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The United States, western Europe, and Japan all face a common set of economic restructuring and demographic changes. Each is in transition away from a manufacturing and industrial-sector base, and moving toward a postindustrial, information-based economy. Each is also encountering labor-market population changes as the overall population is aging and birth rates remain relatively low. The effects of these changes have been felt in labor shortages in some sectors. Yet for all the similarities among America, Europe, and Japan, there are striking differences in the coordination of labor markets for private companies to train employees. To explain why these differences exist, it is helpful to look at the history and structure of workforce training efforts in Europe (particularly Britain and Germany) and Japan designed to bring about public-private cooperation for skills development and human capital investment.

Workforce Training in Britain

Britain has been marked by a more voluntary connection between the public and private sector in workforce development policy. Initially, training policy until 1963 was characterized by a limited state intervention in labor markets–except for occasional efforts during the interwar years and the first decade after World War II to provide training as a means of remedying unemployment. The establishment of industrial training boards (ITBs) in 1963 was the first government recognition that economic growth was slipping in Britain, as compared to other European countries. The ITBs, while developing a compulsory levy/grant system to finance training efforts, did little to raise awareness of the linkage between economic growth and investments in human capital.

The ITBs were weakened by the 1973 Employment and Training Act, which set up the Manpower Services Commission (MSC). Unlike the ITBs, the MSC's main focus (until the rise of Thatcherism in 1981) was on job creation programs, although the legislative intent was to develop a comprehensive manpower strategy. The New Training Initiative (NTI), which was introduced in a 1981 white paper, returned MSC to its adult-training mission and moved to integrate youth into the workforce. The NTI again promoted a volunteer connection between employer training needs and the public sector, but shifted focus to stress portable skills for identified labor shortages and as a bridge for school-to-work connections. But the MSC failed to change the paradigm of employer involvement in training, and the National Audit Office was critical of the MSC's fiscal accountability and its failure to address the high-level course needs of employers.

Borrowing from the American model of private industry councils, the MSC was replaced by Training and Enterprise Councils (TECs) in 1988. While still being a more voluntarist model of cooperation between the public and private sectors, TECs are designed to be locally based and include private employer representation to set policy direction, although they are publicly funded through the Department of Employment. The charge of TECs, announced in the 1990 white paper Employment forthe 1990s, was not to deliver training, but rather to transfer responsibility for skills-development investment to employers, who would identify needs and administer public funds. In so doing, Britain embarked on the creation of a true training market, compatible with a limited government role in industrial policy.


By contrast, the mark of the German training system is the role of strong financial incentives that promote and enhance the coordination of the public and private sectors, primarily through the apprenticeship training initiatives for younger workers. As early as 1908, industrial employers in Germany recognized the need for a systematic training process to meet their shortage of skilled workers. In response to these problems, a committee called DATSCH (Deutschen Ausschuss für Technisches Schulwesen) was formed. In 1909 DATSCH recommended that all apprentices in the areas of industry and commerce be trained at an equivalent level. Following World War I, DATSCH worked with companies such as AEG and Siemens to design an apprenticeship program for these employers, and by 1925 a working committee set out to define industrial trades and distinguish between skill requirements in the labor force.

During the 1930s, before the rise to power of the Nazis, the apprenticeship content developed by DATSCH was recognized more globally by industry and chambers of commerce, and the principles of apprenticeship were refined by industry associations. Accordingly, training was geared toward, and reflected the needs of, employers. Following the war, there was concern that industrial apprenticeships would become fragmented and disorganized, and by 1953 the ABB (Arbeitsstelle für Betriebliche Berufsausbildung) had been organized to carry out similar functions as DATSCH. In the 1960s apprenticeship training met with criticism, as it was viewed as not meeting the needs of employers, and as being neglectful of an organized, tailored curriculum for industry.

