Report No. 11 785-CHA

ChinaNew Skills for Economic DevelopmentThe Employment and Training Imphicationsof Enterprise ReformNovember 24, 1993

Human Resource Operations DivisionChina and Mongolia DepartmentEast Asia and Pacific Regional Office

FOR OFFICIAL USE ONLY

MICROGRAPHICS

Report No: 11785 CHAType: SEC

Document of the World Bank

This document has a.restricted distribution and may be used by recipients onlyin the performanc-e of their official duties. Its contents may not otherwise beaisclosed'without World Bank authorization

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CURRENCY EQUIVALENTS(As of July 1993)

Currency unit = Yuan (Y)

$1.00= Y 5.70Y 1.00 = $ 0.18

FISCAL YEAR

January 1 - December 31

ACADEMIC YEAR

September 1 - August 30

ABBREVIATIONS AND ACRONYMS

COE Collectively owned enterpriseENTC Enterprise training centerETC Employment training centerLSC Labor service companyMOL Ministry of LaborSEdC State Education CommissionSOE State-owned enterpriseSTS Secondary technical schoolSVS Secondary vocational schoolSWS Skilled workers schoolTVE Township and village enterpriseUI Unemployment insuranceVTET Vocational and technical education and training

FOR OMCAL USE ONLY

CONTENTS

Executive Summary ............................. v

1 Itroducton .......t...................... 1

2 Enterprise Reform and Surplus Labor . 3

A. Enterprise Reform and Accompanying Reforms. 3B. Estimates of Surplus Labor. 7

3 Employment Trends and Employment Service Operations. . 15

A. Labor Force and Employment Trends .15B. Employment Service Operations ......................... 18

4 Structure and Efficiency of Institutionalized Inservice Training ........ 22

A. Institutions and Types of Activities ....................... 22B. Enrollment Level, Course Length, and Student Profile .... ....... 25C. Faculty Profile, Teaching Hours, and Teacher/Student Ratio .... ..... 28D. Industrial Input, Course Content, and Theory and Practice Mix ...... 30E. Teaching Materials, Teaching Methodology, Equipment, and

Workshops ..... 33F. Cost and Financing .................. 37G. Planning and Management Framework and Links with Industry.44

5 Institutional Issues and Recommendations ...................... 46

A. Low Internal Efficiency .............................. 46B. Severe Resource Limitations ........................... 46C. Teacher Qualification ................................ 47D. Instructional Material and Curriculum ...................... 48

Ihe report is based on the findings of a mission to China in October 1992 comprising K. Ogawa(Economist and Mission Leader, EA2CH), G. Howell (Vocational Training Specialist, SAIPH),R. McGough (Industrial Training Specialist, ASTPH), D. Hou (Operations Officer, EA2CH),J. K. Lee (Vocational Training Specialist, Consultant), and T. P. Leung (Vocational Educator,Consultant). Peer reviewers were S. Cochrane (PHN), R. Drysdale (SASVP), and A. VanAdams (ESP). The Acting Division Chief is Halsey Beemer (EA2HR) and the DepartmentDirector is Shahid Javed Burki (EA2).

This document has a restricted distribution and may be used by recipi.-i only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorzation.

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5 Institutional Issues and Recommendations (cont'd)

E. Teaching Methodology ............................... 49F. Management, Planning, and Coordination Mechanism .... ........ 49G. External Efficiency Issues ............................. 50

6 Employment and Retraining Strategies in Other Countries .... ....... 53

A. Labor Market and Employment Policies .................... 53B. National Labor Market Poiicies to Assist Industrial Restructuring .54C. National Training Funds .57D. Conclusions ............. ,,.,,,.,.......... 59

7 Issues and Options for Employment and Retraining in China .... ...... 61

A. Industrial Adjustment ................................ 61B. Management Education ............................... 61C. Functional Flexibility of Labor .......................... 62D. Development of the Tertiary Secntor ....................... 63E. Technical Testing and Certification ....................... 64F. Development of a Local Framework for Retraining Surplus Workers . . 64G. Suggested Areas for Additional Preparatory Studies .66

ANNXES

1. Preservice VTET-Institutions, Issues, and Recent Developments .... ..... 672. Enterprise Training Institutions in Dalian, 1991 .................... 713. Enterprises Listed by Reference Numbers in Tables 2.1 and 2.2 .... ...... 724. Proprietary Schools ...................................... 735. Training Institutions Visited by the Mission ....................... 756. Education and Training Requirements for Lower-Level Jobs in the

Tertiary Sector ........................................ 767. Employment and Retraining of Displaced Workers: The Case of Canada .... 788. Skill Training in Township and Village Enterprises .................. 86

Statistical Appendix .88

Referens ............................................. 96

TABLES IN TEXT

2.1 Dalian: Enterprise Estimates of Surplus Labor ................... 92.2 'Wuhan: Enterprise Estimates of Surplus Labor and Aggregated Totals for

Dalian and Wuhan .10

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TABLES IN TEXr (cont'd)

3.1 Employment by Sectors, Selected Countries, 1988 ................. 153.2 Urban Employment by Ownership Pattern, 1980-92 .163.3 Urban Employment by Type of Industry, 1980-95 .163.4 Source of New Recruits for the SOE Sector, 1986-91 ........... . ... 173.5 Net Increase in SOE Labor Force, 1986-91 .173.6 Dalian: Premiums and Expenditure of Unemployment Insurance

Fund, 1986-91 .20

4.1 Year-End Enrollment for Training Institutions in Dalian, 1991 .254.2 Year-End Enrollment for Training Institutions in Wuhan, 1991 .254.3 Year-End Enrollment by Course Length, Dalian (1991) .264.4 Year-End Enrollment by Course Length, Wuhan (1991) .264.5 Sources for Enrollment by Type of Training Institution, Dalian (1991) 274.6 Average Number of Faculty by Training Institution, Dalian (1991) .284.7 Average Number of Faculty by Training Institution, Wuhan (1991) .284.8 Faculty Profile by Educational Background and Type of Training Institution,

Dalian (1991) ..... .. .......................... 294.9 Faculty Profile by Educational Background and Type of Training Institution,

Wuhan (1991) ........ 294.10 Teaching Load of the Training Institutions Visited by Mission, 1992 .304.11 Teacher to Student Ratio of Training Institutions Visit'1 by Mission, 1992 . . 314.12 Time Spent on Practice Training, Aviation Industry, 1991 .334.13 Evaluation of Adequacy of Time Spent on Theory and Practice, 1991 .334.14 Recurrent Cost per Student for Inservice Training in the Iron and Steel

Industry, 1991 .374.15 Recurrent Cost (Exclusive of Personnel Expenditures) per Student from

Major Types of Work in the Aviation Industry .384.16 Main Sources of Funds, by Training Institutions, 1992 .44

BOxES IN TEXT

2.1 Local Policy for Surplus Workers: The Case of Dalian .122.2 Transitional Economies and the Implications for Labor and Wage Issues ... 13

4.1 Xi Gang Employment Training Center and Dalian OccupationalTechnology Training School .34

4.2 Dalian Locomotive Drivers School .394.3 Dalian Shipyard Enterprise Training Center .414.4 Inservice Training in the Aviation Industry .42

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EXECuIVrE SUMMARY

i. China's economic reform has reached a stage where many of the relativelystraightforward changes have been implemented. What remain to be addressed are the morecomplex issues, one of them being enterprise reform. Enterprise reform is "the area where allother reforms-price, fiscal, finance, investment, plananing, and labor and trade-cometogether. "1/ Although enterprise reform has been a priority topic for several years, theperformance *e state-owned enterprises (SOEs) has continued to deteriorate, with one thirdof the industrial SOEs generating losses. These losses are a significant drain on thegovernment's budget and the banking sector.

ii. One of the several obstacles to accelerating enterprise reform is the existence ofa large number of surplus workers in SOEs. By some estimates, about one quarter of the laborin SOEs is redundant. To date, enterprises are constrained from laying off their surplus workersbecause of their traditional responsibilities, such as providing housing, social security, and untilrecently, subsidized foodstuffs. There are at present no alternative institutions providing incomemaintenance, housing services, medical care, and other basic social services to unemployedworkers. However, as these responsibilities of a social nature are transferred out of theenterprise sector through successful reforms in housing, social security and wage systems,enterprises will gradually acquire more discretion to eliminate surplus workers throughretirement, voluntary separation, and layoffs. In that event, it is crucial that the younger laid-offworkers have, or have access to, opportunities to acquire skills qualifying them to findalternative employment. Workers remaining in the enterprise will also need improved vocationaltraining because they will have to continuously update their skill levels to keep up with therequirements of industrial restructuring.

Enterprise Reform, Accompanying Reforms, and Surplus Labor

ii. The current policy regarding the disposition of surplus workers still emphasizesmaintaining social stability. In implementing reform measures, therefore, local governmentsmust carefully monitor the socially affordable level of unemployment in light of the strength ofthe local economy. Government policymakers recognize that this is inefficient, but the socialsecurity system is not yet adequately developed to handle significantly larger open unemploymentrates.

iv. Reforms in labor and wage areas are encouraging policies with more incentivesto improve efficiency and increase labor mobility. These include a contract labor system,abolition ofjob assignment by the state, and reforms in the wage system that strengthen the linksbetween performance and wage determination. It is expected that these reforms will bring aboutan increased demand for quality training programs, in contrast to the passive, supply-drivenprograms of the past. Social security reform at present focusses on: (a) relieving the individualenterprises of their social security responsibilities by making these services available outside theenterprises; (b) enlarging the social security premium pool to district- and municipal-wide

1-/ China: CoIwMry Economic Memorandum-Reform and the Role of the Plait in the 1990s, ReportNo. 10199-CHA, June 1992, Washington, D.C., World Bank, p. 103.

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pooling thereby reducing the risk to individual enterprises; and (c) expand coverage to allworkers and all enterprises.

v. Employment Services. Localities and industries in developed countries affectedby dislocation offer many examples to illustrate that training is a key intervention in making iteasier for redundant workers to find new jobs and shortening the time they remainunemployed.ZI Hovwever, what is equally clear from these cases is that first, training must betaken in conjunction with other employment services such as screening, counseling, a job searchand placement service, income maintenance, and financial counseling. Second, there must beparticipation in training from industries that are potential future employers, and a partnershipamong government, industries, and workers (typically trade unions in the case of manyindustrialized countries).

vi. The types of employment services currently offered by labor authorities in Chinaconsist of the following:

* Employment facilitation services that include registration of job seekers andvacancies, labor maket information, vocational guidance, career counseling, andemployment projections.

* Vocationaltraining, usually given at employment training centers. The proceedsof the unemployment insurance fund can be used to train unemployed workers,and the Ministry of Labor (MOL) now requires that 15 percent of the fund beused for this purpose.

a AAdministration of the unemployment insurance system, which coversunemployment relief, medical care, survivor's pension, retraining, provision ofstart-up capital for those seeking self-employment and occasional creation oftemporary employment.

- Overseeing employment service enterprises, which are collectively ownedenterprises established to provide employment to job-waiting youths.

Since to date the bulk of the responsibility for placing surplus workers falls on the enterprises,the scope of the public employment service system has been limited to the small number ofworkers who are laid off, and therefore it is difficult to judge the effectiveness of the system.If in the future, a higher open unemployment rate is adopted or becomes inevitable, this systemwill have to play a larger and more active role in placement. At the same time, the need forcomprehensive income support and reemployment policies (on labor market information,counseling and placement services, and retraining programs) will also become increasinglycompelling.

ZI See W. H. Kohlberg (ed.), The Dislocated Worker: Preparing Ameica 's Work Force for NewJobs, Chapters 7 and 9 and K. Hollenbeck, et al. (ed.), lhe Displaced Workers: Implicationsfor Edcional and Training Institutions, for examples.

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Isavice Vocational T.alnint Institutions

vii. There are three main types of institutions that carry out inservice training inChina today: training departments or centers attached to enterprises (hereafter referred to asent3rprise tradning centers" or "ENTCsU), skilled workers schools (SWSs), and employment

training cunters (EFCs).

viii. The ENTCs are owned and managed by enterprises, and operate specifically tomeet the llabot wairing uieed- of hu- )arent enterprise. This sole-Clent relationship allows themto be cosely in tune wiithie ..eds of .i ente rprise, fonrmally thrAugh the enterprise's workereducation committee, which provides overall guidance. Most large enterprises and some of themedium-sized enterprises have their own ENTCs. The main advantages of such an arrangementare that the ENTC is assured of a steady flow of financial resources from its parent enterprise,and that it can use the enterprise's facilities for practice training and its skilled staff asinstructors.

lx. The primary function of the SWS is residential preservice training for uppersecondary students, but many SWSs also run inservice training programs for midlevel and seniortechnicians. They are under the general administration of the Ministry of Labor, and aremanaged by technical ministries or bureaus, local labor bureaus, or enterprises. Their clientbase is either a single enterprise or a group of enterprises in a single industry with which theschool is linked through the local technical bureau. They have close links, in terns of financingand curricula, with employers and technical bureaus. The SWSs offer the most structuredprograms of the three in terms of course content and organization and have the largest share oflong-term inservice courses. Some SWSs have a management committee consisting of enterprisemanagers and municipal officials which serves as a forum that helps convey the requests of theenterprises and overall policy direction of the municipality.

x. In contrast to the ENTC and SWS, the ETC has no formal organizational orfinancial affiuiation with enterprises. The ETCs are typically run by the local labor authorities,frequently through a labor service company (LSC) which runs the ETC as one component of thepackage of employment services it provides. The ETC courses cater to the training and skillneeds of the locality (district or municipality). Their student body is more diversified than theother institutions and includes unemployed youths, workers from township and villageenterprises, and surplus workers. Except for receiving some initial capital for its establishment,the ETC must finance its operations by itself, mainly through student fees. The supervisinglabor bureau or the LSC has continuing meetings with managers and training officials of themain enterprises in the districts to discuss what training to conduct and what types of workersshould participate. The ETCs are best positioned to provide short, intensive, and specifictraining courses for service sector jobs and have the flexibility to adapt course content quicklyto market needs. They have neither the experience nor the resources to move into higher costtechnologies.

xi. The issues and recommendations that arise out of the review of the three typesof training institutions are described below:

* Low Internal Effciency. Utilization of workshops and laboratories is generallylow, mostly because of the lack of appropriate equipment, a shortage ofconsumable materials used in practice training, and shortcomings in curricula

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design and instructional management. Instructional staff have very low teachingloads, both as stipulated by regulation and in practice. Many of the institutionsvisited have significant excess capacity.

* Severe Resource AUmitations. Tbis is one of the most critical factorscontributing to low internal efficiency. The limitations are particularly severefor the purchase of instructional materials, consumable materials for practicetraining, tools and equipment. It is not easy to find a solution to this issue,because vocational training is by nature substantially more costly than generaleducation, and the training institutions depend on their sponsoring governmentbureaus or enterprises for resources. The ENTCs are in the most advantageousposition as long as the parent enterprise is financially viable. Other means togenerate resources include increasing the costs recovered from enterprisessending their workers to the training institution and from the students. As wagereform deepens and workers see (and reap) the merit of improving their skills,they are expected to become more willing to finance the training themselves.On the other hand, wage reform will also lead to significant increases in staffsalary, particularly salaries of those teaching specialized skills in demand, andthus the share of personnel expenses in total recurrent costs is unlikely todecline.

* Teaching Staff. While the academic training of the teachers is in generalsatisfactory, many teachers lack adequate industrial experience. In addition,their teaching, techniques consist predominantly of lectures and somedemonstration, and they are not familiar with other pragmatic and effectivetechniques suitable for vocational training, such as audiovisual and computer-based teaching techniques, simulation technology, and use of performance-basedobjectives. As the curricula and teaching materials are revised to make use ofthese techniques, the teachers should also receive training in these areas.

- Instructional Material, Curriculum, and Teaching Methods. The quality ofinservice delivery is being adversely affected by lack of curricula andinstructional material prepared specifically for inservice programs. Based on theincorrect assumption that the content of inservice courses is basically the sameas that of preservice courses and inservice students have the same characteristicsas preservice students, inservice programs frequently use bits and pieces ofpreservice curricula and textbooks. In China, preservice programs are typicallythree-year residential programs offered to students coming straight from lowersecondary school, while the inservice programs are offered to older enterpriseworkers with substantial work experience. It is recommended that in the shortrun, curriculum and textbooks be developed specifically for inservice programs,taking into account the course duration and student characteristics. In the longerrun, development of a training system that is textbook-free, time-free andcompetency-based-such as the DACUM approach, which develops a curriculumthrough extensive use of modules-should be considered.

* Improving External Efficiency. External efficiency appears high, as attestedby the high percentage of graduates who are placed in jobs, and the evidence ofa continuing exchange of views among the training institutions, employers, and

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government. However, this could simply be a reflection of an absolute shortageof most types of skilled labor and of inservice training slots, or the government'serstwhile policy on full employment. When a more open labor market develops,wages are decontrolled, and managers have a better understanding of theoperational costs and benefits of creating a skilled work force, moreconventional measures of external efficiency could be applied. In the meantime,it is important to ensure that mechanisms to encourage and demonstrate goodtraining, and to engage local managers in determining and applying trainingpolicy, are put in place.

* Management, Planning, and Coordination Mechanism. Each type oftra;ninginstitution has formal and informal li ks with the enterprise, industry, or districtit serves. These links facilitate communication between individual institutionsand employers or government regarding course content, policy, labor marketneeds, etc. However, on a sectorwide basis, there is much scope forstrengthening management, planning, and coordination mechanisms. Given thetendency of individual training institutions to act as isolated entities serving onlythe sponsoring enterprise, technical bureau, or district, there is a notable lackof sectorwide coordination between employers and government and the threedifferent types of training institutions (thus there is no complete local databaseof allocation of training places). Expansion of "coordinating conimittees,"which currently already exist in some municipalities such as Dalian, to enlargetheir membership and mandate to form a "consultative committee' is suggested.The membership would consist of representatives from enterprises as well asgovernment and training institutions. The purpose would be to (i) jointlyformulate policies and programs on vocational training; (ii) identify localcommon training priorities in new and advanced technologies; (iii) identifycommon institutional training equipment, facilities, and programs needed locally;(iv) establish criteria within national guidelines to set up and activate a localcommon training fund; (v) authorize and evaluate expenditures from the fund;(vi) determine local arrangements for applying national skill test and certificatesystems; and (vii) provide advice and publicity to promote efficient training andretraining.

xii. As enterprise and price reforms deepen and the hard budget constraint starts tobite, enterprises and training institutions will become more conscious of the low utilization ratesof their facilities and equipment. The likely outcome would be for training centers to try toprovide the complementary inputs (consumable materials, etc) so that the utilization rateimproves (and increase the rate of cost recovery to cover the cosEs of these inputs), lease thefacilities and equipment to other entities when they are not being used, or shut down trainingcenters that prove too inefficient to maintain (i.e., those for which there is insufficient demand).Utilization rates overall are therefore likely to improve. At the same time, access to externaltraining institutions by workers of small or loss-making enterprises which no longer find itprofitable to operate their own ENTC should be ensured. Wage reform and increased labormobility will make it more costly and difficult for the training centers to find and retain highquality teaching staff, leading them to be more efficient in the use of this input. At the sametime, however, there is also the danger that as enterprises increasingly come under pressure tobecome financially viable, they may be reluctant to train workers who can then leave theenterprise before it can recoup the costs. Effective government policies and funding as well as

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industrial programs to encourage investment in human resource improvement to counter thistrend need to be considered. The need to improve instructional material, curriculum andteaching methods, and to train teaching staff in their use remains regardless of the pace ofenterprise reform. However, the case to strengthen the planning and coordination mechanismwould become stronger, since as enterprises gain more autonomy over their activities,opportunities for contact between govermment and industries become fewer, and withoutcoordination there is a risk that different entities could be duplicating efforts in the field ofvocational training where scale economies make such duplication inefficient.

Employment and Retraining Strategies in Other Countries

xiii. A review of how different countries have adopted different labor market andemployment policies to address industrial restructuring issues, and of the national fundingmechanisms for inservice training in China and the underlying policy aims offers a range ofexamples from which China can adapt policies and practices to suit its economic, social, andlabor force characteristics. The review also offers observations on the elements or arrangementsin retraining and skill upgrading programs that have made some more successful than others.As a result, it is possible to focus on factors that will be important in successfully addressing theneed to retrain surplus workers in China. These are briefly descr;bed below.

* The future functional flexibility of labor, which is crucial to responding tochanging organizational and technological needs, is best established on the basisof articulateness, numeracy, and literacy achieved through good basic education,and is rarely enhanced by training at the secondary level in specific vocational.skills.

* Successful industrial restructuring need not imply large-scale layoffs: Japanprovides evidence of successful redeployment of labor, and sustained orenhanced productivity within a continuing employment relationship, althoughthis is likely to depend on government support, and on skillful management ofproduct diversification, enterprise mergers, operational rationalization, andproductivity enhancement.

* Adequate advance notice of lay-offs, and counseling and placement services havebeen the most successful elements of job relocation programs in some westernindustrialized countries.

* Retraining and job placement programs are most successful when the releasingand recruiting enterprises are the prime agents in implementing the transitionalprograms, supported, if appropriate, by government incentives and assistance.

* Where employer commitment is high, because of either traditional employmentobligations, or a sense of corporate social responsibility, successful job changeprograms can be implemented within enterprises, or by mutual agreementbetween enterprises, often with minimal government support.

* Once a specific new job has been identified, enterprise-based training programs,provided on-the-job are the most effective, and preferred, way to trainexperienced workers, especially older ones.

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* Appropriate training facilities that are external to the enterprise may beincreasing!y useful in teaching specialized skills related to advancedtechnologies, especially for small enterprises with limited resources.

* Government retraining programs are unlikely to attract candidates, or to equiptrainees for employment, unless payment of benefits is conditional onenrollment, specific employers and jobs are foreseen, and the training given ispractical and active.

* Training programs for self-employment, or small enterprise development, shouldbe offered as part of a job creation package, including a suitable regulatoryframework, counseling, extension service:,, and access to credit.

xiv. Financing Mechanism. The current regulation in China of requiring enterprisesto devote the equivalent of 1.5 percent of the payroll to inservice training is in principle a soundbasis for having enterprises defray their own training costs. However, the criteria fordisbursement are not clear, inspection regarding actual use appears lax, and technical guidanceon optimal utilization of the funds does not appear to be available to enterprises. Experiencefrom other countrie. indicates that management of such a fund is best made as autonomous asconsistent with proper control, and its managing body should include representatives ofgovernment, industry, workers, and academia to reflect different interests and perspectives.

xv. Other options that should be made available in.clude contracting for professionaltraining advisory services, pooling training funds at the local level for enterprises that do notwi.ah to conduct training, and providing centralized help for enterprises that lack their owntraining facilities. These options have varying degrees of attractiveness to government and toenterprise. However, without the commitment of employers and workers' representatives,training funds will not be well spent.

3&sues and Options for Employment and Retraining in China

xvi. Issues and factors that China should take into consideration in designing itsstrategy foi employment and retraining programs are:

* Improving the education of enterprise managers so that they can meet thechallenge of making strategic operational decisions in a more market-orientedeconomy. This means training which encompasses the financial, marketing, andpersonnel functions within a strategic framework in addition to the traditionalproduction function. So far, the limited scope of enterprise reform has notrequired managers to make accurate, productivity-based assessments of the fullextent of labor surplus. Nor have managers been under any operational pressureto make plans for staff deployment, versatility, and training. They will needtraining to assess skilled labor requirements and to determine recruitment andtraining policy in a more open labor market economy. These are importantmanagement skills not generally hitherto needed by SOE managers in China.

* Promoting fnctional flexibility of labor, which will become increasinglyimportant as industrial restructuring demands adjustments. A major contributoryfactor in sustaining industrial productivity, for instance in Japan, is the

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availability within the enterprise of skilled workers who can be reassigned inresponse to market and other pressures. The government can promote a climatewhich encourages, rather than impedes, the inevitable labor adjustments bysupporting the continual updating of workers' skills by enterprises andappropriate external training institutions.

Development ofthe tertiary sector, which is expected to generate a large numberof jobs. The government hopes a significant part of surplus labor might moveinto this sector. Tertiary sector jobs are not confined to peripheral personalservices, but require the highest level of skill of any sector. Such areaw includebanking, financial management consulting computing, and communications, aswell as support services provided within manufacturing enterprises exposed toautomation and other technological advances. The profile of workers currentlydefined as surplus in SOEs, however, does not conform to the skill needs of thetertiary sector except for simple manual skills. Thus, the more likely outcomeis that the new jobs in the tertiary sector will increasingly be filled by labormarket entrants while most of the surplus industrial workers would bereabsorbed into enterprises or shed by planned attrition. The mission sawtraining programs for some lower-level tertiary sector skills conducted at thetraining institutions visited. An initial evaluation of these courses indicates thereis much scope for improvement in curricula, textbooks, faculty, and practicefacilities.

* An appropriate role for technical testing and certification. With greater labormobility, there will be a demand for a ready system to test and recognize theskills of unknown job applicants. However, too rigid a system often tends toexclude uncertified, but otherwise qualified, candidates. It is essential that anyskill testing system be designed to support, not restrict, the hiring discretion ofenterprises.

xvii. This review describes a framework for retraining surplus workers that is suitablefor municipalities in China. Four elements are important for its success:

* Formulation of Local Training Policy. This should be undertaken with thejoint participation of enterprises, government, and spokesmen for social andworkers' interests, through a committee along the lines suggested in para. xi(management, p:anning, and coordination).

* Management Education. This would consist of local consultative and trainingseminars for enterprise managers to improve their awareness of labor-relatedproductivity issues, explore the local labor and training implications of enterprisereform, and share information about training options in both institutions andenterprises, and on and off the job.

* New and Advanced Training Facilities. Despite the surplus of low-skilledlabor, there is a serious shortage of skills needed to cope with new and advancedtechnologies. Improved training activities in advanced skills and technologiesshould be est4 olished, preferably at a strategic common center in the city, andmade accessible to individuals and enterprises. Decisions on technologies,

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curricula, and operating arrangements would be entrusted to the joint cc initteereferred to above.

* "Job Changing Retraining Package." The joint committee could decide on theuse of local training funds to facilitate job transfers. Innovative uses mightinclude training and technical support for small entrepreneurs or the self-employed, who want to use lump-sum severance pay to start businesses;payments to those changing jobs for use in obtaining new qualifications, or forenrolling in fee-charging programs; and payment to private providers of trainingin priority skills.

xviii. Finally, there are particular areas where either current policy options in Chinaneed to be explored and articulated in greater depth, or information is deficient or nonexistent.These areas should be studied fiirther by:

* Assessing educational and training improvements, in the form of facilities,equipment, programs, and curricula, needed to meet the accelerating demand foradvanced technological and tertiary sector skills;

* Determining the feasibility of establishing national or local funds to supportworker training and retraining programs, including determining appropriatesources of funding, setting criteria for disbursement to institutions, enterprises,and individual workers, and monitoring the use of funds;

* Reviewing the available current scale and content of management trainingfacilities, and estimates of future requirements for training programs, facilities,and curricula; and

* Assessing the current labor market policies, services, and information systems,and measures to improve their operation, as a basis for determining policy andallocating resources.

These four elements-improved training facilities, systematized funding, managementcommitment and competence, and a functioning labor market-will likely be decisive in anysuccessfil national policy to retraining workers. This policy in turn will be a significantdeterminant of the pace and productivity of the enterprise reform program, its stability andsustinability, and hence future economic and social progress in China.

1. RODUCTION

L1. China's economic reform has reached a stage where many of the relativelysaraightforward reforms have been implemented. What remain to be addressed are the morecomplex issues. One such area is the reform of the state-owned enterprises, an area "where allother reforms-price, fiscal, finance, investment, planning, and labor and trade-cometogether.l/ For reforms in one area to be effective, changes in other areas are needed, andreforms in one area will in turn have repercussions on others.

1.2 The Bank's strategy for supporting China in its enterprise reform process consistsof assistance in both policy formulation and in operations. The policy issues on which the Bankis offering advice through economic and sector work and other fora to facilitate this processinclude labor and wages, housing and social security, increased market competitiveness, andimproved legal and regulatory frameworks. On the operational side, the Bank is working withspecific provinces, municipalities, and subsectors which not only conform with national policy,but are also advanced or innovative in their approaches toward reform in these policy areas.Operations that contain elements of reform include the Tianjin Industrial Development Project,the Grain Distribution and Marketing Project, the Housing and Social Security Reform Project,and the Shenyang Industry Engineering Project; the latter two of which are under preparation.

1.3 This sector report provides a backdrop for a proposed project on vocationaltaining and labor market development which complements the Bank's other efforts in promotingenterprise reform. Its emphasis is on reviewing and evaluating the current situation of inservicetraining in China-including the availability and quality of retraining programs to promote amore efficient deployment of labor to facilitate enterprise reform. The report is confined toreviewing the inservice segment of vocational and technical education training (VTET) which ismore directly linked than preservice training to enterprise reform and redeployment of urbanworkers in state-owned enterprises (SOEs). It therefore complements rather than replaces thesector study of preservice vocational and technical education published in 1987.2/

1.4 The Bank's strategy in the education and training sector consists of a two-pronged approach. In basic education, the strategy is in line with the Bank's emphasis onalleviating poverty and the Chinese Government's policy of popularizing nine-year compulsoryeducation. The geographic focus has been on poor and remote areas since compulsory educationhas already been achieved in most urban areas, but continues to lag in the poorer areas. In

I/ MChina. Counry Economic Memorandum-Reform and the Role of the Plan in the 1990s, ReportNo. 10199-CHA, June 1992, Washington, D.C., World Bank, p. 103.

ZI See Sector Report: Technical/Vocational Education for China's Development, ReportNo. 6789-CHA, Washington, D.C., World Bank, August 1987, and Annex I of the presentreport for recent developments in presemce VTET.

