Training and employment performance

According to the OECD Employment Outlook 2004, policies aimed at enhancing workers’ skills contribute to an improvement in employment performance. Lifelong learning is shown to be a vital element in employment strategies.

Education and training are increasingly important for better labour market performance. Along with the growing demand for skilled labour comes a constant need for updating of skills. One chapter of the OECD Employment Outlook 2004 is devoted to the issue of adult training, and explores its impact on the labour market in OECD countries. The analysis attempts to evaluate the general and individual effects of adult education and training on labour market performance.

The findings can be used to identify the important role of lifelong learning strategies in achieving the employment targets set out in the Lisbon strategy.

Overall employment performance

The analysis shows a positive link between upgrading skills and overall labour force participation. There is a significant cross-country correlation (Excel file) between employee training and employment and activity rates.

Estimates indicate that, in OECD countries, adding one extra year of education causes an increase of 1.1-1.7 percentage points in labour force participation and employment rates.

A widening employment gap between high- and low-educated groups can be seen due to a decline in relative demand for lowskilled labour.

Education has an impact on overall employment rates in the light of its positive effects on productivity, the growing demand for skills, and the need for competitiveness in high-tech sectors. On the other hand, no significant cross-country correlation (Excel file) is found between training and unemployment rates.

Training and employment at an individual level

There is a strong association between training histories and employment outcomes. Labour market participation rates are higher for individuals who received some training in the last two years than for those who received no training in the same period. This applies particularly to women and to workers aged 45-55 years.

Unemployment

Unlike data at the aggregate level, training at an individual level has a positive effect on unemployment. Individuals who received training in the previous two years have, on average, lower unemployment rates than those who did not receive training in the same period.

The fact that training is not associated with lower unemployment rates overall, while it is associated with a lower individual probability of unemployment, suggests that some displacement might be at work. The report analyses potential displacement effects, i.e. the risk and the extent to which gains enjoyed by individuals upgrading their skills reduce the employment prospects of other individuals who do not participate in training. The tests conducted found no evidence that there is a strong crowding-out effect.

Therefore lifelong learning policies, if well targeted for specific groups, can be effective in improving the labour market performance of these groups, and can form part of a general strategy to reduce unemployment traps.

Impact on wages

Across Europe, the impact of training on wages ranges from practically zero to an almost 5% increase in Portugal. Wage growth as a result of training is only clear in the case of young or highly educated employees. Increases in income following training appear to be lower for women than for men.

An important question regarding potential wage growth is whether better skills gained through training are transferable across jobs and employers. Previous studies confirm the report’s findings that wages are likely to increase after a job change, based on training record.

Impact on employment security

The report finds that:

• training has a positive impact on perceived job security;

• training from a previous job has the greatest impact on perceived job security;

• the impact of training is particularly strong in the case of both older and low-educated workers.

Workers who previously received education or training tend to leave their work more often for better jobs, and are less likely to leave on an involuntary basis.

Trained workers have the greater chances of finding a permanent job. The benefit of training is highest for workers with less than upper secondary education. In general, a favourable outcome of training is much lower for women than for men.

Training before job loss tends to reduce the length of unemployment and increases the probability of re-employment. The chances of getting another job are higher when the training provides transferable competences.

Workers who receive training or education in the year before losing their job are more frequently re-employed two years later than their untrained peers. This impact is even stronger in the case of workers with lower educational attainment.