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Institutional framework of transfer from education to work in Ukraine


... next 20 years, the size of labour force will be decreasing by 1-0.5% annually. ... Restrictions on the use of term contracts; ... – PowerPoint PPT presentation

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Title: Institutional framework of transfer from education to work in Ukraine

Institutional framework of transfer from
education to work in Ukraine
  • Iryna Akimova, Director of Analytical Centre BEST
  • ETF expert meeting
  • Turin, June 2007

  • 1. General macroeconomic overview
  • 2. Labour Market in Ukraine
  • 3. Institutional framework of ETS
  • 4. Interface between ETS and LM

General overview
  • 1. Ukrainian economy is growing
  • for 2000-2006, average annual growth rate
    constituted 7.4 (and 7.1 in 2006). It exceeds
    growth rate of real GDP in most of the CEE
  • 2.Demographic situation is not favorable the
    population is aging and shrinking
  • By 2015, the share of young people entering the
    labour market in total population will go down
    from 30 till 23. In the next 20 years, the size
    of labour force will be decreasing by 1-0.5
  • ? More job opportunities for the young in the
  • ? Higher labor productivity is needed to support
    the aging population? skills challenges for the

General overview youth unemployment in Ukraine
is not very high
  • The average unemployment in the economy is rather
    low (7.4 in 2006 according to ILO). For youth,
    this indicator is higher - about 10. Youth
    unemployment is declining since 1999 (together
    with a general decline of unemployment). Main
    factors high economic growth rates, increasing
    labour force emigration, and unfavorable
    demographic trends.
  • The level of youth unemployment level varies
    across the age cohorts. It is the highest for
    the 15-24 years old (like in other countries)
  • The duration of unemployment also varies across
    the age cohorts. It is the lowest for 15-24 years
    and doubles after the age of 24.
  • The youth employment is likely to occur in the
    informal economy. Thus, while the average rate of
    employed in Ukraine work in informal economy is
    22.3, 30.4 of employed youth work in informal
    economy. (Derzhkomstat)

General overview however, there are structural
  • Higher education does imply higher wages
  • . but does not increase chances for being
    employed ( in terms of getting the first working
  • In 2000- 2005, the rate of unemployment among
    graduates of vocational secondary schools was
    decreasing , while similar indicator for
    graduates of higher school was increasing.
  • In 2005, the share of unemployed among graduates
    of higher schools was about 17, for graduates of
    vocational and secondary schools - 10 and 5

General overview structural imbalance is likely
to increase remaining high on the policy agenda
Gross enrollment ratio Gross enrollment ratio Gross enrollment ratio Gross enrollment ratio Gross enrollment ratio Gross enrollment ratio Gross enrollment ratio
1999 2000 2001 2002 2003 2004
Higher education Ukraine 47 50 53 58 62 66
CEE 39 42 44 48 51 54
Professional, technical
Ukraine 23 23 22 21 22 21
CEE 33 33 34 36 36 34
  • There is a mismatch between LM and ETS in terms
    of educational levels
  • 60 of the youth is trained in higher education
    and 40 in vocational schools, while the
    demand structure in LM seems to be just the
    reverse. In 2006, the lowest unemployed/vacancy
    ration is 2 for the skilled tool workers and 3
    for Professionals. At the same time the
    average unemployed/vacancy in the economy was 5.
  • This mismatch is likely to grow with the growing
    demand for higher education
  • There is a mismatch between LM and ETS in terms
    of structure of professional training about 40
    of newly-trained economists become unemployed
  • There is a mismatch between ETS and LM in terms
    of quality of professional training
  • Lack of practical skills, low level of
    professional skills

Labor market structure from internal to
Ukraine has moved from social internal LM and
life long employment to the domination of
occupational LM
  • Jobs are defined in terms of content with
    qualification requirements which serve as entry
  • A high level of consistency across the industries
    and enterprises in terms of job defining. Similar
    skills are required by different employers,
  • Life long employment schemes are rare,
  • Limited upward mobility within the firm
  • (with the exception for the sectors/occupations
    with the low supply of skilled labour.
  • E.g. lack of professional auditors led to
    intensive in-firm training programs followed by
    upward promotion)

Labour market structure is there internal LM in
  • Civil service an example of internal LM
  • About 570 thousand people are employed in the
    civil service
  • Upward promotion of insiders is a common
  • ?areer path depends on working experience as a
    civil servant,
  • Career promotion is defined by special
    administrative procedures
  • There is sector-specific internal training which
    supports upward mobility
  • There are special educational establishments that
    are aimed at provision of training to civil