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vocational training, the Bank is focusing on urban areas, in particular developed municipalities,because such cities are likely to be more advanced in their policies regarding employment andservices, and have more reform-oriented enterprises. This characteristic is an importantconsideration in selecting the geographic location of assistance since retraining taken in isolationwill not be effective as an intervention measure in creating jobs or in placing displaced workers.Aside from the importance of the general economic situation of a locality, other measures (suchas availability of employment services and unemployment insurance schemes) are indispensableas elements of the intervention package. Bank assistance for higher education, teacher trmning,and development of teaching material involves working closely with the central governmentbecause of the importance of national policy development, and with local governments orinstitutions implementing the program under central leadership.

1.5 This report is a product of a single mission to China. In addition to meetingwith central government officials, the mission spent much of its time in the municipalities ofDalian and Wuhan, interviewing government officials, training institution staff, and enterprisemanagers; and visiting training institutions. The two municipalities were chosen for theirsomewhat different characteristics: Dalian is a dynamic coastal city which has taken advantageof the open door and reform policies, resulting in a high rate of exports and many joint ventures.Wuhan is a large inland city with a large number of SOEs in heavy industry. Severalconsiderations led to the adoption of the case study approach using the two municipalities. First,the bulk of the responsibility for implementing retraining and finding productive employment forsurplus workers falls on local governments, training institutions, and industries, and thus focusat the municipal level is appropriate in the case of China. Second, the nmicipalities have aconcentration of urban SOE workers-the segment of the work force wheic the surplus laborissue is most serious and yet most difficult to resolve. Third, both cities are 'separate-planmunicipalities' which have a higher degree of autonomy in policy initiatives and financing thanother municipalities, and this enables us to observe how national policies and guidelines aretranslated into action a& the local level. Moreover, there are relatively few nationwide statisticson inservice training because this is an activity that involves many training institutions andenterprises, which in turn report to a large number of different ministries at the central level.Information collected in the municipalities partially compensates for lack of national data.

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2. ENTERPRISE REFORM AND SURPLUS LABOR

A. ENRRISE REFORM Am ACCOMPANYG REFORMS

Reasons for Ineffidency

2.1 The reasons for the SOEs' inefficiency are historical and numerous. Much hasto do with the legacy of central planning with its planned allocation of inputs and outputs, thedistorted price system (of both commodities and labor), and allocation of credit without dueconsideration given to rate of return on capital. One of the several obstacles to acceleratingenterprise reform is the inefficient deployment of labor in SOEs, including a large number ofsurplus employees. Chronic overstaffing is a function of China's post-Liberation labor and wagepolicy, which has consistently pursued low levels of open unemployment and intentionallyavoided the overurbanization problems seen in many developing countries.j/ As a result,underemployment is prevalent. By some estimates, about one quarter of the labor force in SOEsis redundant. On the other hand, the skills of the existing workforce in enterprises areinadequate to keep pace with technological advance and other changes in the externalenvironment.

2.2 To date, enterprises are constrained from deploying their workforce in a moreoperationally efficient manner and laying off surplus workers because of their traditional socialresponsibilities toward their workers, such as housing, social security, and until recently,subsidized foodstuff, provided in the form of nonwage benefits. These social responsibilitiesinhibit enterprise managers from pursuing the purely production-oriented goals of running anenterprise and from firing surplus workers. Moreover, to date, there are no alternativeinstitutions that could provide income support, housing, medical care, and other basic socialservices for unemployed workers. However, once such institutions are established and socialresponsibilities are removed from the enterprises, it is likely that enterprise managers would havemore discretion to layoff surplus workers.2/ It would then be critical that opportunities bereadily available and accessible to younger laid-off workers so that they too can acquire skillsqualifying them to find alternative employment.

1/ China: Reforming the Urban Employment and Wage System, Report No. 1)266-CHA,Washington, D.C.: World Bank, June 1992, p. v.

ZI Even with increased latitude to fire redundant workers, it is unlikely that this would lead toimmediate massive layoffs in China, given the economy's gradualist approach to systemic reforn,the implicit social (as opposed to explicit contractual) obligations of Chinese enterprises towardtheir employees, and the examples of earlier industial restuctuing i countries such asGermany, Japan, and Korea, which took place without massive layoffs.

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2.3 In recent years, reforms in the areas of housing and social security, labor andwages, have gradually moved in the direction of converting nonwage benefits into wages so thatthe provision of these services can be divorced from the enterprises. The social security systemis being revised to gradually move away from the current enterprise-based system to a district,municipal, and even provincial system with contributions from the state, enterprises, andindividuals, which will enable the individual workers to retain benefits even if they aretransferred from one enterprise to another. New unemployment insurance (UI) schemes tobroaden the coverage of beneficiaries are also being proposed by the Ministry of Labor (MOL)and the State Council's (former) Production Office, which would facilitate the movement ofsurplus workers out of SOEs.QI The current scheme is extremely restrictive. The SOEworkers are not eligible for unemployment benefits unless job loss is due to bankruptcy, businesscutbacks ordered by the government or expiration of the labor contract. Thus only 650,000persons nationwide received UI benefits during 1986-91.41 Reforms in the housing area aimto gradually sever the link between the work units and households' housing choices, and expandthe availability of commercialized housing.

Labor and Wage Reforms

2.4 Several key reforms in labor and wage policies in the 1980s have enabledindividual enterprises and the labor market to pursue some degree of efficiency and flexibility,rather than security and rigidity:

(a) For urban new recruits, since 1986, the system of virtual lifetime employmenthas been replaced by the labor contract system. As of the end of 1992, about19 percent of SOE employees were covered by this system (27 percent whenconfined to industrial SOEs).5/ Selected enterprises choosing to pursue reformmore aggressively (reform enterprises §I) have put their entire workforceunder this system. In Dalian and Wuhan, about 5 percent of the total workforce

3/ Beijing Review, Vol. 35, No. 22, p. 10.

A/ Provinces and municipalities have discretion to decide on the level of the Ul premium andbeneficiary coverage. In Dalian the premium is set at 0.5 percent of wages, which is reportdto be the lowest in the nation, and in Wuhan it is 1 percent of the basic wage. 'Reformingenterprises' (see footnote 5) in Wuhan have recently set this at the level of 1 percent of totalwage inclusive of various subsidies and allowances. The Ul coverage in Dalian will be expandedduring the Eighth Five-Year Plan to include: (a) COE workers losing theirjobs due to expirationof the labor contract, busi ess closure or stoppage, and streamlining; (b) employees of jointventures; and (c) job dismissai, interpreted widely. Furthermore, there are plans to includeprivate entrepreneurs in the scheme. The inclusion of individual workers is expected to takesome more time to work out, however. The UI fund will be pooled at the municipal level beforethe end of the Eighth Five-Year Plan period.

s/ These figures were up from 14 percent and 17 percent, respectively, for 1991, attesting to theexpanding coverage of the contract system.

6/l These are enterprises that are pursuing reforms which give them more autonomy in labor andwage policies and allow them to be more accountable for their own profit and losses, in exchangefor giving up the financial support they used to received from the government. These enterprisescan also directly engage in foreign trade. In Dalian, there were 50 such enterprises and inWuhan, 40.

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of the reform enterprises was classified as surplus and these workers were notoffered a contract. Dalian plans to put all its urban workers under labor contractby the end of the Eighth Five-Year Plan period (i.e., 1995).

(b) Regarding job selection, the state allocation of labor is gradually being replacedby job placements by labor service companies (LSCs) and enterprises, except forgraduates of universities, secondary technical schools (STSs), and skilled workerschools (SWSs). Even in these three areas there are gradual reforms. Forexample, 16 percent of the graduates of STSs must now find their own jobs.For university graduates, mutual expression of preference (by the prospectiveemployer and employee) has been allowed since the late 1980s.

(c) Wage reform has taken place in the form of reintroduction of piece rates andbonuses, thus linking remuneration to productivity and allowing enterprises todistribute part of the after-tax profit as bonuses.

The introduction of the contract system and the abolition of state job allocation mean the end ofguaranteed lifetime employment by the state, forcing schools and students to become moreresponsive to the needs of the market. This is expected to lead to increased demand for qualitytraining programs in specialties where there is a demand for workers. Wage reform linkingremuneration to productivity will also increase workers' initiative in obtaining better skills, incontrast to the supply-driven, passive attitude toward training in the past.

2.5 More recently the Government has reviewed, with the Bank, its reform agendaand options in the field of labor and wages, and has drafted an Action Plan to be carried outduring the rest of the decade. The reforms center around increasing labor mobility and Unkingwage determination to productivity. The direction of the reform actions is as follows.

2.6 To increase interenterprise labor mobility: (a) the control presently exercisedby the local labor bureau and the worker's current work unit regarding a worker's transfer toanother enterprise is to be removed; (b) pensions, health care and unemployment insurance areto be pooled at the municipal, and gradually provincial, level from the current enterprise level;(c) housing is to be commercialized so that its availability can be delinked from a worker's workunit; (d) a labor market information network will be established to provide data on employmentand wages by sector, industry and occupation, and on characteristics of job seekers andvacancies. The contract system will be expanded to all workers. The contract will more clearlyand equitably define the rights and responsibilities of both the enterprises and workers, as wellas dispute resolution procedures. In this regard, a labor code would be adopted, particularlywith adequate protection of workers' rights in the areas of: contract clauses; workers'representation; work hours' female workers; and dispute resolution.

2.7 With respect to rural-to-urban migration, policies to reduce the 'pull" factorinto urban areas (phasing out of subsidies and price distortions favoring urban residents) and the'push' factor from the rural areas (expansion of township and village enterprise employment,diversification of agricultural income sources, development of medium-sized cities) are alreadyunder way. The elimination of legal and regulatory barriers to rural-to-urban employmentmobility is likely to take longer to accomplish than interenterprise mobility. The delinking ofurban employment from the urban "hukouu (household registration) system is being studied, andevery city would eventually grant residency and work permits to those living within its

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administrative boundaries, provided they first register their residence with the local publicsecurity office. Intraprovincial labor movement will over time become less restricted.

2.8 Wage reform at the enterprise level would allow enterprises to freely set theirbasic wage scales, i.e., no longer subjected to the government-determined scale. Enterpriseswould be allowed to introduce their own wage-efficiency linkage in setting bonuses as long asthe schemes are transparent and binding. Workers' representatives should be involved in bothprocesses. In-kind payments and benefits are gradually being monetized. A minimum wage lawwill be legislated and enforced, possibly with some geographic differentiation.

Social Security and Housing Reforms

2.9 Reforms in the areas of housing and social security have gradually moved in thedirection of making these services available outside the enterprise sector. The guiding principleson which the individual reform steps in social security are based are to: (a) relieve the individualenterprises of their heavy social security responsibilities; (b) enlarge the social security premiumpool, in order to reduce the financial risk to individual enterprises, through gradually introducingdistrict- and municipal-wide pooling of premiums thus distributing risks across enterprises withdifferent age and illness/injury piofiles; (c) expand the coverage of these measures to all workersregardless of their status (permanent, contract, or temporary workers) or type of enterprise theywork for; and (d) introduce policy changes to improve the management and administration ofthe social security system to achieve economies of scale and better efficiency. The enlarged poolwill allow risks to be distributed across enterprises employing workers with different age andillness/injury profiles. Approaches taken or actively being considered for seleeted social securityarea in several municipalities which are advanced in their reform of the social security andhousing system are summarized below.7/

2.10 For pensions, the selected cities have in principle agreed to move towardcomprehensive pooling which would: (a) include all types of enterprises (i.e., not only SOEsbut to include COEs, joint ventures and private enterprises); (b) include all types of workers(permanent, contract and temporary); and (c) have uniform contribution rates across all workersand enterprises.8/ Temporary workers with urban registration should also be included. Thepremium rate is expected to be a uniform 2 percent of total wage, except for temporary workersfor whom it will be 3 percent. The contribution rates should be unified at the same time aspooling is introduced since otherwise the distortionary effects would remain. The system wouldrequire: (a) all workers to make contributions into the pension system to supplement enterprisecontribution; (b) indexing for inflation; and (c) exploring the possibility of additional voluntarycontributions to individual accounts. For the last element, a possibility is the introduction of amultitiered system where the basic tier can provide a minimum level of support, established assome proportion of the average municipal wage; another, earnings related tier can meetadditional needs by providing a pension which is higher the higher the worker's average indexedwage.

7/ These are the cities participating in the proposed Housing and Social Security Reform Project(FY95).

I/ The current system is enterprise-based and covers only permanent workers, or has a different ratefor contract workers.

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2.11 For health insurance, a system which would pool comprehensive health carebenefits across all the enterprises in the municipality, and all types of workers will be developed.All industries should be covered in order to pool the risks associated with systematic differencesacross industries both in the proportion of retirees and of incidences of certain medicalconditions.2/ The health insurance premium will be paid by both employer and employee.Cost control features including copayment and deductible systems, will be incorporated. Furtherreview is needed regarding: (a) standardized evaluation methods for assessing health careexpenditures; (b) management of health insurance; (c) research and design of reimbursementsystem options; and (d) medical pricing.

2.12 For housing reform, the overall objective is to expand the availability ofconumercialized housing and the establishment of a financially viable institutional framework tooperate such a housing sector. The Joint Stock Housing Companies (JSHCs) are expected toplay this role. JSHCs, which will be formed by transferring the title for the housing stock andthe accompanying land use rights from several enterprises to the company, will engage in realestate development, buy and sell land use rights, and design and develop housing. Constructionactivities will be left to existing construction companies which will operate on the basis ofcompetitive bidding. Enterprises currently not owning housing stock could buy shares of theJSHCs.

2.13 JSHCs will operate on sound business principles, and will not receive or providesubsidies. Until rent levels in the municipalities approximate market levels, JSHC activities areexpected to focus primarily on providing rental rather than sale of housing to the workers of theparticipating enterprises .10l

B. ESTIMATES OF SURPLUS LABOR

2.14 Reliable estimates of surplus labor are difficult to obtain, under anycircumstances, but especially so when wages and prices do not reflect scarcity value. In Chinathey are firther complicated by different concepts of what constitutes surplus labor. Accordingto MOL, there are three different concepts of surplus labor.

(a) the number of workers that are in excess of what is required for the enterpriseto be at its maximum production capacity;

(b) the number of workers that are in excess of what is required for the enterpriseto be at its maximum profit level; and

(c) the number of workers that are in excess of what is needed for the enterprise'slabor productivity to be at its highest.

9/ Some municipalities have started with enlarging the geographic coverage, starting from a district-or county-wide pooling to city-wide pooling, while other have started with major illness coverageand are expanding that to more comprehensive coverage.

10/ On discussion regarding the cost factors which should be incorporated in the rent and the currentsituation in China, see China. Urban Housing Reform: Issues and Implementation Options,Report No 9222-CHA, June 1991.

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2.15 According to the 1992 country economic memorandum,Lj/ "Planners estimatethe extent of surplus labor (open and disguised unemployment) in 1990 at about 29 percent ofthe total workforce." Mission findings support this statement. Central government officials,with the exception of MOL, note that while there are regional and industrial variations, aboutone quarter of the SOE workers are redundant.

2.16 The estimates of the labor authorities and enterprise managers are lower. Ofthose employed in urban SOEs, about 10-12 percent are considered redundant by MOL.12/This estimate is based on a survey of 15,000 enterprises in 11 provinces. There is considerableindustrial variation. For example, in the machineries industry, with 8.1 million workers, 1.6million (20 percent) were considered redundant. In textiles, 10 percent of those working on theproduction line were considered surplus. MOL notes that other research institutes estimate that20-25 percent of urban SOE workers are redundant. A survey of 45 reforming SOEs inShanghai revealed that 20 percent (400,000 workers) were redundant, of which 40,000 are nowwithout jobs. The Shanghai study also indicated that procedures and criteria for identifyingredundant workers are not yet standardized and usually consist of a lengthy process involvingboth the enterprise's management and its worker conference.a1/

2.17 The first concept, which yields the lowest number of surplus workers, was theone being most commonly used by enterprise managers responding to the mission'squestionnaires and interviews in Dalian and Wuhan. With this restrictive concept, the resultingestimate of surplus labor yields only a small number of workers aside from those who forwhatever reason have difficulty fitting in the workplace-the type of workers found in any workplace under any system of economic management. l4/ Discussions with other centralgovernment officials (n charge of planning and systems reform) yielded higher estimates ofsurplus labor, usually around one quarter of the total workforce. In general, it seems that thefrther removed the interlocutor is from the workers-and thus the less responsible for theworkers' welfare-the higher the estimate. The results of a questionnaire to 19 enterprisemanagers in Dalian and Wuhan are presented in Tables 2.1 and 2.2. These tables containestmates of the total number of surplus employees foreseen over the next five years. Theaverage figures are of the same order of magnitude as those cited by MOL. However, the rangeis also quite wide.

2.18 Also, Jefferson and Xu jU/ estimated the extent of labor redundancy in SOEsthrough a survey of 20 industrial enterprises in Wuhan, of which 13 were SOEs. The survey

II/ Chiw Country Economic Memorandum-Reform and the Role of the Plan in the 1990s, ReportNo. 10199-CHA, June 1992, Washington, D.C.: World Bank, p. 90.

JV They are in line with municipal labor bureau estimates from Dalian and Wuhan.

13/ Report on the Situation of Trainingfor Surplus Workers in Enterprises in Shanghai Municipality,MOL, 1992.

141 It is also the mission's impression that many enterprise managers are not accustomed to makingaccurate operational assessments of the full extent of redundant labor based on efficiency criteria,or making plans for staff recruitment and improved training for future skilled labor.

151 G. Jefferson and Wenyi Xu, The impact of reform on socialist enterprises in transition," Journalof Comparative Economics, Vol. 15, No. 1 (1991), pp. 45-64.

Table 2.1: DALAN: ENmsE EnSIIME8 OF SURPLUS LABOR

Surplus emDloyees lbEnterprise Total _ Absorbable To be

ref. no. La employees With Without Retirees dismiased Total Percentagetraining training

1 10,000 300 400 300 none 1,000 102 741 none 200 20 none 220 303 1,900 50 100 none 150 300 164 2,164 none none 175 none 175 85 5,012 none none 250 none 250 56 2,056 40 35 100 17 192 97 8,600 100 200 700 noae 1,000 128 14,700 none none 3,000 none 3,000 20

Total 45.173 490 935 4.545 167 6.137 14

Percentageof totalemployees 1.08 2.07 10.06 0.37

/a Annex 3 lists the names of enterprises indicated by reference numbers./b Estimates of surplus employees foreseen over the next 5 years.

Source: Mission survey of 20 enterprise managers in Dalian and Vh. an.

consisted of asking factory directors to estimate the actual number of hours worked each day.The average actual work time was 5.4 hours for the SOEs, which is 20-30 percent below thestatutory figure of 7-8 hours a day (depending on the industry and season).

2.19 Regardless of the differences in definition and the difficulty of obtaining accuratefigures, the estimates from different sources indicate that the number of surplus workers issubstantial and that their existence is an impediment to more efficient productive operations bythe enterprise.

Social Stability and Surplus Labor

2.20 MOL's Work Report to the State Council in May 1992 emphasized the criticalimportance of maintaining social stability when addressing the surplus labor issue: 'Guidanceand coordinaion should be provided to enterprisesforplacing surplus workers and intentionallycontrolling the job-waiting rate at a socially affordable level. " Clearly, the present concept ofredundant labor is based on concern for social stability and what the maximum bearableunemployment rate for the local community would be. Central and local government officialsand enterprise managers alike would p.-efer to break the "iron bowl," which they recognize asdetrimental to incentive and efficiency, but the social security system is not yet adequatelydeveloped to handle larger open unemployment. Enterprise managers and municipal officialsinterviewed by the mission noted that the amount of surplus labor would likely increase asreform deepens, implying that the current estimates are a function of their state of socialsecurity. Current policy allows provincial and municipal governments to set the percentage ofredundant urban workers who can be fired. This is usually a small number, such as 1-2 percent,of an already underestimated number of surplus workers. However, it is also usually a functionof the local economic growti rate. In Henan Province, where the unemployment rate is arelatively high 4.5 percent, the releast of surplus labor is constrained by economic conditions

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Table 2.2: WURAN: ENlEPRISE ESITES OF SURPUS LABOR AND AGGREGAn3) TOTAFOR DALIAN AND WUBAN

Survlus emilovees lbEnterprise Total Absorbable To be

ref. no. La employees With Without Retirees dismissed Total Percentagetraining training

1 4,324 100 40 40 20 200 52 6,805 320 66 94 223 703 103 1,489 100 200 116 n.a. 416 284 9,481 474 284 300 300 1,358 145 26,090 100 300 350 50 800 36 1,710 85 170 85 U.a. 340 207 6,480 150 200 700 80 1,130 178 2,i11 50 50 50 50 200 79 7,684 150 270 80 16 516 7

10 334 n.a. 35 30 n.a. 65 1911 454 20 60 20 5 105 23

Total 67.762 1.549 1.675 1.865 744 5833 9(2) 2.28 2.47 2.75 1.10

Daliau total 45,17V 490 935 4.545 167 6.137 14

Aggregated totals for Dalian and Wuhan

Total 113,389 2.039 2,610 6.410 911 11.970 11(2) 1.80 2.30 5.65 0.80

Note: n.a. = 1.ot applicable.

La Annex 3 lists the names of enterprises indicated by reference numbers.& Estimates of surplus employees foreseen over the next five years.

Sourc.;: Mission survey of enterprise managers in Wuhan.

that make finding another job difficult. On the other hand, in Hebei Province, which has onlya 1 percent unemployment rate, more SOE workers are being laid off with no visible socialconsequences. In Beijing, 5 percent of surplus workers have already left SOEs.J&/ InDalian, the unemployment rate jumped from 1.9 percent in 1992 to 3 percent in September1993. Two thirds of the unemployed were women. Municipal officials predict the rate willincrease to 4.3 percent in 1994 with further economic, enterprise and other related reforms.Historically, the highest unemployment rate since Liberation was in 1979 when it was5.4 percent due to the large number of urban youths returning from the countryside. MOL'scalculation indicates that if 3 million of the estimated 10 million redundant workers are fired,the unemployment rate would be 4.5 percent.

Disposition of Surplus Labor

2.21 Regarding the likely disposition of surplus labor, MOL's outlook included thefollowing: (a) reabsorbing the labor within the enterprise through retraining and developing newservice units; (b) organizing them as contract labor; (c) giving them early retirement;(d) providing "job-waiting' within the enterprise, i.e., having workers remain redundant; and

161 Based on a briefing by the Systems Reform Commission, October 1992.

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(e) self-employment or terminating employment ("release to society"). A recent aticle [71on the placement of surplus enterprise workers indicated that the most popular options were:"Job-waiting' within the enterprise, and self-employment or household production with no salaryfrom the enterprise (each absorbing 20 percent of total surplus workers). This was followed bysending workers to other enterprises or lcalities as skilled or annual contract labor (12 percent);orgarizing surplus workers to undertake small production or constuction projects (10 percent)and 'welfare-type placement' (retirement, early retirement, or extended leave). The mission'squestionnaire to enterprises showed results indicating "reabsorption with or without training" and"retiement" to be the destination of most surplus workers (Tables 2.1-2.2).

2.22 Local governments are free to draw up their own guidelines on the dispositionof surplus workers. The guidelines for Dalian are shown in Box 2.1. With its current low levelof redundant workers, retirement or early retirement and voluntary separation would be thelikely outcome for most cases. However, as the number increases, more active measures suchas option (b) above may become necessary. It is conceivable that groups of workers could beorganized into a small financially independent enterprise which would contract a large part ofits work with the original SOE, but which sJio would do business with other enterprises.Fortmately, it is expected that China will be going through this adjustment during a period ofprojected sustained growth,l8/ which would be conducive to the creation of new employmentopportunities, thus making the adjustment less painful.

121 People's Daily (overses edition), February 13, 1993.

1I/ The official target for growth in gross domestic product (GDP) to the year 2000 is 6 percent peryear, this is considered a conservative taget by the Bank and otier external observers. Thereare reports that the State Planning Commission recently revised its tdrget upward to 9 percent

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Box 2.1: LOCAL POLICY FOR SURPLUS WORKERS: THE CASE OF DALIAN

Based on policies and regulations issued by the central government, localgovernments draw up more specific labor and employment programs in light of their respective localconditions. In the case of Dalian, a dynamic coastal 'separate-plan' city, the municipal governmenthas decreed that entepnise surplus labor that can be laid off will be limited to 2 percent of thosedesignated as surplus workers. The municipal government estimates that 9.7 percent of enterpriseworkers ar redundant, a figure that is somewhat lower than mission estimates obtained fromindividual enterprises in the city. The municipality has formally identified nine ways in which tocope with the surplus labor issue. These measures were jointly endorsed by the municipal planningcommission, systems reform commission, tax bureau and commerce bureau. They are summarizedbelow. (Wuhan, on the other hand, did not have detailed steps aside from generally encouragingintemal absorption of surplus labor by the parent enterprise. The proportion of surplus labor thatcould be laid off was also 2 percent.) It should be noted that all the measures are of a temporary,second-best nature, pending consolidation of a comprehensive social security system and moreflexible and mobile labor markets.

* Creation of a collectively owned enterprise (COE) within the established SOE. Thereare tax breaks for such new establishments during the initial period, based on a 1988provincial directive (usually a two-year tax holiday followed by a three-year tax breakfor service industry ventures).

* Absorption of redundant workers by labor service units within the enterprise.

* Organization of external labor services. Surplus workers can be organized toundertake contract projects with the approval of the city's labor and financialauthorities and with the endorsement of parent units.

* Development of vocational training programs. Enterprises should tailor their trainingprograms for redundant workers to their production needs in order to facilitate thesurplus workers' job transfer or redeployment.

* In-r1antjob-waiting program-the enterprise gives the workers training and lets themwait for a position to open up in the enterprise.

* Early retirement or long-term leave of absence (without pay).

* Extended maternity leave for women.

* Permission to resign, voluntary job-seeking by those laid off. With the permissionof the enterprises, workers who voluntarily resign can receive a lump-sum subsidyin accordance with a municipal directive of 1988.

* Scheme of pay suspension while allowing the workrs to kreep their status as aregistered worker at the enterprise.

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Box 2.2: TIUNSmONAL EcoNOMES AN)D WE IuCAONS FOR LABOR AND WACE ISSUES

The economies of Central and Eastem Europe (CEE) and the former Soviet Union (FSU) offersome examples of what happens when a formally sociarist1 centrally-planned economy transforms itself to amore market-oriented one, and what are the priority policies and programs to minimize the negative effectsof the dislocation.JI

The trends in these economies have been characterized by an initial decline in sutpute=ployment and real wages. Layoffs and open unemployment usually emerge after a penod ofunderemployment taking the form of shortened work hours, extended vacations and unpaid leave. Sucl;unemployment is attributable to faling output (usually due to stabilization efforts to reduce public deficit) andstructural changes in egn ent, as well as the normal operations of a dynamic market economy attemptingto balance the supply and demand of labor. In the long run, the economy will benefit from these labor marketadjustments since lbor will move from Icss productive to more productive employment. However, there wiUbe severe dislocations in the short run, and m order to minimize the negative unpacts of such dislocations, itis critical that these economies devise appropriate economic and social policies and institutions which addressthe unemployment problem and facilitate la6or mobility.

A review of the performance of the CEE and FSU economies reveals that Poland, starting itsrelatively rapid transition in January 1990, suffered a rapid decline in output, employment and real wages inthe same year. Czechoslovakia, Romania and Bulgaria experienced their principal shock in 1991 whc i theyfully launched their transformations. Hungary, which started its gradual transition earlier than the other CElEcountries, experienced a milder decline in employment and real wages during this period. The transition inthe Baltic states and Russia has been slower with evidence of the first real shock in 1992 for industrialproduction in Lithuania and real wages in Russia. Selected economic indicators for 1989-92 are listed in thetable below.

INDVSrRIAL PRODUCTION, EMPLOYET, WAGES, AN!) UNE3MPLOYMET IN SELECTE TNSITIONALIECONOMIES, V989-92

Bulgaria CSFR Hungary Poland Romanis Estonia Lithuania Latvis Russia

1. Industrial Produotion (% changes from previous year)

1989 -1.1 0.7 -1.0 -0.5 -2.1 3.3 1.1 5.7 -1990 -16.8 -3.7 -9.2 -24.2 -14.3 -8.1 *6.9 -3.5 0.41991 -27.5 -23.0 -21.5 -14.2 -22.0 -10.0 -l15.0 -8.3 -9.01992 - - - - - - -35.0 - -

2. Emnlovment ($ changes from previous year)

1989 0.2 0.3 -4.0 -1.4 -1.9 0.8 0.2 -0.4 0.31990 -8.2 -2.5 -11.3 -8.9 0.0 -2.0 -2.7 0.1 -1.01991 -17.1 -12.0 -16.5 -14.2 - - 0.4 -0.9 -1.1

3. Real Wanes (% changes from previous year)

1989 2.3 1.0 -0.9 - 3.0 2.7 7.4 5.1 7.01990 -2.8 -12.5 -5.1 -37.2 12.0 6.4 7.1 5.3 6.01991 -33.8 -26.0 -5.8 -8.4 - -39.3 -18.3 -29.1 6.01992 - - - - - - - - -33.0

4. Une nvlovment Rate

1989 - - 0.5 - - - - - -

1990 1.5 1.0 2.0 6.3 0.5 - - - -1991 10.5 6.0 8.0 11.4 1.4 0.1 0.5 - -1992 - - - 12.1 - - 1.5 2.0 -

Note: For Bulgaria, CSFR, Hungary, Poland, and Romania, the figures refer to industrial production; forthe other countries, they refer to ¢DP.

Sources: Various Government and World Bank data.

/1 This sectin is based on Arvil Van Adams, "Labor Markets and Marktet-Oriented Reforms in SocialistEconomies,- World Bank, June 1993. .. ovne

..Candue

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Box 22: (cont'd)

For the labor market to adapt itself to a more market-oriented economy, wage reform isessential. Unlike under a socialist economy where wages had a role in ensuring fuU emnployment and anequitble income distribution, under a market economy wages must become more closely aligned toproductivity and pay a 8reater role in determining atlocation effcieny of rources. Desirable adlustmets:- tho primary income distrbution should be made through income tasfer and or e. At the same time, oewinstiutions offering securty to the unemployed and protecting the poor must replace the safety new functionof fund employment in the socialist economies while provision of basic social services should be divorced fromthe wokpce.

