Stakeholders in Cuenca (November 24-25, 2014) in the context of the “Building an Effective Skills Strategy for Spain” project, a collaborative project of the OECD and the Government of Spain. The material was intended as input to the Diagnostic Workshop with Stakeholders and does not aim to provide a comprehensive assessment of Spain’s Skills System. It focuses on the Effective Skills Systems pillar of the OECD skills strategy.
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OECD Skills Strategy Building an effective skills strategy for Spain: Effective Skills Systems
Diagnostic Workshop with StakeholdersCuenca, 24-25 November 2014
How to unlock Spain’s full skills potential?
skills.oecd
Better Skills, Better Jobs, Better Lives
Pillar 4: How can a country provide enabling conditions
for building an effective skills system?
Create formal systems for information sharing and planning across government
portfolios
Assess the interaction effects of policies across ministries and levels of
government.
By improving policy coherence:
By facilitating informed decision making:
Conduct ex-post and ex-ante evaluations of skills policies
Develop and disseminate timely, accurate and targeted information to support
policy design and the skills, training and career choices of stakeholders.
skills.oecd
Better Skills, Better Jobs, Better Lives
Pillar 4: How can a country provide enabling conditions
for building an effective skills system?
Create effective, efficient and equitable financing policies that reflect the
relatives costs and benefits to all skills system actors.
Set up financing policies that create strong incentives for all stakeholders to
maximise skills development, activation and use.
By establishing effective financing systems:
Foster strong linkages and collaboration among governments and stakeholders.
By fostering strong partnerships:
skills.oecd
Better Skills, Better Jobs, Better Lives
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Linkages between Skill Development and Skill
Activation
Labour Market
ParticipationSkills Levels
skills.oecd
Better Skills, Better Jobs, Better Lives
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Financing and expenditure on Skill systems &
Employment & Skill Levels
Employment
Financing &
expenditure on
Skill systems
Skill Levels
• Create effective, efficient and equitable financing policies.
• Set up financing policies that create strong incentives for all
stakeholders to maximise skills development, activation and use.
skills.oecd
Better Skills, Better Jobs, Better Lives
Costs of education
• Lost earnings during education & up-skilling
• Tuition costs, books, materials
• Private costs of funding education (student debt – do financial
constraints have a big impact on skill development in Spain?)
• Public spending
Costs can be reduced by:
• Scholarships & Grants, Student loans
• Education Tax Breaks for students and employers
Returns come in the form of:
• Higher wages & profits
• Better employment opportunities, etc.
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Taxes affect the Costs and Returns to Education
skills.oecd
Better Skills, Better Jobs, Better Lives
Apportioning costs and returns through the tax system
• Personal income taxes lower costs and returns for individuals while they
have the opposite impact for government.
• Proportional personal income tax systems do not create a (direct)
disincentive to up-skilling, as costs and returns will be reduced in a
proportional way
• But higher personal income taxes make working, and therefore
education and up-skilling, less attractive.
• A higher degree of public spending on skill systems warrants a higher
level of personal income taxes and, possibly, a higher degree of tax
progressivity.
skills.oecd
Better Skills, Better Jobs, Better Lives
Financing Education in Spain: total spending on
education, primary to tertiary, is at the OECD average
• Overall skills spending is at the OECD average, while skills levels
in Spain are below average. Is there scope for efficiency gains in
the education system?
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skills.oecd
Better Skills, Better Jobs, Better Lives
Average tax wedge on workers in private sector earning 67% of
the Average Wage in Spain in 2013 is above the OECD average
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30
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Employer SSC Employee SSC Income tax
OECD average at 32.3% compared to 37.2% in Spain (2013 data)
skills.oecd
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1
Taxation and Skills Activation, Development and
Effective Use
Employment
Labour Tax Wedge
Skill Levels
Where taxes on labour are too high, it can be too expensive
to hire, and not rewarding enough to work, to up-skill or to
change jobs where skills are rewarded more.
skills.oecd
Better Skills, Better Jobs, Better Lives
Few employees receive employer funded training
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Better Skills, Better Jobs, Better Lives
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3
Low Skills – High (Youth) Unemployment
Poland
Estonia
Japan
S. Korea
Germany
Slovak Rep.
Czech Rep.
United States
Denmark
Spain
Austria
Canada
Italy
Norway
Sweden
NetherlandsFinland
Australia
France
Ireland
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PIA
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16
-24
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ea
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lds
Youth Unemployment
• Countries with low skills tend to have higher
unemployment, especially among young people (also
because “insiders” are “protected”).
