EUROPEAN COMMISSION Brussels, 10.12.2021 SWD(2021) 369 final COMMISSION STAFF WORKING DOCUMENT



IMPACT ASSESSMENT REPORT

Accompanying the document Proposal for a Council Recommendation on individual learning accounts {COM(2021) 773 final} - {SEC(2021) 417 final} - {SWD(2021) 368 final} - {SWD(2021) 370 final}



List of acronyms 1. INTRODUCTION: POLITICAL AND LEGAL CONTEXT 2. PROBLEM DEFINITION 2.1 What are the problems? 2.2 What are the problem drivers? 2.3 What are the consequences? 2.4 How will the problem evolve? 3. WHY SHOULD THE EU ACT? 3.1 Legal basis 3.2 Subsidiarity: Necessity and added value of EU action 4. OBJECTIVES: WHAT IS TO BE ACHIEVED? 4.1 General objectives 4.2 Specific objectives 5. WHAT ARE THE AVAILABLE POLICY MEASURES? 5.1 What is the baseline from which options are assessed? 5.2 Measures discarded at an early stage 5.3 Description of the policy measures 5.4 Description of the alternative policy packages 6. WHAT ARE THE IMPACTS OF THE POLICY PACKAGES?

6.1 Analysing the main impacts 6.2 The choice of legal instrument 7. HOW DO THE POLICY PACKAGES COMPARE? 8. PREFERRED POLICY PACKAGE 9. HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED? ANNEX 1: PROCEDURAL INFORMATION 1. Lead DG, Decide Planning/CWP references 2. Organisation and timing 3. Consultation of the RSB 4. Evidence, sources and quality ANNEX 2: STAKEHOLDER CONSULTATIONS 1. Introduction 2. Consultation strategy 3. Inception Impact Assessment 4. Targeted consultations 5. Public Consultation ANNEX 3: WHO IS AFFECTED AND HOW? 1. Practical implications of the initiative 2. Summary of costs and benefits 3. Summary of the SME test

ANNEX 4: ANALYTICAL METHODS 1. Quantification of impacts 2. Qualitative methods 3. Constraints ANNEX 5: OVERVIEW OF THE INTERVENTION LOGIC ANNEX 6: ADULT LEARNING: MEASUREMENT, KEY CHARACTERISTICS AND PARTICIPATION LEVELS 1. Measurement 2. Key characteristics 3. Participation levels and differences between groups 4. Recommendations to increase participation in adult learning in the European Semester ANNEX 7: ADDITIONAL EVIDENCE ON THE PROBLEM DRIVERS 1. Driver 1: Insufficient financial support 2. Driver 2: Limited incentives and motivation of individuals ANNEX 8: BASELINE SCENARIO 1. The existing EU instruments 2. Baseline scenario by Member State 3. Estimating adult learning participation in 2030 under the baseline scenario ANNEX 9: EVIDENCE ON THE DISCARDED POLICY MEASURES 1. Tax incentives for individuals 2. Subsidised loans or savings schemes for adult learning

ANNEX 10: EVIDENCE ON THE BENEFITS OF ADULT LEARNING 1. Returns to individuals 2. Returns to enterprises 3. Returns to society 4. Selection of coefficients for impact estimates ANNEX 11: EVIDENCE ON INDIVIDUAL TRAINING ENTITLEMENTS 1. Effectiveness of training entitlements 2. Evidence on the costs of providing training entitlements ANNEX 12: QUANTIFYING IMPACTS A. IMPACT ON ADULT LEARNING PARTICIPATION B. COST-BENEFIT ANALYSIS OF SHORT TO MEDIUM TERM IMPACTS C. LONG TERM AND INDIRECT IMPACTS ANNEX 13: CASE STUDIES 1. Austria: Education Savings 2. Estonia: Unemployment Insurance Fund 3. Greece: Targeted training voucher schemes 4. Italy: Regional individual training entitlements 5. Netherlands: The STAP - from income tax deduction towards individual training entitlements 6. Singapore: SkillsFuture Credit - using personal accounts for a universal yet targeted provision of training entitlements 7. UK: Individual Learning Accounts

ANNEX 14: INDIVIDUAL LEARNING ACCOUNTS – THE FRENCH EXPERIENCE 1. Summary 2. General Description, Key Features, and Achievements 3. Performance of the CPF ANNEX 15: OPERATIONAL OBJECTIVES AND MONITORING List of acronyms ACVT Advisory Committee for Vocational Training AES Adult Education Survey AL Adult Learning CPF Compte Personnel de Formation (French individual learning account) CSR Counry-specific Recommendation (European Semester) CVET Continuing vocational education and training CVTS Continuing Vocational Training Survey DG EMPL Directorate-General for Employment, Social Affairs and Inclusion DGVT Directors General for Vocational Training EC European Commission EMCO Employment Committee EENEE European Expert Network on Economics of Education EPSR European Pillar of Social Rights EQAVET European Quality Assurance in Vocational Education and Training EQF European Qualifications Framework ESF European Social Fund EU European Union IA Impact Assessment ICT Information and Communication technologies ILA Individual Learning Account ILO International Labour Organisation ISCED International Standard Classification of Education ISCO International Standard Classification of Occupations JRC Joint Research Centre LFS Labour Force Survey OECD Organisation for Economic Co-operation and Development PC Public Consultation PES Public Employment Services PIAAC Programme for the International Assessment of Adult Competencies SME Small and medium-sized Enterprise TEU Treaty on European Union TFEU Treaty on the Functioning of the European Union VET Vocational education and training 1. INTRODUCTION: POLITICAL AND LEGAL CONTEXT On 25 June 2021, the European Council welcomed the EU headline targets of the European Pillar of Social Rights Action Plan and the Porto Declaration. Leaders thereby supported the ambition that at least 60% of all adults should participate in training every year by 2030. This contributes to making a reality the right to quality and inclusive education, training and life-long learning, as set out in the Charter of Fundamental Rights of the European Union (Article 14: Right to education) and principle 1 of the European Pillar of Social Rights on education, training and lifelong learning. It also acknowledges the importance of improving the opportunities for developing skills throughout working life to achieve the EU’s ambitions for the coming decade: a swift economic recovery from the COVID-19 pandemic and a successful digital and green transition. Notably, the EU will only achieve its digital transition if individuals have the skills to take advantage of emerging technologies and jobs. Equally, the green transition “can only succeed if the EU has the skilled workforce it needs to stay competitive”, as set out in the “Fit for 55 - delivering the EU's 2030 Climate Target on the way to climate neutrality” package. As labour markets are reshaped by these transitions, the existing support systems for developing skills need to evolve as well to allow all individuals to thrive in the labour markets of the future. This requires additional investments as well as the engagement of individuals. The European Council invited Member States to “explore possible models for public and private financing of lifelong learning and the development of skills on an individual level”, and asked the Commission to support Member States in these efforts. The revised Employment Guidelines call on Member States to strengthen the provisions on individual training entitlements and ensure their transferability during professional transitions including, where appropriate, through individual learning accounts. Following up on the Mission Letter to Commissioner Schmit and the request to “explore the idea of individual learning accounts”, the Commission’s Communication on the European Skills Agenda announced its intention to explore individual learning accounts as a tool to support the up- and reskilling of working age adults, complementing other actions targeted at employers and education and training providers. The European Parliament shares the views of the European Council, the Council of the EU and the Commision and called to ensure access to skills development and life-long training opportunities in its Resolution on a European Pillar of Social Rights and its Resolution on a strong social Europe for Just Transitions. The Resolution on the European Skills Agenda points out the potential of individual learning accounts as a step towards universal lifelong learning entitlements and a funding mechanism key to the implementation of the Skills Agenda. The present initiative aims to put forward recommendations to Member States to close gaps in existing support systems for training and to increase individuals’ motivations and incentives to take up this support and participate in training. Recognising the complex reasons why individuals do not take up training (Section 2.2), the initiative aims to outline measures to integrate financial/demand side with non-financial/supply side support. It thereby aims to support the implementation of existing EU Recommendations on education and training, notably the Council Recommendations on VET, Upskilling Pathways and the validation of non-formal and informal learning. The initiative does not seek to replace any currently well-working training policies, but to complement them and help close the remaining gaps. This proposal is related to two other Commission initiatives in preparation. Firstly, the initiative on Micro-credentialscomplements the present initiative by promoting transparency and recognition of short training programmes and therefore incentivising uptake of training. Jointly, both initiatives aim to empower individuals to seek training by addressing challenges on the supply side and demand side. Secondly, the present initiative is also complementary to the initiative on improving the working conditions in platform work. The lack of access to training opportunities is an important challenge for platform workers, and the present initiative considers concrete policy measures to support the training of individuals that do not depend on the current employer or employment status. 2. PROBLEM DEFINITION 2.1 What are the problems? Not enough adults participate in learning. In 2016, only 37.4% of adults in the EU participated in learning. This is 22.6 percentage points below the 2030 target of 60% and participation levels fell also short of the 2020 EU-level target in 21 of 27 EU Member States. Progress in increasing participation in adult learning in the EU over the last decade has been limited and uneven across EU Member States. The COVID-19 crisis has had a negative impact on training participation but already in 2019 20 Member States were below the target. The public and targeted consultations on this initiative showed a broad consensus by stakeholders that participation in adult learning is insufficient, even more so in light of the expected acceleration of the green and digital transitions. In addition to being low, participation in adult learning is unequal and strongly depends on the labour market status, employment relationship, company size, educational attainment and the exposure of sectors or occupations to automation. To varying degrees, this problem is present in all Member States and all of them received country-specific recommendations on skills in the context of the European Semester in either 2019 or 2020.