LM rigidity restrictive labour legislation
Rigidity of LM is rather high due to a
restrictive labour legislation
Hiring difficulty Rigidity of hours Difficulty of firing Rigidity of employment Firing difficulty
Bulgaria 33 40 10 28 30
Croatia 61 60 50 57 55
Czech 44 20 20 28 22
Estonia 11 80 40 44 33
Hungary 11 80 30 40 34
Latvia 78 20 50 49 42
Lithuania 33 60 30 41 34
Poland 11 60 30 34 25
Russia 0 60 20 27 17
Slovakia 0 20 10 10 17
Slovenia 28 80 50 53 47
Ukraine 44 40 80 55 13
High-income OECD 26 50 26 34 40
Ireland 28 40 20 29 52
UK 11 40 10 20 25
USA 0 0 10 3 8
WB Doing business survey
LM general de juro rigidity is complemented by
special provisions for youth
  • Rigid LM legislation
  • Restrictions on the use of term contracts
  • Relatively high minimum wage rate (close to 40
    of average wage in the economy), In 2002-2006 the
    share of employed whose wages do not exceed
    minimum wage declined from 18.1 to 7.6.
  • High hiring costs due to high payroll taxes
    (38.8 of the wage bill)
  • Rigidity of hours (restrictions on night work and
    weekly holiday work)
  • Firing is difficult (need for a third party
    permission, priorities for staff redundancy).
  • Additional provisions for youth
  • Labour Code, The Law On promotion of social
    development of youth in Ukraine
  • First working place is to be provided for at
    least 2 years
  • No probation period
  • Additional paid vocations for study, short
    working week, privileges in case of lay-offs
  • Employment quotas (5 of working places to be
    provided to uncompetitive persons fines for
    violation the legislation)
  • Results
  • The employer becomes more selective, skill
    requirements increase
  • Legislation creates incentives for shadow economy
    and tax avoidance

LM rigidity de-facto rigidity is lower due to
implementation gap
  • reduction of hiring costs via hiring black
    labour ,
  • a large share of youth works in the shadow
  • minimization of tax burden by registering as
    entrepreneurs (simplified tax scheme used for
    the employed labour force)
  • poor compliance with labour legislation

LM unemployment insurance is not generous
  • Relatively low level of general unemployment
  • In 2006, average unemployment benefit
  • 20 of average wage and
  • 51 of subsistence minimum for those who able to
  • No special unemployment provisions for youth.
  • Limited public policies to support unemployed
    youth through
  • facilitation of entrepreneurial activity,
  • vocational guidance and training/re-training,
  • provision of public works

LM conclusions
  • Unfavorable demographic situation together with
    good growth perspectives provides better
    employment opportunities for the youth in the
    future, however, it raises demand for specific
  • Rigid labour market increases probability of
    shadow employment for the youth
  • Rigid occupational labour market non-generous
    unemployment support ?
  • demand for strong vocationally/occupationally
    specific skills
  • and ETS as a good sorting machine

Educational system and its institutional framework
  • Policy context

ETS institutional framework
  • ET providers
  • Secondary schools compulsory education for 11
  • Vocational training institution
  • Higher school (institutions, universities,
  • National agencies involved in the development of
    educational policy
  • Main Ministry of Education and Science a high
    level of state intervention in ETS activities
    including licensing of ET providers, setting,
    monitoring and control of standards and quality,
    determining distribution of public funds across
    ET providers
  • Ministry of Labour, Ministry of
    Economy, Ministry of Finance

ETS a high level of formal standardization
  • The level of standardization in secondary school
    is high including strong regulation of
    curricula, setting obligatory minimal set of
    subjects to be taken and minimal end points to be
    achieved at the end of the courses. Ranking of
    pupils is based on their academic performance
  • Unified national final tests in secondary school
    are still under introduction
  • In higher education, despite a high level of
    formal standardization (curricula, minimal set of
    subjects and minimal end points) comparability
    of diplomas is problematic. Quality standards
    vary across the ET providers. Image of the
    university matters more for quality judgment of
    the graduates than their final grades

ETS together with poor quality insurance
  • Signals
  • A significant difference between national and
    international standards ( especially, in
  • A lack of practical skills that should be closed
    via on-job training
  • Significant deviations in quality of teaching
    across the different ET providers are not
    necessarily reflected in outcome differentiation
  • Reasons
  • weak selection criteria for the professors
  • Lack of objective external audit
  • Lack of incentives to improve quality of teaching
  • Lack of financial autonomy of ET providers
    distribution of public financing does not
    provide incentives for improving performance of
    ET providers
  • The role of academic ranking as a sorting
    mechanism is weakened by the widespread
    corruption , especially, on the upper secondary
    level of schooling and further on in higher

