Rethinking the Welfare State: The prospects for ... - e-Library

Labour market training 203
labour market needs to be as effective as market ordering, there would need to be an
enormous devotion of public resources to analyzing every industry and sector of the
domestic and international economy and a strong mechanism for determining the
capabilities and interests of trainees. Even so, it is highly unlikely that central planning
could ever evaluate trainees well enough or predict the eclectic and dynamic needs of the
economy long enough in advance or flexibly enough to meet demand satisfactorily. In
abandoning the idea of central planning in favour of market-based choice, we can avoid
the costly and ultimately futile exercise of trying to predict labour-market needs or
worker preferences and abilities.
With respect to wage subsidies granted to industries providing on-the-job training
(which would follow worker choice), a balance is required between allowing only those
industries to qualify that can provide genuinely valuable skills training and allowing a
considerable degree of flexibility in the choice of program to individuals and supplying
firms. Experience suggests that some form of labour-industry partnership may be the
most appropriate way of identifying and certifying qualifying industries with future
employment growth prospects. 113 This may still leave some room for strategic behaviour
on both sides, 114 but if unemployment benefits are not available on completion of the onthe-job
training program without a substantial requalifying period of employment, the
unemployed will have strong incentives to search out effective programs. Employers will
have similarly strong incentives when recruiting employees to offer credible assurances
regarding the future prospects of employment.
Once we are sure that consumers both have relative freedom to choose their own
training program and that the incentives to choose effective programs exist, we must
ensure that they are well informed about the relative merits of the different programs.
Information failure is implicated for two reasons: (1) a general lack of consumer
information and (2) consumers of employment training are often disadvantaged members
of society who may lack the ability to assimilate the available information. If consumers
simply select providers at random, then the rationale for introducing consumer choice is
subverted. Jurisdictions offering some form of voucher program have struggled with this
issue in different ways.
Australia has attempted to address information failures by setting training standards. 115
Although this ensures that consumers are provided with a basic minimum standard of
service, it does not really address the problem of information failure: studies found a
significant variation in performance (successful employment of program participants)
among Australian labour training providers. 116 Australia responded by supporting highprofile
advertising campaigns and other initiatives designed to disseminate
information. 117 While these activities will doubtless increase awareness of choice among
consumers, it does not necessarily address the key problem: lack of specific information
on the relative performance of service providers.
The United Kingdom uses “Restart” interviews before election of a voucher program
to ameliorate information failures. 118 At these interviews voucher recipients meet
government counselors who provide information about the various programs—with some
success in reducing structural unemployment. 119 Similarly, Denmark has established a
system of advisory meetings at which “individual action plans are drawn up…either at
the request of the individual after the first 6 months of unemployment or on a mandatory
basis after 20 months of unemployment.” 120 These initiatives are arguably better-suited to