Technological and Vocational Post-Secondary Education Zvi Eckstein, Avihai Lifschitz, Keren Sagi and Tom Trilnick * Policy Paper 2016.10 December 2016 The Aaron Institute s policy papers series is a product of research and policy suggestions commissioned by the institute and approved for publication by the scientific committee. The views expressed in these papers are those of the authors, and the board takes no responsibility for the suggested policy. Details on the Aaron Institute for Economic Policy are on this paper s last page. This is a short summary, for the full paper (in Hebrew) see https://www.idc.ac.il/he/research/aiep/pages/policy-papers.aspx. * Prof. Zvi Eckstein is Dean of the Tiomkin School of Economics and Head of the Aaron Institute for Economic Policy, Interdisciplinary Center Herzliya, zecsktein@idc.ac.il. Avihai Lifschitz is a senior researcher at the Aaron Institute. Keren Sagi is a researcher at the Zur association. Tom Trilnick is a research assistant at the Aaron Institute.
Technological and Vocational Post-Secondary Education In this policy paper, we examine the government policy on vocational training for individuals who do no study in a college or university toward a recognized academic degree. The goal of the paper is to put forward practical and detailed recommendations for a comprehensive and long-term reform of technological and vocational post-secondary education. Therefore, we focus on presenting a long-term vision of the reform, as well as practical steps with clear quantitative targets for technological and vocational post-secondary education in the near future. In 2014, the OECD published a comprehensive report which surveyed vocational education and training in Israel and provided general policy recommendations. 1 The proposals presented here are pursuant to that report. The number of students entering the academic education system has increased significantly since the 90s when the academic colleges were opened. Currently, about one half of the relevant cohort is acquiring an academic education. 2 In contrast, the other half of high school graduates in Israel does not have an educational framework to ensure their professional future on a level that is commonly found in the developed countries, whether in terms of scope, quality, suitability to the changing demands of the labor market or the government budget allocated to it. This lack of balance requires a professional discussion in view of its implications for labor productivity, growth and wage inequality. In addition, when the academic colleges first opened, it was unclear how many students they would attract and how many colleges would eventually open. The addition to supply is what exposed the demand that had already existed. If the Government will create a high-quality infrastructure of technological and vocational education and budgets it appropriately, the demand for this system will also appear. The productivity per hour worked in the Israeli economy stood at $37.50 in 2013 (PPP in constant 2010 US$), which is 24 percent lower than the OECD average. The rate of growth in productivity during the last 15 years has been similar to that of the OECD average, but this average includes countries with a level of productivity much higher than that in Israel. Moreover, the rate of increase in productivity varies widely between the various industries of the economy. In fact, productivity is increasing at a high rate in industries where the level 1 Musset, Kusczera and Field (2014). Appendix 2 summarizes the recommendations of the OECD report. 2 According to the figures of the Council for Higher Education, the percentage of students in their freshman year within an average cohort was 49.4 percent in 2013, in contrast to 27.5 percent in 1994. The figures include universities, budgeted and unbudgeted colleges and academic teachers colleges. 2
of productivity is already high, such as in hi-tech, communication and business services. In traditional manufacturing, construction, commerce and services, as well as in the public sector, sectors in which a majority of the economy's workers are employed, and in particular most of the workers without an academic education, both the level of productivity and its rate of increase are low. The gaps created in productivity affect wage inequality and the level of poverty. We propose practical steps that will increase the quality of human capital among the population that does not acquire an academic education. The policy proposed here deals with this phenomenon, which affects both economic growth and disparities in the economy. For the sake of brevity, the paper refers to the relevant industries that are in need of skilled workers without an academic degree as "the business and public sector". According to figures of the Manufacturers Association, Israel's manufacturing industries suffer from a severe shortage of skilled manpower at all levels, from workers on the production floor, to technicians and practical engineers at the mid-level and finally engineers. About 80 to 85 percent of all employers report difficulty in recruiting skilled workers. The working assumption is that the shortage will intensify as professional and highly skilled workers who have integrated successfully in manufacturing in particular immigrants from the FSU begin to retire (the average age of employees on the production floor is 55). Moreover, the establishment of academic colleges that grant academic degrees led to a drop in the level and quality of practical engineering students in the technological colleges. High-quality students, who in the past chose technological and practical engineering programs, now choose to acquire an academic degree from one of the colleges. As a result, technological colleges are often forced to accept lower-quality students who do not pass the final exams and do not obtain a practical engineering diploma. In the long term, productivity is the main determinant of the rate of growth in wages. Labor productivity in Israel is low relative to most of the OECD countries and therefore the key to reducing poverty and raising the standard of living in Israel is to raise productivity. The gap in productivity between Israel and the OECD is concentrated among workers without an academic education and therefore one of the policy tools for closing the gap is to increase investment in human capital and in technological and vocational education. Although the rate of return on technological education, both to the economy and to the student, is no less and in many cases is even greater than the rate of return on academic studies in the colleges, the government support per student in the system of technological colleges is 3