Across the EU, permanent employees have higher adult learning participation rates (45%) compared to other adults (29%). This pattern can be observed across all Member States, although with different sizes of the gap ( Figure 1 ). 83% of the respondents in the public consultation agreed that a lack of support for workers with no or loose links to an employer is an obstacle to a higher training participation. Lower shares of employees in SMEs (42%) and micro-enterprises (36%) participate in adult learning compared to those in large companies (55%). This pattern is visible across all EU Member States. In the public consultation, 83% of respondents see the lack of capacity by small, medium-sized and micro-enterprises to organise training for their employees as an obstacle. Adults with lower educational attainment participate less in learning, and participation rates are lower in sectors, occupations and types of employment with higher shares of lower qualified people. However, also within groups of similar educational attainment, the employment status remains a significant determinant of participation. There are no pronounced gender differences in the participation of adults in learning, but men are somewhat more likely than women to report learning for job-related reasons (see Annex 6.3). Adults in occupations and sectors with a higher risk of automation participate less in learning. This means that workers in the sectors and occupations where employment shares are predicted to decrease the most until 2030 participate the least in learning. Individuals facing a higher risk of skills obsolescence and unemployment are hence less equipped for these vulnerabilities in the near future. Figure 1: Participation in adult learning for permanent employees vs. other adults in 2016 Source: Adult Education Survey 2016, ages 25-64.Participation figures presented in this IA exclude guided-on-the-job training to match the definition of adult learning used for EU benchmarking. See Annex 6 for details on the definitions used and disaggregated figures. 2.2 What are the problem drivers? The reasons behind low participation in adult learning in the Member States and Member States’ policy responses to the issue are heterogeneous. Yet, there are two broad problem drivers which can be observed across the EU: insufficient financial support for training, and insufficient incentives and motivation of individuals to take up training that go beyond a lack of financial support. This Section outlines how they limit progress in increasing participation rates of adults in learning and contribute to inequalities in participation between different groups of adults. Additionally, external drivers, outside of the scope of this initiative, amplify the incidence or the adverse consequences of low and unequal participation of adults in learning (Figure 2). Figure 2: Problem tree 2.2.1 Internal Drivers 1. Insufficient financial support The costs of skills development are often concentrated on a specific actor, while the benefits (e.g. in the form of job progression, higher wages or productivity or a successful transition to new employment) only become apparent later and are typically shared among the individual, employers and society at large. This results in insufficient investment overall, a limited coverage of existing support schemes in terms of groups of adults and types of training, barriers to devoting time to training and the fragmentation of the existing support schemes. Insufficient investment levels in adult learning: According to the best available evidence, the overall level of investments (public and private) in adult learning in the EU is around 1.7% of GDP with the largest share contributed by employers (1% of GDP), followed by public authorities (0.5% of GDP) and the remaining share contributed by individuals themselves (0.2% of GDP). The shares of overall investments in Member States range from 0.5% of GDP in RO to almost 2.5% of GDP in SE and FI. The public share of investments (0.5% of GDP) is relatively low when compared to the 4.7% of GDP that public authorities in the Member States invest on average in education. While there has been rapid progress in increasing educational attainments over the recent decade (notably by reducing early school leaving an increasing the share of adults with tertiary education), there has been no corresponding increase in the public commitment to support the continuing skills development of adults after they have left initial education. Also 23 of 27 national adult learning experts who have been consulted for the purpose of this impact assessment consider the current levels of financing in their Member State as insufficient. There is a positive correlation between the participation in adult learning and the estimated available funding in relation to GDP. The six Member States that scored above the EU participation targets for 2020 (SE, FI, DK, NL, EE and LU) spend on average 2.0% of GDP on adult learning, compared to an average of 1.3% of GDP for the other 21 Member States. Member States with higher levels of investments in adult learning also show smaller differences in participation between permanent employees and other adults (Annex 7.1), indicating that sufficient investments also ensure a more equal access to learning for all adults.This suggests that raising the level of participation in adult learning will also require increasing the level of investment in adult learning. Current investments in adult learning are low also when compared against available estimates of their social and economic benefits. Most evidence in the academic literature suggests that the benefits of additional investments (such as wage and productivity gains) would outweigh their costs at the current participation levels. However, even here countries have earmarked funds for adult learning, they are not always underpinned by sustainable financing sources, limiting their impact and leading to insufficient funding during recessions, when it is most needed. Limited coverage of existing support schemes in terms of the groups of adults and types of training that are supported: Survey data and the public consultation point to the costs of training as a key barrier for individuals leading to low and unequal adult learning participation (Section 2.1). As currently employers sponsor 88% of job-related non-formal training, adults who would like to learn more and are not in permanent employment report costs as a barrier more often than those in permanent employment (31% vs. 22%). Among employees, those employed in SMEs receive less support for training than those in large companies, mirroring the pattern of inequality in participation levels documented in the previous Section.

