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Chapter 2: Investing in human capital and responding to long-term societal challenges
Chart 27: Employment impacts of subsidising companies’ training only for young people in Slovakia
Simulation with DG EMPL’s Labour Market Model: subsidise firm-sponsored training in Slovakia (0.1 % of GDP) —
young age groups targeted (aged 15–24 years) — employment effect
1.0 0.45
0.8 0.35
0.6 0.25
% %
0.4 0.15
0.2 0.05
0 -0.05
All Young All Low-skilled Medium-skilled High-skilled
Source: Own calculations based on DG EMPL’s Labour Market Model.
Chart 28: Impacts of policy mix support to young people in Slovakia while avoiding negative side-effects
Simulation with DG EMPL’s Labour Market Model: Policy Mix of firm subsidy resulting from the lower educational mix
for the training of young workers (15–24 years), combined with tertiary in the training-only scenario.
education scholarships for tertiary education (20–24 years), Slovakia.
Magnitude: 0.05 % of GDP each Lastly, we assume that the 0.1 % of GDP
is spilt into two equal parts. The first part
0.30 is invested in the firm-subsidy that targets
0.25 young people’s training as in the previous
scenario, with the second part used to
0.20 fund tertiary education scholarships for
0.15 people aged between 20 and 24 years.
% As assumed previously, funding will be
0.10 through lump-sum taxes on all households.
0.05
Employment gains are similar to both
0.00 training-only scenarios above. Contrary
-0.05 to the training-only-policy targeted
GDP Investment Labour productivity Employment Gross wages towards young people, the strong incen-
tive to take up tertiary education would
be expected to result in the strongest
Source: Own calculations based on DG EMPL’s Labour Market Model. employment gains for high-educated
people, as shown in Chart 29.
their earnings are low. Firms offer higher of young people improves due to the
wages to those young workers as a result training, since investment growth will be The additional supply of highly educated
138
of their increased individual productivity subdued as a result of the capital-skills- people reduces their gross wages ( ),
and as a result of the (wage) bargain- complementarity described earlier. resulting in a less pronounced increase in
137
ing over the subsidy ( ). Higher wages average wages than in the training-only
lead to youngsters staying in (low- and As a result, we see stronger employment scenarios above. However, as the work-
medium-skilled) employment rather gains than in the non-targeted scenario, force’s educational mix moves upwards,
than investing in higher education with which might be seen as good news by the policy mix avoids a decline in total
a result that, in the long term, there will Slovak policy-makers in so far as the labour productivity and would result in
-
actually be more medium- and low-edu - young people’s labour market situa strong shifts in investment, following the
cated people in employment and fewer tion is seen as critical, even though this complementarity between capital forma -
highly educated people than before the comes at the cost of relatively moder- tion and skills. The GDP increase is much
measure — as shown in Chart 27. ate economic expansion and decreasing stronger than in the training-only sce-
total labour productivity. Knowing how nario focused on the young and is even
This changing educational mix would be important higher education is for stronger a bit stronger than in the non-specialised
expected to reduce total labour productiv- investment and higher productivity, Slovak training-only scenario.
ity, even if individual labour productivity policy-makers might, therefore, consider
combining the positive employment-
( ) The subsidy increases the rent of a firm- impact of a training subsidy aimed at ( ) Again, this is also due to the wage-
138
137
worker-pair and the two parties split this bargaining-effect. As the subsidy is
additional rent among them via higher young people with a subsidy that encour- lower than in the training-only case, so
gross wages, see also the wage bargaining ages high education — the idea being to is the additional worker-firm rent to be
equation in the model documentation. See spread over the two parties through wage
Berger et al., (2009), Part II, p. 39. continue to focus on young generations, bargaining. See previous footnote.
127
Chart 27: Employment impacts of subsidising companies’ training only for young people in Slovakia
Simulation with DG EMPL’s Labour Market Model: subsidise firm-sponsored training in Slovakia (0.1 % of GDP) —
young age groups targeted (aged 15–24 years) — employment effect
1.0 0.45
0.8 0.35
0.6 0.25
% %
0.4 0.15
0.2 0.05
0 -0.05
All Young All Low-skilled Medium-skilled High-skilled
Source: Own calculations based on DG EMPL’s Labour Market Model.
Chart 28: Impacts of policy mix support to young people in Slovakia while avoiding negative side-effects
Simulation with DG EMPL’s Labour Market Model: Policy Mix of firm subsidy resulting from the lower educational mix
for the training of young workers (15–24 years), combined with tertiary in the training-only scenario.
education scholarships for tertiary education (20–24 years), Slovakia.
Magnitude: 0.05 % of GDP each Lastly, we assume that the 0.1 % of GDP
is spilt into two equal parts. The first part
0.30 is invested in the firm-subsidy that targets
0.25 young people’s training as in the previous
scenario, with the second part used to
0.20 fund tertiary education scholarships for
0.15 people aged between 20 and 24 years.
% As assumed previously, funding will be
0.10 through lump-sum taxes on all households.
0.05
Employment gains are similar to both
0.00 training-only scenarios above. Contrary
-0.05 to the training-only-policy targeted
GDP Investment Labour productivity Employment Gross wages towards young people, the strong incen-
tive to take up tertiary education would
be expected to result in the strongest
Source: Own calculations based on DG EMPL’s Labour Market Model. employment gains for high-educated
people, as shown in Chart 29.
their earnings are low. Firms offer higher of young people improves due to the
wages to those young workers as a result training, since investment growth will be The additional supply of highly educated
138
of their increased individual productivity subdued as a result of the capital-skills- people reduces their gross wages ( ),
and as a result of the (wage) bargain- complementarity described earlier. resulting in a less pronounced increase in
137
ing over the subsidy ( ). Higher wages average wages than in the training-only
lead to youngsters staying in (low- and As a result, we see stronger employment scenarios above. However, as the work-
medium-skilled) employment rather gains than in the non-targeted scenario, force’s educational mix moves upwards,
than investing in higher education with which might be seen as good news by the policy mix avoids a decline in total
a result that, in the long term, there will Slovak policy-makers in so far as the labour productivity and would result in
-
actually be more medium- and low-edu - young people’s labour market situa strong shifts in investment, following the
cated people in employment and fewer tion is seen as critical, even though this complementarity between capital forma -
highly educated people than before the comes at the cost of relatively moder- tion and skills. The GDP increase is much
measure — as shown in Chart 27. ate economic expansion and decreasing stronger than in the training-only sce-
total labour productivity. Knowing how nario focused on the young and is even
This changing educational mix would be important higher education is for stronger a bit stronger than in the non-specialised
expected to reduce total labour productiv- investment and higher productivity, Slovak training-only scenario.
ity, even if individual labour productivity policy-makers might, therefore, consider
combining the positive employment-
( ) The subsidy increases the rent of a firm- impact of a training subsidy aimed at ( ) Again, this is also due to the wage-
138
137
worker-pair and the two parties split this bargaining-effect. As the subsidy is
additional rent among them via higher young people with a subsidy that encour- lower than in the training-only case, so
gross wages, see also the wage bargaining ages high education — the idea being to is the additional worker-firm rent to be
equation in the model documentation. See spread over the two parties through wage
Berger et al., (2009), Part II, p. 39. continue to focus on young generations, bargaining. See previous footnote.
127
