the Labour Market Survey Report - Council of European ...

2.4 Employers’ and Individuals’ Roles
It is perfectly possible to view skill shortages as something that a free/flexible labour market will resolve
itself. With salary levels of IT practitioners often some 50% higher than the national average wage or
higher, there is - in principle - considerable incentive for individuals to try to acquire the necessary skills
to enter this labour market and thereby increase their income significantly. Clearly there are various
potential barriers to this taking place:
• Inadequate funds for the individual to cover the cost of the relevant training (effectively a “capital
failure”);
• Inadequate time for him/her to devote to such training given current work (and other) commitments;
• Lack of sufficient underlying understanding (education) on which to base such “further
learning”.
In principle, the greater earning power available when such skills have been acquired could cover
(retroactively) the “capital” cost of the training. For example, if an IT training course costing 5,000
would enable an individual to get a job at a salary level, say, 2,000 per annum higher than their current
one, then – if the new job were found straight after the course was completed – the cost of the training
investment could in principle be comfortably paid off after three years, and thereafter the individual
would have lifted his/her future income level and possibly achieved more future employment security
in a growing sector.
However, there is never an absolute guarantee that the individual would get the new, highly-paid,
job automatically; and, even if this did happen, the individual might not be able to afford to finance
the course in cash-flow terms. The “Career Development Loan” initiative by the United Kingdom
government (which provides guaranteed loans for this purpose at comparatively low interest rates and
with “repayment holidays”) has helped tackle this “capital failure” problem, and over 100,000 people
have benefited from its provision to “give their careers a lift” since its introduction in 1988, in many cases
in acquiring new IT skills.
From the employer’s point of view, there is always a risk of loss of the “return” on investment made in
the training of an employee, since the “newly-trained” employee – with extra value in the marketplace
arising from the newly-acquired skills – may decide to leave to go to a higher paid job. This produces
what economists refer to as the “poaching externality”, the fear of which can cause employers to hold
back from providing such training. In philosophical terms, there are two ways of viewing this:
• The first is that such “poaching” is fundamentally wrong, and that government should try to stop
it. Clearly if the result is a (probably significant) under-investment in employee training, there is a
case for exploring policy initiatives that might reduce it*.
• That “all’s fair in love and business” – i.e. that competition between enterprises is not just for
sales or market share, but also for the best “talent”. In order to attract the most valuable workers,
an employer has to make itself as attractive as possible to new recruits, by offering an attractive
overall “package”, including generous amounts of training for its employees…
* The “Transferable Training Loan” policy initiative currently being piloted in the United Kingdom is one such
approach. This attempts, through a government-mediated (but not subsidized) agreement, involving all the major
employers in a sector, to “pick-up” (the residue of) any loan made by the employer from whom a worker is recruited
for training enjoyed by that worker.
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| C E P I S I.T. PRACTITIONER SKILLS IN EUROPE | Section 2