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3. EMPLOYMENT TRENDS AND EMPLOYMENTSERVICE OPERATIONS

A. LABOR FORCE AN EMPLoyNT TRENDS

3.1 At the end of 1990, China's labor force was 697 million, out of a totalpopulation of 1.14 billion, or 61 percent of the total population.1/ Of this total, 567 millionwere employed ("social labor force"), resulting in a labor force utilization rate of 81 percent.Of the 567 million, 340 million (60 percent) were in the primary sector, 122 million (22 percent)in the secondary sector, and 105 million (18 percent) in the tertiary sector. Table 3.1 showshow these figures compare with employment profiles in selected countries.

Table 3.1: EMPLOYMENT BY SECORS,La SELECrED COUNTRIES, 1988 (percent)

Country Primary Secondary Tertiary

Brazil 24 24 52Japan 7 34 59Korea 18 35 47Malaysia 26 27 47USA 3 26 71

China 60 22 18

La Sectoral classifications follow those used in ILO's Yearbook of Labor Statistics, StatisticalYearbook, 1990.

Source: International Labor Organization.

3.2 The change in the composition of urban employment by type of enterpriseownership and by industry from 1980 to 1992 is shown in Tables 3.2-3.3. There are highgrowth rates in the nonstate sector, especially in the self-employed and "others" categories,includingjoint ventures (from 810,000 in 1980 to 8.4 million in 1990), and in the tertiary sector(from 42 million to 66 million).

I/ This includes all pes who are able-bodied and within the working-age range (16-59 years formen and 16-54 for women); it excludes military personnel, prisoners, and the disabled.

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Table 3.2: URBAN dPWoYMwr BY OwNESIP PATrERN, 1980-92

Total urban Self em-Year employment SOE COE p_loyment QOter

(million) No. % No. % No. % No. %(mln) (min) (m}n) (mnn)\

1980 105.3 80.2 76.2 24.3 23.0 0.8 0.8 - -1985 128.1 89.9 70.2 33.2 26.0 4.5 3.5 0.4 0.31990 147.3 103.5 70.2 35.5 24.1 6.7 4.6 1.6 1.11992 - 106.4 36.1 - - - - - -

Source: Ministry of Labor.

Table 3.3: URBAN EMPLOYMENT BY TYPE OF INDUSRRY, 1980-95

Year Total Primary Secondary Tertia(million) No. % No. 9 No. %

(nmln) (mln) (mln)

1980 105.3 7.8 7.4 55.1 52.4 42.3 40.21985 128.1 7.5 5.9 65.5 51.1 55.1 43.01990 147.3 7.1 4.8 74.1 50.3 66.1 44.91995 , 166.3 7.0 4.0 83.0 50.0 76.0 46.0

La Projected figures.

Source: Ministry of Labor.

3.3 The flow of labor into and out of the SOE sector during 1986-91 is illustratedin Tables 3.4 and 3.5. Table 3.4 shows that over the past five years the importar .e of rural andurban recruits and demobilized servicemen as a source of labor supply to SOEs has decreased,in contrast to the increased supply from graduates of universities, STSs, and SWSs under theunified labor allocation system. The latter categories have steadily increased over theobservation period, even when the total number of new recruits decreased significantly duringthe 1989/90 retrenchment period. This implies that the skill and education profiles of newentrants into SOEs are improving. In contrast, "urban recruits' and 'transfer from urban COE'dec.Iined significantly during the retrenchment period but recovered in 1991, indicating that thesetwo categories most likely serve as a flexible source of labor supply. Table 3.5 indicates thefairly stationary level of intake on the part of SOEs. Clearly, employment in SOEs is notgrowing rapidly.

Table 3.4: SOURCE OF NEw RECRU11S WR mE SOE SECToR, 1986&91 (million)

Unified allocationTotal Unified Unified Transfernew Rural Urban demobilzed university & SWS Temporary from

Year recruits recruits recruits servicemen STS graduates grduates workers urban COE Othesf

1986 4.74 0.70 1.66 0.49 0.73 0.23 0.20 0.20 0.531987 4.50 0.79 1.50 0.44 0.87 0.26 0.19 0.27 0.181988 5.33 0.69 1.55 0.34 0.95 0.31 0.32 0.60 0.571989 4.55 0.57 1.03 0.34 0.98 0.36 0.44 0.29 0.541990 4.76 0.50 1.27 0.35 1.13 0.41 0.21 0.28 0.611991 5.14 0.46 1.36 0.36 1.21 0.43 0.20 0.38 0.74

LI 'Others' includes 'off-plan' workers who become contract workers, returning workers formerly on leave or layoff, etc.

Source: Labor and Wage Yearbook, Ministry of Labor, Beijing, 1992.

Table 3.5: NET INCREASE IN SOE LABOR FORCE, 1986-91 (million)

Net Reasons for exitGross Exit increase Military Resigned Termina-new from SOB in SOB Retirenent or entering Transfer or/and tion of

Year recruits labor force labor fore and layoff a school to COE dismissed contract Deaths Others

1986 4.74 2.16 2.58 1.48 0.01 0.10 0.17 - 0.13 0.531987 4.50 2.0S 2.45 1.35 0.01 0.09 0.16 0.11 0.13 0.201988 5.33 2.23 3.10 1.39 0.00 0.10 0.20 0.18 0.13 0.231989 4.55 2.29 2.26 1.26 0.01 0.17 0.22 0.20 0.14 0.291990 4.76 2.15 2.61 1.30 0.01 0.09 0.17 0.17 0.14 0.271991 5.14 2.31 2.83 1.37 0.01 0.10 0.22 0.19 0.14 0.22

Sourc: Labor and Wage Yearbook, Ministry of Labor, Beiing, 1992

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3.4 The government estimates that the labor force will grow by approximately70 million during the Eighth Five-Year Plan period (1991-95)-from about 570 million in 1990to 640 million in 1995. Of this increase, 20 million will be in urban areas (of which 7 millionwill be due to in-migration from rural areas) and the remaining 50 million in rural areas.

3.5 In terms of ownership pattern of the employers, MOL projects that 32 million(out of a total of 36 million) new entrants in urban areas a/ will be placed as follows: 20million in SOEs, 8.5 million in COEs, 2 million in individual enterprises, and 1.5 million inother forms of enterprises.

3.6 A calculation of the distribution of new labor market entrants across the differentsectors that is based on past elasticities [employment elasticities of gross national product (GNP)for 1980-89] and planned growth rates for the three major sectors yields the following results.If the Eighth Five-Year Plan targets of an overall growth rate of 6 percent and a growth rate of9 percent in the services sector are attained, 84 million new jobs will be created in urban andrural areas over the next five years: 17 million in the primary sector, 23 million in thesecondary sector, and 44 million in the tertiary sector. Of the 18 million new jobs to be createdin the urban sector, 12.5 million are expected to be in the tertiary sector.3/ Clearly theexpected trend is for expanded employment in the tertiary sector.

B. EMPLOYMENT SERVICE OPRATIONS

3.7 In contrast to manpower placement by the labor authorities under a centraleconomy, the range of services offered since 1979 increasingly addresses the needs of a market-oriented economy in which the government does not attempt to carry out everything by itself,but consolidates the external environment to allow economic entities to function efficiently.Examples are such services as strengthening the social security system and providing informationservices, while leaving job selection increasingly to enterprises and individuals.

Organizational Structure

3.8 The Ministry of Labor is the central government organ responsible forformulating principles, policies, and programs for deploying the labor force. Its Department ofLabor Force and Employment Administration is responsible for strategic planning foremployment service policies and programs, coordination with the relevant ministries anddepartments, instruction and supervision of the implementation of national employment services,and o:ganization of training for staff in charge of employment services.

/J These figures refer to gross new entrants while the 20 million in the preceding paragnph refersto net figures.

3/ Projections are taken from China: Counuy Economic Memorandum-Reform and the Role of thePlan in the 1990s, Report No. 10199-CHA, Washington, D.C.: World Bank, June 1992,pp. 89-93.

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3.9 At the provincial A/ level, the Bureau of Labor is responsi'ble for drafting localemployment policies and specific programs. Within the bureau, the Division of EmploymentService formulates policies and development plans for employment service, and organizes theirimplementation. At the municipal, prefectural, county, and district levels, the bureau isresponsible for implementing employment policies and programs. The Section of EmploymentService under the bureau is in charge directly, or indirectly, through labor servicecompanies,/ for employment facilitation services, employment training, and administrationof the unemployment fund.

3.10 Four types of services are provided by the labor authorities:

(a) Employment Facilitation Services. This service consists of registering jobseekers, surveying, and registering employment, collecting labor marketinformation, providing vocational guidance and career counseling, and makingemployment projections. These tasks are undertaken by the Job-MatchingAgency, Labor Information Center, and Labor Service Station at the local(municipal and district) level. MOL plans to computerize management of labormarket information in 60 cities by the end of 1995, and compute annualemployment predictions for urban areas.

(b) Vocational Training. The training is oriented toward the need of the urbanunemployed and those seeking job transfers. Such training takes placepredominantly in employment training centers (ETCs), and covers, in additionto technical courses, such topics as production safety and professional ethics.Proceeds of the UI fund can be used to train unemployed workers (but notunemployed youths who have not landed the first job and thus are not coveredby the fund). In Dalian and Wuhan, to date 15-20 percent of the UI fundproceeds have been used for this purpose. Legislation introduced by MOL in1992 required that up to 15 percent of this fund be used to train or retrainunemployed workers.

(c) Administration of Unemployment Insurance. The Ul system, first institutedin 1986, aims at setting up and administering the funds for unemployment relief,medical care subsidies to the unemployed, survivor's pension retraining coursesfor the unemployed, provision of start-up capital for those seeking self-

4 nThe terms aprovince' and 'provincial* will be used to cover provinces, autonomous regions, andthe municipalities of Beijing, Shanghai and Tianjin unless otherwise specified.

51 Labor service companies were first established in 1979 with the objective of placing the largenumber of urban job-waiting youths who had returned from rural areas, either by findingemployment for them or starting and operating an enterprise itself to provide temporary orpermanent job opportunities to the youths. The LSC receives some assistance from its sponsoringu"t, which is a local labor bureau, local technical bureau or an enterprise. The LSCs sponsoredby labor authorities have additional tasks such as preparing and implementing the labor plan andproviding employment services (registration of job vacancies, providing guidance on recruitmentprocedures, providing information on the local labor market, organizing vocational trainingcourses, often through the employment training eenter it runs, and arranging periodic job fairs).For more details on LSCs, see China: Reforming the Urban Employment and Wage System,Report No. 10266-CHA, June 1992, Annex 1.

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Table 3.6: DALIAN: PBRM AD EXENDmRE OF UNEMLoYMENT INSURANCE FUND, 1986-91(Y million)

Inflow 1986 1987 1988 1989 1990 1991 1992

Premimn (0.5% oftotat wage bill) 1.0 4.0 6.0 6.0 7.0 10.0 34.0

Total 1.0 4.0 6.0 6.0 7. 10.0 3n

Exvenditure

Hardshp relief - 0.1 0.1 0.2 0.8 1.0 3.0

Medical care - 0.02 0.03 0.15 0.3 0.5 1.0Self-help production - 0.5 0.5 0.5 1.0 1.5 4.0

Low-interest loan toentrprises that havestopped prodution - - - 0.5 1.0 1.5 3.0

Job transfer training - 0.2 0.3 0.5 0.8 1.2 3.0Administrative service

fee 0.1 0.2 0.3 0.6 0.8 1.0 3.0

Total cxnenditures Q.1 1.02 1.23 2.45 4.70 7.S0 17.0

Number of beneficiaries 352 1,050 967 1,164 1,583 2,939 8,020

Balance for currentyear 0.9 2.98 4.77 3.55 2.30 2.50 -

Carryover from previousyear n.a. 0.9 3.88 8.65 12.20 14.50 -

Cumulative total n.a. 3.88 8.65 12.2 14.5 17.0 -

n.a. = not available.

Source: Dalian Municipal Labor Bureau.

employment and creation of temporary productive activities for the unemployed.There are some variations in overall objectives and implementation. Forexample, in addition to these services, Dalian has introduced low-interest loansto assist productive activities in SOEs operating at a loss (Table 3.6). At theend of 1990, there were 3,000 institutions nationwide administering the Ul fundsat the local level. In the case of Dalian, from 1986 to 1991, a total of 8,025persons received UI relief.6/ There are plans to expand UI coverage so thatby 1993 it will cover all SOE workers, and will extend fiurther so that by theend of 1995, a comprehensive UI system would cover everyone in Dalian's

f mThe numbers have increased in recent years. Compared to 352 in 1986, there were 1,583persons in 1990 and 2,939 in 1991 (Table 3.6). Nationwide, 650,000 persons received Ulbenefits during the same period. Furthermore, 650,000 received UI benefits during the first sixmonths of 1993 alone.

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urban enterprises regardless of ownership. Unemployed persons can alsoreceive their UI benefits for two years as a lump sum and use it as seed capitalfor a new operation.

(d) Establishment and Management of Employment Service Enterprises.Employment service enterprises are commercial or industrial enterprisesestablished and operated by LSC. These enterprises have COE status. At theend of 1990 there were 200,000 employment service enterprises with 8.2 millionemployees. By the end of 1995, the total number of enterprises Is expected toreach 240,000 with employees totaling 10 million. Given the expectedexpansion of the employment service enterprises, MOL is consideringdeveloping organizations providing supporting services such as an informationconsulting center, financial affairs institute, urban labor credit office, legalaffairs office and so on.

3.11 Currently, the enterprise has the largest share of responsibility for placing surplusworkers. One survey covering 200 large and medium-sized SOEs indicates that 85 percent ofthe placement is done by enterprises and only 15 percent by public employment services andother channels.7/ However, even the limited number of clients has already placedunprecedented pressure on the public employment services, which require strengthening.Furthermore, if a policy of higher unemployment on the open labor market is later adopted orbecomes inevitable, the need for comprehensive income support and reemployment policies (onlabor market information, counseling and placement services, and retraining programs) willbecome compelling. Thus, while the structure and institutions to provide employment servicesare in place, the next task would be to strengthen them so they are equipped to meet thechallenge of larger numbers of clients, in an increasingly market-oriented economy.

2r People's Daily (overseas edition), February 13, 1993, and Sunmary of World Broadcaus,February 9, 1993.

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4. STPT CTURE AND EFFICIENCY OFINSTITUTIONALIZED INSERVICE TRAINING

A. INsfTrUtmoNS AND TYPEs OF AcTnvT

Institutions Conducting Inservice VTET

4.1 Inadequate preservice training, continuing industrial restructuring, and theexistence of an increasing number of surplus workers all point to a need to enhance inservicetraining capacity in China.l/ This chapter reviews the three major types of institutionsconducting inservice training, viz., are training centers and schools attached to enterprises,skilled workers schools, and employment training centers. The secondary technical andvocational school streams also offer some inservice training courses, but to a much lesser degree,less systematically, and usually to meet the specific training needs of particular enterprises fora fee. The number of proprietary schools is increasing, especially in the last year, both to teachskills in areas where there is demand but where limited equipment is required (e.g., foreignlanguages), and for general education (for adults and for students who failed to pass theuniversity entrance exams). To date, they do not play a major role in inservice training, but arelikely to become significant actors in the future.2/

4.2 As in most countries, industrial skills needed in enterprises are mainly learnedand perfected on the job, with little or no formal structuring of training. Historically, becauseof the ready availability of labor, and the lack of pressure for improved productivity, there hasbeen little incentive for SOEs to develop efficient on-the-job training programs. Most large andsome medium-sized SOEs have some form of training institution, broadly designated as'enterprise training centers' (ENTCs). These are owned and managed by enterprises, and areoperated specifically to meet the training needs of the parent enterprise. Ihis sole clientrelationship allows them to be closely in tune with the needs of the enterprise. A nationwidefigure on the number of ENTCs is not available 3/ but Dalian, for example, a city with 2,486enterprises, has 1,503 ENTCs. The ENTCs are assured of steady financial flows from theparent enterprises and have the advantages of being able to use the enterprise facilities forpractical training and their skilled staff as faculty. However, small and medium-sized enterpriseswhich cannot afford their own training centers experience some difficulty in meeting skill

1/ As noted earlier, this report reviews only the inservice portion of vocational and technicaleducation and training. The preservice portion is described in Annex 1.

2,1 The approval procedures for opening such a school in Beijing municipality are described inAnnex 4.

3/ This is because each enterprise reports to its technical ministry, and there is no single agency orministry at the central level that receives this information from the different ministries.

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training needs, as there are no pooled training funds from the central government such as areavailable in other countries, and many ENTCs are not willing to take students from otherenterprises because of space constraints or other reasons.

4.3 The primary function of the SWS is preservice training, but many SWSs also runinservice training programs for midlevel and senior technicians. They share the facilities,equipment, faculty, and some of the administrative overhead with the preservice program, thusrealizing some economies of scale. Of the three types of schools, the SWSs are usually the moststructured and have the largest share of long-term courses, some on a three-year full-time basis.Their client base is larger than that of ENTCs; often it is a group of enterprises in a singleindustry, with which the school maintains links through the technical bureau at the local level.

4.4 In contrast to the above two types of schools, ETCs have no formalorganizational or financial affiliation with enterprises (or other potential employers except laborservice companies). They are typically run by the local labor authorities, frequently through alabor service company, and cater to the training and skill needs of the locality (district ormunicipality). They are the most active short-term training centers. Clients include unemployedyouths who do not yet have a work unit, enterprise workers who want to learn a new skill orupgrade an existing skill, surplus workers, the unemployed, and township and village enterprise(yVE) workers. Aside from the initial capital, ETCs finance their own operations, the mainsource of income being tuition fees. In 1991 there were 2,200 ETCs with an annual trainingcapacity of 0.9 million.4/ The ETCs are best positioned to provide short, intensive andspecific training courses for service sector jobs and have the flexibility to adapt course contentquickly to market needs. Many LSCs run ETCs as one component of the series of employmentservices they provide, the other components being employment exchanges (ob referral, andregistration of job-seekers and vacancies), administration of the UI fund, and emergencyemployment operations (such as organizing employment-generating activities for the short-termunemployed).

Classification of Inservice Training Activities

4.5 There are several different types of VTET activities that are regarded as'inservice training' in China. In practice they fulfill different objectives: (a) full-timeprevocational training (usually six months), (b) short-term (usually part-time) training forworkers who got their positions without the prerequisite training, (c) short-term (part-time)training for upgrading one's skills when new equipment or new technology is introduced into theworkplace, (d) short-term training for upgrading one's skill to a higher level, (e) short-termtraining for job transfers (including training for surplus workers), and (f) educational courses tobring one's education up to the secondary level or to advance to a higher level of education.

4.6 Definition of some commonly used Chinese terms will help to distinguish amongthe different types of inservice training activities.

(a) Qualification training is inservice training that aims to ensure that the workersare qualified for undertaking new jobs, transferring to other jobs, or are beingpromoted according to the occupational placement standards. Upon completion

4/ When the number of persons enrolled in courses organized by ETCs (but not run on theirpremises) is included, the number is about 2.7 million.

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of training and receipt of the qualification certificate, the trainees can beemployed, transferred, or promoted. Occupations for which such training andtesting is conducted include drivers, electricians, boiler operators, welders, andprofessional categories such as lawyers, doctors, and teachers.

(b) Adaptation training is short-term orientation training for workers taking up newjobs, to ensure that they meet the demand and standard of the production work.

(c) Skill level training is for skilled workers to enable them to master the technicaltheories and practical skills required by the 'standards of workers' skill level'promulgated by the sectoral authorities concerned.

Annex 2 contains a table showing the types of training and education provided by the differenttypes of enterprise schools or training institutions in Dalian. In Dalian, 20 percent of theactivities in these schools are general education.j/

4.7 Nationwide statistics §/ indicate that participation in the wide range of inservicetraining activities is quite high. Among all SOE employees, 34.3 percent of the total participatedin 1991 in some training activity with 50 or more class hours.l/ Of those participating intraining, 23.1 percent took part in qualification training, 20.5 percent in skill level training, and56.4 percent in adaptation training. These figures show that, at least from a quantitativeviewpoint, participation in inservice programs is a common experience for SOE workers.

4.8 The following sections describe institutionalized training from a variety of aspectssuch as student and faculty profile, teaching methods and materials, and cost and financingmechanisms. In addition, in order to provide a more comprehensive picture of the variation andflexibility in the way in which the different types of training institutions operate, three "boxes,"each depicting the main features of the respective training institutions (ENTC, SWS, and ETC)are included. A fourth box describes how a particular industry (aviation) organizes inservicetraining for its workers.

4.9 These sections are based upon information collected from responses to aquestionnaire survey of 36 training institutions in Dalian and 34 institutions in Wuhan, a studyof worker retraining by Beijing University A/ and whole-day interviews the mission had with13 traiinig institutions in Dalian and Wuhan. The Beijing University study is based oninterviews with and questionnaires to 30 enterprises in the iron and steel industry, which

I/ In the case of Dalian, the municipality has 11 ETCs, 1,503 ENTCs, and 22 inservice SWSs. Inaddition, the STS and SVS streams have inservice training capacities of 2,000 and 500,respectively.

Based on a survey reported by the State Education Commission (SEdC) Adult EducationDepartment. The survey covered the entire nation except Ningxia, Xiang, Yunnan, and Haban,and all fixed and contract workers in SOEs. It covered only courses with 50 or more class hours.

1/ If educadon courses are included, the percentage increases to 38.8 percent.

'Worker Retraining in the Iron and Steei and Aviation Industries in China and ManpowerTraining in the Tourism Industry' (preliminary draft), Institute of Higher Education, BeiiingUniversity, September 1992.

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collectively have 22 ENTCs and 10 SWSs; and 63 enterprises for the aviation industry, whichcollectively have 63 ENTCs, 10 SWSs, and four worker colleges. The study covers trainingcourseS of 150 hours or more of training a year for the iron and steel industry and 50 hours ormore for the aviation industry. The figures cited in the chapter pertain to the two municipalitiesvisited by the mission or the two industries reviewed by Beijing University unless otherwiseindicated.

B. ENROLLMENT LEEL, CouRSE LENGTH, AND STUDENT PROFILE

Enrollment Level and Course Length

4.10 As can be seen from Tables 4.1 and 4.2 compiled from the Dalian and Wuhansurveys, the institutions have an average enrollment of 607 in Dalian and 847 in Wuhan. Themajority of institutions fall into the 100-500 range. There is also a large number of schoolswhose enrollment exceeds 1,000. These averages are significantly larger than the preserviceenrollment figures, pardy because of the relatively larger number of part-time students.However, given the variation in size within each category, the averages should be treated withcaution.

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Table 4.1: YEAR-END ENROLLNDT FOR TRAuINNG INST[moNs IN DALUAN, 1991

Average 50 1,001Sample enroll- Mazi- Mini- students 51- 101- 301- 501- students

Institution size Mont mum mum or fewer 100 300 500 1,000 or more

ENTC 20 411.8 1,990 87 0 3 6 5 1 5

SUS 7 431.3 1,644 30 2 0 2 1 1 1

ETC 9 1,179.6 2,074 163 0 0 2 1 0 6

Total numberof schools 32 3 10 7 2 12

Source: Questionnaire survey of Dalian trauiing institutions.

Table 4..: YEAR-END ENROLImENT FOR TRAIUNG INSnT11nONS IN WUHAN, 1991

Average 50 1,001Sanple enroll- Maxi- Mini- students 51- 101- 301- 501- students

Institution size ment mum mum or fever 100 300 500 1,000 or more

ENTC 13 852.4 3,132 46 0 0 7 2 1 3

SWS 9 1,048.1 3,878 256 0 0 2 3 0 4

ETC 12 691.8 3,273 153 0 0 03 3 5 1

Total numberof schools 34 0 0 12 8 6 7

Source: Questionnaire survey of Wuhan training institutions.

4.11 In contrast to preservice training, which for the most part lasts for three yearson a full-time basis, the bulk of inservice training is short term Cfables 4.3 and 4.4). In bothcities, more than half the students are enrolled in courses lasting less than threa .nonths. TheETCs in Dalian offer predominantly short-term courses, while those in Wuhan have the largestproportion of students enrolled in courses exceeding one year.

Table 43: YEAR-END ENROLlMENT BY COURSE LENGm, DALAN (191)

Months Sample AverageInstitution 0-3 3-6 6-12 12+ Total size enrollment

ENTC 2,421 1,102 595 4,118 8,236 20 411.80SWS 1,249 1,102 456 212 3,019 7 431.29ETC 9,464 968 184 0 10,616 9 1,179.56

Total 13,134 3.172 1.235 4.330 21.871 36 607.35

Source: Questionnaie survey of Dalian taining institutions.

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Table 4.4: YEAR-END ENROLLMENT BY COuRSE LENGTH, WUHN (1991)

Months Sample AverageInstitution 0.3 3-6 6-12 12+ Total size enrollment

ENTC 8,069 1,844 656 512 11,0181 13 852.4SWS 7,904 1,164 201 164 9,433 9 1,048.1ETC 215 4,736 672 2,679 8,302 12 691.8

total 16,188 1.744 1529 3.355 28.816 34 847.5

Source: Questionnair survey of Wuhan tmaining institutions.

Student Profile

4.12 Given the nature of inservice training, the ownership of the training institutions,and the low mobility in the Chinese labor market, it is not surprising that the students are drawnpredominandy from workers already placed in enterprises (Table 4.5). For ENTCs, 93 percentof the students were such workers, and they were with few exceptions employees of the parententerprise. The percentage dropped only slightly to 87 percent for SWSs. For ETCs, given thattheir clientele is workers in a certain geographic area, rather than a single enterprise or technicalfield, and that their admissions requirement is not as restrictive, a wider variety of students wasrepresented. Even here, representation by workers already placed in enterprises was dominant(70 percent). In this type of categorization, it is not possible to distinguish between inservicetraining for upgrading one's skill and learning a new trade for job transfer, but the findings ofthe Beijing University study indicate that most (85-90 percent) of the training at ENTCs andSWSs is of the former type. When an enterprise sends its workers for training, it sends themmostly to SWSs and ENTCs if its own training facility is inadequate or absent. Based oninterviews, it is estimated that it is the ETCs that conduct the largest share of job-transfertraining.

Table 4.5: SouRcEs FOR ENROLLMErr BY TYPE OF TRAiNCIG INSIrnrTON, DAUN (1991)

ENTC SWS ETCType of worker Number S Number 2 Number X

Youth waiting for employment 80 0.30 215 2.99 532 5.62Previous workers waiting foremployment 0 0.00 0 0.00 391 4.13

workers employed by enterprises 13,348 92.61 6,235 86.60 6,672 70.49Workers from township & villageenterprises 466 7.08 620 8.61 1,551 16.39

Retired servicemen 3 0.00 0 0.00 24 0.25immigrants from rural area 728 0.00 0 0.00 66 0.70Others 23 0.00 130 1.80 229 2.42

Total 14.648 100.00 7,200 100.00 9.465 100.00

Sample size 20 7 9

Source: Questionnaire survey of Dalian training institutions.

28 -

4.13 Admissions Requirements. Most ENTCs have no entrance examinations butdo require a minimum education level Oower or upper secondary school graduate certificate) andsometimes the recommendation of the worker's shop manager. One ENTC (Jinzhou Textile MillENTC) whose inservice program is a three-year full-time program, requires that the applicanthave a lower secondary graduate certificate and pass the unified exam for SWSs organized bythe municipal labor bureau. In the case of SWSs, a lower or upper secondary graduatecertificate and recommendation from the worker's enterprise is the norm. Some SWSs requirethe prospective student to already have a certain skill level as well. For ETCs, in addition tothe secondary school graduation certificate, some conduct interviews or administer their ownexam to screen the potentially very heterogeneous set of applicants (para. 4.4).

4.14 Graduation Rate. The enrollment-to-graduation ratio for the inservice programis estimated to be on the order of 70-80 percent. This is lower than the ratio of the preserviceprograms (90-100 percent), which is natural since the opportunity cost of time is much higherfor inservice students, who usually have work and family obligations, than for preservicestudents. Most well-developed programs in Canada, UK, Germany, and the United States havean average inservice graduation rate that ranges from 50 to 80 percent. China's estimatedaverage would be considered acceptable by these comparisons.

4.15 The placement of students completing the course is typically higher than98 percent because the workers are usually sent to attend the inservice training program by theiremployers, who have specific expectations on how the training will improve the workers' skills.Those completing the ETC course include workers entering self-employment. In one ETC(Dalian Occupational Technology Technical School), as many as 13 percent of those whocompleted the course went into self-employment.

C. FACuLTY PROFILE, TEAcHNG HOURS, AND TEAcHRSTuDENr RATIO

Faculty Profile and Teaching Time

4.16 The profile of faculty by educational background and professional titles asobtained from the Dalian and Wuhan surveys is presented in Tables 4.6-4.9. At least 60 percentof the faculty have received higher education, and the academic training of the teachers wasfound to be generally satisfactory. In addition, almost all teachers have pedagogical training(200 hours required by MOL) and have been tested on their subject. However, it is in the areaof industrial experience that qualifications are lacking. At least 50 percent of the teachers havehad little or no related industrial experience. The lack of related work experience is considereda critical shortcoming in the potential efficiency of VTET teachers.

4.17 Many training institutions employ part-time teachers and instructors. Thisreduces the overall cost of the training (because these instructors are paid by the hour) and alsohelps to provide the technical expertise that the school's own staff is lacking.

4.18 Teachers work 7-8 hours a dav, but teach on average only 14-15 hours per week.In the iron and steel industry, the stipulated teaching load is 8-9 hours a week for SWS teachersand 7-14 hours a week for ENTC teachers (depending on the rank of the teachers), with actualteaching hours being only slightly higher than the stipulated norm. This is a phenomenon

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Table 4.C: AVERAGE NuMBER OF FACULTY BY TRAING INSnTUnON, DALIAN (1991)

Faculty ENTC SWS ETCAvg. Max. Min. Avg. Max. Min. Avg. Max. Kin.