Another dimension of coverage gaps concerns the types of training undertaken. Any current employer is unlikely to have an incentive to provide support for training that will help a worker to change company or sector. However, such training is important to prevent skills gaps in light of the labour market transformations ahead. This results in a risk of underinvestment of employers in certain types of trainings and in particular for non-company-specific skills, including transversal skills which are increasing in importance on the labour market. Only in three Member States (AT, EE, IE), the available support for professional transitions was assessed as adequate by national adult learning experts. In the public consultation, 88% of respondents agreed that additional policy efforts are needed to support training in transversal skills, and 93% agreed with respect to digital skills. Existing public support schemes in the Member States are often insufficient to close these coverage gaps. Income tax incentives for training exist in a majority of Member States, but require upfront investment by individuals and a sufficiently high income. Schemes providing individuals with training entitlements upfront such as training voucher schemes could help and exist in 21 Member States, however often with small target groups such as the unemployed and hence not supporting a broader range of “preventive” trainings for transversal skills or professional transitions. Barriers to devoting time to training, related to a lack of income to cover the costs of living during training periods: Lack of time for training also limits participation. Again, the employer plays an important role in providing support by giving the opportunity to participate in training during working hours, or allowing individuals to make use of existing paid training leave provisions. Paid training leave allows workers to keep their salary or a replacement income during periods of training that may range from a few days to several months. Related provisions of some sort already exist in 24 Member States, of which 12 are bound by their ratification of the ILO Paid Educational Leave Convention. However, access to paid training leave is often restricted based on features of the employment relationship. Take-up of existing provisions is usually below 1% of the employed population, driven by restrictive eligibility criteria (e.g. excluding employees without permanent contracts), a lack of information about available training opportunities and a lack of trust in the quality of training among employees and employers. Employees in SMEs are also at a disadvantage since smaller enterprises often face greater difficulties in handling temporary absence of staff. Moreover, the self-employed (including the growing and diverse groups of the “dependent self-employed”) are usually excluded entirely from schemes that provide income support during periods of training. Fragmentation of existing support systems: The fragmentation of existing support systems further contributes to gaps in financial support. One example of fragmentation are weak links between sectoral support systems. A worker may contribute to a sectoral training fund for most of his/her working life, but cannot use it to train for a professional transition and loses access to such entitlement the moment the worker changes to a different sector. Fragmentation can also create or perpetuate support gaps if responsibilities for support are strictly divided by target group and the coordination between different support schemes does not keep up with labour market changes. An example are platform workers who often neither benefit from the training support offers for employees nor from those for the unemployed. Fragmentation can also prevent individuals from making use of available support, as individuals need to be well informed about the eligibility conditions to be able to benefit from it when support is linked to the current employment or income status. 87% of respondents in the public consultation highlight that a lack of awareness of available financial support for training hampers participation. 2. Limited incentives and motivation of individuals to participate in training 80% of adults who did not participate in learning during the previous year say that they did not want to participate, showing that financial support is necessary but not sufficient. This is not due to a lack of appreciation of adult learning, as 96% of adults agree that learning throughout life is important. The reasons why this does not always translate into action are most notably a limited awareness of one’s own skills needs, limited transparency about available training offers, uncertainty about the quality of training provision and recognition of training outcomes in the labour market and an insufficient tailoring of training offers to individual needs. Limited awareness of own skills needs by individuals: There is a large divide between employers’ and employees’ views on the adequacy of skills: Only 16% of employers report that their workers have all the required skills, while 76% of adults do not think that they lack general skills and 71% do not think they lack technical skills. The literature suggests that the truth may lie somewhere in the middle as employees may be reluctant to acknowledge missing skills while employer reports must be assessed in light of the wages and working conditions offered. Limited transparency about available training offers: The advent of digital and blended learning opportunities creates an increasing number of potentially relevant training opportunities. Since employers play an important role also for signalling skills needs and suggesting concrete training programmes, navigating the training offer is particularly difficult for individuals or trainings without a strong link to a single employer. 89% of respondents to the public consultation pointed to limited transparency of information on training opportunities as a reason preventing individuals to train, consistent with the 90% of respondents in the Cedefop adult learning perceptions survey agreeing that more information and guidance would encourage participation in learning. According to the adult learning expert network, 20 Member States already have legally mandated career guidance offers in place, which can help individuals with increasing the awareness of skills needs and training opportunities. However, they often have low effective outreach, as measured by the percentage of adults who have received career guidance in the past year in the AES. Most national public authorities are already conducting awareness-raising campaign on existing adult learning opportunities. Survey respondents identify the internet as most frequently used source of information on training opportunities. This points to the potential of user-friendly digital registries of training opportunities that are recognised on the basis of their quality and labour market relevance in the provision of career guidance services more broadly understood. However, such registries only exist in 12 Member States, and are less likely to exist in Member States with lower adult learning participation rates. Uncertainties about quality and recognition of a training programme: To engage in training, individuals need to believe that it will pay off for them personally, but they need to make choices among a large number of training offers based on imperfect information and with substantial uncertainty about individual returns. The lack of quality assurance has been pinpointed as a reason for low participation in recent national initiatives. Almost a quarter of respondents across the EU (24%) do not have sufficient confidence in the overall quality of adult learning in their country, and 87% of respondents are of the opinion that increased quality standards would encourage participation in work-related training. 80% of respondents to the public consultation agreed that uncertainties about the quality of training prevent individuals from accessing training. Although a number of international quality labels exist, the quality assurance reports underlying the certification are usually non-public, leading to little visibility as to what the labels actually represent. Moreover, there is a risk that the coexistence of multiple quality labels hampers their ability to reduce uncertainties about quality and recognition of training programmes. The currently high uncertainty about the recognition of learning outcomes further reduces incentives for training. If learners cannot evidence the value of newly acquired skills and competences, they may not be able to reap the full benefits of training (i.e. negotiate wage increases or improve job content and prospects). The 2020 evaluation of the Council Recommendation on validation of informal and non-formal learning concluded that while there has been some progress towards providing more validation opportunities in the Member States, strengthening support to individuals is necessary to promote the take-up of these opportunities. Historical evidence suggests that in particular in times of rapidly changing skill requirements, a lack of recognition of skills reduces the bargaining power of workers and reduces wages. The existence of digital registries of recognised training opportunities could support the standardisation and recognition of skills, but as mentioned above, such registries do not exist in most Member States. Insufficient tailoring of training offers to individual needs: It reduces the motivation of individuals to take up training in view of the heterogeneous needs of adult learners in terms of the timing and the delivery mode of training. Related barriers to training participation are among the most frequently mentioned in both the AES and the Cedefop adult learning perceptions survey, and managers in more than 40% of enterprises report that employees have no or a small influence on management decisions concerning training and skills development. 77% of respondents to the public consultation agreed that insufficient tailoring of available training to individual needs prevents individuals from accessing training, and 87% of respondents to the Cedefop adult learning perceptions survey reported that better adaptability to individual learning needs would encourage participation in work-related training. Adult learning experts indicate that supporting individuals directly has been recognised as a policy priority by two thirds of Member States in the top tier of adult learning participation, as compared to one third of Member States in the bottom tier (Annex 8.2). 2.2.2 External Drivers In addition, a number of external drivers are relevant insofar as they increase the importance of training or risk reducing its provision in the absence of a policy response. Technological change: It makes some jobs increasingly susceptible to substitution by digitalisation and automation while at the same time creating new jobs. Estimates suggest that around 9% to 14% of jobs in the EU face a high risk of automation, and that a further 32% to 40% of jobs are likely to be transformed by automation, entailing corresponding changes in their skill requirements. Changes in the technology used at work are already felt by 43% of adult employees in Europe according to the European Skills and Jobs Survey. This indicates that many workers may require training to perform job tasks which are potentially very different from those they have previously undertaken. On the upside, the digital transformation also creates many new online learning opportunities for adults that can reduce cost and distance barriers and allow for better targeting of learning to individual needs, further accelerated by COVID-19 pandemic. However, the present lack of certainty about quality and recognition prevents adults from fully seizing these opportunities (Section 2.2). The green transition: It is driving a profound transformation of labour markets, not only displacing workers but also by changing the task requirements within occupations and creating new jobs that require new skills. Substantial investments are needed to provide opportunities for acquiring new skills to those who are at risk of losing their jobs in high-emissions industries. Skills shortages already constrain the transition to a greener economy, highlighting the importance of skills investment also to reach the ambitious EU emission reduction targets. Demographic ageing: Europe has an ageing and shrinking labour force. With people living longer, there is an increasing need for people to update their skills. Ageing is also expected to further increase old-age dependency ratios. This suggests that there will be an increased demand to raise employment rates of older workers as well as productivity of employed adults across the board, whereby training will play a key role. At the same time, older people participate significantly less in adult learning than younger workers (see Annex 6.3), which highlights the urgency of creating learning opportunities that are also tailored to the diverse needs of older learners. High atypical employment and more frequent labour market transitions: The share of workers in atypical forms of work is high and the frequency of professional transitions has increased. Around 4 in 10 adults are in atypical forms of work (defined as not having full-time permanent employment contracts). However, most groups of atypical workers participate less in learning (cf. Section 2.1). While the share of atypical workers has remained rather stable in recent years (cf. Section 2.4) the number of professional transitions from one labour market status to another throughout one’s working life has increased considerably. This increases the need for training to adjust to new job tasks; it is, however, less likely to be supported by the current employer who has fewer incentives to support such transitions into new jobs (cf. Section 2.1). A high share of atypical forms of work and an increasing frequency of labour market transitions both risk reducing the coverage of employer support for training on the labour market: individuals may not have a single employer to turn to for support, or this employer may be more reluctant to grant it for fear of not being able to capture the returns of their investment once their employee moves on. 2.3 What are the consequences? The low and unequal participation in adult learning across the EU reduces prosperity and produces inequalities between those who benefit from learning and those who do not. Beyond that, socio-economic consequences are also felt by enterprises and the society as a whole (see Annex 10 for a literature review, and Section 6 for quantitative estimates).