about 40% of that per student in the budgeted academic colleges, 3 and the support of other types of training is even lower. According to the economic literature, in countries with a well-established system of post-secondary vocational education the rates of return on academic and vocational educations are similar. We believe that in Israel, where there is a low level of investment in the vocational education system, the return on post-secondary technological and vocational education will at the beginning be even higher, thus providing economic justification for the proposed reform. Government support of the acquisition of human capital is essential since there is a market failure in this type of investment and the capital market does not provide credit for the acquisition of human capital. This policy paper focuses on post-secondary technological and vocational studies. Notwithstanding the existence of technological and vocational education at the high school level within the frameworks of both the Ministry of Education and the Ministry of the Economy, we believe that choosing a profession is a prolonged process that occurs primarily after graduating from high school and in Israel in many cases even after the completion of military service. Furthermore, the changing demands in the labor market in response to technological advances will require vocational training and on-the-job training over the course of a worker's life. Only few of the high school students in a technological specialization enter the labor market immediately on graduation and a significant proportion of them do not choose to work in a technological field. We attribute great importance to the exposure of high school students to technological and vocational fields in order to increase their interest and awareness, even though the high school technological framework cannot meet the need for technological and vocational programs that will train high school graduates for the modern labor market and will provide workers with the skills that are needed by employers. The focus of technological and vocational education, which is lacking in today's economy, should be in the stage in which individuals are preparing themselves for the labor market, such that their studies will be part of the process of entering employment. There are many who feel that Israel should adopt a vocational education system similar to that in Central European countries, such as Germany, Austria and Switzerland (known as the "dual system"). Although the dual system has been a great success in these countries, we feel that it is not the most appropriate model for Israel today. The dual system, in which a student is also employed in a specific firm during the course of his studies, is based on a 3 The support for a student in the universities is even higher though it also includes support of research and therefore a comparison to the budgeted colleges is the relevant one. 4
centuries-old tradition of guilds and a society in which the value of a vocational education is no less than that of an academic education. In such a system, the curriculum in each occupation is highly structured and there is an infrastructure and tradition of learning within the manufacturing companies. Even in these countries, the changes taking place in the labor market, which require greater reliance on general human capital, are creating pressure on the existing systems and attempts to adopt the system or parts of it in other countries have been only partially successful (Euler, 2013). In Israel, there is no pervasive tradition of professional guilds that can support a dual system and most of the public attributes a high level of importance to academic studies, both as a basis for professional success and as a social necessity. 4 The experience in other countries shows that short vocational training courses that are not sufficient to fill the gaps that have accumulated among students will provide little benefit, and therefore we recommend a significant expansion of support for the acquisition of human capital by individuals who do not acquire an academic education, as part of the postsecondary technological and vocational education system. Due to the growing need to provide general human capital in order to prepare individuals for the labor market, and due to the importance attributed in Israel to academic studies, we recommend the integration of technological colleges, which will constitute the main platform of the system, with the academic colleges. This integration will make it possible to raise the level of studies in the technological colleges while putting emphasis on general human capital studies in all of the curricula and while exploiting economies of scale. It will also make it easier for individuals to continue on to academic studies if they wish, while receiving recognition for what they have already studied. This integration will also improve the image of technological and vocational studies and will emphasize that they do not constitute a glass ceiling for professional advancement in the future. The economic and academic literature has found that highquality post-secondary technological and vocational education provides a return that is identical to that of an academic education and that it is essential for a country's economic success. 4 A vocational training program through mentoring (the Starter program) was recently created by Teveth Joint Israel and the Branch for Vocation Training. In this program, the period of training is short and the component of practical training becomes the responsibility of employers by means of vocational mentors in the workplace. As part of the program's pilot, courses were opened for machining, autotronics and structural metalwork and welding. 5