Average no. ofgeneral subjectteachers 18.5 92 0 16.0 46 4 6.3 18 0

Average no. ofspeclaltyteachers 14.2 69 0 31.9 82 5 14.6 38 2

Average no. ofpart-timeteachers 14.2 508 0 4.1 16 0 11.1 22 0

Sample size 20 7 9

Source: Questionnaire survey of Dalian training institutions.

Table 4.7: AVERAGE NuMBER OF FACULTY BY TRAINING INSITnUoN, WUHN (1991)

Faculty ENTC SWS ETCAvg. Max. MET. Avg. Max. Min-. Avg. Max. Min.

Average no. ofgeneral subjectteachers 5.23 13 1 13.89 32 5 8 34 0

Average no. ofspecaltyteachers 6.92 17 2 18.11 59 3 16.25 50 2

Average no. ofpart-timeteachers 25.62 94 2 10.67 21 0 5.75 54 0

Sample size 13 9 12

Source: Questionnaire survey of Wuhan training institutions.

observed throughout the different levels of the Chinese educational system. These teachinglevels must be considered inefficient and a less than satisfactory use of teaching staff. TheENTCs generally have more experienced personnel but they too have light teaching loads. Theload for teachers and instructors at the 13 training institutions visited is shown in Table 4.10.

4.19 In terms of professional titles, the bulk of the faculty is classified as lecturers andteachers, with 5-7 percent ranked as senior lecturers. The ratio of senior lecturers is somewhatlower than for the preservice segment.

Teacher/Student Ratio

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Table 4.8: FACuLTY ROFILE BY EDUCATeNAL BACKGROUND AND TYPE OF TRANCG INSmUTInoN,DALIAN (1991)

Educational level ENTC SWS ETCNumber Z Number X Number 2

Four years university or above 647 33.63 143 39.72 61 20.96University--less than four years 627 32.59 74 20.56 124 42.61Secondary tech./vocational school 391 20.32 85 23.61 59 20.27Upper secondary 226 11.75 30 8.33 45 15.46Lower secondary school or below 33 1.72 28 7.78 2 0.68

Total 1,924 100.00 360 100.00 291 100.00

Sample size 20 7 9

Source: Questionnaire survey of Dalian training institutions.

Table 4.9 FACULTY PROFILE BY EDUCAnONAL BACKGROUND AN" TY OF T'RAIN G INSMTUON,WunA (1991)

ENTC SWS ETCNumber S Number 2 Number 2

Four years university or above 128 26.02 197 34.87 129 35.73University--less than four years 223 45.33 251 44.42 146 40.44Secondary tech./vocational school 105 21.34 82 14.51 70 19.39Upper secondary 28 5.69 27 4.78 12 3.32Lower secondary school or below 8 1.63 8 1.42 4 1.11

Total 492 100.00 565 100.00 361 100.00

Sample size 13 9 12

Source: Questionnaire survey of Wuhan training institutions.

4.20 Given the relatively large number of part-time teachers and instructors, it isdifficult to accurately calculate the teacher/student ratio.2/ Table 4.11 illustrates theteacher/student ratio calculated for the 13 training institutions visited based on conversions tofull-time equivalents. The ratios are still quite low compared with the international norm.

D. DuSTrRmAL INPUT, COURSE CONTET, AND THEORY AN PRACTICE MIX

Industrial Input

4.21 Since 1987, there have been considerable improvements in the planning andprovision of industrial input to the VTET curriculum development process. These

9/ For this purpose, it was assumed that three part-time teachers were equivalent to one full-timeteacher, six part-time instructors were equivalent to one full-time instructor and, furthermore, twofull-time preservice or inservice students (six-month programs) or two part-time inservice studentswere equivalent to one full-tme equivalent student, and that four part-time short inservicestdents (three- to four-month program with about 14 contact hours per week) were equivalentto one full-time equivalent student.

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Tabl 4.10: Tl0Uu LoAD AT zTRAmNG NITninoNS VmI svI BYmoN. 199

Faculty Averaze teaclhnu load (hours per reek) /a Overallstatus A s c I E £ C h I J R L n average

lull-ti.teacher 8 a 8 36 11 12 12 20 20 9 12 20 12 14.5

lull-timeiatructor 14 36 24 36 24 i.a. U.S. U.S. 20 n.a. t.a. 24 36 26.8

Part-tit.teacher 3 8 1 n.e. n.a. n.e. n.e. 12 9 U.&. n.S. 12 5 8.7

Part-ti,Instructor U.S. U.e. o.a. 20 n.a. n.e. n.e. 12 9 n.a. n.a. n.e. n.e. 13.7

na. = not pplicable ori ationot availabl.

JA Sample ies- 13: A. C.!. and J ar ENTCc; B. E. F. G. and K aer SWSa; and D. H. L. and M ar ETCl. For na- of ieic em

Annex S.

Sourwc: Quetionnalresurvey of elcoed Dalian and Wuban training inhtuiots.

Table 4.11: TEACHER TO STvDENT RATO OF TRA1NNG INSTITUTIONS VISInED BY MISSION, 1992

Training Total Total Total Total Teacher Teacher &

inasti- esrollment enrollment no. of no. of to instructorstution 1991 1991 teachers instructors student to student

IC number (full-time (imcl. (incl. (full-time (full-timeof equiv. part-time part-tim equiv.) ratio equiv.) ratio

students students) conversion) conversion) (c):(b) [(c)+(d)l:(b)(a) (b) (c) (d)

A 1,654 540 60 16 1:9 1:7.1B 1,318 818 52 32 1:15.7 1:9.7C 1,845 549 741a 38/a 1:7.4 1:4.9D 157 79 12 10 1:6.6 1:3.6E 985 770 41 44 1:18.7 1:9.1F 431 431 42 8 1:10.3 1:8.6G 700 350 24 0 1:14.6 n.a.H 2,148/b 866 661a 10/a 1:13.1 1:11.4I 429 429 61 4 1:7.0 1:6.6J 1,101 376 39 12 1:9.6 1:7.4R 1,824 1,104 63 40 1:17.5 1:10.7L 594 266 21 13 1:12.7 1:7.8H 356 278 21 5 1:13.2 1:10.7

Overall 1,042 527 44.3 17.8 1:11.9 1:8.5Sample size - 13

/ These figures include those estimated number of part-time teachers and instructors from shop-floor indirectlyemployed by the Training Center for short inservice courses.

/b Student number obtained from written document provided by school.

/c The breakdown by types of institutions are the same as for Table 4.10.

improvements, if effectively implemented, can focus the curriculum development process onmeeting the needs of local employers-in effect, a 'demand-driven' approach to VTET. This

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increased involvement in establishing links between the institutions 2 .' employers is evident atall levels (national, provincial, and municipal). Local government a liorities have also begunto effectively serve as coordinators and facilitators in the design of courses and curricula.

4.22 Industrial input often varies, depending on the location and on the focus of theinstitution, technical ministries, and employers concerned. In many SWSs and ETCs,managemnent committees are maintained by the institution. These committees function as quasi-advisory bodies. They often include representatives from the relevant technical ministries, thebureau of labor, the training institution, and local employers. Some committees may do morethan provide advice. They sometimes function as key decision-makers on institutional policy,course offerings, and other important matters associated with training services at the institution.In this sense, employers are actively participating in the management of many institutions. TheENTC usually has a single enterprise serving as the sponsor, so it has considerable control ofthe decision-making and is almost certainly industry driven. Although the ENTC has moreemployer control, it still often maintains some type of management committee to obtain inputfrom the relevant technical ministries and the labor bureau.

4.23 Other types of employer and industry input are also evident. Most technicalministries participate actively in curriculum design, many having full-time curriculum specialistsavailable to survey employers and to modify curricula and instructional materials as needed. Ascurricula are developed, the institutions may easily gain access to them. Other traininginstitutions may have informal relationships with local employers. These relationships havemany advantages and generally result in a closer understanding of local employer needs. Theyoften result in more access to industry attachments IQ/ for students and more physicalresources obtained from industry. Although the important philosophical change from "supply-driven" to Tdemand-driven VTET" has been initiated, inservice training institutions mustrecognize the need for more flexibility in their service delivery and continue to strengthen theirlinks with employers so that they may respond more quickly to the changing needs of employers.

Course Content

4.24 The SWSs generally have well-established curricula. A review of the curriculasuggested that the content was usually developed by professionals within the relevant technicalministry who are evidently knowledgeable about the technical specialties involved and theirapplication within preservice VTET programs. It was also clear that the curricula weredeveloped with considerable input from employers. It was less evident that the curriculumspecialists were well trained in adopting curricula to meet the needs of adult workers in inserviceprograms as opposed to younger, full-time preserAice students. The ENTCs are similarlysupplied with full curricula for most of their programs. As in the SWSs, the curricula aregenerally provided by the relevant technical ministries. In a few programs, which are new ortemporary, the individual ENTCs provide their own curricula. The ETCs are much more variedin their acquisition and use of curricula and instructional materials. Some course content isprovided through their labor bureaus. Often, there are no curricula for many short-term coursesoffered and the institution usually hires part-time skilled teachers who, in turn, provide simplecurricula and instractional materials (i.e., worksheets, handouts, and copied reference materials).

10/ Placement of a trained or partially trained student in an industry setting as a worker (not trainee).Usually the industrial attachment is for a fixed period of time, ful time.

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Such materials, if carefully prepared and based on appropriate inputs, are suitable for short-termcourses. Often the courses have to be approved by the labor bureau on a provisional basis.

4.25 Overall, there are two major shortcomings in the inservice training system thatseriously affect course content, namely, the absence of flexible, time-free VTETdedivery systemsand the lack of curricula and teaching materials designed specifically for inservice programs.These two areas are explored further in Chapter 5.

Theory and Practice Mix

4.26 In VTET, all courses require a combination of theory, taught in traditionalclassrooms, and practice, taught in shops or laboratories. The variation of this blend is thesubject of much discussion and research. Experience from a range of VTET programs indifferent countries suggests that, for the level and types of programs offered in most ENTCs,SWSs, and ETCs, the mix (in terms of course hours) should be about 40 percent theory and60 percent practice. In high-technology programs for higher level skilled workers andtechnicians, the practice level might need to be reduced to about 50 percent, or in unusual casesto 40 percent.

4.27 Almost all of the programs visited are too heavily oriented to theory. Mostprograms offer about 60 percent theory and 40 percent practice; many institutions offer even lesspractice. This is often due to shortages in equipment, consumable supplies, and facilitiesequipped with appropriate tools and machines. It is not unusual to see the practice componentlImited to less than 30 percent although the curricula for that institution calls for a moreappropriate mix.

4.28 The Beijing University study of the aviation industry also presented findingssimilar to those of this study. The teachers and trainees clearly considered the existing theoryand practice mix to be inadequate (Tables 4.12 and 4.13).

Table 4.12: Tm SPET ON PRACnCE TRAINNG, AvATnON INDUsY, 1991

Full-time program Part-time program On-the-lob traininxAvg. Avg. 2 of Avg. Avg. S of Avg. Avg. 2 ofteach- prac- prac- teach- prac- prac- teach- prac- prac-ing tice tice ing tice tice ing tice tice

Specialty hours hours hours hours hours hours hours hours hours

Machinery 936 412 44 637 294 46 307 117 38

Assembly 248 99 40 207 79 38 - - -

Quality inspection 666 275 41 239 86 36 - - -

Casting 346 101 29 364 134 37 408 167 41

Welding 288 124 43 438 171 39 365 124 34

Heat and surfacetreatment 1,084 282 26 - - - - - -

Source: Beijing University Study, 1992. Based on interviews and questionnaires to 63 ENTCs and 10 SWSs.

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Table 4.13: EVALUATON OF ADEQUACY OF TME SPENTr ON ThEORY AND PRACTICE, 19l

Theory PracticeIndustry Too much Adequate Inadequate Too much Adequate Inadequate

Aviation industrv

Teachers 13.8 50.2 26.0 16.8 25.0 58.2

Trainees 12.6 44.2 43.2 4.1 31.8 64.1

Iron and steel industry

Teachers 23.3 58.6 18.1 3.5 49.0 47.5

Trainees 20.6 43.4 35.0 1.9 44.4 53.7

Source: Beijing University Study, 1992. Based on interviews and questionnaires to 63 ENTCs and 10 SWSs fromthe aviation industry and 30 ENTCs and 10 SWSs from the iron and steel industry.

E. TEACHING MATmALS, TEACHING METHODOLOGY, EQUIPMENT, ANDWORKSHOPS

Teach' ig Materials

4.29 As mentioned in Section D, the ENTCs and SWSs are usually supplied withcurricula. Associated with this are substantial teaching materials (e.g., textbooks, worksheets,information sheets, drawings, etc.) Although they are much more variable, ETCs also receivea substantial portion of their curricula and teaching materials from !abor bureaus and relevanttechnical ministries. A review of these teaching materials, which are available in mostinstitutions, suggests that they are generally less than adequate for inservice students. As is thecase with the curricula, most of the materials were designed for preservice programs and as suchoften have large quantities of cognitive material (knowledge or theory) which is not essential toteaching adults in short, specific, and intense programs of an inservice nature. Many materialsfound for shorter courses are "bits and pieces" of the preservice materials that were originallyintended to be used in two- or three-year programs.

4.30 Books. Except for the above-mentioned concerns, most of the availabletextbooks were well prepared and appropriately constructed. They are low cost and readilyavailable in most institutions. The mission noted that most of the textbooks were supported bysimple line drawings and illustrations. This is a good approach because line drawings add muchto the quality of the books without adding greatly to the production cost. Their small sizes(usually about 6" x 8") also support their low production cost which is generally less than Y 10per copy. Most textbooks are written within the technical ministries with significant inputs forrelevant employers. In all of the institutions visited, the books were sold or provided to thestudents with no profit or markup added by the institutions.

4.31 In many temporary or shorter courses, particularly in the ETCs, informationalhandouts, worksheets, and other types of teacher-prepared materials are used. If preparedproperly, these teaching materials would work well for such courses, and there may be no needfor textbooks. It is important to understand that more administrative flexibility is needed to

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Box 4.1: Xi GANG EMLOYMENT TRUNING CENTER ANDDAtAN OccUPATIoNAL TECHNOLOGY TRAINING SCHOOL

The Xi Gang Employment Training Center (XETC) is a district employmenttraining center operated by the Xi Gang Labor Service Company, which in turn is operated by theXi Gang District Labor Bureau. It offers short-term, full-time, preservice training for employmentin the service sector. In 1991, its preservice enrollment was 497 students. Associated with andlocated within the XETC, the Dalian Occupational Technology Training School (DOCTS) providesevening-based, short-term, part-time, inservice programs of a wider variety but includes thoseoffered by the XETC. The DOTrS accepts some lower secondary school graduates, but mainlyprovides upgrading programs (existing worker training) for client SOEs. 7Te school a'so trains alimited number of surplus workers as the need arises. In 1991, its total inservice enrollment was819.

The DOTTS has students sent by enterprises of various types for preservice andinservice training. The school provides some self-employment training for potential entrepreneurswho want to get a license to operate a small business in the Dalian area. There is also considerableenrollment from technicians and master technicians who have to take skill examinations every twoyears. If they fail to pass, they are required to take a course offered by the DOTTS. The averageage of the DOTTS student is about 35 years, with an average of 10 years of work experience.Eighty percent of the students are male because the DOTTS offers many technical short courses inaddition to some programs for the service sector. Many of these technical courses are aimed atemployment areas that are traditionally male dominated. The students are generally from the Dalianarea.

The DOTTS functions as the evening training program for the XETC. The uniquefeature of this arrangement is the lack of links between the two schools. Although they share staffand facilities, the two schools have different principals and keep separate books and accounts. Boththe XETC and the DOTTS have simple management structures.

While the XETC reports to the labor bureau of the Xi Gang District via the laborservice company of the district for policy direction and approval of training applicants and courses,the DOTTS reports to the Dalian Municipal Bureau of Labor. The DOTTS also undertakes someresearch for the labor I ureau. For their respective schools, both bureaus provide the curricula(other relevant bureaus also provide some), set the skills certification criteria, supervise theexamination for certification, and award the skill certificates to graduates. The two schools havea service area with about 800 enterprises, with which the schools have considerable interaction withthese enterprises, including frequent meetings with training officers and other managers from thefirms. These meetings provide the XETC and DOITS with opportunities to set up agreements withspecific firms to conduct training for preservice and inservice needs. This interaction also allowsfor the mutual selection of training participants. There is considerable flexibility in curriculummodification, but any changes must be authorized by the relevant bureaus. The DOTrS has moreflexibility in curriculum modification than does the XETC.

The two programs offer more than 13 courses: (e.g., garment making; catering;barbering; boiler operation; electric arc welding; and driving) in the service sector. Almost all skilltraining is conducted on the job. The schools have joint access to five classrooms, a training shopof about 2,000 square meters and one library room. Both schools employ five full-time teachersand 24 part-time teachers/instructors. All hold college diplomas or degrees and have been trainedin pedagogy. They have an average of seven years of work experience. Teachers and instructorsteach between 8 and 12 hours per week and 24 hours per week, respectively. Part-time teachersteach about 12 hours per week. The facility's capacity utilization is about optimum (0.85). Forboth schools, the estimated unit cost for instruction is about Y 0.40 per student hour (60 minutes).

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move away from highly standardized curricula and an absolute requirement for textbooks in allcourses in order to respond quickly to the short-term training needs of employers.

4.32 Audiovisual Materials and Equipment. Most of the larger institutions haveaccess to some audiovisual equipment and materials. It is typical to see two or three overheadprojectors, a portable video camera, and a videocassette recorder in use. In the SWSs, it wasalso common to see production facilities for video and audio tape. Often these facilities werewell equipped with studio-type cameras and editing equipment. Some institutions indicated thatthere were shortages of supplies and maintenance for the available equipment. The missionvisited several smaller ETCs that had little if any access to audiovisual support.

Teaching Methodology

4.33 Theory. In all of the institutions visited, it is typical that all theory (cognitive)is taught in traditional classroom settings by academic teachers. Often these types of teachershave less than adequate industrial experience. Two instructional methods are predominant:lecture and, to a lesser extent, demonstration. There is extensive use of the chalkboard and rotememorization. These methods reflect the passive teaching approaches that have been used intraditional education. They also reflect the extensive preservice experience of most of theinstitutions. Without proper training in other methods, the teachers and instructors teachinservice courses as they have taught their preservice courses. Moreover, in most institutions,the teaching methodology suggests that there is little understanding of the need to teach adultsdifferently than children. Inservice VTET training requires much more student participation inlearning. Adults also learn more by doing, not listening. They need to know the relevance oftraining to their expected employment. Experience has also shown that adult learners are moreproductive in programs using competency-based objectives and materials. As for instructionalmaterials, it has been found that large textbooks are less effective than a series of small, thin,informative documents that focus upon learning only a few tasks at a time. Inservice programsshould be intense, specific, and as short as possible.

4.34 Practice. Skill training and practice are usually provided in laboratories andworkshops. In the ENTCs and SWSs and, to some extent, the ETCs, skill training is oftenprovided by a separate instructor who is not considered properly prepared to teach the theoryparts of the course. He is considered the craftsman of the two-person teaching team. Thisapproach is similar to the well-known Della Voss system that was developed in Russia duringthe early 1900s. Many countries have now moved away from this approach because it hasproven to be costly and reduces general program efficiency. Depending upon the number ofenrollments, most effective VTET programs elsewhere are now staffed by one, two, or evenmore well-trained and experienced teachers who are required to provide instruction in all areasof the program.

4.35 Laboratory and workshop teaching methods are well developed. There isextensive use of demonstrations, drawings, work assignment sheets, and repetition for skillacquisition. Instructors are usually serious, well organized, and trained. Although theorganization of skill training is often good, in many labs and workshops, the effectiveimplementation of the skill training is difficult or impossible because of the severe lack ofinstructional materials and supplies. This may be a primary reason that the programs remain tootheory oriented. When institutions have to work within a fixed-time curriculum and there are

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insufficient supplies in the labs and workshops to effectively teach skills, there is little choicebut to take the students back into the classrooms and talk theory to them.

4.36 Industry Attachments. The ENTCs and SWSs offer industry attachments inmany of their longer-term, inservice programs. These attachments are well administered, withcoordination being provided by the technical ministries and bureaus of labor. These attachmentsrange from short term (six weeks) to quite long periods (up to three years in one case).

Equipment

4.37 All the institutions are severely shiort on equipment, tools, and supplies.Maintenance budgets are meager and there is little concern for deterioration of equipment. Insome schools it was observed that production activities were using machines intended only foruse in instruction. Such activities generate short-term profit, but if such profits are not put backinto maintenance then, in the end, the equipment will be totally deteriorated and there will beno funds to replace it. One major operational advantage that ENTCs have over the SWSs andthe ETCs is their potential access to more quality equipment and ease of arranging industryattachments for students within the enterprise.

4.38 The cost and acquisition of equipment are major efficiency issues in most of theinstitutions visited by the mission. Every VTET administrator and teacher in China recognizesthat the pervasive lack of equipment is the major drawback to providing inservice training.

4.39 The use of more simulation equipment in the higher technology programs isrelated to the issue of cost control. The cost of such equipment would be lower and ,ihecontinuing maintenance and instructional supply costs would be also be lower than thoseexperienced with standard production equipment.

Workshops and Laboratories

4.40 The mission found a mixed picture in the availability and quality of workshopsand laboratories. With some exceptions, the best laboratories and workshops were found in theSWSs, which have extensive preservice programs. The ENTCs often have much floor space,but inadequate equipment in their dedicated skill training facilities. Often, this is because theydepend heavily upon industry attachments for even short-term training.

4.41 Typically, the ETCs have more limited skill training facilities. Their focus uponshort-term training and service sector skills offers them more flexibility and opportunities to usebusiness and industry as their venue for training. In one ETC visited, the institute rented trainingspace from employers for about Y 10 per student per day. It should be noted that there werea few ETCs with excellent and comprehensive training facilities. For example, the Dalian LaborBureau's Labor Service Company operated an ETC with a modem practice hotel, two practicerestaurants, and eight classrooms.

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4.42 The mission found much scope for rationalizing the capacity utilization ItJof existing laboratories and workshops. There is much unused capacity already established.Some institutions have facilities that are as much as 60 percent underutilized. It was alsoobserved that the present theory and practice mix in some institutions contributes to heavydependence on classroom facilities rather than woikshops or laboratories.

F. CosT AND FINANCING

4.43 The Beijing University study provides some estimates of training costs for theiron and steel industry based on a survey of 21 ENTCs and 9 SWSs. The results are given inTable 4.14.

Table 4.14: RECURRENT CoST PER STUDENT FOR INSERVICE TRAINING IN THEIRON AND STEEL INDUSTRY, 1991

(yuan/ciass hour)

Costs ENTC SWS

Total average cost 0.47 0.65

Average coat exclusive of personnelexpenditures 0.38 0.52

Source: Beijing University Study, 1992.

4.44 In order to account for the difference in course length and hours of classes a day,the averages are calculated in terms of recurrent cost per hour. Furthermore, in order tocompare the recurrent costs between ENTCs and SWS, the fact that the parent enterprisefrequently lends production staff to its training centers as instructors must be taken into account.Thus, the nonpersonnel unit recurrent cost-rather than total unit cost-is also calculated.

4.45 The study noted that, generally speaking, if the specialties require more rawmaterial for training (e.g., the welding rods and the steels expended by welders, the billetsexpended by turners and fitters), and more practice, then the training cost is higher. Entrustingan external organization to conduct training is also fairly expensive because it usually involvestraveling, board, and lodging expenses in addition to the tuition paid to the extemal traininginstitution. On the high end, the training cost is in the range of Y 1-2 per student class hour.One of the more expensive courses was the 12-month full-time (2,400 class hours) inservicetraining course for crosscut mill operators, which cost Y 2,500 per student or Y 1.04 per classhour because the training contained much more practical operation links. On the other hand,if the specialties require few raw materials, have more theory and classroom teaching, and

11/ Facility utilization is expressed as the percentage of actual occupancy of dedicated trainingfacilities compard with the design capacity of the facility during a defined peniod of teaching(day, week, semester, etc.).

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training can be done without involving external organizations, the cost is fairly low. One of thelowest was Y 0.25 per hour for the Benxi Iron and Steel Company's six-month full-timeretraining course (1,200 hours) for drivers. In addition, the practice training at the last stagesof some specialties (or type or work) is usually conducted at the work sites, so this is oftenincluded as the cost of production, and not as the cost of training.

4.46 Another set of estimates obtained from the aviation industry is based on a surveyof 63 ENTCs and 10 SWSs, in which recurrent cost by different types of work is presented(Table 4.15). Admittedly, aviation is a more specialized industry than iron and steel and thusit should be understood that the estimates in Table 4.15 represent the cost of training in eachtype of work as performed in the aviation industry. The figures, nevertheless, illustrate the widerange of recurrent cost per student for each type of work, and are similar to average figuresobtained from the iron and steel survey.

Table 4.15: RECURRENT COST (EXCLUSIVE OF PERSONNEL EXPENDITURES) PER STUDENTFROM MAJOR TYPES OF WORK IN TIIE AVIATION INDUSTRY

(yuan/class hour)

ENTC SWSType of work Minimum Average Maximum Minimum Average Maximum

Machining 0.14 0.91 1.93 0.25 1.12 2.05Assembly 0.19 0.36 0.51 - - -Inspection 0.17 0.68 0.89 - - -

Casting 0.21 0.57 0.74 - - -Welding 0.33 1.07 2.87 0.28 1.07 2.89Heat & surfacetreatment 0.29 0.34 0.43 0.37 0.53 0.59

Source: Beijing University Study, 1992.

4.47 The figures the mission obtained from individual training institutions werege - ally on this order of magnitude as well. The figures (inclusive of personnel expenditures)fot tne Dalian Locomotive Drivers School yielded a per-hour unit recurrent cost of Y 0.77;Dalian Occapational Technology Training School, Y 0.41; Dalian Shipyard ENTC, Y 4.0; andDalian Medium Commercial School, Y 1.0 (see Boxes 4.1-4.3). The reason the figure forDalian Shipyard ENTC is particularly high is the training center's low utilization rate.

4.48 In comparison with the average unit costs for preservice students,i../ theinservice programs typically cost at least 25 percent less for the same effort. The estimatedinservice unit costs are quite low when compared with similar programs in other Asian countriessuch as Thailand, Singapore, Malaysia, Korea,and Indonesia. The low costs most often resultfrom low salaries paid and the limited purchase of instructional materials, tools,and supplies thatare typical in most inservice programs. The unit cost is likely to increase in the future as wages

DI The average unit recurrent cost for preservice training ranged from Y 1,200 to Y 2,000 peracademic year (excluding room and board).

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Box 4.2: DALIAN LOCOMOTIVE DRIVERs SCIIOOL

The Dalian Locomotive Drivers School is a skilled workers school administeredjointly under the authority of the ministries of labor and of railroads. Established in 1949, it isoperated by the Shenyang Bureau of Railroads. The Dalian Municipal Bureau of Labor providesdirection regarding selection of trainees, skill-related examination of graduates, and the award ofskill certificates. All curricula are provided by the Ministry of Railroads. The school is 90 percentfinanced by the provincial Bureau of Railroads and ftaances the rest with inservice training fees andthe profits from its production print shop. The graduate employment rate is almost 100 percent.Graduates are employed in the operation of railroads throughout Northeast China (five provinces)with an average salary of about Y 268 per month, including subsidies. The school is a full-time,residential institution with students coming from five northeastern provinces.

The inservice training program currently enrolls 521 full-time students in thefollowing two- to six-month courses: locomotive internal combustion engine; locomotive driver,vehicle inspection and maintenance (medium); and vehicle inspection and maintenance (advanced).Inservice students are employed at the Shenyang Bureau of Railroads, which employs about 380,000workers; the Port Authority of Dalian; Liao He Oil Field, and other SOEs using enterprise-basedrailyards. Client enterprises employ a total of about 550,000 employees. The students have anaverage age of about 30 years. Most have at least a lower secondary certificate and about 10 yearsof railroad experience. Some redundant workers have been retrained at the center (enrollment isnot available). The curriculum for inservice training is mostly theory with little skill traininginvolved.

There are also about 700 preservice students enro!led in the three-year, preservicetraining program which offers two courses-locomotive driver and vehicle inspection/maintenance.It is typical, but not required, that preservice students have job assignments before they arrive fortraming. The entering students, all being recent lower secondary graduates, are about 16 years ofage. There is also a preservice requirement of 40 weeks of on-the-job training following the secondinstructional year. The preservice curriculum involves a mix of about 50 percent theory and50 percent skill training.

The school has 226 staff including 57 teachers, 40 instructors, 19 teachingassistants, 44 administrative personnel, 5 managers, and 30 workers in their factory. The rest arelaborers. Teachers are well trained and have at least three years of related work experience anda sidll level of 6 (the system is 1 to 8, 1 being lowest). The school is operating at optimumcapacity utilization, but the teacher-to-student ratio is about 1:10 and teachers are in the classroomabout 2 hours per day.

There are 35 classrooms, 5 labs, and 10 practice shops. There is a substantialamount of equipment in the facility, but it is in need of updating and repair. In particular, theschool needs equipment and facilities to train for more modem railroad technology that is currentlybeing installed by local and provincial employers. The school's maintenance and supply budget isclearly inadequate to take care of the extensive array of equipment already installed. The schoolprovides textbooks at no cost to the students. The estimated annual unit cost for both the preserviceand inservice students (for the same amount of services rendered) is about Y 1,850 or Y 0.77 perstudent hour (60 minutes).

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Box 4.3: DALIAN SinPYARD ENTERPRISE TRAiNING CENTER

The Dalian Shipyard Enterprise Traininig Center (DSETC) is an enterprise-basedschool offering two types of inservice VTET programs. The first program is a part-time secondarytechnical school (STS) that produces about 40 graduates each year with an average age of about 35years. This three- to five-year, part-time program is authorized by the Dalian Municipal EducationCommission. The second program offers short-term, inservice training to workers with low tomedium skill levels. Currently, there are 167 workers enrolled in these short-term programs. Theages of short-term inservice students range from 20 to 38 years, depending upon the level and typeof program that they are paticipating in. These programs are authorized by the municipal bureauof labor. The shipyards employ about 11,000 workers. The average income of the workers is aboutY 307 per month, including subsidies.