2.3.1 For individuals Many immediate consequences of low and uneven participation in training are observed at the individual level. Low-skilled individuals are more likely to face unemployment and exclusion from the labour market. These consequences are particularly pertinent given that workers facing the highest risks of displacement in the future are also the ones that currently participate less in learning (Section 2.1). For those in employment, less training means foregoing wage increases. In terms of risks to well-being more broadly, the literature points to negative associations with personal and job satisfaction, health and social inclusion for individuals that participate less in training. 2.3.2 For enterprises 73% of EU employers considered difficulties in finding workers with the right skills as an obstacle to investment in 2020. Skills shortages reduce productivity and enterprises’ capacity to adopt new technologies, which is particularly costly in the face of the digital and green transitions. There is also evidence that companies who fail to invest sufficiently in the skills of their workforce are more likely to go out of business. These consequences are particularly relevant for SMEs and micro-enterprises, whose staff participate in training comparatively less than that of larger enterprises. This reduces their opportunities to develop personally and professionally and impacts on the attractiveness of SMEs as a workplace. It also reduces the productivity levels of the SME, increasing the competitiveness gap with larger companies. 2.3.3 For society as a whole At a macroeconomic level, income and productivity losses by individuals and enterprises and a less efficient reallocation of labour add up to lower GDP levels (ceteris paribus) and higher unemployment with associated transfer spending. Skills are also associated with a range of non-monetary externalities concerning civic participation and social cohesion, and there is growing evidence to suggest that the relationship is causal. Taken together, this suggests that low and unequal levels of participation in adult learning make the EU less resilient in the face of economic downturns and structural change. This is of particular concern in light of the rapid digital and green transition as both transitions will require both an openness to adapt to change and an ability to shape the change, for instance in the form of innovations that advance the EU on the path to carbon neutrality. 2.4 How will the problem evolve? Extrapolating recent trends, adult learning participation in the EU could increase from 37.4% in 2016 to 48.6% in 2030, but would stay below the EU-level target of 60%. Large differences in participation rates between Member States are likely to persist, reflecting differences in investments in and policy attention for adult learning. Thus, existing support gaps will not disappear without further policy action. External drivers like the green transition, digital transformation and demographic trends will persist and even partly accelerate in light of the ambition to reach climate neutrality by 2050. At the same time, labour market transitions from one job or employment status to another are expected to become more frequent. This is expected to result both from increasing life expectancy and extrapolating the significant decrease in job tenure observed across EU Member States over recent years (Section 2.2.2). While there is no compelling evidence that atypical forms of work will increase further overall, some forms of it such as platform work are expected to grow. These are typically associated with fewer benefits in terms of support to training. There is broad recognition at EU and Member State levels of the importance to increase adult participation in learning in order to increase the resilience of labour markets and ease necessary professional transitions (Section 1). The measures adopted to tackle the impact of the COVID-19 pandemic, notably Next Generation EU, could provide a strong impetus for reform and some Member States have included reforms of adult learning policies in their recovery plans (see Annex 8.1). However, pressures on public budgets in the medium-term increase the importance to devise sustainable funding arrangements through a comprehensive policy framework. 3. WHY SHOULD THE EU ACT? 3.1 Legal basis The envisaged legal basis is Article 292 combined with Article 149 TFEU. Article 149 allows for non-binding measures in the field of employment aimed at providing comparative analysis and advice as well as promoting innovative approaches. It contributes to the implementation of Article 145 TFEU, according to which, “Member States and the Union shall (…) work towards developing a coordinated strategy for employment and particularly for promoting a skilled, trained and adaptable workforce and labour markets responsive to economic change”. Article 166 TFEU specifies that Union action shall aim to “facilitate adaptation to industrial changes, in particular through vocational training and retraining”. However, the ultimate and predominant purpose of the initative is to support Member States in reaching the objectives of employment policy (cf. also Section 4), leading to Article 149 TFEU as the legal basis (next to Article 292). Article 153 TFEU, which would allow for measures to “support and complement the Member States [on] working conditions”, was also discarded. Its relevant paragraph 1) b. on working conditions would only cover workers whilst leaving out self-employed, unemployed, and inactive people. In light of the problem analysis, it was essential to choose a legal basis which could cover the entire population on the labour market. 3.2 Subsidiarity: Necessity and added value of EU action The problems described above are widespread across EU Member States and have similar underlying causes, as shown in Section 2. The structural transformation of labour markets in light of the digital and green transitions and an ageing European population greatly increase the stakes for all Member States. An EU initiative in this area is warranted by the EU’s interest in having a skilled labour force as reflected in its objectives (Section 4.1). This is particularly important for upward socio-economic convergence across the economic and monetary union and the EU in general in a context of rapid shifts in skills demand within and across sectors. Increasing access to training opportunities can also improve the resilience of labour markets to shocks such as the one induced by COVID-19 pandemic. While Member States can take measures to improve the situation at national level (see baseline scenario in Section 5.1), an EU initiative can support and accelerate national efforts by sharing experiences and promoting innovative approaches (see Section 6.2 for a discussion of the available instruments). It can also help set expectations and create trust among Member States and stakeholders for an increase in public and private investment in skills, sending the message that all of them will contribute to, and benefit from, the shared asset of a skilled EU labour force. 84% of respondents to the public consultation agreed that the initiative could also lead to a more efficient use of EU funds for skills development. While the main EU added value of the initiative is to support Member State reforms to reach EU level objectives in the field of employment policy and the European Pillar of Social Rights, there are a number of additional dimensions of EU added value: The initiative can facilitate access to training for the growing number of EU citizens who reside in another EU Member State, contributing to labour mobility within the EU and a further integration of the single market. The initiative can also contribute to creating a level playing field for companies operating on the single market by enhancing the quality and transparency of training markets across the EU. 75% of the public consultation respondents agreed that the initiative can improve the portability and recognition of training outcomes across Member States, and 71% agreed it can increase the transparency of national training markets for companies operating on the single market.

Article 149 TFEU precludes measures that would lead to a harmonisation of the laws and regulations of the Member States in this area, respecting subsidiarity by allowing Member States to adapt the measures taken to national circumstances. 4. OBJECTIVES: WHAT IS TO BE ACHIEVED? 4.1 General objectives The general objective of the initiative is to support Member States with reforms to empower adults to participate in training in order to increase participation rates and reduce skills gaps. The initiative thereby contributes to the EU's objective to promote a highly competitive social market economy, aiming at full employment and social progress (Article 3 TEU). The initiative also aims to contribute to the implementation of several individual social rights that have been derived from this general objective in the context of the European Pillar of Social Rights: the right to “quality and inclusive education, training and life-long learning” (first principle), the right to “active support to employment” (fourth principle), and the right to training “regardless of the type and duration of the employment relationship” (fifth principle). Alongside the other inititives from the European Skills Agenda, the initiative aims to support Member States in making progress towards the EU-level target of 60% adult participation in training every year by 2030. This target has been set by the European Pillar Social Rights Action Plan and endorsed by EU leaders in the Porto Declaration and in the European Council conclusions of June 2021 (see Section 1). Significant progress on these dimensions will be crucial in order to support the just transition to a carbon neutral Europe, to equip citizens with the skills they need to grasp the opportunities resulting from the digital transition, and to adapt to change and uncertainties such as those ensuing from the COVID-19 pandemic. 4.2 Specific objectives To reach the general objective, the specific objectives of the initiative are to support Member State reforms to: -Close gaps in existing support systems so that all adults have access to support for training, including for professional transitions and irrespective of their labour force or professional status. -Increase the incentives and motivation of individuals to seek training. 5. WHAT ARE THE AVAILABLE POLICY MEASURES? 5.1 What is the baseline from which options are assessed? Under the baseline scenario, adult learning will continue to be an important strand of the EU’s policy work and funding. The most important recent Skills Agenda initiatives include the 2020 Council Recommendation on Vocational Education and Training and the Pact for Skills launched in November 2020. Several of the Recovery and Resilience Plans to address the socio-economic impact of the COVID-19 pandemic agreed between the Member States and the Commission include relevant initiatives, and the European Social Fund+, the European Regional Development Fund and Erasmus+ remain important funding sources for skills development. However, existing EU policy initiatives focus mostly on the design of the provision of education and training for adults (the “supply side”), rather than on making this provision accessible to adults and encouraging them to use it (the “demand side”). The 2019 stocktaking report on the implementation of the Upskilling Pathways Recommendation and the 2020 evaluation of the Council Recommendation on the validation of non-formal and informal learning show that a key challenge is to ensure a sufficient uptake of new opportunities that are created on the supply side. Moreover, existing EU policy initiatives are often limited in scope. For instance, the 2016 Council Recommendation on Upskilling Pathways focuses primarily on one level of skills (basic skills) and one target group (low-skilled adults). Hence, under the baseline scenario, the EU’s policy support will not fully cover Member State policy reforms and programming of EU funds to reach the objectives of the initiative. At the national level, 24 Member States have identified increasing participation of adults in learning as a priority in legal acts, policies, or strategies, which can be expected to translate into further concrete measures relevant to the general and specific objectives of the initiative. However, on the basis of past experience, overall progress is expected to be uneven across Member States and groups of adults. While most Member States have for instance training voucher schemes in place (giving individuals an entitlement to a specific type of training), target groups are usually small and the overall impact on participations levels limited. This is also reflected in the Recovery and Resilience Plans by Member States: among the 18 plans that had been endorsed by the European Commission by August 2021, 7 include schemes providing individuals with training entitlements, however often with a limited number of expected beneficiaries (ranging from 3 500-30 000, with the exception of 500 000 expected beneficiaries in EL- cf. Annex 8.1). Some of the supporting services that could address the limited incentives and motivation of individuals to take up training (such as registries of recognised training opportunities, validation and guidance services) exist in many Member States, but they often have low effective outreach and are not systematically linked to financial support instruments. The baseline scenario for this impact assessment hence assumes that adult learning participation until 2030 stays on its modest trend growth observed between 2007 and 2016, reflecting the ongoing policy efforts at Member State and EU level and the combined impact of the external drivers (Section 2.2.2). While adult learning participation dropped in 2020 following COVID-19 restrictions, direct impacts of the pandemic on adult learning participation are are likely to be transitory (Annex 6.1). However, expected growth in adult learning participation under the baseline scenario is not fast enough to reach the EU-level targets and to address the challenges facing the EU. Moreover, the inequalities in access to learning opportunities observed between different groups of adults (Section 2) are not expected to narrow, given the inconclusive trends in participation gaps (Annex 8.3) and the systematic patterns of under-representation also observed in Member States with high participation rates. 5.2 Measures discarded at an early stage A number of policy measures have been discarded for inclusion in this initiative, in light of the existing policy initiatives at EU and Member State level in the baseline scenario and the specific objectives of this initiative. Tax incentives for individuals: Income tax incentives for training exist in 16 Member States. Their potential to increase incentives and motivation of non-participating adults is limited by a significant delay between expenditure and reimbursement (via the income tax return), requiring significant forward planning by individuals. While income tax incentives have a large potential target group, progressive income tax regimes imply that they often favour high-income earners, and by design they cannot support individuals who do not pay any or little income tax. This limits their potential to close existing support gaps. This is further exacerbated by a structural lack of integration with measures that could provide information on training opportunities and their quality and recognition. Subsidised loan or savings schemes for adult learning: Their high administrative burden makes them more appropriate for one-off formal education rather than shorter and more frequent non-formal learning to update skills throughout working life. They are better suited for already motivated and informed individuals, and less effective in incentivising and motivating current non-learners. They are also less well suited for low-income learners, who may face restricted access to credit and saving. Existing schemes point to generally limited outreach.

