examples of positive results from programs combining private provision with public financing.<sup>37</sup>

# **B. Interventions to increase private sector training**

52. Training (and re-training) programs generally account for the largest share of expenditures in active labor market programs, usually ranging between 40% to 60%. Public interventions to increase training by enterprises include revenue-raising training levies to support public provision of pre-employment and in-service training;<sup>38</sup> tax incentives to train by allowing workers to deduct a multiple of training expenditures from income;<sup>39</sup> training levy-reimbursement schemes (“training funds”)<sup>40</sup> and wage subsidies. There is considerable debate about the effectiveness of such programs. With some exceptions, assistance for enterprise training has generally not been successful. It has been particularly difficult to reach large numbers of small firms.

53. There are only a few studies on the effects of wage subsidies on the provision of training. Analyses in Australia suggest that the effect may be positive, if weak, although there are indications that subsidization of apprentices has led to displacement of other, unsubsidized workers.<sup>41</sup> Literature on the effects of tax exemptions is also scant. In Chile and Brazil, where some evaluations have been carried out, the main beneficiaries are large enterprises in a few dynamic sectors of the economy.<sup>42</sup> Evidence on the direct subsidization of training expenses indicates a positive impact on the amount of training provided by enterprises, but the effect on quality is uncertain. Some evidence from Latin America indicates that small firms gain little benefit from reimbursements.<sup>43</sup> 54. A recent survey of 100 studies of active labor market programs found outcomes varying by type of intervention and type of training. There was limited impact in training programs aimed at long-term unemployed, retraining for laid-off workers, training of youth, and wage subsidy programs. Impact of subsidies for training was uncertain. Tax exemptions had some impact but the benefits accrued mostly to larger firms; SMEs have in general not benefited. Over 75% of the programs had limited success.<sup>44</sup> 55. Among the success stories is Singapore. Here, a levy on the wages of unskilled workers goes into a Skills Development Fund which is used to upgrade the workforce through training grants to enterprises. Training reached 21% of the labor force in 1985. By most measures these training grants have been successful.<sup>45</sup> More recently, matching

> 37 World Bank (2002), chapter 2.

> 38 Most common in Latin America (e.g. Brazil, SENAI; Colombia , SENA; Peru, SENATI and Guatemala, INTECAP). Seem as too supply driven and unresponsive to new skill needs.

> 39 Brazil, Malaysia, Pakistan and Chile have used tax incentives with mixed experiences—typically subsidize firms which already train.

> 40 Allows companies to eliminate or reduce payroll levy by amount of training provided—used in France, Australia and Korea. Scheme provides flexibility in use of funds; but creates monitoring and abuse problems or degenerates into revenue-raising policy.

> 41 Middleton, Ziderman and  van Adams (1993).

> 42 Middleton et. al., _op. cit._

> 43 Middleton et. al., _op. cit._

> 44 Dar and Tzannatos (1999).

> 45 Middleton et. al., _op. cit._

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