Advantages:
• Earmarked payroll levies can be viewed as “benefit taxation”, meaning those that benefit (employers and workers) pay for the training.
• Levy systems can substantially augment the resource base for training.
• Increased training resources can substantially increase the incidence of training.
• Levies can provide a steady and protected source of funding, particularly in the context of unstable public budgets.
• Levy-grant systems can encourage firms to intensify their training efforts, increase training capacity and raise training quality.
• Training levies collected from formal sector employers can serve as a vehicle for cross subsidisation; e.g., for smaller enterprises and for firms in the informal sector.
• Levy-financed funds can also help to correct imbalances in training access by pooling funds, e.g. for training disadvantaged segments of society, unemployed, those in the informal sector.
• Levy systems move away from earmarked taxation, which does not conform well to the principles of sound public finance and weakens attempts to unify the national tax system.
Limitations:
• Payroll levies raise the cost of labour for employers, possibly discouraging employment.
• Employers may shift the levy onto workers in the form of reduced wages. In this case, it is workers rather than employers who bear the burden of the tax.
• Insecurity of income: Under fiscal pressure, governments may divert levy proceeds into general public tax revenues for non-training uses.
• Unequal access: Many firms, particularly small ones, do not benefit from the scheme. This breeds resentment and compromises the status of training levies as “benefit taxation”.
• Inefficiency: Payroll levies may constitute an over-sheltered source of funding, leading to unspent surpluses, inefficiencies and top-heavy bureaucracies.
Source: Johanson, 2009
where a levy grant system is adopted and administered through a training fund.
Enterprises are reimbursed in a levy grant system for the cost of qualified training.
Levy success depends on a sufficiently wide economic base in the formal sector and reasonable administrative capacity.
These schemes are more effective in countries with a large formal sector and a large tax base. Box 4.4 shows the advantages and limitations of levy systems.
c. Contributions by learners
Most programmes in adult education are partially financed by their participants. Such programmes require the individual learner to support his or her learning activities with their own financial means, whether current income, savings or loans. Two types of costs are involved in learner contributions:
direct costs and living costs. In theory, the system of self-financing adult education is based on some important assumptions, including 1) that the supply and demand in adult education follow the market allocation mechanism and are steered by market prices; 2) the cost of learning is borne (solely or partly) by the learner according to the pay-as-you-use principle; 3) learners with sufficient income are able and willing to pay these prices; and 4) learners from lower income backgrounds who are only partly or unable to pay market prices are expected to be able and willing to take loans, which they will pay back later from their, hopefully higher, incomes (Dohmen and Timmermann, 2010).
Assessing learner investment in adult education is difficult. In reviewing the data available on individuals’ spending, Dohmen et al. (2013) arrive at rather limited spending by individuals, often due to public supply-side funding that reduces fees substantially. However, in Germany, according to the Adult Education Survey 2010, expenditure by individual learners amounts to approximately EUR 6 billion (Gnahs and von Rosenbladt, 2011), comprising 37.5 per cent of the country’s total continuing education-relevant expenditure of EUR 16 billion in 2009. In summary, data collection in this area is not transparent and, while learners undoubtedly contribute to the costs of their learning, particularly through indirect costs such as transport, child care, books etc., further work on the scale and scope of this contribution is necessary.
d. Financial support by development partners
Development partners, such as international organisations and funds, provide financial support for adult education in low-income countries. From the information provided in the national progress reports, UNICEF, UNDP and UNESCO are often mentioned for contributing to adult education on the African continent. Eritrea has benefited from financial support from partners such as UNICEF, UNDP and UNESCO in the implementation of literacy programmes for out-of-school children and adults. In Malawi, adult literacy and adult education programmes are now benefiting from Sector Wide Approach (SWAp) funding and pooled funding from EFA and the Fast Track Initiative (FTI). Development partners, such as the Icelandic International Development Agency (ICEIDA), contributed, in Malawian Kwachas, MKD 84 million in 2009 and MKD 90 million in 2010. UNDP has supported the Functional Literacy for Integrated Rural Development (FLIRD) programme with MKD 140 million in 2009 and 2010. In Chad, under the Literary Initiative for Empowerment (LIFE) and Capacity Development for Education for All (CapEFA), the UNESCO Yaoundé office in Cameroon finances activities to strengthen administrative capacity and organisational and educational sub-sectors of literacy and non-formal education.