Financial incentives for training for employers and training funds: Both instruments are an important part of training support systems in many Member States. They can increase training provision by employers by internalising the broader benefits that their training investment will confer to other employers, individuals and society at large, and related initiatives are supported by the Commission. They are outside of the scope of the present initiative in light of its objective to close access gaps to training so that all adults receive support to training, including those not well-served by training from an employer, as well as its focus on individual’s incentives and motivation to take up existing training opportunities. Supply side policy guidance and funding: Public funding to education and training providers is used to support adult learning in many Member States, and plays an important role in particular for training for the unemployed and vulnerable groups. Other policy initiatives from the Skills Agenda and EU funding support Member States to further develop the supply side of their adult learning systems. However, the evaluation of the Council Recommendation on the validation of informal and non-formal learning highlights that better training offers on the supply side need to be complemented with incentives on the demand side to significantly increase outreach to individuals. The present initiative covers policy measures to ensure that the substance of existing initiatives on the supply side reaches individuals and empowers them to participate in training. 5.3 Description of the policy measures Identified policy measures need to contribute to closing the existing gaps in financial support. This requires particular attention to groups that are often not well served by the current support systems as described in Section 2. Measures need to also increase individuals’ motivation and incentives to seek training as evidence shows that financial support is important but not sufficient for participation. They are grouped in three areas and combined into packages (Section 5.4). Respecting the principles of subsidiarity and proportionality, choices on key design parameters of all measures are left to the Member States as well as the Advisory Committee on Vocational Training (ACVT) to respect national collective bargaining for instance concerning the funding of training. Area 1: Individual training entitlements For the purpose of this impact assessment, individual training entitlements are defined as a recurrent personal budget that is at the individual’s disposal to cover the direct costs of his/her training/course fees within a set time period. Also guidance, skills assessment and validation of offers may be eligible for funding from this budget. Training entitlements can close gaps in financial support by channelling funding for skills directly to the individuals in need of training. They can also increase individuals’ incentives and motivation to seek training by providing salient financial support and by allowing for content, timing and delivery mode of training that is more tailored to individual needs and professional ambitions. In the public consultation, more then 80% of respondents agreed that individual training entitlements are effective at tackling financial constraints and at increasing incentives and motivation influencing participation in training. There are two main delivery modes to provide individual entitlements and they can be targeted at different groups, as discussed in the sub-section below. The precise amount of entitlements, the funding source and other key design features would be left to Member States. As stated in the ACVT Opinion, Member States are best placed to make these decisions in light of differences in national costs for training and existing arrangements for the funding of training. Member States would be asked to ensure that the implementation of the Recommendation does not reduce existing financial support for training by employers or training providers, but brings about a significant net increase in skills investments in order to satisfy the training needs not well covered by existing support systems. Area 1.1: Delivery mode of training entitlements This impact assessment analyses training vouchers (measure 1.1.1) as some kind of them existed in 21 EU Member States in 2020. Another delivery mode are personal accounts (measure 1.1.2). Whilst not widespread in the EU, personal accounts are an innovative approach that has been receiving increasing attention in the policy debate. Measure 1.1.1: Training vouchers For the purpose of this impact assessment, we define training vouchers as a delivery mode for training entitlements through which a specific funder (e.g. PES) funds a specific type of individuals’ training (e.g. in digital skills). Thus, the individual’s flexibility in using the entitlement is limited. There may be also other modalities and conditions depending on the scheme (e.g. the period during which the entitlement has to be used). This policy measure addresses concerns voiced by stakeholders, in particular employers, to consider the correspondence of training to labour market needs. Measure 1.1.2: Personal accounts For the purpose of this impact assessment, we define personal accounts as a delivery mode for training entitlements that allows individuals to accumulate training entitlements over time in order to use them on whichever training, guidance or validation opportunity they deem the most useful and whenever they see fit within the boundaries of the scheme. They de-couple training entitlements from their original funder and give individuals full ownership over the entitlements. They allow for a portability of entitlements during professional transitions and can facilitate cost-sharing between different funders, such as public authorities and employers, by allowing different funders to contribute to the account. This delivery mode addresses concerns voiced by some stakeholders (including the European Trade Union Committee for Education and civil society organisations such as the AGE Platform and FEPS/Jaques Delors Institute) about the need for broad autonomy in how individuals can spend their training entitlements in order to promote a culture of developing skills throughout working life. The possibility to accumulate entitlements over several years was also specifically supported by some stakeholders. Area 1.2: Target group for training entitlements Training entitlements could be provided to a specific target group (measure 1.2.1) or to all working age adults (measure 1.2.2). Measure 1.2.1: Defined priority target groups This approach can ensure that those who are in most pressing need of training can access it. These target groups can be defined on the basis of the employment or contract status, level of skills or the sector of employment, as well as other circumstances (i.e. disability). This measure addresses stakeholders’ concerns about potential displacement effects of private skills investments (“deadweight loss”) when opting for a broader target group. Such effects can be reduced by successfully targeting only those individuals who would not have been able to participate in learning otherwise. It corresponds to the approach followed by most Member States to date and is in line with the view expressed by some stakeholders, such as AONTAS (Ireland’s national adult learning organisation) or SMEunited (an employers organisation), that attention should be focused on specific vulnerable groups. Measure 1.2.2: All working age adults This approach includes e.g. all those currently in employment who would like to train for new tasks to be able to keep their job or prepare for professional transitions. It addresses issues related to the fragmentation of support schemes for adult learning, and can facilitate the promotion of a culture of developing skills throughout working lives. This is the approach taken by FR, NL and Singapore. It is in line with the view that the initiative should promote a universal right and be available to all learners, expressed in the public consultation by stakeholders such as the Lifelong Learning Platform (LLP), the European Trade Union Confederation (ETUC) and Eurocadres (trade unions) or WKÖ (an Austrian employers’ organisation). In its dedicated opinion, the ACVT agrees that while the initiative should focus on the upskilling and reskilling of the workforce (workers/employees/self-employed), it may also tackle training for other target groups such as the unemployed and inactive individuals, retired people or young persons not in employment, education or training. Area 2: Career guidance