ETS differentiation (1)
  • The level of track differentiation is rather
  • At school pupils are divided into separate
    curricula tracks by 2 instruments
  • a) subject specialization within/across the
  • (on the primary level- language specialization
    on the upper secondary level languages/humanitie
    s vs IT/natural sciences specialization)
  • Subject specialization of school usually also
    implies quality differentiation as it signals
    better quality of programs and teaching
  • b) general/academic vs vocational training (
    vocational schools professional schools or
    technical schools- offer general and professional
    training , while general schools do not provide
    professional training)
  • In higher school, the level of differentiation
    increases after the first two years of training

ETS differentiation (2)
  • Formal differentiation of training outcome is
    also high
  • grading the performance results 12 point scale
    for secondary school
  • Differentiation of tracks allows moving between
    different tracks/routes
  • Vocational training allows for having an
    academic career
  • Flexibility of progression in educational system
    is rather high
  • Possibility to change training specialization
    (except for post-graduate studies)
  • Actual differentiation of training outcome is low

ETS differentiation (3)
  • Selection process for pupils is based on academic
    performance and, partly, on familys income
  • selection by income starts already on the primary
    level if parents choose a private school
  • it continues on the upper secondary level, where
    most of (but not all) specialized schools or
    gymnasiums collect some tuition fee
  • specialized schools/ tracks (both free- and
    fee-based) use academic tests in order to select
    better pupils and control their academic
  • Access to upper secondary level is selective only
    for specialized schools
  • Access to higher education is selective and based
    on academic performance.
  • However, development of wide low quality and
    tuition-fee-based educational opportunities
    reduces the role of performance-based selection
  • Widely spread corruption weakens
    performance-based selection criteria

ETS Conclusions
  • A high level of formal standardization in ETS
    does not reflect the actual needs of labour
  • A high level of formal standardization of ETS vs
    low quality assurance ? weak signals of ETS about
    quality of labour force
  • ETS does not play a role of efficient sorting
  • Can increase in standardization and tightening of
    quality control help to improve quality of
    education without crucial changes in ETS?

Interface between ETS and LM Employer
Involvement in ETS is weak
  • Loosely coupled ET/Employer systems
  • Occupational LM, entry requires specific
    training, ET provides occupationally specific
  • Formally, there is a high level of in-school
    provision of ET specific to particular
    occupation. Actually, there are large
    discrepancies between curriculum and actual
    occupational specification/ entry requirements
    of LM
  • Low level of employers impact on specifying
    curriculum and qualifications
  • - Non-institutionalized involvement of
    employers in ET

Interface between ETC and LM Employer Involvement
  • Employers involvement in ET is limited to a
    provision of short-term internship opportunities
    or beneficiary donations to ET providers
  • Adjustments movement towards direct and
    collinear linkage
  • Development of direct links between ET providers
    (vocational schools and Universities) and
    employers in co-financing of specific
    trainingresearch activities, in-firm
    vocational schools, joint development of special
    curricula for big employers, providing effective
    internships for the students, participation of
    employers in supervisory boards of the
  • Increasing requests to the Ministry of Education
    to institutionalize employers involvement in
    curricula development and supervisory boards of
    the Universities

Interface between ETC and LM youth training and
  • Systems of guidance within the educational
    structure are weak
  • Professional orientation at school is poorly
    designed and implemented
  • Career centres/extension services/alumni centres
    in the Universities start to originate
  • Lack of consistent, consolidated and accessible
    information on LM opportunities and forecasts
  • Assistance in job searching is stronger and is
    mainly provided by
  • Professional HR agencies,
  • - State employment service centres
  • Weak impact on the choice of profession with a
    stronger focus on adjusting already trained labor
    force to LM opportunities ?
  • ?waste of resources (given occupational LM
    that require appropriate skills)

  • ETS in Ukraine does not meet demand of a
    structured LM, there are mismatches in terms
    level, type and quality of education, on the one
    hand, and type and level of job, in the other
  • Consequences inefficient use of public and
    private investment in education
  • Main problems include
  • Lack of objective and accessibly information
    about potential job opportunities (including LM
  • Weak links between ETS and LM
  • Lack of incentives for ETS providers due to the
    overregulation and inefficient financing of ETS

Thank you for your attention!
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