Quality VET is rather expensive. That is why almost all countries use a mix of financial sources to cover the costs of training infrastructure and VET delivery. The most important contributors are:
The tax-payers – almost everywhere the state budget contributes significantly to the financing of the VET system, in particular in countries where school-based VET, for example in technical secondary schools, prevails.
Companies – here we have to distinguish three main variants, which can also co-exist:
First, companies pay – in addition to their general corporate taxes – a training levy according to their turnover or number of staff or wage bill, which is used exclusively for training purposes.
Secondly, companies offer internships, work-based learning or contribute by providing equipment or seconding trainers.
Thirdly, companies pay training fees for their employees who undergo some kind of further training.
The third group of funders is the social partners – in many countries both employers and employees contribute to public employment services which use part of their funds for active labour market policies including financing training courses for the unemployed or people who need a skills upgrade in order to avoid losing their jobs.
Fourthly, the trainees or their parents may contribute – in many countries VET outside the formal education system is not free of charge, and the participants have to pay a fee and / or cover the costs of training material, which can be significant in some occupational fields. In this context vouchers and stipends, provided by government, civil society or donor agencies, are important instruments to facilitate the access of special needs groups and to improve quality by stimulating competition among providers.
Next, training centres often follow a "training-cum-production" approach, i.e. they combine training activities with the production of goods or services they sell on a market. The income is used to increase their budget.
Finally in many countries civil society sponsors VET, in particular for special needs groups. NGOs may make donations, provide venues, make in-kind contributions and/or provide human resources for training courses.
Which mix of these sources is applied depends very much on the relative strengths and weaknesses of state, private sector and civil society as well as on traditions.
Given that all VET systems face financial limitations, most of them being seriously or even dramatically underfunded, resource allocation becomes an issue of major concern. Decisions regarding a good mix of inputs into the system are among the most difficult ones to be taken, and should be based on a sound analysis and understanding of the interdependencies within the VET system.
For our partner countries, funding a high-quality VET system is an enormous challenge. While their economic and administrative weaknesses do not allow the generation of sufficient tax revenue, they are confronted with an increasing number of young people entering the labour markets. The latter is partly a result of demography – high birth rates – and partly a result of their own success in the field of general education. Nowadays, many more young people successfully complete primary and secondary education, and expect some kind of training opportunity when they leave school.
None of the governments of our partner countries is in a position to cover the costs of high-quality training which can meet the growing social demand, and neither are governments in the so-called developed world. The only way out of this dilemma is a stronger involvement of the economy in financing and providing vocational training – and this means work-based learning.