Career guidance services support individuals in their training and career choices, direct individuals to skills assessment and validation procedures, and can provide assurance concerning the quality of training opportunities and the subsequent recognition of training outcomes on the labour market. This can increase individuals’ incentives and motivation to seek training by raising awareness of training needs and available offers, improving the “match” between individuals and training opportunities and training outcomes. The importance of guidance, and its integration into broader strategies to increase adult learning, has been emphasised by the Council. It was also underlined by resondents from all stakeholder groups in the targeted consultations and positions papers submitted in the public consultation. 92% of public consultation respondents agreed that guidance is effective in increasing incentives and motivation to participate in training, reflecting near universal support from all groups of stakeholders. Also the ACVT’s opinion on the initiative emphasises the importance of quality, effective and inclusive guidance and counselling services are essential. Measure 2.1: Making career guidance available to all Under this measure, Member States would be recommended to ensure that career guidance is available to all. Career guidance services already exist in almost all Member States, though with a large variation in effective outreach (Section 2.2). Such services often accompany initiatives that provide individual training entitlements. This policy measure would underline the importance of outreach and cooperation with all relevant stakeholders as well as up-to-date labour market and skills intelligence to inform guidance. The detailed modalities of career guidance provision would be left to the Member States (and may be made available to individuals free of charge or considered as eligible for funding from training entitlements while ensuring it is available to all). Measure 2.2: Career guidance as a pre-condition for the mobilisation of the training entitlement Under this policy measure, the use of the training entitlement would be subject to compulsory guidance, with a view to improve the match between the selected learning opportunity, the labour market and the individual skills needs. This reflects current provisions or policy reflections in some Member States, and addresses stakeholder concerns (in particular by employers such as SMEunited) about a lower efficiency of spending on training entitlements without specific guidance. Area 3: Enabling framework Beyond career guidance, additional policy measures can create an enabling framework complementing individual training entitlements and thereby contributing to reaching the objectives of this initiative. Measure 3.1: Public registry of recognised training, validation and career guidance opportunities A public registry of recognised training opportunities can increase individual’s incentives and motivation to seek training. It does so by centralising information on available training opportunities, thus facilitating the “match” between individual and training opportunities. It has also the potential to reduce uncertainty about the quality, labour market relevance and recognition of the registered training on the labour market by delegating the relevant checks to a third party, tackling the problem of imperfect information by individuals. A comparison of the experiences of the English and Scottish training entitlement schemes also point to the importance of having such a registry for the success of related initiatives (see Annex 13). A registry of recognised offers provides an opportunity to ensure that the substance of existing recommendations, notably the Council Recommendation on VET, becomes tangible for individuals. Comparable registries already exist in some Member States (Section 2.2), and their establishment has been specifically supported in the targeted consultations by some stakeholders such as the European Mentoring & Coaching Council. In the public consultation, 86% of respondents agreed that such registries are effective in increasing incentives and motivation to participate in training. Respondents also largely agreed that skills intelligence should play a strong role in the selection of training opportunities included in the registry, and that public authorities, employer organisations and trade unions should play a strong role. While there was broad consensus among stakeholders that strong quality assurance mechanisms are essential to ensure trust in and acceptance of a scheme of individual training entitlements, employer organisations (such as SMEunited) pointed out that eligibility rules need to be sufficiently flexible to ensure a correspondence of the training offer to (changing) skills needs on the labour market. Under this policy measure, Member States would be recommended to establish a public registry of recognised training, validation and career guidance opportunities. Member States would be recommended to ensure adherence to quality assurance and the labour market relevance of the included training offers by establishing a durable governance mechanism that considers evidence from skills intelligence and social partners and foresees periodic updates to the registry, with the view to support flexibility. Member States would be recommended to also make the registry easily accessible, notably by digital means, and user friendly for individuals. Measure 3.2 Paid training leave Paid training leave schemes allow individuals to take time off work for training while still receiving their salary in its entirety or in part, or alternatively an allowance to cover the costs of living from public or social partner funds. They can cover gaps in financial support concerning the indirect/opportunity costs of training that is not covered by regular employee training during working hours, and for individuals with weak or no links to an employer. They can therefore increase incentives and motivation for individuals to train by addressing the time obstacle to training. Paid training leave provisions of some sort already exist in 24 Member States, but with variable coverage and often low take-up (Section 2). In the public consultation, 82% of respondents agreed that paid training leave for employees is effective to address time constraints to participation in training, and 85% agreed to make allowances for the cost of living during training available to non-employees. Trade unions emphasised the need to strengthen the existing paid training leave provisions in the Member States in position papers and the targeted consultations. Member States would be invited to introduce paid training leave provisions or reassess the existing provisions to ensure they cover all types of employed individuals, including on financial support for employers whose employees make use of paid training leave (in particular SMEs who face greater challenges, cf. Section 2). They would also be recommended to strengthen the links between paid training leave provisions and other available support measures. The detailed modalities of provisions would be left to the Member States. Measure 3.3 Effective governance for continuous improvements Effectively closing support gaps and increasing individual’s incentives and motivation requires an effective governance to ensure sustainable funding and efficient spending. It involves a constant monitoring and evaluation of the success of the existing support schemes and possible adjustments to them. For instance, priority target groups may change as the labour market evolves. Also systematically integrating relevant EU Recommendations and the experience from evaluations and observed take-up rates among different groups of adults can help a support scheme reach its objectives more effectively and efficiently, including concerning effective outreach to vulnerable groups. With this policy measure, Member States would be recommended to set up funding and governance arrangements that pay particular attention to the needs of micro-entreprises and SMEs and allow for an effective integration of financial and non-financial support for training. They would also be recommended to ensure outreach and awareness-raising tailored to the needs of the potential beneficiaries of the scheme for individual learning accounts, jointly with social partners, civil society organisations, regional and local organisations and other relevant actors and networks. In line with the principle of subsidiarity, these governance arrangements would be set at national level, with the view to evaluate and adjust as necessary, for instance, concerning the amount of training entitlements, priority target groups, the registry of recognised training opportunities or dedicated outreach and awareness campaigns. The importance of including external stakeholders, such as social partners, was underlined by employer representative organisations and trade unions. This was also underlined in the ACVT’s dedicated opinion. Annex 5 provides an overview of the intiative’s intervention logic, linking the policy measures to the identified problems and the objectives of the initiative.

5.4 Description of the alternative policy packages The policy measures are grouped in two policy packages (packages A and B). Packages are designed to be coherent and their policy measures are mutually reinforcing in achieving the specific objectives. For instance, making career guidance a pre-condition for the mobilisation of the training entitlement is more feasible when the provision of training entitlements is limited to defined priority target groups. At the same time, they highlight the main trade-offs that emerge on the basis of the available evidence and the stakeholder views (cf. the discussion above under Area 1). Package A combines measures 1.A.1 (vouchers as a delivery mode) and 1.B.1 (defined target groups). It hence aims to empower adults to participate in learning by closing gaps in existing support systems in a targeted way, focusing financial support on those most in need of training and on providing the skills which are the most needed on the labour market at a certain point in time. Vouchers are the delivery mode that fits best this approach because they enable the funders to decide who they give the voucher to and what type of training the voucher should cover. Measure 2.2 (Career guidance as a precondition for the mobilisation of the training entitlement) is also included in package A, as it allows to ensure that the funder’s assessment of labour market relevance is reflected in the choice of training. Package B combines measures 1.A.2 (personal accounts) and 1.B.2 (covering the whole adult population of working age), with the view to operationalise the right to training as a universal right. It responds to the argument that in a context and changing skills requirements and more frequent labour market transitions, everyone should receive incentives to participate in training, no matter their current employment status or their level of skills. Personal accounts are the delivery mode that fits best this approach as they allow for entitlements to follow individuals throughout their careers and they facilitate cost-sharing, which is essential when the entitlement covers the whole adult population of working age (employed, unemployed, atypical workers, platform workers, etc.). Policy package B has 2 two sub-options, B.1 and B.2: under package B.1, all beneficiaries receive the same amount of entitlements (measure 1.2.2), whereas under package B.2 training entitlements are modulated according to the target group, with those having particular training needs as determined by the Member States receiving a higher amount of entitlements (new measure 1.2.3). This is due to the fact that during the analysis, the complementarity between some elements of package A and some elements of package B became clear. This also follows the OECD’s and the ILO’s recommendation for universal support that is however modulated based on recipient characteristics. Both packages A and B include measure 2.1 and measures from area 3 because they are considered as essential to the success of the initiative irrespective of the package chosen. Only training, validation and career guidance opportunities included in the public registry of recognised opportunities would be eligible for funding from training entitlements under all packages, to promote quality, labour market relevance and recognition of the training undertaken. Under package A, this condition complements the requirement of guidance as a condition for mobilising the training entitlements. However, the public registry would be accessible also for those who do not receive training entitlements. Table 1: Overview of the policy packages Measures Package A Package B.1 Package B.2 Training entitlement – delivery mode Measure 1.1.1 : Training voucher Measure 1.1.2: Personal account Measure 1.1.2:

Personal account Training entitlements – target groups Measure 1.2.1: Defined priority target groups Measure 1.2.2:

Entire adult population of working age and same entitlement Measure 1.2.3:

Entire adult population of working age, but modulated entitlement according to the target group Career guidance Measure 2.1 (Guidance for all) Measure 2.2 (Guidance as a pre-condition) Enabling framework Measure 3.1 (Public registry) Measure 3.2 (Paid training leave) Measure 3.3 (Effective governance) 6. WHAT ARE THE IMPACTS OF THE POLICY PACKAGES? 6.1 Analysing the main impacts This section presents the main social and economic impacts of the policy packages as well as impacts on fundamental rights. No direct environmental impact was identified, and potential indirect impacts are discussed in Section 7 under “coherence with other EU objectives”. Significant efforts have been made to collect the necessary data and provide a quantitative assessment. However, this was not always possible. A first reason are limitations concerning the availability of evidence, notably on possible interactions between policy measures. A second reason is that respecting the principle of subsidiarity underlined in Article 149 TFEU, choices on key design parameters of the policy options are left to the Member States, including on the amount of training entitlements and priority target groups. This precludes a full measurement of their social and economic (including fiscal) impacts. Finally, impacts will depend on the degree of implementation of the recommendations by Member States and on the extent to which it can build on already existing provisions. Therefore, the approach taken is to outline a quantification of expected impacts for specific implementation scenarios on the basis of assumptions on the key design parameters derived from the available evidence, complemented with a qualitative assessment. Impacts are assessed relative to the baseline scenario (Section 5.1), based on a view of how the problem may evolve (Section 2.4) and taking into account differences in Member States’ estimated adult learning participation levels and training costs. This is complemented by a qualitative mapping of relevant already existing provisions in the Member States in Annex 8.2. The methodology used is described further in Annex 4, and details on these scenario analyses for the quantification of impacts referred to throughout this Section, including sensitivity checks on the key parameters, can be found in Annex 12. Across impact categories and target groups, the horizontal recommendation of effective governance mechanisms with monitoring and evaluation is expected to have positive impacts by allowing for an adjustment of the design parameters on the basis of “lessons learned”. 6.1.1 Social impacts On individuals Participation in learning: All packages are expected to stimulate reforms in Member States that increase the participation of adults in learning compared to the baseline scenario. The impact on participation rates will depend on the size of the target group that receives training entitlements, on the number of potential beneficiaries who spend their training entitlement (“take up”), and the extent to which individuals purchase training they would otherwise not have undertaken (no “deadweight loss”, cf. Annex 11 for details). The scenario analyses below are based on the existing evidence from related schemes and from training voucher experiments. A limitation is that they do not fully consider interactions between training entitlement and the other policy measures that are included in packages A and B, and whose expected impact is discussed qualitatively below. Package A could result in an additional 5.8 million adult learners every year across the EU if training entitlements were provided to all low qualified. This would increase their annual participation rate in 2030 considerably (from a predicted 23.4% under the baseline scenario to 35.0%). The overall participation rate would increase from 48.6% to 51.0% due to the relatively small size of the target group. Similar changes are expected for additional priority target groups considered in the scenario analyses on packages A and B.2 (the inactive, unemployed, workers not in permanent employment and workers in SMEs), with the support provided to workers in SMEs (the largest of these priority target groups) leading to the highest overall participation rate of 56.2%. Package A would, therefore, not reach the Porto target of 60% participation by 2030 for plausible choices of priority target groups. Packages B would be expected to significantly increase adult learning participation across all groups of working age adults. Package B.1 could result in an additional 33.6 million adult learners across the EU and increase the participation rate to 62.7% by 2030. Under package B.2, the corresponding figures could be an additional 36.6 million learners and a participation rate of 63.9% when providing all workers in SMEs with additional entitlements. Both scenarios under package B would, therefore, achieve the Porto target of at least 60% participation by 2030. By targeting specific groups, package A could also reduce inequalities in learning participation across groups of adults: for example, the gap in the participation rate of low qualified adults compared to the average in 2030 could decrease by 9.2 percentage points (from 25.2 to 16.0 percentage points). The impacts of packages B on inequalities in participation across groups are ambiguous: they may increase if take-up rates among under-represented groups are significantly lower, or decrease them due to the lower deadweight loss for priority target groups. Modulating support according to the target group in package B.2 tends to reduce inequalities. The larger target group of packages B allow them to better address support gaps that cannot be easily anticipated by policy makers on the basis of individual characteristics (for instance, the ambition to prepare for a professional transition).