Source: PIAAC, OECD Employment Database
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Skills, Employment, flexibility of Labour Markets and
increased training opportunities
Employment
Labour Tax Wedge
Skill Levels
Where skill levels are low, it is harder for workers to find work at a given
wage level. Flexibility of the labour market allows tackling labour and skills
challenges. More and better training opportunities for workers will help!
skills.oecd
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5
Skills & Taxation
Employment
Labour Tax Wedge
Skill Levels
Where skill levels are low, a high labour tax wedge
may make even more challenging to sustain high
employment levels. Is this a problem in Spain?
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Ejercicio 7.1: Sistemas eficientes de competencias
The average tax burden on low-income jobs in the private sector in Spain is
above the OECD average.
Why are employers not hiring the vast pool of unemployed workers? Is the tax
burden too high? Are skills of workers insufficient? Are wages too high? Are
economic circumstances too uncertain for employers to hire? Are labour market
rules too rigid? Are their other factors that contribute to the high unemployment
rate in Spain?
Please be as detailed as possible in your response.
The average tax wedge (personal income taxes, employee and employer social security contributions)
paid by low-income workers in the private sector earning 67% of the average wage (2013 data)
0
10
20
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40
50
60
Employer SSC Employee SSC Income tax
OECD average at 32.3%
How to unlock Spain’s full skills potential?
skills.oecd
Better Skills, Better Jobs, Better Lives
Towards an effective skills system in Spain
Cooperation between different stakeholders is crucial
for developing an effective skills system in Spain
skills.oecd
Better Skills, Better Jobs, Better Lives
The balance between skills supply and demand
varies at the local level
skills.oecd
Better Skills, Better Jobs, Better Lives
Unemployment rate, TL3 regions, Spain 2012
skills.oecd
Better Skills, Better Jobs, Better Lives
• Inject flexibility into the implementation of employment and skills policies
• Promote partnerships that can develop place-based responses to structural adjustment and local economic development
• Building capacities so policies can be adapted to local needs –leadership is critical
• Building a strong evidence base - data availability and sharing – creating the “glue” for successful partnership working
• Need to ensure the right level of governance (e.g. corresponding to travel to work areas)
Examples: Action Plan for Jobs (Ireland); Job Creation unit (Japan); Workforce Investment Boards (United States); VDAB (Belgium), Entrepreneurship Centre (Quebec, Canada); Workforce Planning Boards (Ontario, Canada); Four Party Associations (Korea)
Getting collaboration right at the national and local level
skills.oecd
Better Skills, Better Jobs, Better Lives
• Using industry representatives as trainers
• Better linking employers to the employment and training system in an advisory role
• Stimulating local networks among employers (particularly for SMEs) and creating employer ownership
• Cluster and sector-based approaches can be used to better connect the education system to the world of work
Examples: Employer Ownership Pilots (UK); Career Pathways (US); Regional niche sectors (Quebec, Canada); Higher Vocational Education system in Sweden; Talent Houses (Belgium); Strategic clusters in Bucheon (Korea)
How to create better partnerships with employers -
lessons from other OECD countries
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The map above shows regional variations in the supply and demand of
skills, classifying regions into a high-skills equilibrium, low-skill
equilibrium, skills deficit, and skills surpluses.
How can partnerships at the national and local level be strengthened and
better match the supply of skills to demand? Do employers need to be
more involved in the system?
Please be as detailed as possible in your response.
Balance between the supply and demand of skills, TL2 regions, Spain, 2009
Ejercicio 7.2: Sistemas eficientes de competencias
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Ejercicio 7.3: Sistemas eficientes de competencias
Many ministries and levels of government jointly contribute to building an effective
skills system. Spanish sub-national governments have a prominent role, for
example, in expenditure on education.
How well do you think different ministries and levels of governments collaborate to
improve the skills system in Spain? What more could they do to ensure policy
coherence?
Please be as detailed as possible in your response.
Total expenditure in education by sub-national governments
as a % of total government expenditure on education
Note: Source: Eurostat and OECD
National accounts
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Ejercicio 7.4: Sistemas eficientes de competencias
Many stakeholders jointly contribute to building an effective skills system.
Do you think that employers and trade unions are engaging effectively in the skills
system?
In your experience, what concrete areas would benefit from stronger engagement from
employers and trade unions? (e.g. vocational education and training, higher education,
continuous education and training, etc.)
What are some of the concrete barriers to more effective employer engagement in
these areas?
Please be as detailed as possible in your response.
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Ejercicio 7.5: Sistemas eficientes de competencias
Learning and labour market information is critical to: informing the education, training,
career and mobility choices of individuals; the curricula and seat allocations planning of
tertiary institutions; and the human resource and training planning of enterprises and
trade unions. This could include information about the labour market outcomes of
graduates by level and field of study, information about high demand occupations and/or
current skills shortages, and information about projected skills shortages.
Is the learning and labour market information available in Spain accessible, timely, and
sufficiently detailed? What more could be done to improve leaning and labour market
information in Spain?