The Dalian shipyard finances 100 percent of the cost of the programs. TheDSETC is an umbrella training organization within the SOE. As such, it also operates a varietyof other human resource development programs for the Dalian shipyard (e.g., college courses,management training, overseas training, technical and vocational training). The factory educationcommittee provides oversight to the DSETC. The workers education committee also provides inputto the operation of the programs. This sole client relationship closely aligns the program offeringswith the perceived needs of the shipyard.

The STS programs are considered to be senior level technical training at thecenter. All enrollees in the programs must have a lower secondary graduate certificate. Almostall skill training is done on the job and the primary skill trainers of the DSETC are practicingcraftsmen in the shipyards. Such links are practical, consistent, and flexible as needs change withinthe industry and the level of training necessarily fluctuates. The STS offers: shipbuilding, shiptransmission, and enterprise management. For the STS programs, the municipal educationcommission determines: students to be enrolled, programs to be offered, curriculum requirements,examination criteria, and the award of certificates. In 1991, the STS enrolled 12 women in thelong-term STS programs. It is typical that the curriculum mix of an STS program is 90 percenttheory and 10 percent practical. Usually there is a requirement for about 300 hours of on-the-jobtraining, plus the complction of a half-year practical project.

The short-term programs are more flexible and are two to six months in duration.These programs are offered as junior level (450 hours theory and 900 hours practical), mediumlevel (270 hours theory and 270 hours practical) and higher level (770 hours theory and 500 hourspractical) training. The offerings include: metalworking, heat treating, mechanics, sheetmetal,modeling, quality control, mechanical drawing, and welding. With the exception of a large weldingtraining program, all other skill training is conducted on the job. Last year, there were 81 womenenrolled in the various short-term programs. In the short-term programs, the municipal bureau oflabor oversees the junior level (grade 14) and middle level (grade 4-6) training). The bureau alsotests for skill levels and awards skill certificates for these levels. There are no entrance requirementsto these programs. Over the past five years, there has been an average of about 4 percent failuresin the short-term programs.

There are 6 administrators, 22 teachers, 4 instructors, and 95 part-time instructors(shop-based) employed at the center. The DSETC facility has 17 classrooms, a computer lab, awelding lab, and a small library (5,000 books). The estimated maximum facility capacity is 170enrollments in the STS program and 360 enrollments in the short-term programs. The presentcapacity utilization is less than 50 percent. Teachers are reasonably well trained and have above-average industrial experience in the shipyards. The teacher-to-student ratio is about 1:10. Averagestudent contact time is only 1.5 hours per day. Due to very low internal efficiency, the estimatedunit cost is about Y 4,300 per instructional year or Y 3.0 per student hour (60-minute hour).

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are fiuther decontrolled and renumeration for specialized skills such as those of teachers oftraining institutions rises.

Box 4.4: INSERVICE TRANNG IN TIE AVIAiON INSDUSRY (cont'd)

6. The ENTCs and SWSs undertake about 90 percent and are clearly the key institutions for thistype of training. The workers' colleges usualy offcr more theoretical courses and mainly conduct retrainingin basic principles. The ENTCs have the advantage of being able to make ful use of the engineers andtechnicians as well as the production equipment. The SWSs have both the instructors for basic principles andthe tsaining facilities and equipment. The ENTCs have a larger share of workers in courses of 100 hours orless, while SWSs are mainly for training workers for over 100 hours. Full-time training is the dominant modefor both. For entrusted training, the workers usuaUy go to other SWSs and ENTCs. The cost ranges fromY 80-100 per month per student for ordinary workers and about Y 150 per month per technician, to Y 300-500per month per person for training using modern equipment.

7. Since SOEs with more than 3,000 employees usually have their own SWSs, and their ENTCsalso have strong training capacities, most of the inservice training can be undertaken in-house. However, thisis not the case for the SOes with fewer than 2,000 employees (considered small in this industry), so they mustconduct part of their training through entrusted training. To address the issue of inadequate training facilitiesfor the smaller SOEs that MAI plans to establish about 15 centers for retraining Al workers by upgradingENTCs whose training capacity is already strong.

8. Issues identified for inservice training in the Al sector through this survey were as follows:

(a) SOes generaly have satisfactory plans for retraining for technological upgrading, butthey are not as well prepared for training for adjustment of the product structure;

(b) The capacity for training is smaler than the demand, especially for the smaler SOEs(para. 6);

(c) The quality of the instructional staff needs to be improved because many youngteachers lack either real production experience or basic education theory, and teachersneed to update their knowledge about modem production technology;

(d) Budgetary allocation for training is inadequate, severely limiting the scope and scaleof the training;

(c) As a result of inadequate budget allocations, the physical conditions for inservicetraining are insufficient, with regard to classrooms, labs, workshop, and equipment,many of which are outdated by today's production standards;

(f) The absence of a unified entrance requirement (aside from the general requirement ofa graduate certificate and factory recommendation) and a unified graduation exam leadsto different levels of trainees in a single class, which makes teaching very difficult; and

(g) Unified teaching materials are not available for inservice training and thus theinstructors often resort to preparing lectures based on whatever reference material isavailable, includirg textbooks for preservice courses. As a resul, classes often sufferin terms of systematization and standardization. Since the proportion of part-timeteachers is relatively high in inservice training, the contents delivered in the class differaccording to different instructors for eveni the same type of work within the sameenterprise. To address this problem, MAI's education bureau is considering setting upa service center for publishing the teaching material based on the Teaching MaterialsEditing Department of the Aviation Industry Press, and to establish a division withinthis center dedicated to compiling and publishing teaching materials for inservicetraining.

4.49 In discussing cost figures, however, caution should be exercised against attachingtoo much significance to the estimated average figures since it is extremely difficult to obtain a

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Box 4.4: INSERVICE TRAINING M IUE AVIA1oN INDUSTY

1. The following is an illustration of how inservice training is organized and implemented on aindustry-wide basis. It focuses on inservice trainng of two types: (a) training given to surplus wokers forjob transfers; and (b) training for workers whose tasks change due to equipment renewal, technologicalinnovation, and the introduction of new techniques and technology. For most manufacturing industries, todate, the second category of training is predominant, as the number of surplus worker is still controled.

2. The aviation industry (AI) has been forced to undergo sigrificant restructuring as the demandfor military aviation products has markedly declined in recent years, leaving the equipment and techniciansfor military production idle. It has adjusted its product structure to convert from manufacturing only militaryaviation products to producing a variety of civilian products such as civil aviation products, automobiles andparts, textile machinery, medical equipment numerical control equipment, and robots for industrial use. By1988, the share of civil products in total output value was over 70 percent. At present, the Al is concentratingits efforts on technical progress, upgrading civil products, and consolidating the adjustment of its outputstarture. Whether this transformation wiU be successful or not would depend, among other factors, on theretraining and upgrading of workers.

3. The administrative structure for worker retraining consists of three levels-the Ministry ofAviation Industry (MAI), the local Al bureau or corporation group, and the enterprises. The MAI's educationbureau is responsible for worker retmining, with its employees education division I responsible for daily work.At the local level, some provinces have an Al bureau or corporation group which has an education trainingdivision in charge of administration and policy for retraining of AI workers in the geographic area. At theenterprise level, the education training division (or center) is responsible for inservice training activities. Thedivision conducts training itself through its own ENTCs, or entrusts other institutions such as workers' colleges(engineering institutes and TV university), SWSs or inservice STSs to train its workers. The education trainingdivision coordinates its activities with MAl's education and planning bureaus, and the local education,planning, and economic commissions as well as the local labor bureau. Currently, Al has 51 SWSs, 32inservice STSs, and 21 workers' colleges, in addition to ENTCs in all the SOEs.

4. In the survey, 63 enterprises were interviewed, comprising 52.5 peroent of the SOEs in theindustry. They represent 48.7 percent of total Al employees, 64.0 percent of total Al workers, and 63.0percent of gross output value; 13.3 percent of the inservice training was for job transfers and 86.7 percent forpreparing the workers to cope with the introduction of new techniques, technology, and equipment.

5. Based oia the survey of the 63 SOEs, the following describes which institutions are conductinginservice training on what scale. It covers only workers who have undergone training of 50 hours or more:

INSERVICE RETRAING IN 63 SOEs IN TnE AviAnoN INDusrRY, 991

No. of TraineesInstitution institutes Full time Part time On the job Total

ENTC 63 2,095 921 660 3,676(63.8%)

SWS 10 1,006 433 217 1,656(28.7%)

Workers' college 4 71 35 0 106(1.8%)

External (entrusted) training n.a. 264 35 29 328(5.7%)

Total 777 3.436 1.424 906 5766(59.7%) 24.7%) (15.7%) (100.0%)

n.a. = not available.

...cont'd

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reliable estimate of the average cost of inservice training, for the following reasons: (a) mostof the training institutions conduct both inservice and preservice training and it is difficult todifferentiate the expenditures incurred by inservice training from total expenditures; (b) ENTCsoften use the production staff of the parent enterprise as instructors and its production facilitiesand equipment for the students' practice training, but the opportunity cost of these arrangementsto the parent enterprise is not included in the cost of training; (c) likewise, in the advancedstages of practice training, some of the output produced by students contributes to theenterprise's production, and students provide labor at no cost; and (d) costs vary greatly bothacross different specialties and within the same specialty, depending on the relative proportionof time spent on theory and practice, and the training method.

4.50 Financing. The main financing source for ENTCs is naturally the parententerprise. It also receives some revenues in the form of tuition, and some income from theother services it conducts (research, consigned training, etc.). Some ENTCs receive a smallamount from the district labor bureau but not on a regular basis. The SWSs main fundingsource is the municipal (and in special cases the provincial) technical bureau in charge of theschool, and contributions from its client enterprises. For the ETC, tuition (either directly fromthe students or paid by the students' originating enterprises) is the main source of income. Inaddition, there is some funding from the local labor bureau and/or the labor service companyto which the ETC is attached. However, all ETCs are eventually expected to become financiallyautonomous, independent of even the parent LSC. Already, some of the ETCs are self-financingwith the exception of the initial capital expenditure to establish the training center (see Table4.16).

Table 4.16: MAIN SOURCES OF FUNDS, BY TRAINING INSTITUTIONS, 1992

ENTC SWS ETC

Provinciallmunicipal technical bureau xMunicipal/district labor bureau xEnterprises x xTuition x x xSubsidiary enterprise xUI Fund (through relevantlabor bureau) x

Source: Questionnaires to 20 training institutions in Dalian and Wuhan.

4.51 Several observations are made. First, compared with preservice training, tuitionand fees from students comprise a significant proportion of the total income. Second, there isno budgetary allocation from the central government for inservice training. The technical andlabor bureaus usually make allocations only to those schools under their supervision orownership. The enterprises play a major role. Based on a 1982 regulation, enterprises areencouraged to spend the equivalent of 1.5 percent of their total wage bill to fund recurrentexpenditures for inservice training. If spent for this purpose, this amount would be exempt fromtaxes, and thus the exemption is regarded as the government's encouragement for workertraining. In reality, enterprise managers say this amount is far from sufficient to cover inservice

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training needs, and many spend more than this amount.UI/ However, in practice, theenforcement of this regulation is not strict. For example, enterprises with losses are notpenalized even if they spend less on worker training. Also, there is no option, as there is insome other countries, for enterprises who do not see the need for training their workers to payinto a central training fund. 14/

4.52 The proceeds of the UI fund can also be used to defray the cost of providingtraining to unemployed and surplus workers, and this is being practiced extensively in the twocities visited by the mission. Such payments are made almost exclusively for the type of trainingconducted at ETC.

G. PLANNING AND MANAGEMENT FRAMWORK AND LANKS wrIm NDUSRY

4.53 All the training institutions have extensive links with enterprises directly andlorthrough the labor or technical bureaus in charge of the institution. For the ENTCs, the parententerprise's worker education committee provides overall guidance. The committee serves tochannel the training requirements of the enterprise to the training center. The sole clientrelationship enables the ENTC to arrange its program offerings to reflect the enterprise'sperceived training needs. Since skilled craftsmen and technicians often work as trainers, skillsthat the workers are actually using in the workplace can be taught too. Such links are practical,consistent, and flexible as needs change within the industry.

4.54 For the SWS, the municipal labor bureau usually provides policy direction,approves course offerings, and selection of trainees, and conducts the skill examinations andcertification. The municipal technical bureau offers the link with enterprises. There isconsiderable interaction between the school on the one hand and the managers and trainingofficials of the SOEs sending their workers for training on the other. While no formal advisorygroups are formed, several SWSs have a management committee consisting of enterprisemanagers and representatives of the municipal bureaus of labor, finance, tax, price, and technicalbureau. This forum helps convey the requests of the enterprises and overall policy direction ofthe municipality.

4.55 The ETCs are usually operated by the municipal or district labor bureau or its[SC. The local labor bureau provides policy direction, course offerings, and studentrecruitment. The labor bureau or the LSC has continuing meetings with managers and trainingofficials of the main enterprises in their district. These meetings provide an opportunity forreaching agreements on specific training and what types of workers should participate in thecourses. Some ETCs supplement these meetings with a questionnaire survey on programs to allthe enterprises in their geographic area. The labor bureau requires the ETC to conduct a tracersurvey every two years, which provides another form of feedback.

WLI The Baoshan Iron and Steel Company spends as much as the equivalent of 6 percent of its totalwage bill on worker training. The aviation industry has voluntarily increased this target figureto 2.5 percent of the wage bill. The *1.5 percent3 is not meant to represent any level ofadequacy of training costs but rather is an incentive (in the form of tax exemption) for enterprisesto carry out inservice training for their workers.

J4/ In addition to the '1.5 percent of wage bill,' enterprises are allowed to use part of thetechnological renovation fund for inservice training. No concrete figures were obtained on howlarge the share from this fund might be.

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5. INSTITUTIONAL ISSUES AND RECOMMENDATIONS

A. LOW INTERNAL EFICNCY

5.1 The 1987 Bank study on VTET found that low internal efficiency was one of themost serious issues in preservice programs. The present mission's findings indicate that this isalso generally true, although to a somewhat lesser extent, for inservice training. Internalefficiency is particularly low in the following areas:

(a) Workshop Utilization. In all training institutions visited which had their ownworkshops and laboratories (and not all institutions had such facilities), therewas consistent underutilization of the facilities, most by at least 50 percent. Thisis mostly due to shortages in consumable materials and/or appropriateequipment, shortcomings in curricula design and instructional management, andinefficient facility programming. In all institutions there was an apparent lackof resources to purchase materials, tools, and equipment, and the shortages wereoften extreme.

(b) Teaching Lead. As observed earlier, the instruction load of the teachers, bothas stipulated by regulation and in practice, is far too low. While it is recognizedthat Chinese teachers often have duties that their foreign counterparts do not, thevery low teaching load (in some schools a mere 8 hours a week) must beconsidered an inefficient use of skilled human resources.

(c) Capacity Utilization. Although almost half of the training institutions visitedhad utilization ratios close to the optimum level (80 percent), there were alscmany institutions with significant excess capacity. This was in particular trueof ENTCs, which typically had at least 50 percent more facility capacity thanwas being used. The mission was informed that this situation is common inmany, if not most, of the ENTCs across the country. This state of ENTCs ismost likely attributable to a lack of training resources as well as the nature anddemand of industrial training. SWSs, and to a lesser extent ETCs, had moreacceptable utilization rates.

B. SEVERE RESOURCE LIMITATIONs

5.2 Severe limitations on resource is one of the most critical factors ontributing tothe low utilization rates at training institutions. The limitations are particularly s Nvere for thepurchase of instructional materials, consumable materials, tools, and equipment. The availabilityof such instructional aids is especially important when an institution engages in high-cost skilltraining, such as electronics, welding, or food processing, or for skills in which repetition andpractice is an important requirement for psychomotor (skills and hand-eye coordination)

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development. In these types of training activities, there is generally a high consumption ofmaterials and tools.

5.3 When consumable materials and instructional tools are limited, there are fewsatisfactory alternatives to counter the shortcomings. Most institutions try to adopt lower costtraining approaches, such as the use of sandwich and cooperative programs L/ in industry. Theinstitutions may simply reduce the requirement for skill training in the curriculum. If thelimitations are not severe, the training institution may be encouraged to move toward industry-based skill training, a preferred and lower cost approach. However, if the limitations are severe,the institution will be forced to substitute theory courses for skill training, and to simulate skilltraining with small models, chalkboards, paper, and pencil. The use of these options leads torapid deterioration in the quality of training. It also leaves workshops and labs underused orunused, and equipment deteriorating, resulting in a decline in internal efficiency. At the sametime, this affects the employer's confidence in the training institution as a service provider andoften incurs a loss of external efficiency even if there is an unmet need for skilled workers. Ifthis is the case, the training institution's orientation to a demand-driven approach is notsufficient to guarantee external efficiency.

5.4 It is not easy to find a solution to the resource constraint issue, becausevocational training is by nature substantially more costly than general education, and the traininginstitutions are dependent on their sponsoring government bureaus or enterprises for resources.The EN,TCs are in the most advantageous position to secure adequate resources as long as theparent enterprise is fina icially viable. However, ENTCs of smaller or less profitable enterpriseswould still face difficulties. Other means of generating resources include increasing the costsrecovered from enterprises that send their workers to the training institution and from thestudents themselves. As wage reform deepens and workers see (and reap) the merit ofimproving their skills, they should become more willing to finance the training themselves. Onthe other hand, wage reform will also lead to significant increases in staff salary, particularlythe salaries of those teaching specialized skills that are in demand, and thus the share ofpersonnel expenses in total recurrent costs is unlikely to decline.

C. TEACHER QUALICATION

5.5 As in most VTET programs in Asia, there is a chronic need to improve thetraining of teachers. In general, too many teachers are still too academic and lack an adequateorientation to the world of work. It would be effective to put in place a policy requiring allVIET teachers to have a substantial amount of industry experience related to their specialtybefore they can teach. This would not be difficult to accomplish because the SOEs would bewilling to provide such an opportunity if it was requested by the authorities. In one SWS visitedby the mission (Dalian Locomotive Drivers School), the teachers were required to have at leastthree years of industry experience before teaching. The provincial railroads provide thisexperience and training for newly hired teachers before they teach at the SWS. The teachersshould also be exposed to teaching methodologies other than the traditional classroom lecturesand limited demonstrations. The methodologies are discussed in Section E below.

11 These are formal preservice or inservice training programs where students attend scheduledclasses in an institution to receive part of their training and then work for part of the day (oralternating days) as a trainee in industry or business. Usually, they are paid by the cooperatingemployer.

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D. INsTuCToINAL MATERIAL AND CURRICULUM

5.6 The quality of the inservice delivery is being adversely affected by the-lack ofhigh-quality, relevant curricula and instructional materials prepared specifically for inservicecourses. There seems to be a pervasive assumption that preservice content in courses is the sameas inservice content. This is not the case because as inservice programs are usually much shorterin duration and provide services to adults who have substantial work experience and differentrates and styles of learning. A priority task would be to adapt the available preservice materialsin a fashion that more explicitly takes into account the characteristics and needs of inservicestudents.

5.7 In this context, there is also a need to establish a system to quickly developquality curricula and instructional materials, based upon the student's past experiences and theemployer's needs. This system should be textbook free and should allow for flexible, time-free,competency-based training in a variety of environments. There are many options to consider inthis regard. The internationally accepted DACUM approach 2/ (possibly computerized) maybe considered because it is particularly adaptable for use in short courses that are taught in bothindustry and in a classroom setting. At the same time, organizational structures and policies foraccommodating such flexible approaches should be considered. Ideally, the process should bedecentralized and implemented at the local (municipal) level. This decentralization of effortwould result in the capacity to quickly prepare any type of curriculum as required by the localenterprises. They could be actively involved in the process and the result would be directlyrelevant to their needs. It should be noted, however, that this approach would require aconsiderable amount of training in the selected curriculum development processes.

5.8 At present, the relevant authority (e.g., state, province, or municipality) dictatesthe duration and content of most of the inservice training institutions. This is less evident in theETCs, but, even there, it is common. This mandate virtually eliminates any local option to setup more flexible, time-free training methodologies. There is a need to modify policies to ensuremore flexibility in the local institutions' ability to modify content and length of programs to meetlocal student and employer needs. Fixed-time programs result in a course or program with lesscontent than is needed if the period is not adequate to meet the demands of training as specifiedby the employer. This results in graduates who are inadequately trained for employment.Conversely, if the time period is too long, the content must be expanded to fill the hoursrequired. This may result in overtraining, which, in turn, results in costly, inefficient, andwasteful service delivery, with negative effects. Students from such programs often lose theirdesire to work in the jobs for which they are being trained and, if employed, are oftentroublesome to their employer. Alternatively, long fixed-time programs often have largeunprogrammable gaps in their curricula, leaving students with nothing to do. In either case, theresult of excessively long programs is inefficiency. The mission saw examples of all of theabove types of problems in fixed-time programs.

2I Developing a curriculum with extensive use of modules.

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E. TEACHNG MEMODOLOGY

5.9 In many training institutions visited, the proportions of time devoted to theoryand to skill training were unbalanced. The municipal bureaus are concerned about this issue andare requiring an increasing amount of skill training. In practice, however, the resourcelimitations noted earlier often seem to prevent the training organization from offering therequired amount of skill training. Some schools substitute unprogrammed industry attachmentsinstead of providing any skill training. However, sending a student to a factory to work at anyjob assigned is not a meaningful substitute for participation in a well-structured training program.Policies should be reformed to carefully describe the minimum requirement in all skill trainingactivities. As it stands, many students are assigned to SOEs as free labor with little trainingbenefit being received.

5.10 All VTET in China is currently based upon fixed-time programming. The meritsof introducingflexible-titne approaches should be considered, given the differences in individuallearning speed for inservice students. There are many variations of such approaches, one beingopen-entry/open-exit, competency-based training. This is a scheme in which students come intothe program at any time and may leave at any time. Each student progresses through acompetency-based curriculum that is divided into performance-based objectives (cognitive,affective,3/ and psychomotor). The evaluation is formative (continual), and once the studentshows that he can undertake all of the required tusks at a certain standard, then he is graduatedregardless of how much time it took to train him to that standard. In such programs manystudents will speed through a program and into employment without any problem. Others willtake longer to acquire the necessary knowledge and skills. This approach has been proven withmillions of students in many countries and is much more cost effective than time-basedapproaches. It will also allow for a substantial increase in the output of training institutions.Using high-impact curricula, it is possible to train good combination welders in six months ratherthan the three years currently experienced in many preservice programs in China. While it isquite different as a program concept from the existing programs in China, its introduction shouldbe considered because as it would allow for a more efficient use of teachers' and students' timeand existing facilities.

5.11 Another issue regarding teaching methods is the he:vy concentration on longlectures and of rote memorization. There is a need to move away from this traditional approach,and consider use alternative and practical teaching methods such as (a) performance-basedobjectives in teaching, (b) demonstration techniques, (c) audiovisual and computer-based teachingtechnologies, (d) simulation technologies, (e) competency-based teaching, (f) learning activitypackages, and other types of teacher-prepared materials.

F. MANAGEMENT, PLANNiNG, AND COORDiNATION MECHANISm

5.12 In general, the quality of administrative and fiscal management at the institutionallevel were found to be satisfactory. There is, however, an almost universal need to upgrade theknowledge and skills of managers and training officials in the areas of planning, scheduling,implementing, and evaluating VTET programs and students. This is particularly evident in thetraining institution's management of short-term programs, where there is much scope for

If Teaching of attitudes and values.

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innovation and the creative use of community and enterprise-based skill training, and a varietyof flexible and cost-efficient options exist. Some optional approaches that instructional managersshould become familiar with and consider incorporating in programs include (a) classroom-based,subject-centered, technical libraries; (b) a single teacher to combine theory and skill training inthe laboratory; (c) time-free VTET approaches (see para. 5.10); (d) class-sized projects andvestibule training in industry; (e) informal and formal apprenticeship programs as an option toinservice training; (f) industry-based training approaches; (g) multishift training within the samefacility; and (h) cooperative VTET.

5.13 The variety of formal and informal links between the training institutions andindustry were earlier described in detail. These arrangements facilitate communication betweenindividual institutions on the one hand and employers and government on the other, and havemany merits. However, on a sector-wide basis, the management and planning and coordinationmechanism could be strengthened further. For example, there is still considerable trainingcapacity within the different types of training institutions that have not been fully exploited, themain reasons being (a) a lack of overall coordination between the different entities (employers,government, and the different types of training institutions); (b) the absence of a complete localor municipal database on allocation of training places; and (c) the tendency of individual trainingunits to act as isolated entities serving almost exclusively the sponsoring enterprise, technicalbureau or district, oblivious of the activities or services of other training institutions. For amultidisciplinary area such as VTET, and in order to make most use of the scarce financial andphysical resources, better coordination is needed between the concerned authorities. Inparticular, the artificial barrier between training institutions and schools under the laborauthorities and those under the education authorities should be eliminated, because both typesof schools (and both offices) are dealing with VTET.

5.14 It was encouraging to observe that in Dalian, a Coordinating Committee forVocational Education had been formed since 1982. Under a deputy mayor, it includes thedeputy directors of the concerned bureaus Oabor, education, planning, finance, commerce, etc.)who formulate policies and programs for VTET and solicit the views of the industrial bureaus.The coordinating committee itself meets once or twice a year, but working-level officials of theconcerned bureaus are in touch on a regu'1r basis. Experiences from other countries indicatethat such a committee would enhance its effectiveness if it included representatives of industryand took a more active and decision-making role, expanding its duties to include such tasks as:(a) identifying local common training priorities in new and advanced technologies; (b) identifyingcommon institutional training equipment, facilities, and programs needed locally; (c) establishingcriteria within national guidelines to set up and activate a local common training fund;(d) authorizing and evaluating expenditure from the fund; (e) determining local arrangements forapplying national skill test and certification systems; and (f) providing advice and publicity topromote efficient training and retraining.

G. ExTERNAL EFFICIENCY ISSUES

5.15 It is difficult to evaluate the external efficiency of current inservice training inChina through the variables normally used, such as the comparison of the cost and the outcomeof training interventions. Such outcome can include time taken to enter employment in the skilllearned; or, within enterprises, reduced damage, waste, and operational downtime; or improvedlearning times in attaining acceptable quality and speed of operation. Broader labor marketindicators include unfilled vacancies and trends in earnings. These measures are not readily

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applicable in China where employment has been traditionally guaranteed, wages controlled, andlabor mobility severely restricted.

5.16 While external efficiency seems high as attested by the high proportion ofgraduates who are placed, and the continuing exchange of views between training institutions,employers, and government bureaus, it would be misleading to conclude that training isnecessarily externally efficient. The high placement rate is much more likely to be a reflectionof the Government's policy of full employment, regardless of operational need. It could be areflection of an absolute deficit of most types of skilled employees and a strong social demandfor the inservice training being offered. (Unemployment of skilled workers in the Dalian areais low, and many such jobs go unfilled for months.) Or, it could reflect the shortage ofinservice training slots. Thus, it may be that the shortage of skilled labor is contributing to thehigh placement rates, and to the demand for places in inservice training institutions. When anopen labor market develops, wages are decontrolled, and managers have a better understandingof the operational costs and benefits of creating a skilled workforce, conventional measures ofexternal efficiency can be applied. Meanwhile, as in many other countries, mechanisms areneeded both to encourage and to demonstrate good training, and to engage local managers indetermining and applying policy.4/

5.17 As enterprise and price reforms deepen and the hard budget constraint starts tobite, enterprises and training institutions will become more conscious of the low utilization ratesof their facilities and equipment. The likely outcome would be for training centers to try toprovide the complementary inputs (consumable materials, etc) so that the utilization rateumproves (and increase the rate of cost recovery to cover the costs of these inputs), lease thefacilities and equipment to other entities when they are not being used, or shut down trainingcenters that prove too inefficient to maintain (i.e., those for which there is insufficient demand).Utilization rates overall are therefore likely to improve. At the same time, access to externaltraining institutions by workers of small or loss-making enterprises which no longer find itprofitable to operate their own ENTC should be ensured. Wage reform and increased labormobility will make it more costly and difficult for the training centers to find and retain highquality teaching staff, leading them to be more efficient in the use of this input. At the sametime, however, there is also the danger that as enterprises increasingly come under pressure tobecome financially viable, they may be reluctant to train workers who can then leave theenterprise before it can recoup the costs. Effective goverunent policies and funding as well as

41 There are, however, examples of enterprises in China which have identified operational trainingneeds, organized corresponding training programs, and the results have been found to be costeffective. The Beijing University study (1992) examined the external efficiency of inservicetraining undertaken in three steel works. Trlining programs were mainly designed to cope withtechnological change. Because the programs were run with clear operational objectives, theywere quantifiably successful, and contributed to improved machine performance, greater plantefficiency, and enhanced profitability. Also, in one case, training was focused on teaching theslills needed to run diversified operations as a means of redeploying surplus labor. This not onlyhelped to make the ancillary service operations profitable, but also reduced wage costs in theinefficient main enterprise, thus demonstrating an effective way for old enterprises to address thetwin problems of surplus labor and low productivity. The same study looked at an SOE in theaviation industry, which introduced training programs to assist its switch from military to civilproduction. As a result of training, annual production of compressor ets rose from 100,453 in1989, to 165,621 in 1991, and machine downtime fell from 20 percent to 5 percent. Themeasured output of individual workers also increased substantially after training, demonstratingthe value of practical training programs driven by enterprise demand.

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industrial programs to encourage investment in human resource improvement to counter thistrend need to be considered. The need to improve instructional material, curriculum andteaching methods, and to train teaching staff in their use remains regardless of the pace ofenterprise reform. However, the case to strengthen the planning and coordination mechanismwould become stronger, since as enterprises gain more autonomy over their activities,opportunities for contact between govermment and industries become fewer, and withoutcoordination there is a risk that different entities could be duplicating efforts in the field ofvocational training where scale economies make such duplication inefficient.