Both packages could also reduce inequalities in adult learning participation across Member States, with stronger impacts under packages B due to its larger target group. The reason is that in Member States where adult learning participation rates are lower under the baseline scenario, deadweight loss can be expected to be less prevalent, resulting in larger increases in participation rates. Under package B.1, the increase could range from 11.6 percentage points in the Member State with the highest participation rate under the baseline scenario (SE) to 17.7 percentage points in the Member State with the lowest (RO). The limited available evidence suggests that making prior career guidance a condition for the mobilisation of training entitlements in package A may have a small negative effect on the uptake of training. The evidence from the French CPF suggests that when individuals can accumulate their training entitlements in personal accounts over multiple years (as foreseen in packages B), they use this flexibility to undertake less frequent yet longer or more expensive trainings, which would reduce the impacts on annual participation rates in packages B. However, aligning the intensity of training to the current skills needs and circumstances is expected to increase its effectiveness overall. Registries of recognised training opportunities can be expected to increase the uptake of training by making it less time-consuming for individuals to identify a suitable training offer. The review and strengthening of paid training leave is expected to increase the share of beneficiaries who make use of their training entitlements as it relaxes time barriers, in particular among groups often not yet covered by existing schemes such as atypical workers (Section 2.2). Wages and employment: The impacts on wages and employment follow from the changes in participation rates and are lower for package A and highest for package B.2. Studies from a large number of countries suggest that there are substantial positive wage returns to training. Return estimates also remain significant in studies that are able to account for the selection of high-ability adults into training, and a review of these estimates suggests returns around 1% for a training course of 30 hours (Annex 10). Regarding the impact on employment, a review of more than 200 recent studies of active labour market programmes by Card et al. (2018) identified asignificant increases in employment probability of the previously unemployed after training participation. Results from macroeconomic modelling that also takes into account general equilibrium effects via higher productivity and a more efficient reallocation of workers across jobs suggest that giving low-qualified individuals training entitlements under package A could yield an additional 30 000 jobs across the EU by 2030, compared to 120 000 under package B.1 and 140 000 under package B.2 when providing additional support to all low qualified, with job gains increasing to 100 000 - 400 000 by 2040 (see Annex 12C for details). There will be substantial heterogeneity in wage and employment returns both across individuals and training courses. The conditions on quality assurance and labour market relevance for inclusion in the registry of recognised training opportunities and effective governance provisions are expected to ensure that average returns are in line with those found in the literature. While giving individuals greater freedom in their choice of training opportunities under packages B compared to package A can be expected to lead to a higher share of training conferring more transversal skills, there is no evidence that it is less labour market relevant (Annex 11). All packages are expected to have positive indirect effects on wages and employment outcomes by improving the participation in guidance and take-up of skills validation opportunities, which can facilitate wage negotiations or finding employment. The evaluation of the Council Recommendation on validation of informal and non-formal learning concluded that strengthening the financial support to individuals can promote the uptake of the new validation offers that have been created by the Member States. 81% of public consultation respondents agreed that the European initiative on individual learning accounts can add value on the validation of non-formal and informal learning outcomes, and 77% agreed on the provision of guidance services. Working conditions and social dialogue: All packages are expected to improve the working conditions of the beneficiaries of training entitlements by improving access to training. Providing individuals with training entitlements is already used by some employers, mainly large companies, to improve the working conditions and motivation of their employees to take up training. Under package A, positive impacts would concern only some target groups selected by the Member State. Under packages B, this would cover all adults on the labour market, whereby the groups most in need could receive additional support under B.2. The recommendation to revisit paid training leave provisions is expected to improve the working conditions of employed adults, benefitting particularly those who are not well covered by the current paid training leave provisions (notably those in atypical work and employees of SMEs). It would also benefit employees at large by making it easier to identify quality training opportunities and cover the direct cost of training, strengthening the take-up of existing training leave offers beyond the currently low levels (Section 2.1). In the consultations, trade unions, such as ETUC, have expressed their concern that the initiative could reduce the training provision by employers, and employers, such as SMEunited, have argued that resulting national schemes should not regulate such training provision. Both packages would recommend to Member States to ensure that the implementation of the Recommendation does not reduce existing financial support for training by employers, mitigating this concern. Moreover, the decision to spend training entitlements would lie with the individual, ensuring that the resulting training would complement the existing training provision by employers. Packages can strengthen social dialogue, by recommending to give social partners an important role in the governance of the registry of recognised training opportunities. Packages B could further strengthen the role of skills in social dialogue by creating the infrastructure for top-ups to the personal accounts of employees in specific companies or sectors. Other social impacts on individuals: Packages A and B are expected to have a range of positive impacts on individuals’ health and well-being (Section 2.3). The universal packages B is expected to create less stigma for vulnerable groups than the targeted package A in light of their approach that training is for everyone, no matter their current employment situation or skills level. On education and training systems All packages are expected to increase the size of the market for continuing training by mobilising additional skills investments, with a larger potential impact of packages B stemming from their larger scale. This creates opportunities for training providers, who are also expected to benefit from enhanced visibility for their training offer after inclusion in the registry and from a rapid invoicing process with the authority managing the training entitlements as the single contact point. The registry of recognised training opportunities is expected to increase the quality and transparency of training offers, in particular for non-formal training offers where the scope for improvements is largest (Section 2.2). While small training providers may face greater difficulties to meet the requirements for inclusion in the registry, the effective and inclusive governance of the registry recommended to the Member States is expected to remove unnecessary access barriers. This form of governance is also expected to improve the dialogue between training providers, public authorities and social partners, which can help improve the tailoring of the training offers to labour market needs, including the skills needs of employees of SMEs. The increased transparency from the registries of recognised training opportunities can be expected to increase competition among training providers and reduce the cost of training, thereby having a positive impact on the funder of the training. This is confirmed by first indicative evidence from the French CPF, where the average price of more standardised training offers such as English language certificates or driving licences has decreased following the most recent reform (Annex 14). On society as a whole Packages A and B are expected to have a range of positive impacts on civic participation and social cohesion (Section 2.3). Since these benefits are expected to be proportional to the increase in adult learning participation, they can be expected to be stronger for packages B. The evidence also suggests that increasing inequality of opportunity has played an important role in the recent rise of anti-establishment sentiment. This hints at broader positive impacts of closing gaps in the access to training and thereby equalising opportunities. 6.1.2 Economic impacts Direct costs of training entitlements