It is important to emphasize that even though we are proposing that the post-secondary technological and vocational education system be based on the technological colleges, the intention is not that the focus should be on practical engineering studies only. The groups that currently require a solution include students from strong sectors of the population who choose academic studies even though they would prefer high-quality vocational studies, students who choose the existing practical engineering programs and also individuals who today have no available solution. The individuals from the weakest sectors of the population, most of whom do not have matriculation certificates, are in need of a system that will provide them with suitable skills and also high quality vocational training programs. It is important to also include vocational programs that are suited primarily to this population, such as welding, auto mechanics, etc., as part of the post-secondary technological and vocational training programs. This will provide these individuals with general human capital that can serve as the basis for professional advancement in the future, and in this way will help them "break through" the glass ceiling that prevents their advancement, even if they do not meet the requirements for academic studies or practical engineering studies. The first step toward implementing the reform must be the creation of a new institutional framework through legislation: the Council for Technological Education. It will constitute the umbrella organization that is responsible for setting policy and providing oversight of the post-secondary technological and vocational education system. It is important that from the start the management of the program will be in the hands of the authorized body, which will establish the criteria and rules necessary for the system's efficiency and will achieve the coordination needed between all of the relevant parties. In addition, and in view of the broad scope of the proposed reform, we recommend the choice of a small number of colleges in the first stage and the expansion of the reform once lessons have been learned. We are not concerned here with the question of which government ministry the new council will report to; this will be determined by the government. In our opinion, the most important thing is to define in detail the objectives and powers of the council, so that it can fulfill its function under the oversight of whichever ministry it will be reporting to. Since all of the parties currently dealing with technological and vocational training report to the Director of Employment within the Ministry of the Economy it is important that he will have a significant role to play in the determination of the new council's policy. 6
The vision is to establish a post-secondary technological and vocational education system that contributes to the development of skills and human capital of individuals who do not enter academic studies and that will support the growth of productivity of these individuals and of the business and public sectors. In order to achieve this goal, the general education provided to students must be expanded to include, among other things, high-level reading and writing skills in Hebrew and English, basic mathematical ability and use of computers. In addition, a broadly based connection should be created between education on the one hand and the business and public sector on the other, which will include mentoring and absorption in the workplace. In order to support this vision, we would establish the following measurable targets for the system: 1. Quality: The system should constitute an attractive alternative for starting one's professional career for high school graduates that do not enter academic studies. The high standards of the system will provide students with a feeling of pride and excellence, without detracting from the possibility of acquiring an academic education. 2. Career development: The system will enable workers to develop professionally during the course of their working lives by providing them with appropriate training and the possibility of recognition of their acquisition of knowledge and skills by passing exams and receiving professional rankings. 3. Adjustment to demand: The system should provide the business sector with workers who have the knowledge and skills that are suited to its needs and who are capable of developing and learning in order to keep pace with the needs of the current and future labor market. 4. Quantitative target: The system should set a target to attract one-quarter of the cohort to technological and vocational training programs (in addition to experienced workers who are improving their vocational skills), which amounts to about 30,000 students annually. 5. Budget: The budgeting (by school year) of the system will not be less that the budget for a student in the budgeted academic colleges. 7
Aaron Institute for Economic Policy In the name of Aaron Dovrat z l The vision of the Aaron Institute for Economic Policy is to sustain economic growth and social strength in Israel, by researching, modelling and developing modern, innovative and up to date strategies and policy tools for the Israeli economy, based on up-to-date global knowledge. All modern economies aim for economic growth, achieved through employment increase and a rise in workers' productivity. The Aaron Institute conducts economic research that yields proposals for innovative policy tools and reforms for promoting growth, employment and productivity. The goal of policy research is to influence monetary and fiscal policy, as well as to formulate long-term plans for economic and social issues and contribute to the narrowing of social gaps. The institute aims to affect professional discourse, spur discussion based on credible information and socio-economic research, which will ultimately provide tools that will support a growth path and create social resilience in Israel. The institute's main aim is to develop policy strategies that eliminate weaknesses and empower the strengths of the Israeli economy. We propose broad reforms as well as policy changes to particular industry sectors. In this framework Israel s relative advantages in technologic innovation and advances in the public and services sectors can be maximized. At the Aaron Institute, we crucially define quantitative goals while involving some of the countries' best economists in research and policy paper discussion meetings. Board Members: Mr. Shlomo Dovrat (Chairman), Mr. Shaul Shani (Vice-chairman), Prof. Zvi Eckstein, Prof. Martin Eichenbaum, Prof. Rafi Melnick, Dr. Tali Regev, Mr. Haim Shani, Ms. Ofra Strauss, Prof. Daniel Tssidon, Mr. Erez Vigodman, Prof. Amir Yaron. Head: Prof. Zvi Eckstein. Scientific Committee: Prof. Zvi Eckstein (Chairman), Prof. Martin Eichenbaum, Prof. Zvi Hercowitz, Prof. Rafi Melnick, Prof. Omer Moav, Dr. Tali Regev, Prof. Daniel Tssidon. Contact details: The Interdisciplinary Center Herzliya - IDC, P.O. Box 167, Herzliya, ISRAEL 4610101 Phone: 972-9-9602431, Email: aaron.economics@idc.ac.il, Website: aiep.idc.ac.il 8