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6. EMPLOYMENT AND RETRAIING STRATEGIES INOTHER COUNTRIES

6.1 In recent years, substantial growth in world trade, increased competition, andrapid technological change have led to planned or forced industrial restructuring on anunprecedented scale in most industrialized countries. This has created the potential for massiveunemployment, which is often concentrated in single industries and localities. Governments andemployers have come under intense pressure to ensure that their policies are responsive to thechallenge of easing social and economic transition to new patterns of enterprise and employment.The following sections review (a) how different countries have adopted different labor marketand employment policies to address the issues of industrial restructuring, with particularreference to the cases of Japan and the United States where the respective roles of thegovernment and the enterprises, are contrasted; and (b) national funding mechanisms forinservice training and their underlying policy aims. The review concludes with a series ofobservations on the elements of retraining programs that make some more successful than others,thereby indicating the key considerations in designing effective programs.

A. LABOR MARI= AND EMPLOyuENT POuCIES

6.2 Most governments in industrialized countries either expect enterprises to avoidreleasing surplus workers to the open labor market, or themselves provide some level of supportto all unemployed workers, or pursue a combination of both. Government employmentprograms for displaced workers who come onto the open labor market have been called either"passive" (when directed primarily to short- or long-term income maintenance), or "active," inpromoting employment opportunities.1/ In their application to the individual, both types ofprogram are often limited by time, and conditionally linked to each other. Passive programsprovide compensatory income support for displaced workers and their families, throughpayments in cash or in kind for unemployment benefits, severance and pension rights, earlyretirement, housing, health care and/or general welfare (the "social safety net"). Activeprograms aim to shorten the duration of unemployment, and to improve the future income-earing potential of the unemployed. These programs include (a) direct job creation andemployment subsidies; (b) employment services, which provide information, advice, andassistance in finding and securing a new job; and (c) retraining programs.

6.3 The mix of programs adopted in different countries varies widely. lTus, until1988, labor market policy in Britain (with unemployment at 9 percent) emphasized government-funded unconditional income-maintenance paid to the individual, and temporary employment

LI D. Fretwell et al., "Employment Dimensions of Industrial Restruchuing" (unpublished),Washington, D.C.: World Bank, April 1991; Duane E. Leigh, "Retraining Displaced Workers,*(woring paper), World Bank, August 1992.

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subsidies to distressed industries and regions. By contrast, in Japan, private sector employersare expected to bear the major responsibility for maintaining a low level of unemployment(which was 2 percent in 1988), and the government spent only 0.20 percent of GDP on labormarket programs, compared with 0.77 percent in the United Kingdom.Z/ In Swede., thegovernment provides employment security by taking responsibility for job placement, retraining,and payment (through the new employer) of transitional wage subsidies. The Swedish programcosts 1.79 percent of GDP and is financed by high taxes. On the other hand, workers whobecome unemployed in the United States are expected, while drawing public benefits, to take theinitiative in seeking their own new jobs, availing themselves of appropriate counseling, jobsearch, and retraining support services.

B. NATIONAL LABOR MARKET POLICES To ASSIST INDUSTRLAL RESTRUCTURING

6.4 To support industrial restructuring programs, and to alleviate the social impactof large-scale redundancies, recent policy in many industrialized countries has targeted additionalspecial assistance to surplus workers in specific industries and localities. 'Targeting" is justifiedby the competitive benefit which restructuring is intended to confer on the economy as a whole.These special programs tend to reflect each country's general policy on unemployment, whichdetermines the assignment of responsibility, incentives and support for retraining programs, andalso reflects different national approaches to the development of industrial skills. Thus,programs of retraining for new employment need to be understood within their national context,and as an integral part of the package of other passive and active measures designed to facilitatethe restructuring process. The cases of Japan and the United States, which provide contrastingapproaches, are reviewed.

Japan

6.5 The traditional principle of the Japanese system is that the employing enterpriseassumes a life-long responsibility to the employee. Hence, large firms in Japan make extensiveinvestments in training and education, thereby increasing the versatility and flexibility of theirstaff.3/ These two factors have made it both socially appropriate and operationally feasibleto transfer workers internally to healthier divisions of the same firm. Equally, whenredundancies are inevitable, the employer has a moral and often a legal obligation to compensateworkers generously for the implied breach of trust.

6.6 These obligations are reflected in Japan's 1983 Law for Employment Assistancein Specific Industries. The law states that firms planning to displace workers are to besubsidized at two thirds of the wage bill for six months (three quarters in the case of small- andmedium-sized firms) on condition that the firm gives six months of retraining to the staff to bedisplaced. In addition, firms employing displaced workers qualify for a subsidy of one quarterof the wage bill (one third for small firms) for a year. Despite the subsidies, governmentprograms are augmented by those of many private firms in declining industries, which take

2;1 Organization for Economic Cooperation and Development, Employment Outlook Paris: OECD,July 1989.

,1/ R. P. Dore et al., Japan at Work,' Paris: OECD, 1989; L. Atiyas et al., 'Fundamental Issuesand Policy Approaches in Industrial Restructuring," Washington, D.C.; World Bank, April1992.

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primary responsibility for retraining and relocating workers into other industrial activities, andpay substantial amounts for layoffs, relocation, and early retirement. In addition, firms are awarethat labor unions monitor their placement records, and that a firm's bad record can spur demandsfor higher discharge payments in future negotiations.

6.7 Several other factors contribute to the success of relocation and retrainingprograms in Japan.41 First, general education, which is highly esteemed, is well supportedby both society and the family. Tbis ensures receptive trainees, and supervisors who are ableto give coherent training at the workplace, within firms which explicitly aim to be "learningorganizations." Second, there is strong demand, and a well-developed system, for vocationaland technical education from the upper secondary to the university level. Third, the traditionof training for life-long employment encourages investment in new and advanced skills; animportant element in creating and absorbing technological change. Fourth, good complementaryuse is made of external, individually paced, and institutional training programs in order toenhance on-the-job learning: employees are encouraged to enroll in appropriate inserviceprograms throughout their career. Thus, retraining for relocation falls relatively easily withinan accepted pattern of self development.

United States

6.8 In the United States, the usual, and accepted, response of US employers to adownturn in demand is to lay off surplus workers. A majority of all wage ai. salary workers,including displaced workers, then became eligible for benefits under standard unemploymentinsurance programs financed from tax contributions by employers, and administered byindividual states. Benefits run for 26 or 39 weeks. In addition, the Trade Adjustment Assistanceprogram (TAA) was aimed at providing a constructive alternative to trade protection, byproviding supplemental payments to help industry and workers respond to competition fromimports through retraining, reequipment, and development of new products. However, TAApayments have failed to achieve the expected labor market adjustment, and may actually havereduced the incentive for recipients to find new jobs. The program will end in 1993.

6.9 Also, prior to 1988, in addition to standard unemployment and TAA support,displaced workers were eligible under the Title III program of the Job Training Partnership Act,1983, for training, retraining, job search, relocation, placement, and other support services. Inprinciple, any permanently displaced worker was eligible. However, about 38 percent of totalfunds was targeted to specific factories, industries, or localities. The program passed on to thestates many of the earlier federal responsibilities for determining priorities and targets. Projectsunder the Act were locally operated by private industry councils, in which local employerscooperated with such bodies as community colleges, vocational schools, and local employmentagencies to provide employment and training services. Despite the program's emphasis ontraining, relatively few participants underwent classroom training, on-the-job training, orremedial training. However, most participants received other job placement assistance; for

A/ M. Sako and R. P. Dore, 'Teaching or Testing: The Role of the State in Japan," Oxford Reviewof Economic Policy, Vol.4, No.3, 1988, pp. 72-81.

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example, 80 percent received job counseling, and 60 percent received job search assistance. Astudy conducted in 1986 found an average placement rate of 69 percent.5/

6.10 Since 1988, the Economic Dislocation and Worker Adjustment Assistance Acthas been the principal basis of the US employment adjustment program. It underlines the USapproach that the individual, with appropriate government support, rather than the corporateemployer, should take prime responsibility for seeking out, and preparing for, reemployment.To encourage retraining, the Act establishes time limits, from the date of unemployment, forenrollment in training programs, in order to qualify for supplemental income support. The totalbudget for employment and training assistance for displaced workers is $980 million; 80 percentis assigned to the states and 20 percent is assigned at the discretion of the secretary of labor.

6.11 In addition to direct programs of federal assistance, state law imposes varyingobligations on employers regarding notice of plant close-downs, severance benefits, continuationof health and welfare entitlements, job counseling, placement, and occupational retraining.Many large private firms, notably in the automobile and steel industries, have undertaken specialjob relocation and retraining initiatives in cooperation with private and public bodies, and withsome government financial support.

6.12 The actual process of retraining, job search, and relocation has proved slow andpainful for many workers, and older workers in particular experience difficulty in adapting theirskills to new industrial demands. In many cases, collective bargaining, backed by state andfederal legislative requirements, was the individual worker's best route to suitable transitionalor retirement benefits.

6.13 Annex 7 contains a detailed description of practices in Canada as an example ofa comprehensive national approach.

National Policies to Support Training

6.14 It is increasingly recognized that the competitiveness of firms, regions, andnations depends on the skills and motivation of the workforce. The diffusion of newtechnologies, changes in work organization and management style, and increased globalizationof product and skill markets have led to rapid changes, and the need for a greater variety ofskills. There is concern in many countries that recovery or development will be hampered byemerging gaps in skills.6/ The quality of the labor supply has therefore become a majorconcern in many countries, with far-reaching implications for education and training policy.

6.15 Many governments provide or sponsor training and retraining programs for theunemployed as a major element of their labor market policies. Programs may be targeted at thelong-term unemployed, at those who become unemployed as a result of industrial restructuring,

I/ H. Tan, 'Policies Toward Troubled Industries in the United States: An Overview,' RandCorporation, Santa Monica, California, 1991.

fil OECD, Employment Outlook, July 1992; Janet Hilowitz, 'Education and Training Policies andPrograms to Support Industrial Restructuring in the Republic of Korea, Japan, Singapore and theUnited States,' Training Policies Discussion Paper No. 18, International Labor Organization,November 1987.

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ci a regional or sectoral basis, or to address specific aims of social equity. Typically, suchprograms are shorter and more sharply focused on specific labor market needs than standardtraining programs directed at young entrants. In many countries, retraining programs inprogress help to reduce short-term unemployment rates by up to two percentage points.7/However, the main impact on unemployment should occur after training. There is evidencefrom OECD countries that the proportion of trainees finding jobs soon after training is on theorder of 70 to 80 percent. Estimates vary according to the prevailing level of unemployment.Thus, in Sweden in 1988, when there were widespread skill shortages, 72 percent of thosefinishing courses found jobs within six months. By contrast, in 1983, only 60 percent found jobssix months later, because job vacancies were fewer, and thus mismatches between training andlabor market needs were more evident. Assessment of the usefulness of retraining is subject toother variables. Hence, it cannot be known whether course participants would have succeededin getting a job without training. Also, there is little information about whether suitable jobswere available in the labor market, how long former trainees remained in jobs, whether theydisplaced other job-seekers, or, conversely, whether they failed to find (or enter) suitableexisting vacancies.

6.16 It is widely recognized that national standards of general education are criticalto an articulate and flexible workforce.8/ In most countries, primary and secondary educationis the responsibility of public authorities, or of specialized educational institutions. Even wherethe arrangements are in the hands of the work units of parents, as is frequently the case inChina, the common objective of education policy is to engender basic numeracy, literacy, anda capacity to handle later educational, vocational, economic, and social challenges. In mostcountries in the past, before the advent of accelerating technical and technological change, it wasnormal for the training of new job entrants to be slow, static in content and method, predictable,and inefficient. However, today, most job entrants face several unavoidable job changes (withor without a change of employer) in the course of their careers. Thus, for adults, retrainingneeds to b. swift and efficient, which calls for functional flexibility based on a good generaleducation. Emerging demands for skills are often barely discernible even to employers, and areusually far less apparent to institutional providers of training and to labor market planners.Hence, to keep abreast of changing labor market needs, skill development requires the activecollaboration of enterprises, training institutions, and government in planning, financing, andproviding retraining for the employed and unemployed.

C. NATIONAL TRA1iG FuNDS

6.17 Many industrialized, newly industrialized, and developing countries have soughtto strengthen cooperation through various funding mechanisms. Depending on policy aims, thesevary according to their source of financing, disbursement criteria, recipients, organization, andadministration. Aims can include:

(a) The use of a tax levy (on a payroll or other basis) to raise revenue from targetsector(s) in order to finance government training programs. Disbursement is

7/ Organization for Economic Cooperation and Development, 'Labor Market Policies for the 1990s8Paris: OECD, 1989, p. 37.

I/ World Bank, Vocational and Technical Education and Training (policy paper), Washington,D.C.: World Bank, May 1991.

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through general funds to individual trainees (e.g., by a 'voucher" program) orto training institutions, with no disbursement to contributors; for example, LatinAmerican governments such as Colombia use a payroll levy to provideinstitutional training facilities and consultant services to all sizes of enterprises.

@) Some countries have systems with the same aims as in (a), but which also seekequity in sharing training costs by compensating enterprises which train but maylose skilled workers to competing enterprises, and give a financial incentive toemployers to train for their own needs. They use a tax or levy with eligibilityfor exemption; for example, companies in Brazil can withhold part of the levyfor use in direct contracting for services.

(c) Others have systems with the same aims as (a), but also share the cost, andericourage enterprises to invest in training programs as an alternative to publicprovision for sectoral or wider needs through a tax or levy redistributed asgrants; for example, the Skills Development Fund in Singapore uses grantdistribution to encourage in-plant training, small enterprise training, and trainingquality. The initial 1964 UK legislation authorized levies on enterprises to beredistributed as grants against varying sectoral criteria.

(d) Some countries use industrial, public, or proprietary institutional providers oftraining as instruments of policy (e.g., to train workers in advanced or priorityskills, or for disadvantaged or special groups). Public funds are distributed asgrants to providers or recipients of training, whether or not as part of alevy/grant system. An example is the US system of private industry councilsand the 1983 Job Training and Partnership Act. These mechanisms are beingused to assist worker adjustment resulting from economic dislocation.

(e) Some countries forgo revenue in order to achieve enhanced productivity and alower budgetary requirement for the public training system. They provide taxincentives for in-company training programs. The incentives are perhapsdifferentially applied to assist other policy goals such as small enterprisedevelopment; for example, all levy exemption schemes are variants of this.Some governments have provided additional incentives through exemptions fromdirect taxes, a practice already partially adopted in China.

6.18 The options, as listed, are of decreasing attractiveness to governments, and ofincreasing interest to enterprises. Without the commitment of employers and workers'representatives, training funds are not well spent. Consultation with industrial interests helpsto ensure both the right mix of approaches, and the acceptability and likely effectiveness ofproposed measures. Each approach entails some risk. A levy-based approach increasesemployment costs, and hence threatens job opportunities. As a tax, it tends to negate other taxincentives, and hence restrict the growth that its payoff-enhanced skills-aims to encourage.Disbursement to public institutions, individuals, or enterprises will only enhance efficiency ifaccompanied by sound assessment systems, advice, and counseling. The same is true of taxdeducions, which may forfeit revenue without generating comparable benefits. The greater thenumber of transactions for the transfer of funds, the more cumbersome and costly the resultingadministrative arrangements, and the greater the scope for abuse.

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6.19 In addition to the structure of a fund, other preliminary issues include its locationwithin the government system and its management. The Ministry of Labor or an affiliate isfrequently the responsible authority in other countries, because of its links to workers,enterprises, and the labor market (currently in China, local training funds are administered bylocal labor bureaus). The management of a fund is best made as autonomous as is consistentwith proper controls, and its managing board ought to include official, industrial, and academicmembers, so that policy, which should be locally responsive, reflects these interests andperspectives.

6.20 The immediate policy aim of this form of cooperation in the management oftraining is to provide short-term incentives to improve enterprise-based and enterprise-sponsoredtraining programs. A parallel aim is to demonstrate the operational payoff of a better-skilledworkforce: investment in enterprise-based training has demonstrated an attractive cost-benefitratio.2/ Benefits include reduced learning time, quicker attainment of production speeds andstandards, and reduced waste and machine downtime from unskilled operators. Managers ofenterprises are often not aware of potential benefits, or of how to achieve them (i.e., identifyingkey areas of operational payoff, assignment of skilled supervisors or workers as instructors,designation of training facilities and periods, planning courses and curricula where needed,giving access to external training programs, evaluation of benefits, and so on). A well-operatedfund assists enterprises in identifying and realizing potential benefits, by organizing orientationseminars for managers and providing resources so that they can use external consultants. Also,proprietary training institutions are given financial support to respond to social and industrialdemand for skills.

D. CONCLUSIONS

6.21 In most industrial countries, retraining programs for the involuntarilyunemployed are part of a varied package of benefits that includes payment of entitlements;income support; continuation of health and welfare benefits; and job search, counseling, andplacement services. The experience of other countries in addressing the implications of industrialrestructuring for labor market and training and retraining suggests that:

(a) To respond to changing organizational and technological needs, the functionalflexibility of labor in the future is best established on the basis of articulateness,numeracy, and literacy achieved through good primary and secondary education,and is rarely enhanced by training at the secondary level in specific vocationalskills.

(b) Successful industrial restructuring need not imply large-scale layoffs: Japanprovides evidence of successful redeployment of labor, and sustained orenhanced productivity within a continuing employment relationship, althoughthis is likely to depend on governmental support, and on skillful enterprisemanagement of product diversification, mergers, operational rationalization, andproductivity enhancement.

2/ Examples from Chincse enterprises are cited in Chapter 5, footnote 4.

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(c) Adequate notice of redundancy, and provision of counseling and placementservices have been the most successful elements of job relocation programs insome western industrialized countries.

(d) Retraining and job placement programs are most successful when the releasingand recruiting enterprises are the prime agents in implementing the transitionalprograms, supported, if appropriate, by govermnent incentives and assistance.

(e) Where employer commitment is high, because of either traditional employmentobligations, or a sense of corporate social responsibility, successful job changeprograms can be implemented within enterprises, or by mutual agreementbetween enterprises, often with minimal government support.

(f) Enterprise-based training programs provided on the job, once a specific new jobhas been identified, are the most effective and preferred mode for trainingexperienced, especially older, workers.

(g) Appropriate training facilities external to the enterprise may be increasinglyuseful, especially for small enterprises with limited resources, in teachingspecialized skills related to advanced technologies.

@h) Government retraining programs are unlikely to attract candidates, or to equiptrainees for employment, unless payment of benefits is conditional onenrollment, specific employers and jobs are foreseen, and the training given ispractical and active.

'Q) Training programs for self-employment, or small enterprise development, shouldbe par4 of a job creation package that includes a suitable regulatory framework,counseling, extension services, and access to credit.

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7. ISSUES AND OPTIONS FOR EMPLOYMENT ANDRETRAINING IN CHIA

A. INDusTRIAL ADJuSTMET

7.1 The declared aim of China's enterprise reform is to create a dynamic andefficient system of management for SOEs, while preserving the nature of their publicownershipl/ To this end, reform approaches include the encouragement of mergers, sales,takeovers, and restructuring, which in other countries have led to declining employment intraditional, labor-intensive, industrial skills, and to an enhanced need for advanced technologicalskils. Also, a significant shift is foreseen toward tertiary sector employment, which is expectedto compensate for declining job opportunities in restructured SOEs. These trends are the maindeterminant of training and retraining strategies to support enterprise reform. Meanwhile, theexact sequence and priority of different retraining strategies will be affected by the pace ofreform, ard by parallel progress in other areas of economic development in China (such as thegrowth rate for joint ventures and other forms of enterprise, development of export commodities,trading patterns, and so on). For instance, the pace of development of township and villageenterprises may have important lessons for skill development strategies.2/

7.2 This final chapter highlights selected issues and factors that should be taken intoconsideration in China today in designing a strategy for employment and retraining programs.These issues are (a) strengthening management education, (b) raising the functional flexibilityof the labor force, (c) expanding the tertiary sector, and (d) developing a balanced role fortechnical testing and certification. A suggested local framework for retraining surplus labor isoffered. Finally, the chapter identifies several topics for further study that address theemployment, labor market, and retraining implications of expediting SOE reform.

B. MANAGEMENT EDUCATION

7.3 Structural change in SOEs in China will have the aim of improving theirproductivity and, hence, their competitiveness in world markets. To this end, changes areforeseen in the regulatory and financial framework within which enterprises are at presentrequired to operate. To interpret and respond to these changes, managers will require newabilities. In addition, the intention to reassign labor within enterprises, and to reabsorb surpluslabor internally, in alternative jobs and new forms of economic activity, will demand additionalnew skills on the part of enterprise managers, for which past training and experience in China

,/ CM= Couniy Economic Memorandum-Reform and the Role of the Plan in the 1990s, ReportNo. 10199-CHA, Washington, D.C.: World Bank, June 1992.

y/ Training practices in township and village enterprises are reviewed in Annex 8.

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has not equipped them. Therefore, training in management of the adjustment process will bean immediate priority in efficiently expediting reform. Also, an expanding tertiary sector willdemand a wide range of new management and entrepreneurial skills.

7.4 In Beijing in October 1987, the World Bank sponsored an international seminaron management education. Among issues identified 3/ was the current "production" emphasisof management training in some of the Chinese universities. However, the seminar participantsnoted that the impact of the reforms on decision-making in enterprises remained to be analyzedand understood. If strategic operational decisions were to be made by enterprise managers (aprinciple now confirmed under the July 1992 State Council "Regulations on Transforming theManagement Mechanisms of SOEs'), it declared that a broader concept of management trainingwould be needed, encompassing financial, marketing, and personnel functions in addition toproduction within a strategic framework. So far, the slow pace of restructuring SOEs has notrequired managers of inefficient enterprises to make accurate, productivity-based assessments ofthe full extent of labor surplus. Nor have managers been under any operational pressure to makeplans for staff deployment, versatility, and training. Indicators to assess the effectiveness ofemployee training would include shortened learning times in attaining acceptable quality andspeed of operation, flexible workers, reduced damage and waste, and reduced operationaldowntime, set against the related costs of the training. Managers will need training to applythese indicators, to assess skilled labor requirements, and to determine recruitment and trainingpolicy in an open labor market economy. These are important skills not generally hithertoneeded by SOE managers in China.

C. FUNCIIONAL FLEXIBT OF LABoR

7.5 The mobility of skilled labor within enterprises has traditionally been of limitedimportance in China because the surplus labor stemming from guaranteed employment hasresulted in staffing that is often in excess of operational requirements. Pressure for increasedproductivity and diversification of enterprises into new products and activities, coupled with alikely continuing official policy to discourage discharge of surplus workers to the open labormarket, will make functional flexibility of labor - kvy characteristic in revitalizing the SOEs.A major contributory factor in maintaining industrial productivity, for instance in Japan, is theavailability within the enterprise of skilled workers who can be reassigned in response to marketand other pressures. Worldwide, structural change, job loss, and job changes are becomingconstant elements in the lives of workers and enterprises. In China, as elsewhere, the authoritiescan assist in promoting a climate that encourages, rather than impedes, the inevitable adjustmentsby supporting continual updating of workers' skills within enterprises,4/ or through suitableexternal training programs that are developed and operated in close liaison with managers.Certain jobs will necessarily be eliminated, and here, the enterprise's involvement in reskillingredundant workers can contribute decisively to their efficient reabsorption in appropriate jobs.Within the enterprise, this requires as a preliminary step, the assignment and training of skilledtraining managers and instructors, who are capable of determining training priorities, futurelabor needs, and the necessa.y allocation of resources to training and retraining programs.

I/ 'Management Education in China: Issues Paper' (draft), Washington, D.C.: World Bank,November 1987.

!1I Findings of a study of displacement and job loss, Organization for Economic Cooperation andDevelopment, Einployent Outlook, Paris: OCED, 1990.

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Enterprises could then determine the relative cost-effectiveness of entrusting the teaching ofselected professional or vocational skills to suitable external training programs, or of providingtraining within the enterprise.

D. DEVELOPIENT OF THE TERTIARY SECTOR

7.6 In July 1992, the State Council issued a decision on expediting the developmentof the tertiary sector, endorsing a trend evidenced by recent rapid growth of employment in thesector at rates in excess of 5 percent.5/ Of the 18 million new jobs to be created during theEighth Five-Year Plan period (1991-95) to absorb urban labor growth, 12.5 million are expectedto be in service sector occupations.6/ There is a worldwide trend toward tertiary sectoremployment, which in the United States, for instance, rose from 60 percent in 1965 to76 percent of the labor force in 1992. Services provided in the tertiary sector increasinglycompete internationally, and represent a major source of potential foreign earnings inindustialized countries. They are not confined to peripheral personal services, but require thehighest level of skill of any sector. Such areas include banking, financial management, productand process design, accounting, insurance, real estate, foreign trade, consulting, computing,communications, community services, architectural, engineering and legal services, securityservices, transportation, tourism, catering, retail, and distribution trades. T hey also include thesupport services provided within manufacturing enterprises exposed to automation and othertechnological advances. The employment share of factory labor is declining rapidly in mostindustrialized economies, a trend that can be expected to accelerate in China.

7.7 The profile of workers currently defined as surplus in SOEs does not conformto the skill needs of these subsectors, except for simple manual tertiary sector skills neededwithin the same enterprise. Therefore, projected tertiary sector jobs would more likely be filledby labor market entrants, with university graduates and above occupying the professional andtechnical jobs that require specialized skills and knowledge, and a larger number of high schoolgraduates (including those from secondary vocational and technical schools) taking up the lesssophisticated jobs. Most of the existing surplus industrial workers would either be reabsorbedwhere possible, or otherwise shed by planned attrition (retirement and voluntary separation),ideally managed in parallel with the introduction of improved technologies and processes.

7.8 Currently, there are several different institutions engaged in training workerswith less than a university education for the tertiary sector. The ETCs provide short courses forcashiers, street vendors, waiters, auto mechanics, and hotel services. Secondary vocationalschools (SVSs), in their inservice and preservice programs, provide more formal training in theareas of food processing, cosmetology, hotel services, sales, and low-level office work. Somesecondary technical schools provide training in accounting, basic information processing,technical sales, driving, and so on. The SOEs organize short courses for their own employeesor send them to ETCs or SVSs for training. An initial evaluation of these training programsshows that there is much scope for improvement: standardized curricula should be developed;textbooks and other training materials are in short supply; there is a shortage of qualifiedtrainers; training methods depend heavily on lectures; and practice facilities are poorly equipped.

S/ State Council 'Decision on Accelerating the Development of the Tertiary Industry,' July 1992.

China: Counry Economic Memorandum-Reform and the Role of the Plan in the 1990s, ReportNo. 10199-CHA, Washington, D.C.: World Bank, June 1992.

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T'e Government, especially the Ministry of Commerce, should develop model curricula,standardized textbooks, training materials, and model training workshops in this area incollaboration with SEdC, MOL, and the relevant enterprises. Training of workers would mainlycontinue to be carried out by SVSs, ETCs, proprietary schools, and enterprises. Based on thecurrent trend of development in China and the experiences in other countries, a list of lowerlevel jobs likely to be required to support a growing tertiary sector, together with estimates ofeducational background and training duration needed to develop adequate skill levels is providedin Annex 6.

E. TECHNICAL TESG AND CERTIFICATION

7.9 A standardized system of technical testing and certification can sometimesfacilitate mobility in an open labor market. Certification of job competence is a principle ofgreat antiquity and often of practical importance. Thus, professors and airplane pilots are alikerequired to satisfy accredited bodies of their ability to meet recognized standards of attainmentor performance. Mobile labor markets have always tended to seek ways for potential employersto be satisfied that "journeymen" could be entrusted with particular tasks, and a system of testingand certification can be useful as a source of information about an individual's attainment.Greater mobility of labor in China will create demand for a readier system to test and recognizethe skills of unknown job applicants. However, there can be dangers in too rigorous a system,transplanted to an economic context unused to it. Thus, premature attempts might be made toimpose a system of greater rigidity than the present state of the labor market in China eitherrequires or can sustain. Also, a rigid system of certification can often tend toward excludinguncertified, but otherwise qualified, candidates. Equally, shortages of advanced skills (alreadynoted in China) can lead employers to avoid or ignore, and hence to devalue, systems ofaccreditation. It is essential that any strengthened system of skill testing be designed to support,rather than restrict the hiring discretion of enterprises.7/

7.10 Until recently, China did not have a uniform system for testing skills andbestowing accreditation. However, in June 1990, a decree was promulgated empowering theMinistry of Labor to organize and implement a certification system in collaboration withtechnical ministries, the State Education Commission and local authorities. The current passrateof 80-95 percent in China, seems high, compared, for instance, with Korea, where an averagepassrate is about 30-40 percent. In China, certification tests are conducted annually, which candelay employment if certification is made a precondition. Experience elsewhere highlights theimportance of frequent testing opportunities, and proper recognition of standards attained. Inother Asian countries, competent consultative bodies, assisted by technical specialists, haveproven useful in maintaining standards and systems to an acceptable level.

F. DEvELoMmENT OF A LOCAL FRAMEwORK FOR RETRAINNGSUrLUS WORKERS

7.11 Development of skills at all levels will be critical to the success of anaccelerating reform program. A suitably innovative retraining strategy, suggested as aframework for Chinese municipalities, would probably need to incorporate four elements to beeffective: (a) joint policy formulation and implementation by enterprises, institutions, and

I/ Claudio de Moua Castro, 'Training in China: Remarks and Recommendations' (unpublishedpaper), Washington, D.C.: World Bank, October 1992.

- 65 -

government bureaus; (b) management education; (c) availability of training and retrainingfacilities in now and advanced services and technologies; and (d) a "job changing package" fordisplaced workers, especially the vulnerable.

7.12 Formulation of Local Training Policy. Executive and consultative committees,composed of representative managers, officials, and spokesmen for social and workers' interests,should be formed as the forum to formulate local training policy. The composition would reflectthe industrial base of the locality. The committee's suggested terms of reference were describedin para. 5.14.