The direct costs of training entitlements depend on the size of the target group, the take up and the amount of entitlements. The scenario analyses introduced above suggest that implementing package A in all Member States could result in a direct annual cost of €4.2 billion (or 0.03% of 2020 GDP) for EU-27 when targeting the low-qualified.Packages B costs would be higher, ranging from €16.8 billion /0.13% of GDP (package B.1) to around €24.5 billion / 0.18% of GDP (package B.2 with additional entitlements for SME workers). The amounts will depend on decisions by Member States regarding target groups and levels of entitlements. Depending on the financing arrangement chosen by the Member States, these costs would be partly or fully borne by public authorities, employers or individuals. Additional costs for enterprises including SMEs Additional costs may result from staff absence during training, which can lead to a decrease in productivity. Scenario analyses suggest that possible additional costs of undertaking training during working hours (either with informal permission from the employer, or making use of paid training leave provisions) would not outweigh training benefits (see Annex 12B). In the consultations, SME representatives have highlighted that the absence of staff during periods of training is a particular challenge for SMEs. Therefore, both policy packages include a recommendation to also include the financial support provided to employers whose employees make use of paid training leave in the review of the adequacy of existing paid training leave provisions, with particular attention to the needs of SMEs. They also include a recommendation to consider the needs of micro-entreprises and SMEs in the design of funding arrangements. Additional costs for public authorities Under all packages, the set-up, maintenance and governance of the registry of recognised training opportunities would result in costs to public authorities. Additional costs may be limited for the 12 Member States where similar registries already exist. Under packages B, the set-up and maintenance of personal accounts would create additional costs. Limited information is available on the magnitude of these costs, as Member States do not systematically report them in a sufficiently disaggregated way. Estimates for the French CPF point to costs of running the system of personal accounts of about €100 million over the three-year period 2020-2022. A review of the limited available evidence suggests that administrative costs as a share of direct costs of training entitlements decrease with the number of beneficiaries from a scheme. Providing career guidance for free could result in additional costs for the guidance providers, often public authorities. However, public career guidance already exists in 25 Member States at least to some extent(Section 2.2). The simplified cost options used for reimbursement of guidance services under the ESF place the cost for an hour of in-person guidance at on average €18 across the Member States, ranging from €2 to €39. Thus, no or minimal set-up costs would arise and most additional costs would result from a higher uptake. Similarly, modest additional costs for public authorities can be expected due to the increase in the use of validation opportunities. Both packages allow for a provision of guidance services by providing orientation through the registry of recognised opportunities. Under package A, in-person guidance is a precondition for the use of training entitlements, and additional costs of this can be substantial. Therefore, expected additional guidance costs per beneficiary are significantly lower under packages B compared to A. The recommendation to revisit paid training leave provisions included in both packages could also lead to additional costs for public authorities. In the Member States where public authorities are already involved in the funding of paid training leave, additional costs would be limited to those resulting from expanding coverage or higher take-up resulting from the other policy measures included under packages A and B. Costs for education and training providers Compliance with the criteria required for inclusion in the registry of training offers may create costs for training providers, which can be a relatively higher burden for smaller providers. To minimise compliance costs for training providers, both packages recommend to establish these criteria in line with existing national quality assurance frameworks and a governance of these registries that is responsive to these concerns. Other economic impacts On enterprises and SMEs: All packages are expected to lead to an increase in the productivity of workers and hence in the competitiveness of their employers. The literature review suggests that productivity impacts are about double the size of wage impacts, so that a 30 hour training increases productivity by about 2%. In the public consultation, 77% of respondents agreed that the initiative could increase the productivity and competitiveness of companies. As employees of SMEs currently participate less in training, the potential impacts of both packages on the productivity and competitiveness of SMEs are larger. Yet, while it is clear that packages B would cover SMEs, the impact of package A on SMEs would depend on each Member State’s choice of target groups, which could or could not cover SME employees. On individuals: Individuals participating in training may face indirect costs related to their inability to earn income during periods of training or costs of transport. The initiative reduces such indirect costs by including the paid training leave provisions in all packages, and in packages B by the flexibility given to individuals concerning the timing of training, allowing them to select the most convenient time (such as a period of low economic activity to minimise income losses). On public authorities: The increase in employment foreseen for both packages can be expected to entail in the long run higher tax returns and cost savings resulting from lower spending on unemployment benefits or healthcare (Section 2.3), with the smallest impacts for package A and the strongest impacts for package B.2. On society as a whole: By facilitating training in transversal skills and for professional transitions, both packages are expected to improve the employability of workers and thus support successful labour market transitions in particular from declining to growing sectors of the economy. 81% of public consultation respondents agreed that the initiative could support the digital and green transitions by providing relevant skills. Impacts of packages B are expected to be stronger as they can support a broader range of training to support professional transitions, with the strongest impacts for package B.2 due to its additional support for target groups with specific needs. Both packages are expected to increase investment and business growth, in light of the evidence of skills shortages as a barrier for companies (Section 2.3). They can be expected to have indirect positive impacts on research, innovation and technology diffusion throughout the economy. Impacts of packages B could be expected to be larger due to the fact that it is expected to trigger more participation in learning than package A. This is in part also due to the fact that personal accounts can stimulate additional skills investments by companies by facilitating a flexible sharing of training costs among multiple stakeholders. The estimated macroeconomic benefits include a higher level of GDP per capita in 2030 estimated at 0.23% (package A targeting the low qualified), 0.87% (package B.1) and 0.99% (package B.2 with additional entitlements for the low qualified) in comparison to the baseline, with increases between 0.33-1.4% of GDP by 2040 (cf. Annex 12C). The set-up of personal accounts in packages B is expected to contribute to macroeconomic stabilisation, as it allows individuals to accumulate training entitlements over time and spend them on training during economic downturns and also creates the infrastructure to quickly provide individuals with additional public support for skills investments during downturns. 6.1.3 Fundamental rights impacts Article 14(1) of the Charter of Fundamental Rights of the EU states that “everyone has the right to education and to have access to vocational and continuing training”, which is also reflected in principles 1, 4 and 5 of the European Pillar of Social Rights. Both packages are expected to have a positive impact on fundamental rights by bridging gaps in the access to continuous training. Fundamental rights impacts are stronger under the universal but targeted support provided under package B.2, as it foresees coverage of the entire adult population of working age while also providing specific support to those most in need. 6.2 The choice of legal instrument

In light of the objective of the initiative to support reform in the Member States and the envisaged legal basis, only non-binding instruments are under consideration. A first option would be a revision of the Employment Guidelines to support Member State reforms through the European Semester process and country-specific recommendations. The most recent revision from October 2020 already asks Member States to “strengthen the provisions on individual training entitlements and ensure their transferability during professional transitions, including, where appropriate, through individual learning accounts”. However, as they are general by nature, they do not provide further guidance on how to do this. A Commission Communication or Recommendation could provide further guidance to the Member States and inform country-specific recommendations. However, it would not have any political ownership by the Member States, and would therefore be insufficient to incentivise the required reforms in the Member States. The preferred instrument is a proposal for a Council Recommendation. A Council Recommendation would provide a common framework for action that could serve as basis for subsequent analysis of reforms and progress. It would provide Member States with commonly agreed recommendations on a concrete tool that can help them to make the necessary progress towards the objectives of this initiative, with a view to implement the right to education, training and life-long learning from the European Pillar of Social Rights and make progress towards the ambitious 2030 EU headline target on training participation (Section 1). A Council Recommendation would be complementary to country-specific recommendations in the European Semester, as it would provide a commonly agreed framework for the implementation of recommendations that are well suited to a Member States’ starting point. In the public consultation, 61% of respondents agreed that the introduction of EU legislation to be adhered by Member States on a voluntary basis such as a Council Recommendation would be suitable to reach the objectives of this initiative. 7. HOW DO THE POLICY PACKAGES COMPARE? Table 2 summarises the results of comparing the baseline scenario to the alternative packages A, B.1 and B.2, on the basis of the analysis from the previous Section. Effectiveness All packages are expected to support reforms in Member States to increase overall participation in training and reduce skills gaps compared to the baseline scenario. The increase in training participation is expected to be smallest under package A and greatest under package B.2. Regarding the specific objective of closing support gaps, effectiveness is expected to be of medium strength for packages A and B.1. In package A, this is because of the expected small target group receiving training entitlements. In package B.1, the positive impacts of universal coverage are reduced by a risk of insufficient support for individuals who are in need of more fundamental reskilling. Package B.2 is expected to have significant positive impacts by supporting all adults with training entitlements while also envisaging additional support for individuals with additional training needs. Through personal accounts, packages B also reduce the fragmentation of support and the portability of training entitlements during professional transitions, and facilitate the cost-sharing among different funders of training entitlements. With regards to increasing the incentives and motivation of individuals to take up training, the recommended individual entitlements, strengthened guidance, increased transparency about quality assured training offers, improved access to paid training leave and effective governance are expected to contribute to effectiveness across all packages. Impacts are expected to be moderate under package A but significant under packages B. This is because packages B allow for a greater tailoring of training to individual needs by allowing individuals to freely select among eligible opportunities and at the time that suits them best. Hence, packages B provide incentives to train also in situations that cannot be easily anticipated by policymakers for targeted support at the level of groups of adults (e.g., a desire to learn new skills to prepare for a professional transition, or a sudden period of low economic activity and work intensity), and are expected to trigger a positive change in the overall approach of adults to learning. Table 2: Comparison of the packages Criterion Policy package Baseline A B.1 B.2 Effectiveness 1. Close support gaps 0 ++ ++ +++ 2. Increase incentives and motivation 0 ++ +++ +++ Efficiency 0 +++ +++ +++ Coherence 1. European Pillar of Social Rights 0 + ++ +++ 2. Other EU objectives 0 + ++ +++ Note: For the purpose of comparing the impacts of the p