The discontent behind the apprenticeship system eventually led to an expansion of the government's role in training. Passage of the 1969 Vocational Training Act shifted the orientation of the apprenticeship system from macroeconomic concerns, such as reducing unemployment, to a set of standards for testing procedures that would ensure that apprenticeships met employer needs. In fact, the law set up the contemporary vertical system of secondary school education with the design of the Hauptschule (general secondary school) and Real-schule (intermediate secondary school) system. Following the passage of the law, any person age eighteen or younger who completes Haptschule, Realschule, or level one of Gymansium and does notpursue an Abitur (a university education track) is required to attend the apprenticeship system, which combines part-time vocational education with work experience. Accordingly, the German approach is far more interventionist and has been able to achieve higher labor participation rates. These higher labor-force participation rates allow employers to have a stronger labor force with diminished turnover.


As a hybrid of both the British and German models, the Japanese tradition of hierarchical mentoring is a pattern that seems to have been replicated in industrial and skills training, although with less formal government support. In Japan, two unique features are present in the implementation of workforce preparation. First, there is an extensive level of onthe-job training that is required to be conducted between senior workers and new, less-experienced workers. Indeed, it has been documented that the ability to teach one's coworkers is a key criterion for promotion within a Japanese firm. These new workers are recruited from schools, where employers have established relationships for identifying and selecting high-performing students. New hires receive orientation sessions in safety and corporate culture (fudo) and informal on-the-job-training led by a senior worker.

The second critical element of Japan's investment in human capital is that employers engage their workers in a rotation system over their lifetime in employment. By engaging in the rotation system, the employee gains firm-specific skills that are commensurate with a career-ladder approach. Accordingly, the employee is trained in both technical skills and employment relations, and the employer is able to provide some measure of lifetime job security. But while job training is conducted formally in classroom settings to complement existing knowledge, the homogeneity of Japanese labor markets within firms encourages private employers to tailor programs that are more firm-specific than industry-specific in focus.

United States

On the federal government level, a sweeping set of workforce development reforms were implemented with the passage of the Workforce Investment Act (WIA) in 1998. WIA marked a radical departure from past federal workforce/employment policy for adult workers–a patchwork quilt of categorical, tailored responses–to the consolidation of some seventy separate programs under WIA into three funding streams.

In a significant development, policymakers made a conscious decision not to provide WIA with an open-ended authorization as was the case under the Job Training Partnership Act (JTPA). In repealing the JTPA, WIA sought to expand the role of the private sector with a more active voice to ensure that the workforce development system incorporates their input to prepare people for current and future jobs. In addition, WIA recognized that meeting individual needs in the workforce development system was paramount and resulted in a move toward greater decentralized delivery of training services.

Workforce Investment Boards (WIBs) under WIA replace the former Private Industry Councils (PICs) that existed under JTPA and implement the public-funded workforce development strategy of their geography. In so doing, the federal formula dollars are disbursed to WIBs to provide a comprehensive set of services at some 1,500 One Stops across the United States. These services include: a preliminary assessment of skills and support-service needs; information on a full array of employmentrelated services, including listings of training providers, job search and placement assistance, career counseling, access to up-to-date labor market information (which identifies job vacancies), and skills necessary for in-demand jobs; and information about local, regional, and national employment trends.

By the same token, the American workforce development system is decentralized for employers. Yet there can be connections between employers and potential employees at the One Stop Centers. In fact, One Stops enable employers with a single point of contact to list job openings and to provide information about their particular company's hiring needs and requisite skills for occupational openings. This emphasis on using market forces to enable customers to get the skills and credentials required in their local economies makes accountability among training providers a paramount concern.

In sum, the differences among Britain, Germany, Japan, and the United States fall along a continuum between individual autonomy and compulsory codetermination for employers in the provision of workforce training. The design of a genuine training market that reflects both employer demands and the existing labor supply (or the potential labor supply) is evolving. However, to encourage employers' investment in their employees will require a set of financial incentives and strategic planning to ensure the connection between school, work, and lifelong learning, rather than a policy approach that solely addresses unemployment and job creation.


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FREEMAN, RICHARD. 1994. Working Under Different Rules. New York: Russell Sage Foundation.

LAYARD, RICHARD; MAYHEW, KEN; and OWEN, GEOFFREY. 1994. Britain's Training Deficit. Aldershot, Eng.: Avebury.

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