7.13 Management Education. Local consultative and training seminars for enterprisemanagers are required. They would aim to (a) improve awareness of labor-related productivityissues in enterprises, (b) explore the local labor and training implications of the reform,(c) improve understanding of training options in institutions and enterprises, on and off the job,(d) initiate enterprise-based training improvements, and (e) seek managers' advice on theformulation of local training priorities. In addition, a national review of management trainingneeds should be undertaken to determine a policy for providing, in each locality, managementtraining facilities appropriate to local conditions and to China's special needs.

7.14 New and Advanced Training Facilities. While there is a surplus of low-skilledlabor, there is a serious shortage of skills needed to cope with new technologies. Byinternational standards, training facilities observed during this study are inadequately equippedfor teaching the advanced modem technical and technological skills required in themanufacturing and services sectors. Many institutions are enterprise-based, but most programseither resemble group apprenticeships in production units, or have a high general educationcontent beyond the needs of job-related training, with inadequate hands-on experience. Thereis already a growing need for new job entrants to be skilled or trainable in the operation ofadvanced and automated industrial technologies. The progress of reform will demandaccelerating competence in understanding and applying new technologies, as well as adequatetraining facilities to support this effort.I/

7.15 There is a clear need for improved training facilities in advanced skills andtechnologies. Such facilities could be made available at a strategic common center in the city,accessible to individuals and enterprises. Training programs would be short and intensivebecause the cost is high. An appropriate proportion of operating cost would be recovered fromthe individual or corporate user, thus encouraging training institutions to develop marketresponsiveness in determining which skills to offer, and the optimal content and duration oftraining. Local common training funds might be earmarked to support either enterprises,individuals, or training programs. Decisions on technologies, curricula, procedures, andoperating arraagements would be entrusted to local joint committees, working within nationaland local guidelines.

7.16 "Job-changing Retraining Package." Use of local training funds would bedetermined by local joint committees within the framework of national and local social security

I/ This is only partly grasped by planners. One new purpose-built training facility observed in anecononiic development zone planmed to start training in six months, but there had been no contactwith local joint-venture employers to determine their training requirements, or to solicit theiradvice and assistarnce. In many countries, such advice would be thought essential for adequateplanning of training programs, and in China as elsewhere, would likely be readily forthcoming.

-66 -

arrangements for facilitating job transfers. For example, innovative uses might include trainingand technical support for small entrepreneurs, or the self-employed, who want to use lump sumseverance entitlements to start businesses; payments to. the "job-changing" to obtain newqualifications, or to enroll in institution-based, fee-charging programs; payments to privateproviders of training in priority skills (in enterprises or proprietary training institutions); orassistance with the cost of training attachments or apprenticeships. Appropriate evaluation andcontrol procedures would be applied.

G. SUGGESTED AREAS FOR ADDITIONAL PREPARATORY STUDES

7.17 This limited study has identified some critical questions concerning optimalaction and investment needed to expedite enterprise reform in China, in the areas ofemployment, labor market, and retraining. As a consequence, it has also touched on some issuesof meeting future requirements for skilled labor in emerging sectors. The review process hasalso identified particular areas for further study where either current policy options in China needto be explored and articulated in greater depth, or information is deficient or nonexistent. Theseinclude:

(a) An assessment of educational and training improvements, in the form offacilities, equipment, programs, and curricula required to meet the acceleratingdemand for advanced technological and tertiary sector skills.

(b) The feasibility of establishing national or local funds to support worker trainingand retraining programs, including determining appropriate sources of funding,and criteria for disbursement to institutions, enterprises, and individual workers.

(c) The available current scale and content of management training facilities, andestimates of future requirements for training programs, facilities, and curricula,including identification (by questionnaire and consultation with managers)) of:

* current enterprise practice and attitudes with regard to the internaldeployment and redeployment of labor, retraining, and productivityenhancement; and

* opinions regarding future training needs to produce skilled workers, andpreferred alternative means of addressing them, including financing oftraining programs.

(d) An assessment of the current labor market policies, services, and informationsystems, and of measures to improve their operation, as a basis for determiningpolicy and allocating resources.9/

7.18 These four elements-improved training facilities, systematized funding,management commitment and competence, and a functioning labor market-will likely bedecisive in any successful national policy to retrain workers. This policy in turn will be asignificant determinant of the pace and productivity of the enterprise reform program, its stabilityand sustainability, and hence future economic and social progress in China.

2/ In this context it is recommended that China adopt the OECD classifications of expenditure levels. to facilitate comparison with other countries.

-67 - ANNEX I

PRESERVICE VTET-INSTITUTIONS, ISSUES, ANDRECENT DEVELOPMENTS

Preservice Training and Placement

1. Preservice VTET takes place mainly in three different types of school at theupper secondary level: secondary technical schools (STS), skilled workers schools (SWS), andsecondary vocational schools (SVS). With a few exceptions, mainly in the rural areas, primaryand lower secondary education consists of general education, with no significant VTET content.Tnus, upper secondary is the first level at which there is a VTET program for students in urbanareas.

2. The STS stream comes under the general administration of the State EducationCommission (SEdC)._/ The schools are managed and financed by central technical ministries,local technical bureaus, and SOEs, and thus have close ties to employers. The STSs wereoriginally designed to enroll mainly the upper secondary graduates for two-three years, to betrained as cadre/technicians, but since the early 1980s have been enrolling lower secondarygraduates for three- to five-year courses. In terms of the skill level of graduates, the STSgraduates become workers with the highest level of skills among the three types of schools.

3. The SWSs are under the general administration of the Ministry of Labor (MOL)and are managed by central technical bureaus, local labor bureaus, and enterprises. They alsohave close links, in terms of financing and curriculum content, with employers, and generallyhave substantial internships in industry for their students prior to graduation. The SWSs enrolllower secondary graduates to be trained as midlevel skilled workers (i.e., entry levels 2-3 in theChinese 8-grade scale).

4. The SVS stream comes under SEdC administration and is managed and financedby local (provincial, municipal, and district) education bureaus. These schools have fewerformal links with employers because there is no formal input, in terms of curricula or funding,from either the technical bureau or enterprises. Currently, they enroll lower secondary graduatesto be trained for jobs in the tertiary sector or as skilled workers and technicians. Many SVSswere converted from general upper secondary schools in the 1980s to conform to the SEdCpolicy (discussed in para. 1.16) of having half the students entering upper secondary educationenrolled in VTET schools. Thus they tend to be underequipped and underfunded to properlytrain students in heavy industry and the more highly technical specialties. Many also lackqualified teachers. However, since for SVSs, the approval procedure for establishing curricula

1/ Sector Report: Technical/Vocational Education for China's Devetopmen (Report No.6789-CHA), August 1987, has a detailed deseription and analysis of the preservice segment ofVTET.

-68- ANN EN1

Table Al.l: NUMER OF GRADUATES, INTAKE AND SCWooIS ATUPPER SECONDARY LEVEL, 1991

(By Type of School)

Graduates Intake Number of

Type of school (000) (000) schools

General upper secondaryschools 2,229.5 2,438.2 3,232.e

SVS 808.6 1,140.0 8,016

Secondary specialized schools 740.3 780.0 3,982

STS /a 427.6 502.8 2,956

SWS 454.2 544.5 c. 4,200

Total 4,232.6 4.902.7

La Statistics are for 1990. Specialized secondary schools consist of STSs andsecondary normal (teacher training) schools.

is not as strict and rigid as for the STSs and SWSs, SVSs could become a vehic!e for reflecting

local labor market requirements, in particular for services sector specialties. The reality that

SVS graduates-unlike STS and SWS graduates-are not guaranteed job assignments also makes

school authorities more sensitive and responsive to local employer needs.

5. VTET Expansion Policy. It has been the government's explicit policy since

1985 to expand enrollment at the upper secondary level so that half the stu'ents entering this

level are enrolled in general high schools and the other half in VTET schoois. This is one of

the three policy pillars in education policy.2a The intention of this policy stemmed from the

reality that only about 15 percent of the students graduating from upper secondary schools each

year can be accommodated in the existing higher education instituticns; for the majority of these

students, upper secondary schools represent terminal education. The education authorities feel

the students should be provided with some practical skills to prepare them for the labor market.

At the same time, the general education content of the curriculum at VTET schools is relatively

heavy (usually time allocated between general education, theoretical courses for the specialty,

and practical work is 60:30:10), due to, among other things, the education authorities' desire to

give a considerable amount of general education to even those students who will not be going

on to higher education. As of 1991, 47 percent of the students entering high schools were

attending VTET schools, and thus it can be said that the Government's quantitative target has

basically been met. The nationwide intake and graduation figures for the different types of upper

secondary schools for 1991 are listed in Table Al.1.

Z/ The State Council 'Decision to Reform the Education System' (May 1985). The other twopillars are the popularization of nine-year basic education and reform of the higher educationsector.

- 69 - ANNEX

6. Aside from these full-time three-year courses, employment training centers(ETC) also offer preservice training primarily for "job-waiting' youths. Their courses are shortterm (3-12 months), have no general education content, are less structured, and a fee is charged.They are often run by labor service companies which usually assist in finding jobs for those whocomplete the courses, frequently in enterprises the companies themselves run.

7. The 1987 report (Sector Report. Technical/Vocaton,l Education for China'sDevelopment, Report No 6789-CHA) reviewed the preservice VTET at the upper secondary leveland identified the following issues: (a) planning and evaluation of VTET to meet labor marketneeds are underdeveloped; (b) the curriculum of specialized courses is too narrow and theintegration of general education ii1 VTET is not well developed; (c) quality and efficiency sufferbecause schools are small and programs within schools are often uncoordinated; (d) existingteachers, facilities, and equipment, mostly general in nature, are underused by internationalstandards; (e) instructional quality suffers because of a shortage of management skills, specializedteachers, equipment and facilities; (t) the costs and financial implications of the proposedexpansion have not been well explored (including the risks of cost escalation); (g) some labormarket characteristics inhibit the efficient development and use of skills for economicdevelopment.

8. Developments since the report was issued indicate that while VTET has expandedon a quantitative basis so that the target of enrolling half the students at the upper secondarylevel in VTET schools is almost fulfilled, there have been qualitatihe problems. Chineseeducators, administrators, and researchers identify the following issues:

(a) To fulfill the stated policy requirement, VTET was expanded in a rash anduncoordinated fashion. The SVS system suffered most because many of theseschools were converted from general upper secondary schools, and lackedexperienced technical faculty, equipment, and facilities to make thetransformation from general education to VTET. There are also manyvocational schools with too few students, leading to inefficient hivestment.

(b) The fields of vocational specialization were often established without reflectingthe needs of the economy, but rather were based on the availability of vocationalteachers, or for "trendy" subjects. Thus the sense of priority as reflected in theVTET curricula did not necessarily conform to the expectations of students andparents, or to the local labor market requirements. Course content has alsofailed to reflect the changing job content and technological advance during thedecade.

(c) Inadequate budget to fund the schools, both for capital expenditures andrecurrent cost, resulted in substandard facilities and equipment for practicalwork. (According to the Ministry of Labor, in the SWS stream most practicefactories have outdated equipment, and only 60-70 percent of the requiredexperiments can be conducted.)

(d) The traditional mindset of disdaining vocational and technical education remainsstrong. VTET is still in a stage in which it has not yet acquired a firm andsteady foothold among parents and students.

- 70 - ANNEX I

Overall, among the Chinese observers there is a consensus that the financial and humanresources used to expand VTET apparently have not translated into a commensurate upgradingin the labor force, nor have they been responsive to the local economy's requirements. It shouldbe noted, however, that this is an area where regional disparity is seen, which is most likely afunction of the strength of the local economy and labor market requirements. A survey of thechoice of schools by lower secondary school graduates in inland Xi'an and coastal Guangzhouis an example.3/

9. Also, the economic and social environment surrounding the education system hasundergone some major changes since the last sector mission, and the government and schoolsare keenly aware that the VTET upper secondary schools must change in order to adaptthemselves to serve an economy operating under a more market-oriented framework. Moreeconomic decisions will be determined by market forces rather than central planning.Specifically, job assignment by the state will gradually be eliminated and enterprises will be freeto select their employees. Students must thus be prepared to find jobs themselves. The curriculaand coi. se offerings of the schools would have to be such tLat their graduates would have skillsrequired by the local labor market. With a growing and diversifying economy, there will bedemands for new skills, especially in the tertiary sector. The rapidly growing rural industriessector will also be making demands on the VTET system for skill training. The current VTETsystem will therefore have to become flexible enough to accommodate these policy changes andemerging new demands while upgrading the quality of its trziitlonal teaching.

,J/ Yang Xanjun: A Survey of the Career Orientations of the Middle School Students of the TwoMunicipalities of Guangzhou and Xi'an (excerpt)" Chinese Education, Fail 1991, pp. 52-55.

ENTERPRISE TRAINING INSITuTiONS IN DALIAN, 1991

Type of trealnnc and education DurrtionTyp*. Of training Number of Number of Qualifi. SIill Adapt.- Higher Secondary Upper Lower Leer than S0 houre to 3-6 Over

Inatitutione inetitutione tralnee" catioa level tion education tecbnical secondary aecondary 50 houro 3 Smouth wotbsh easrtralning training training education general general

education education

Staff ed worker university 19 17.203 . - 17.203 . - - - 17,20)

Staff nd worker encondcrytechnical achoo.1 24 7.708 _ _ _ 7,706 - - - 7.708

Staff an worker *chool 187 99,041 68,170 lIeo87 - - . 19,084 - 31,900 24,087 23,990 19,084

Elterpris trainint centerldepartsente 1.193 105.785 33,758 50,639 20,503 - - 66 62.693 26,196 I6.t97 -

Techbticl bureau trataingceuterjdoportunta, 70 7,230 1.446 1,892 3.892 - - 3,238 3,692

unicipelldistrict trainingcenters 10 1,050 .. - 1050 . - - 1,050

Toa 1.503 238.038 103.374 64.338 20.S03 17.203 7.708 24,024 686 94.393 50.283 45.278 4?7f87() '(43.5) (27.0) (8.6) (7.2) (3.3) (10.1) (0.3)

Now Quwi U kan train hdc UiWi for* uwphu woikci.

Sow= ei Munkipal Lbor Bureau.

-72 - ANNEX3

ENTERPRISES LISTED BY REFERENCE NUMBERS INTABLES 2.1 AND 2.2

Table 2.1: DALIAN

1. Dalian Shipyard2. Dalian House Repair Engineering Company3. Dalian Petroleum General Corporation4. Dalian Power PlantS. Dalian Liaonan Shipyard6. Dalian Nonstaple Food, Candy and Wine Group Company7. Dalian Heavy Machine Plant8. Dalian Steel Plant

Table 2.2: WUHAN

1. Wuhan Water Company2. Wuhan No. 1 Cotton Textile Factory3. Wuhan Switch General Factory4. Wuhan Instrument and Meter Automation Industrial Group Company5. Wuhan Gedian Chemical Industry Group Company6. Wuhan Two-Tigers Coating Group Ltd.7. Wuhan Boilers Factory8. Wuhan Wool Mill9. Hua Zhong Shipping Group Corporation10. Wuhan Speed Reducers Factory11. Wuhan No. 3 Chemical Machinery Plant

-73- ANNEX 4

PROPRIETARY SCHOOLS

1. There are more than 1,000 proprietary schools registered with the Beijing AdultEducation Bureau. In order to open such a school, applicants must first go to the district adulteducation bureau to show their qualifications for running a school, such as education backgroundand teaching experience, financial status, teaching plan, and teaching conditions. The districtadult education bureau approves proprietary schools at the level of secondary education orbelow. For higher learning institutes, the district bureau has to submit applications to the BeijingAdult Education Bureau. Recent applications have not been approved since the State EducationCommittee (SEdC) has decided to control the scale of higher education.

2. In principle, the Beijing Adult Education Bureau is in charge of overalladministration of proprietary schools, while the district adult education bureau is responsible forroutine administration. However, the relationship between the bureaus and schools is relativelyloose. The schools have some rights whicb public schools do not have, such as deciding on thenumber of enrollment, specialties, and courses, appointing teachers, etc.

3. Certification. After students complete their studies in proprietary schools, theycan get a certificate issued by the Beijing Adult Education Bureau. The certificate only showsthe information about the students' study field, credit hours, and scores. This means that SEdCdoes not recognize proprietary colleges and universities as having a position equal to that ofpublic institutes in terms of educational qualifications. In order to obtain a higher educationdiploma, proprietary college graduates have to take the National Adult Higher Education Self-Study Examinations after they finish their proprietary school study.

4. Specdalties and Courses. Many of the proprietary schools are language schools;some have other fields, such as computers, typing, sewing, guiding, hotel service, etc. Forexample, in 1991, China Society University (CSU) had 20 specialties, and China Technologyand Management University (CTMU) had 45 specialties; both of them have tourism education.The specialties related to tourism education in these two universities are hotel management andservice, cooking, tourism English, etc. The schools usually follow the teaching plans made bysome key public collegt s or universities in order to get recognition by the authority and society.The teaching plans for tourism specialties in CSU and CTMU are very similar to those ofBeijing Tourism College.

5. Teachers. Proprietary schools usually do not have their own teachers. Theyoften hire part-time teachers or retired teachers from the nearby public schools. CSU employsabout 300 part-time teachers each year. All or these teachers should have good experience inteaching the subjects, and 40 percent of them hold a senior academic position. A teacher canget Y 8-10 per teaching hour in this university. More than 400 of the teachers in CTMU areusually from the Zhongguancun district, where these are many key universities. Almost 60

-74 - ANNEX4

percent of the teachers have held a senior academic position. The number of volunteersregistered for part-time teaching is said to be in the range of 8-9,000.

6. Students. Annual enrollment at CSU and CTMU has been kept at severalthousands. The number of students of CSU in 1991 was 1,700. The highest level of enrollmentin CSU and CTMU was more than 3,000 and 7,000, respectively. The students who do not passthe national higher education entrance examination often turn to the proprietary colleges.Usually the students of proprietary schools in the higher education level are full-time students,while the students of proprietary schools in the secondary level are part-time or spare-timestudents. Since some public colleges and universities could enroll a number of self-payingstudents starting in 1992, the proprietary institutes did not get as many applications as they hadformerly received. The schools complain that the policy for proprietary institutes is not fair.

7. Finance and Expenditure. The proprietary schools' financial source mainlyconsists of tuition fees. The fee is set in accordance with the standards set up by the BeijingPrice Bureau. For example, for language schools, the student's fee is between Y 0.5 and Y 1.2per class hour, and the tuition for proprietary colleges and universities cannot be over Y 600 peracademic year. The tuition fees in CSU and CTMU are slightly different in different specialties.For example, in CSU, the fee for engineering, foreign languages, finance, and economics is Y600, Y 500, and Y 400, respectively. Also in CSU, the expenditure distribution is as follows:teachers' wages, 35.8 percent; rent for classrooms, 25.6 percent; teaching equipment, 4.5percent; administration fee, 15 percent; etc.

8. Material Conditions. Generally speaking, proprietary schools do not have theiroivn classrooms and teaching equipment. They often rent classrooms from primary andsecondary schools nearby and rent teaching equipment from other units. CSU, for example, hasmore than 10 teaching points located in different units, and its tourism department rents a set ofaudio and visual equipment from the Second Beijing Foreign Language College. However,CTMU has a new large teaching building and some teaching utilities.

75 -7NNEXE

TRAINIG INSlITUTIONS VISITED BY TIHE MISSION

Type of TrainingCode Name of Training Institution Institution

A Wuhan Boiler Factory's Workers Education TrainingCenter ENTC

B Wuhan Commerce Technical School SWSC Education Training Center of Factory No. 3506 of

the PLA ENTCD Wuhan Cookery Technique Training Center ETCE Wuhan Communications Technical School SWSF Wuhan Commercial Technology School SWSG Dalian Medium Commercial School SWSH Zhongshan Labor Employment Training Center ETCI Jinzhou Textile Mill Enterprise Training Center ENTCI Dalian Shipyard Enterprise Training Center ENTCK Dalian Locomotive Drivers School SWSL Xi Gang Employment Training Center ETCM ETC of the Labor Service Company of Dalian

Municipal Labor Bureau ETC

-76 - ANNEX 6

EDUCATION AND TRAINING REQUIREMENTS FORLOWER-LEVEL JOBS IN THE TERTIARY SECTOR

* Occupations that require 9 nine years offormal education plus 3 months ofjob training:ticket checker, price marker, office boy, sales clerk, street vendor, watchman, waiter,chambermaid, baggage porter, bellman, handyman, usher, janitor, sanitation serviceman,etc.

3 Occupacions that require 9 years of formal education plus 6 months of job trainung.mailer, messenger, service station attendant, security guard, helper cook, restauranthostess, lodging facilities attendant, man:curist, sightseeing guide

* Occupations that require 12 years offormal educanon plus 3 months of job tralnng.typist, timekeeper, clerk-typist, claim clerk, dividend clerk, coding clerk, order clerk,bagage man, mail order filler, file clerk, sales promotion clerk, telephone operation,specialty foods cook, short-order cook, bartender, airline stewardess, babysitter,domestic maid, etc.

e *Occupations that require 12 years offormal education plus 6 months ofjob trainng:word processor operator, billing clerk, cashier, money counter, safety-deposit boxcustodian, land measurer, duplicating machine operator, typesetter operator, scheduleclerk, inventory clerk, dry cleaner, etc.

* Occupations th require 12 years offormal education plus 9 months ofjob training:audit clerk, budget clerk, worksheet clerk, insurance checker, storeman, stock-recordsclerk, storeman, circulation clerk, order clerk, etc.

* Occupations at require 12 years offormal education plus 12 months ofjob training.utilities billing clerk, auctioneer, domestic cook, institution cook, barber, cosmetologist,etc.

* Occupations that require 14 years offormal education plus 6 months of job training:bookkeeping clerk, general office clerk, etc.

* Occupations that require 14 years offormal education plus 9 months of job training:assistant accountant, accounting clerk, bank teller, real estate clerk, sales representative(publications), salesman (furniture, hardware, jewelry, books)

* Occupations that require 14 years offormal education plus 12 months ofjob training:secretary, bookkeeper, general insurance clerk, reserves clerk, computer operator(mainframe), construction material estimator, sales representative (food products, motor

-77- ANNEX 6

vehicle, plastic products), technical salesman (chemicals, metals), real estate salesman,insurance salesman, advertising salesman, make-up artist etc.

* OCccuations that require 14 years offormal education plus 15 months ofjob training:technical salesman (agricultural equipment, construction equipment, industrialmachinery), securities trader, etc.

* Occupations that require 14 years offormal education plus 18 months ofjob training:sales engineer, investment broker, real estate appraiser, etc.

-78 - ANNEX 7

EMPLOYMENT AND RETRAING OF DISPLACEDWORKERS: THE CASE OF CANADA

Background

1. Every country's labor market policies reflect its particular experience ofunemployment assistance programs, labor mobility and redeployment, education and training forproductive work, and the division of related responsibilities, incentives, and support among theste, enterprises, and individual workers. Thus, programs of retraining for new employmentneed to be viewed in their national context, and as an integral part of the package of otherpassive and active measures designed to alleviate unemployment, and to facilitate industrialrestructuring. It follows that the experience of Canada is not a blueprint, particularly for acountry like China, whose scale, economic system, labor market policy and retraining needsdiffer markedly. However, in a time of industrial restructuring, similar questions of policy andresource allocation can be expected to arise. Hence, this annex aims to contribute to thediscussion of the employment and retraining implications of reform in China by describing thecontent and outcome of labor market policies in a representative industrial country undergoingsignificant industrial restructuring.

2. In March 1983, seasonally adjusted unemployment in Canada stood at14 percent. Buoyant growth during the 1980s caused the rate to fall gradually to 7.5 percent in1989, but by December 1992, in the wake of the painful restructuring undergone by most sectorsof the economy since the middle of 1990, it had again risen to 11.8 percent,l/ (the highestlevel of unemployment in all industrial countries except Spain). The rate is not expected to fallquickly: firms will be reluctant to lose recent productivity gains, and experience in the 1980ssuggests that periods of individual unemployment have tended to become longer and morepersistent. In part, this is attributed to the difficulty experienced by older workers, often withobsolescent, job-specific skills, to find alternative jobs once they become unemployed.Reallocation of labor after the 1981/82 recession involved shedding older, long tenure workerswho then went into permanent or semipermanent retirement, combined over time with increasedhiring of younger workers in growth sectors.2/

,/ Economist Inteligence UD1t (EIU), Coun*y Profik, 1992/93, and Couty Repors, Febniary1993.

21 One of the presnt policy challenges is to speed up the employment reentry of older unemployedindividuals: There will be less scope [in the 1990s] to accommodate adverse shocks in theevolutionary way in which they were accommodated during the 1980s. The emphasis will haveto shift from promoting early retirement in declining firms or sectors, land] hiring youngerindividuals in the areas of growth, to the direct substitution of employment for older workers inareas in decline, for employment in areas of growth.' From Corak, 'Demographics of LaborSector Adjustmentin Canada,. in Canadian Unemployment, Economic Council of Canada, 1991.

-79- ANNEX 7

Labor Market and Retraining Policies

3. Under the Adult Occupational Training Act, 1966, training assistance was givento improve the reemployment prospects of adult workers, through institutional training, andpurchase of on-the-job training from private sector employers. The 1982 National Training Actprovided increased support for institutional training (through the National Institutional TrainingProgram, NITP), and also for enterprise-based training, and for training in jobs experiencing ashortage of workers. In 1985, activities were consolidated under the Canadian Jobs StrategyProgram, which aimed to assist (a) employers giving training in high-demand skills in shortsupply; (b) experienced workers, to retain jobs by updating their skills; (c) job-entry youth; (d)women reentering the labor market; (e) the long-term unemployed, to equip themselves forreemployment; (f) single-industry communities hit by plant closings and mass layoffs; and (g)pilot and demonstration projects.

4. It is estimated I/ that 30 percent of students currently entering ninth gradeschooling will drop out before finishing grade 12, whereas half of the new jobs needed by 2000,if Canada is to remain internationally competitive, will require more than 17 years of educationand training. Therefore, in 1989, Canada adopted a Labor Force Development Strategy madeup of a number of policy measures reflecting the need to upgrade workforce skills. In July1991, employment services were consolidated to address (a) labor market information and relatedspecial services, (b) labor force development, (c) industrial adjustment, (d) communitydevelopment, and (e) the employability of workers.

5. Labor Market Information and Special Services Program. Working throughCanada's network of employment centers and local labor exchanges, the Labor MarketInformation and Special Services Program collects and disseminates information on jobvacancies, labor market conditions, available training courses, and other services for theunemployed. Also, financial assistance is given for research and development on labor marketissues. In 1991, public employment services and administration in Canada cost an estimated C$1,560 million.4/

6. Labor Force Development Strategy. The objectives of the 1989 Labor ForceDevelopment Strategy is to promote a better industrial partnership in developing a "trainingculture." Employers are encouraged to assume primary responsibility for developing skills in theworkplace. They are provided with technical assistance in human resource planning, and areencouraged and assisted in using work-sharing programs as an alternative to temporary layoffs;there are frequendy linked to retraining programs during "off hours." In addition, employerscan receive government financial assistance for workplace-based worker retraining, provided itis related to increased productivity, and reflects local priorities. The strategic aim, by 1994, isto stimulate greater awareness of the need for improved and advanced skills, which would bereflected in an additional C$M 1,500 per year of private sector spending on training.

3/ CCanadian Employment and Immigration Commission, Employmen Programs and Services,September 1992.

4/ This calculation is based on data in Organization for Economic Cooperation and Development,Employment Outlook Paris: OECD, 1992, and Labor Market Policies for the Nineties, 1990.

- 80- ANNEX7

7. Industrial Adjustment. Government assistance is given to employers andworkers to jointly research, develop, and implement action plans related to specific sectoral orlocal adjustment needs. Through its Industrial Adjustment Service (lAS), government cost-sharing is available to support operational activities agreed upon with joint adjustmentcommittees set up under the program. Through the formation of conunittees with broadrepresentation, the program aims to assist enterprises, workers, and local communities in jointlyresolving the labor market issues arising during industrial adjustment. In the year to March1992, 931 new agreements co. ring 2,093,097 workers were signed with companies,associations, and communities facing layoffs, technological change, and other adjustmentproblems, and 712 agreements were completed. Of these, 258 related to layoffs affecting 45,848workers. Of the 31,042 workers seeking relocation assistance, 24,896 (80 percent) wereassisted, at an average cost per worker of C$288, including C$166 from private sectorsources.S/

8. Community Development. The Community Development Program is designedto assist communities facing severe labor market problems to mobilize local resources to helpmanage change and adjustment. Local committees are given advice, resources, and access toprograms such as the Community Initiatives Fund, designed to financially assist local plans noteligible for support under other federal programs. Within the community, the Job DevelopmentProgram has been an important component of government assistance to the long-termunemployed. Thus, 89,000 people (42 percent of the long-term unemployed) participated in1988/89, at a cost to the federal government of C$480.7 million.f/ Assistance is also availablefor locally sponsored job creation and self-employment programs.

9. Employability of Workers. Like most industrial countries, Canada has a long-established state program of unemployment insurance, designed to provide financial benefits forworkers who become unemployed, and who are laid off by their employer. In 1977, theUnemployment Insurance Act authorized the use of unemployment funds to help unemployedworkers adjust to labor market changes. The Act provided for continued payments tounemployment benefit claimants, enabling them to develop and upgrade thtir skills throughwork-sharing, job creation, and income support programns. In recent years, the developmentaluse of unemployment insurance funds has expanded rapidly. In 1991, the Canadian Labor ForceDevelopment Board (CLFDB) was established, with worker, employer, and communityrepresentation, among others, to recommend annual funding levels for the 'Developruental Uses'program. In 1993, the program is expected to serve over 500,000 participants.

10. The estimated total 1992 cost of the Unemployment Insurance Program inCanada was C$M 20,400,2/ which is equivalent to 2.9 percent of gross domestic product(GDP), or 17.9 percent of the total estimated federal government program expenditure-C$M

5/ From Industrial Adjustment Services, Annual Report, August 1992.

!/ t Canadian Uneinplyment, Economic Council of Canada.

2/ Unemploymem Insurance: Development Uses, Canada Employment and ImmigrationCommission, 1992.