In addition to CapEFA funding for LIFE, other literacy projects have been implemented with special grants from bilateral donors, foundations or government funds-in-trust. Post-conflict countries receive much-needed support from multiple international donors. For example, a major literacy project implemented in South Sudan from 2009 to 2011 received financial support from the Italian Government and technical support by the NGO BRAC South Sudan. In Afghanistan, a major programme called the “Enhancement of Literacy in Afghanistan” (ELA), which reaches 600,000 young people and adults across 18 provinces, is funded by the Government of Japan and implemented in collaboration with the Ministry of Education. In Iraq, a four-year LIFE project was launched in 2010 and was funded (USD 6.4 million) by the Qatar Foundation for Education, Science and Community Development. Its primary goal is to build institutional and human capacities.
FINANCING ADULT LEARNING AND EDUCATION
Some African countries have benefited from North-South-South cooperation. In Cape Verde, for example, Spain and Brazil have provided financial support for adult education. In Senegal, adult education programmes by civil society and the private sector, in addition to state operations executed by local communities, were supported by the following sources:
INTERVIDA (Spain), PMA (The
Netherlands); USAID, IDB, MDG Funds (Spain), PRC (multi-donor), ACDI/FEEB-APC (ICS literacy employees), Metal Africa, and BCI (State of Senegal).
In Asia and the Pacific, the World Bank (WB) and the Asian Development Bank (ADB) provide considerable support for adult education. In the case of the Lao People’s Democratic Republic, the WB and the ADB support the implementation of TVET. In 2010, the World Bank provided funding for literacy research to two provinces in the Solomon Islands for the Coalition for Education Solomon Islands.
In Europe, some countries have benefited from the European Union’s IPA (Instrument for Pre-Accession Assistance) programme, the European Globalisation Fund, and the European Social Fund. In Croatia, since 2009, a number of projects aimed at adult education institutions and individual adult learners have been financed through the European Union’s IPA and, since 2011, Croatia has fully participated in the European Union Lifelong learning programme. In Ireland, the European Globalisation Fund (EGF) provides up to 65 per cent of the costs of programmes to re-skill laid-off workers. Financed by the European Social Fund, the Adult Education System Project in Lithuania imparts basic competencies to learners and implements key priorities of Lithuania’s lifelong learning strategy. In Cyprus, the overall budget of the Programme for Greek Language Teaching Applicable to Migrants and Other Foreign Language Speaking Residents is EUR 3.25 million, which is expected to cover expenses until 2015. Seventy per cent of the budget is financed by the European Social Fund and 30 per cent by the government.
In Latin America, Argentina’s Media Education and Training for Youth Work is co-financed by a grant from the European
Union. In Guatemala, the Literacy and Job Training Programme received financial support from the Organization of American States (OAS) and UNESCO. Peru also received grants from the European
Community to implement a project entitled
“Support to Vocational Training for Work Integration: Consolidation and Upscaling”.
Meanwhile, the education of young people and adults in Paraguay is mainly financed by a mixture of state and international development funds. Funding for adult education in Paraguay during the last ten years came from the Spanish Agency for International Development and Cooperation, whose funds are administered by the Organization of Ibero-American States for Education, Science and Culture (OEI).
This has led to the reform of education for young people and adults, as well as an improvement in quality.
With funds from the federal government of Germany and other donors, and guided by a commitment to human rights and the promotion of women and gender equality, dvv international cooperates with more than 200 partners in over 30 countries.
The institute fosters the exchange of expertise and supports the establishment of youth and adult education structures worldwide.
4.4 Innovative and effective financing mechanisms
Whatever the purpose of investing in adult education, financial mechanisms have to be carefully chosen in order to achieve desired results and outcomes efficiently (Sohlman, 2011). The process of improving the financial efficiency of funding agencies (state, private, etc.), adult education institutions and individual learners can take many different forms.
a. Partnership and cost-sharing Having elaborated on the roles of government, the private sector,
development partners and individuals in financing adult education, it is important to note that, in many cases, these
financing agents work in partnerships to share the cost of adult education. As Schuetze (2009) explains, the cost-sharing approach makes good sense under the principle that those who benefit should pay,
since the benefits of learning generally do not only accrue to one stakeholder, but to several. Furthermore, cost-sharing can be an efficient way to discover whether the stakeholders concerned have sufficient demand and willingness to pay for certain education services (Sohlman, 2011). Table 4.6 provides an overview of major financing mechanisms and cost-sharing models for adult learning in developed countries.
FINANCING ADULT LEARNING AND EDUCATION
As countries have different financial regulations and characteristics, cost-sharing arrangements vary. A recent study in the United Kingdom on expenditure and funding models in lifelong learning suggests that taxpayers, employers and individuals all contribute to the funding of learning. An important reason for bringing these contributors together is that investment depends on a shared sense that everyone is contributing on a fair basis. “Co-financing” – the sharing of costs Table 4.6