- 81- ANNEX 7

Table A7.1: DEVELOPMENTAL USES OF UNEMPLOYMENT INSURANCE

Plannedparti-

Expenditure item Cost (CSM) ciDants1990 1991 1992 1993 1993

estimate plan

Training (incomesupport only) 330.5 523.2 1020.8 1305.0 161,700

Training (income supportplus course Cost8and/or supplementaryallowances) - 335.5 647.3 530.0 164,300

Work sharing 69.8 159.2 118.9 130,0 160,000Job creation 110.1 115.5 115.7 120.0 31,200Self-employment - - 24.9 i10.0 9,900Mobility assistance - - - 15.0 1,200

Total 510.4 1,133.5 1,927.6 2,210.0 528,300Z of total UI 3.5 6.0 9.'. 10.1

Source: CLFDB Budget Recommendatioais for ,993.

114,000.11 Tables A7.2 and A7.3 and give further details of the labor market in Canada, andof expenditure on labor market policies, including comparisons with other countries.

Outcome and Effectiveness of Labor Market and Retraining Policies

11. In Canada, as in most industrialized countries, the government invests heavilyin labor market training and retraining programs, boit through the direct provision of services,and through encouragement, support, or subsidy to consumers or providers of services. Theaim, through various programs, is to facilitate job entry, maximize functional flexibility of thelabor force, reabsorb the long-term unemployed, and alleviate any adverse consequences ofindustrial adjustment.

12. Outcome of Government-Assisted Retrmining. While all labor marketprograms for the unemployed in Canada are accessible to the long-term unemployed, the majorprogram dedicated exclusively to them is the federal Job Development Program, which providestraining and work experience to individuals who have been out of work for 24 of the previous30 weeks. An impact study in 1988 indicated that 62.1 percent of participants were employedor in training after one year, and that 74 percent of employed participants were using skillsacquired during the program. About 80 percent of participants stated that the program would

Jq/ Economist Intelligence Unit, Cowuy Report, February 1993.

-82 - ANNEX7

Table A7.2: LABOR MARKEr INFORMATION AND EXPENDITURE ON LABORMARKET POLICIES

1. Basic Information (1991)

Population 27,127,000Total Labor Force 13,757,000Participation Rate (percent) 66.3Employed 12,340,000Unemployed 1,417,000Unemployment Rate (percent) 10.3

2. GDP (CSM) /a (1992) Lb 695,500

3. Expenditure on Unemplovment

Insurance Programs (1992) 20,400Of GDP (percent) 2.9of which: "Development Uses" Program 1,928

Training (Income Support) 1,021of which: Training (Course Cost) 518

Supplementary Allowances 129Work Sharing 119Job Creation 116Self-employment 25

4. Program Participants (1992) 332,600

La C$1.27 = US$1.00.

Lk EW- (note 1 above).

Source: EIU Country Profile, 1992; 1992 Unemployment Insurance Development Uses,Canada Employment and Immigration Commission; Employment Outlook, OECD,July 1992.

help them keep their present job, or obtain a new or better one in the future.2/ Also, anemployer survey indicated that displacement of other potential employees by participants in theJob Development Program was negligible, and that the program had a favorable impact onemployability. The program thus appears to be relatively effective in reintegrating the long-termunemployed. However, older workers, often the most disadvantaged, are not specificallytargeted. Also, the great majority of the unemployed are already reabsorbed after four months,so that the 24-week waiting period for eligibility could probably be usefully reduced.

13. Fifty-two percent of course participants in 1991 were employed three monthsafter completing their program, and did not draw further unemployment benefits in thesubsequent 12 months. More than 67 percent said that the skills they acquired in their course

9/ Canadian Unemploymnen, Economic Councl of Canada.

- 83 - ANN 7

Table A7.3: COMPAATIE INmERNATIONAL EPEI ONLABOR MARKEr PROGRAMS

(percent of GDP)

Canada USA UK Australia Japan

Active Measures

1. Public employment services 0.22 0.08 0.15 0.09 0.02

2. Labor market training(a) Training for unemployed

Adults and those at risk 0.36 0.09 0.15 0.10 -(b) Training for employed

adults 0.02 - 0.02 - 0.03

3. Youth measures(a) Unemployed and

disadvantaged youth 0.02 0.03 - 0.01 -(b) Apprenticeship & related

general youth training - - 0.18 - -

4. Subsidized employment(a) For regular employment

in private sector - - - 0.04 0.06(b) For unemployed persons

starting enterprises - - 0.03 0.01 -(C) Direct job creation 0.02 0.01 0.01 - -

5. Measures for the disabled(a) Vocational rehabilitation - 0.05 0.01 0.02 0.01(b) Work for the disabled - - 0.02 0.02 -

Subtotal 0.62 9 .25 0.56 0.27 0.13

Passive Measures

6. Unemployment compensation 2.25 0.59 1.35 1.12 0.32

Subtotal 2.25 0.59 1.35 1.12 0.32

Total 2.87 0.84 1.91 1.39 0.45

Total of programparticipants (Z oflabor force) 2.5 2.7 3.7 3.2 n.a

Source: Employment Outlook, OECD, Jly 1992.

-84- ANNEX7

were being used in their present job. Some 85 percent said that the course would help themeither keep their present job, or obtain a new or better one in the future. About 50 percent ofparticipants who took courses over the period 1987-91 took them in occupations with higher skilllevels than their previous job, and 54 percent took courses in medium to high skilloccupations. 91

14. Evaluation of Effectiveness. Although the outcome of the retraining programappears to be effective, as described in the previous section, this observation should be treatedwith caution. This is because it is difficult to isolate the impact and cost-effectiveness ofretraining programs from other pertinent factors. These factors can include individualcharacteristics such as motivation to seek out training, other labor market services, includingjobsearch assistance, which consists of outreach and orientation programs, job and careercounseling, testing and assessment, provision of labor market information, child care, andcommuting assistance. Any of these can be significant contributory factors in the success oflabor market policies. Also, the training provided varies by type, target group, relevance,quality, and intention. Thus, classroom training assumes that skills of potential interest tovarious employers can be developed through intensive, formal, off-the-job training. Often, on-the-job training may be appropriate for acquiring firm-specific skills, and remedial educationmay be needed to overcome severe general learning difficulties. Furthermore, these three typesof training differ in the benefits they offer to displaced workers, as well as their cost. ll/ Forinstance, a significant amount of enterprise-based training takes the form of experienced workershelping less-experienced workers. The cost of this form of training, which in terms of humancapital and productivity is probably the most worthwhile for enterprises, is not easily capturedin any statistics.l2/

15. Studies in Canada and elsewhere have sought to isolate the variables, and toderive general conclusions regarding the effectiveness and cost-effectiveness of govermnent-sponsored training interventions.l3/ In 1985, Canada's National Institutional TrainingProgram L/ (para. 3 above) was evaluated. This program funded classroom training invocational courses offered by public and private vocational centers, technical institutes, andcommunity colleges. The objective of the evaluation was, using a control group, to (a)determine the impact of institutional training on the employability and earnings of trainees, and(b) examine the impact of institutionai training on meeting the skill needs of the economy. Thesurvey found that skill training taken in isolation did not have a statistically significant impacton earnings, and had only a slightly greater impact on labor force participation, unless it wasaccompanied by other active measures to alleviate unemployment.

10/ Development Uses, Budget Recommendations for 1993, Canadian Labor Force DevelopmentBoard.

II/ D. Leigh, Does Training Workfor Displaced Workers?, Kalamazwo, Michigan: Upjohn Institutefor Employment Research, 1990.

12/ A fuller discussion of the cost of enterprise-based training is found in Organization for EconomicCooperation and Development, Labor Market Policy for the Nineties, Paris: OECD, 1990.

13/ OECD's Employment Outlook.

1A/ Robinson et al., Evaluation Report of NITP, Abt Associates of Canada, June 1985.

- 85 - ANNEX 7

16. . In the United States, an evaluation of four demonstration projects forreemployment of displaced workers reinforced these findings. 15/ It was found that classroomtraining did not have a sizable incremental effect on earnings and employment, except as partof a comprehensive job search assistance program, which did achieve the intended effect on avariety of labor market outcomes, including earnings, placement and employment rates, andamounts of unemployment benefit paid. Also, the relatively low cost of job search assistanceper worker made the package of services cost effective. Scarcity of good quality training wascited as another important factor affecting the impact and usefulness of training programs.

Conclusion

17. The demand for functional flexibility of labor in Canada is accelerating,reflecting changes in international trade, markets and techno!ogies; hence, the demand for bothgeneral and specific skills is increasing. In the past, during recessionary periods, the frequentresponse of employers was to discharge older workers, and to employ younger replacements astrading conditions recovered. The accelerating pace at which skills are becoming obsolete meansthat an increasing number of experienced and older workers will need to learn new skills, andeither remain in, or be reabsorbed into the labor force. Therefore, the government's increasingemphasis on linking retraining programs to payment of entitlements during periods ofunemployment is a sensible framework for addressing the consequent social and skilldevelopment needs of a changing economy. However, this presents a major challenge tosponsors and providers of skill development and training programs, and to enterprises (whosenaural economic incentive is to invest in younger, probably more adaptable, workers) to developrelevant, targeted, good quality and cost-effective trainng responses.

18. Moreover, new skills associated with advanced technologies and services are inincreasing demand, although scale and content is difficult to predict, because demand evolvesso rapidly. This is the case whether redeployment takes place within a restructuring enterprise(as is current practice in China), or through the open labor market, with or without a period ofunemployment. Therefore, the policy of stimulating individual, enterprise and communitypartnerships to create a 'training culture' in Canada that is committed to lifelong learning, andhigher level skills, is a sound basis for encouraging speedier, flexible training programs. Also,when needs are defined and addressed in collaboration with individual and corporate users ofemployment and training services, enterprises and training institutions are motivated to monitortraining more rigorously, and to improve the quality of training offered.

19. Like most advanced industrial countries, Canada has a good network of publicand private academic, technical and industrial institutions, which are well staffed and wellequipped to give training to managers, and to thcse needing to learn the advanced job skills ofemerging industrial and service technologies. Many of the occupational changes occurring inCanada are likely to confront China more rapidly, and on a vastly bigger scale, and extensivenew training facilities will be essential merely to keep pace with the current expectations ofChina's reform program. Experience in Canada, as in other countries, is that a system of labormarket information and labor market programs, providing income support, and job searchassistance with the active involvement of enterprises, workers' representatives, and thecommunity, is a critical foundation for cost-effective public investment in advanced trainingfacilities and programs.

II/ In Buffalo, Texas, and New Jersey (cited by Leigh, Does Training Work?9).

- 86 - ANNE8

SKILL TRAINING IN TOWNSHIP ANDVILLAGE ENTERPRISES

1. In the late 1980s, rural enterprises (REs) _1 provided full time or seasonalemployment to over 90 million people in China, some 17 percent of the national labor force.2/Despite the sector's achievements, the success of REs is constrained by inadequate numbers ofstaff and recruits of the required standard of skill. An August 1991, study of 10 townships infour provinces 3I documented a growth from 922 enterprises employing 16,504 workers in1980, to 11,876 enterprises employing 65,655 in 1990. It noted a considerable improvementin local economic and social progress, but identified lack of management and technical skills asone of the major problems now facing development of the sector. Only 0.5 percent of staff werecollege graduates, and only 3.2 percent were technicians or engineers. The situation is similarin Dalian, where 662,000 are employed in REs. Only 3.3 percent of these are engineers,compared to 20 percent in state-owned enterprises.

2. Nevertheless, a remarkable transformation has been achieved by REs, andsubstatial numbers of people in rural areas have moved from agricultural to nonagrculturalemployment. The following review how skill acquisitions has taken place among RE workers.

3. In the '10 towns,' 80.7 percent of RE staff are under 40, and only 4.7 percentare over 50. Although the number of senior middle school graduates is low (11 percent),25.6 percent of total employees are primary school graduates, and 58.5 percent are junior middleschool graduates. Thus, they have a good basic education, and are generally young andadaptable. Training is mostly informal at the workplace, under the guidance of older workersand of engineer/technicians attracted from urban areas by favorable contract terms. However,some courses are conducted at city-based skilled worker schools and secondary technical schools.

4. The success of REs is attributed to the availability of start-up capital, innovativeproducts, outward-looking marketing strategies and flexibility in adapting to changing marketcondiions. The RE sector provides a stark contrast to the SOEs in that it operates on a market-oriented basis for decisions with regard to input and output, product mix, marketing, laboremployment and wage setting practices. There has been, however, little formal training, andno insttionalized training models were observed.

I/ Rual eaterprises are Chi's nrual, nonstate, nonagricultual enteprs, comprsig officiallyposored Township aud Village Collective Enterprises, and vaious "below-village categories.

/ MaRl Entaprise Dewlopnen In China, World Bank, 1992.

21 -Surplus Agricltdurl Labor in Ten Small Touw in China' (unpubished study), ILO, Beijing.

- 87 - & 2X E

S. However, there has been massive skill acquisition on-the-job, due in part to thecalibre and trainability of the "first-generation" of nonagricultural rural workers, and engineeringskill has been brought in. To maintain market competitiveness for the future (n products,technologies and skills), new measures will increasingly be needed to sustain the sector'sspecular record.

- 88 -

STATISTICALANNEX

- 89 - STA1 S CAL AbM

Table 1: EmMPoYmENT TRAINING CEmNERS AmD THEIR CAPACITIES, DY ftOINcEl, 1991

TotalETC8 With Training Total Total Total teachinS

No. practice Trainin8 capacity staff teaChivg staff staffProvince of ETC facilities capacity per ETC In ETC staff per ETC per ETC

Beijing 52 20 21,012 404.1 318 66 6.1 1.3TSanjin 16 8 5,000 312.5 288 23 18.0 1.4Rebei 117 79 25,000 213.7 1517 644 13.0 5.5Shanxi 58 33 12,351 212.9 421 124 7.3 2.1e1maDu8 102 59 17,187 168.5 610 95 6.0 0.9

LiaoSlng 87 61 24,920 286.4 828 268 9.5 3.1Jilin 61 22 13,260 217.4 392 140 6.4 2.3Heilongjiang 102 49 596 5.8 447 299 4.4 2.9

Shanghai 17 n.a. n.a. n.a. n.a. f.5. U.a. U.e.JiangSU 92 48 20,904 227.2 1,156 223 12.6 2.42hejisng 72 18 10,398 144.4 255 45 3.5 0.6Anhul 83 34 314 3.8 257 181 3.1 2.2Fujian 67 45 10,414 155.4 304 76 4.5 1.1Jiangxi 103 89 22,061 214.2 1,243 226 12.1 2.2Shandong 113 62 30,897 273.4 2,217 224 19.6 2.0

Henan 106 84 29,883 281.9 911 121 8.6 1.1Rubei 99 46 23,212 234.5 609 172 6.2 1.7Nunan 159 145 3,329 20.9 575 890 3.6 5.6Guangdong 119 54 37,195 312.6 1178 238 9.9 2.0Guangni 80 46 15,197 190.0 363 84 4.5 1.1Hainan 16 16 2,456 153.5 68 24 4.3 1.5

Siceuan 104 53 18,937 182.1 478 78 4.6 0.8Yunnan 56 27 8,411 150.2 282 65 5.0 1.2Ouizhou 75 25 8,222 109.6 104 5 1.4 0.1Xizang n.e. n.a. n.a. U.e. n.a. n.a. n.a. n.a.

ShaanxL 58 41 12,814 220.9 455 187 7.8 3.2Gansu 27 10 6,436 238.4 132 44 4.9 1.6Qiugbai 5 2 1,340 268.0 45 5 9.0 1.0NingXia 16 0 3,270 204.4 67 33 4.2 2.1Xinjiang 78 39 10,446 133.9 307 41 3.9 0.5

Total 2.140 1.215 395.462 184.8 15827 4621 7.4 2.2

-90- 'TIAISICAL AN

Table 2: FACULTY PROFILE 0F EMLoymENT TRAINI CENTE , By PRoviNCE, 1991(unit: no. of persons)

To tI Of wElch Seachina staff WorkersProvince tal Ofwhidi Total Univ. Upper Othrs Total Tech- Invited

cadre or above secondary nical part-time(Cen'l & teachers

technical)

Bei"ag 318 122 66 21 9 36 146 na 28Tianjia 288 68 23 11 11 1 197 185 127Babel 1,517 418 644 362 172 110 455 297 776ShaUxi 421 162 124 54 35 35 135 71 448Nelmsuggu 610 212 95 41 50 4 303 39 304

LaoRiMg 828 288 268 136 103 29 272 98 1,080Jilin 392 164 140 67 55 18 88 34 757BeilongJlang 447 86 299 65 8 226 62 646 10,163

Shanghai n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. a.a.ia4nsu 1,156 264 223 141 75 7 669 374 3,291Zhejlang 255 152 45 32 12 1 58 18 785Anhul 257 62 181 46 4 131 14Fujian 304 125 76 17 17 42 103 20 401Jlangil 1243 355 226 139 60 27 662 162 680ShandonS 2217 523 224 103 89 32 1470 887 791

Benan 911 433 121 60 37 24 357 98 1,019Bubei 609 206 172 109 52 11 231 60 969Hunan 575 419 890 302 28 560 720 318 24,647Guangdong 1,178 347 238 112 102 24 593 95 1,500Guangxi 363 164 84 51 19 14 115 38 835Balnan 68 24 24 6 7 11 20 14 15

Sichuan 478 202 78 32 32 14 198 42 572Yunnan 282 98 65 44 19 2 119 4 129Guizhou 104 74 5 2 3 25 4 247Xizang

Shaaaxi 455 156 187 119 51 17 112 42 613Gansu 132 51 44 36 8 37 11 94Qinghai 45 22 5 5 18 12 10Ngzia 67 24 33 18 14 1 10 6 81Xlijiang 307 136 41 17 15 9 130 40 247

Total 15.827 5.357 4.621 2.148 1.087 1.386 7L319 3.615 50.609

-91- STATISTICAL ANNEX

Table 2b: EDUCATION BACKGROUND OF FACULTY AT ETCs, By PROVINCE, 1991(unit: %)

Teaching staff at ETCsTotal Of which Upper Othersteaching univ secondarystaff or above (gen'l &

technical)

Beijing 100.0 31.8 13.6 54.5Tianjin 100.0 47.8 47.& 4.3Hebei 100.0 56.2 26.7 17.1Shanxi 100.0 43.5 28.2 28.2Neimenggu 100.0 43.2 52.6 4.2

Liaoning 100.0 50.7 38.4 10.8Jilin 100.0 47.9 39.3 12.9Heilongjiang 100.0 21.7 2.7 75.6

Shanghai n.a. n.a. n.a. n.a.Jiangsu 100.0 63.2 33.6 3.1Zhejiang 100.0 71.1 26.7 2.2Anhui 100.0 25.4 2.2 72.4Fujian 100.0 22.4 22.4 55.3Jiangxi 100.0 61.5 26.5 11.9Shandong 100.0 46.0 39.7 14.3

Henan 100.0 49.6 30.6 19.8Hubei 100.0 63.4 30.2 6.4Hunan 100.0 33.9 3.1 62.9Guangdong 100.0 47.1 42.9 10.1Guangxi 100.0 60.7 22.6 16.7Hainan 100.0 25.0 29.2 45.8

Sichuan 100.0 41.0 41.0 17.9Yunnan 100.0 67.7 29.2 3.1Guizhou 100.0 40.0 60.0 0.0Xizang n.a. n.a. n.a. n.a.

Shaanxi 100.0 63.6. 27.3 9.1Gansu 100.0 81.8 18.2 0.0Qinghai 100.0 100.0 0.0 0.0Ningxia 100.0 54.5 42.4 3.0Xinjiang 100.0 41.5 36.6 22.0

Total 100.0 46.5 23.5 30.0

-92 - ITAT=ISfAL ANNEX

Table 3: VOCATIONAL TRAINING OF TlE UNEMPLOyE, By IEROVNmCE, ANDTRAINNG ENTMES, 1991

(unit: no. of course completers)

Laborauthorities Enterprises Social Frivate

Provinces lacl. ETCM buoinesses organizations schools Total

Beijing 22,900 15,200 600 30,900Tianjin 4,070 8,002 145 12,217Babel 40,353 32,178 2,893 719 76,143Shanxi 27,589 52,573 4,415 930 65,507Neimenggu 23,047 54,359 2,981 4,913 85,300

Liaoning 46,240 75,643 4,845 1,290 128,018JiliU 54,082 37,154 1,031 4,563 96,830Heilongjiang 78,691 127,295 22,422 21,243 249,651

Shanghai 2,645 - - - 2,645Jianagu 42,912 67,114 2,096 20 112,142Zhojiaug 17,519 29,651 4,947 1,179 53,296Anhul 25,621 36,442 3,794 3,009 68,866Fujian 32,237 19,034 9,305 7,816 68,392Jiangxi 51,770 49,037 6,574 9,947 117,328Shandong 56,492 66,552 1,267 75 124,386

Henan 60,086 74,948 12,578 5,741 153,353Hubel 38,674 50,689 5,574 236 95,173Hunan 57,641 38,488 3,923 1,407 101,459Guangdong 96,400 72,500 34,800 16,900 220,600Guangxi 92,479 23,222 10,348 5,259 131,308Hainan 6,403 8,221 1,308 2,931 18,863

Sichuan 38,471 92,376 8,290 5,416 144,553Ouizhou 6,850 39,877 10,271 3,012 60,010Tunnan 8,668 15,866 2,676 373 27,583Xizang n.a. n.s. a.a. a.&. n.a.

Shaanzi 19,980 56,842 5,925 3,761 86,508Ganem 9,264 31,804 3,986 452 45,506qiughal 250 5,623 32 5,905linga 3,992 9,344 301 37 13,674XnSilUg 29,716 20,228 4,434 1,836 56,214

Total 995,042 1.210.262 171.161 103.865 2.480.330

Table 4: EMWNS IrO LABOR MAuEv IN CIEs AND TowNsMPs, 1991(unii: hundred persons)

Univ Demobi- Demobi- Direct Other Unemployedgrad. lized lized Gen'l from rural Uemployed previousProvince or above STS SWS soldier cadre SVS secondary rural vorkers this year Others year Total

Beijing 29.6 15.7 11.0 1.9 1.7 18.1 22.0 12.0 6.0 25.8 25.0 16.7 185.5Tianjin 12.7 11.7 10.5 1.7 0.5 5.1 6.9 12.8 2.0 2.0 1.0 81.0 147.9Bebel 26.8 29.4 23.7 18.8 3.6 14.9 88.0 152.6 12.9 42.4 15.7 76.7 505.5Shanxl 16.5 21.5 12.2 10.6 1.7 13.0 52.6 12.0 15.0 27.7 16.5 55.0 254.3Beimenggu 10.5 11.0 8.7 9.3 1.6 17.7 96.6 1.9 12.8 8.8 4.8 166.0 349.7

Liaoning 30.3 27.3 30.8 22.7 2.9 45.3 118.2 26.9 23.2 16.0 16.5 295.5 655.6Jiiln 16.3 15.2 15.7 19.5 1.4 39.1 83.0 7.2 19.0 2.7 1.5 104.8 325.4Heilongiiang 21.4 16.7 32.6 21.6 2.1 41.6 178.4 9.0 25.4 6.0 37.9 204.3 597.0

Shangha* 21.0 16.5 19.3 1.1 0.7 7.8 10.0 16.3 10.2 69.3 0.2 77.0 249.4Jiangsu 43.1 30.7 15.4 11.6 2.9 21.4 88.1 36.8 56.6 40.2 25.4 213.2 585.4Zhejiang 18.7 19.4 5.0 5.5 1.3 14.4 45.0 41.3 9.5 22.3 3.2 112.0 297.6Anhui 19.0 24.0 14.0 17.0 1.0 18.0 117.0 16.0 20.0 17.0 51.0 134.0 448.0Fujian 15.5 15.0 8.0 5.2 0.7 17.3 55.5 10.4 16.6 13.7 9.0 92.0 258.9Jiangxi 16.7 20.0 9.9 10.6 0.6 14.5 112.6 4.8 31.0 8.1 4.6 102.5 335.9Shandong 44.9 42.0 39.7 18.1 4.2 36.4 126.0 139.2 31.9 54.5 4.2 262.0 803.1

Henan 34.3 38.2 20.0 38.7 2.5 26.5 141.4 33.5 68.2 11.1 5.3 293.2 712.9Hubel 30.7 38.5 23.3 13.0 1.8 23.0 89.0 31.6 42.0 16.0 25.9 127.0 461.8Hunan 26.9 29.0 18.2 11.5 1.7 16.7 102.8 18.1 26.4 20.9 26.0 158.9 457.16uangdoDg 39.7 30.3 1S.1 7.4 2.0 41.5 161.0 83.8 8..5 142.2 97.2 221.5 926.2Guangxi 12.1 15.8 1.6 3.6 0.5 9.5 65.7 17.6 14.3 23.7 11.1 136.1 317.6Nainan 3.3 3.1 0.7 1.3 0.2 2.0 27.6 3.4 1.7 18.3 14.2 57.1 132.9

Sichuan 40.0 42.5 39.2 30.0 4.6 34.1 182.9 52.5 55.8 22.9 13.0 381.2 898.7Guizhou 11.1 16.0 8.3 3.5 0.8 11.0 57.8 5.8 18.1 17.4 0.0 107.3 257.1Tunnan 16.4 22.5 9.9 3.5 1.0 15.4 59.2 32.7 1.0 23.1 0.0 77.6 262.3Xlizang

Shansli 29.0 19.9 17.2 18.6 1.2 18.9 57.8 26.6 14.8 46.0 0.5 112.3 362.8Gansu 9.8 16.1 9.1 7.6 0.7 5.0 38.8 9.8 18.0 24.3 0.0 124.7 263.9Qinghai 2.6 4.2 3.6 1.4 0.2 2.2 14.0 0.2 3.2 11.6 0.5 41.7 85.4Ningxia 4.0 4.1 3.1 1.3 0.1 2.6 23.4 4.1 3.2 5.4 3.8 40.4 95.5Kiujians 13.0 14.0 15.0 8.0 0.5 10.0 40.0 3.0 13.0 20.0 6.0 102.3 244.8

Total 615.9 610.3 446.8 324.6 44-7 543.0 2261.3 821.9 656.3 759.4 420.0 3974.0 11.478.2

- 94 - STATISTICAL ANNEX

Table Sa: DESTINATIoN OF ENTRANTS INTO LABOR MARKEr IN CiTiES ANm TowNsmuS,BY PROVINCE, 1991

(unit: thousand persons)

Decrease inIndivi- Unemployment Unemployed

-Total Enterprise dual Others due to ot..er at endProvinces SOS COE Other workers reasons of year

Beijing 151.0 110.9 30.6 5.0 2.9 1.6 15.3 19.2Tianjlx 63.9 48.6 8.5 4.0 0.8 2.0 1.0 83.0beW 433.6 265.8 141.6 18.1 8.1 0.0 11.4 60.5Sbaua.j 192.5 100.0 56.4 0.6 4.1 31.4 9.5 52.3Nelmauggu 168.3 83.7 52.4 11.7 18.8 1.7 6.3 175.1

Liaoning 397.1 16S.6 154.1 14.4 38.8 20.2 8.8 249.7Julln 221.0 124.C 76.1 5.0 6.9 9.0 1.3 103.1Heilongjiang 367.0 168.8 132.3 4.7 44.3 16.9 17.3 212.7

Shanghai 154.0 114.6 12.6 9.2 0.0 17.6 19.3 76.1Jiangsu 396.8 202.3 121.9 25.4 13.9 33.3 18.0 170.6Zhejiang 180.6 100.1 50.4 7.9 9.7 12.5 7.6 109.4Anhul 287.0 125.0 74.0 19.0 62.0 7.0 12.0 149.0Fujian 168.9 66.2 33.1 29.7 16.7 23.2 6.5 83.5Jiangxi 221.1 64.0 61.7 22.8 33.7 38.9 9.2 105.6Shandong 572.9 302.8 180.2 23.6 48.1 18.2 28.1 202.1

Henan 432.4 244.5 134.6 4.9 34.6 13.8 14.9 265.6Hubel 314.8 190.6 56.1 15.7 8.1 44.3 5.0 142.0Hunan 273.3 145.6 6w.3 8.3 26.9 26.2 24.6 159.2Guangdong 695.6 251.3 167.9 99.6 112.9 63.9 32.0 198.6Guagrxl 187.1 94.1 16.3 11.8 33.4 31.5 4.1 126.4Hainan 81.4 37.6 2.4 4.7 7.4 29.3 1.3 50.2

Sichuan 513.3 294.1 106.9 33.5 55.2 23.6 24.9 359.5Guizhou 146.6 69.0 34.9 4.5 24.0 14.2 10.0 100.5Yunnan 176.4 107.6 33.9 0.9 11.0 23.0 9.6 76.3Zizang n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Sbaanxi 245.3 143.5 37.3 3.8 9.2 51.5 16.7 100.8Gansu 135.8 56.0 44.4 1.0 5.7 28.7 14.7 113.4Qinghai 46.8 21.6 19.2 0.8 2.1 3.1 5.4 33.2NlIRgxa 54.5 30.9 15.0 0.5 3.7 4.4 3.5 37.5XlInjiang 137.5 81.5 26.0 3.0 15.0 12.0 0.8 106.5

Total 7,416.5 3.814.3 1.947.1 394.1 658.0 603.0 339.1 3.721.6

-95 - STATISTICAL ANNEX

Table Sb: DESTMIATION OF ENmRAN' INTO LABOR MARKfE IN CITIES AND TowNsirms,BY PROVINCE 1991

(unit: %)

Provinces Total SOE COE Other Workers Others

Beijing 100.0 73.4 20.3 3.3 1.9 1.1Tlanjin 100.0 76.1 13.3 6.3 1.3 3.1Hebei 100.0 61.3 32.7 4.2 1.9 0.0Shanxi 100.0 51.9 29.3 0.3 2.1 16.3Eeimeng8u 100.0 49.7 31.1 7.0 11.2 1.0

Liaoning 100.0 42.7 38.8 3.6 9.8 5.1Jilin 100.0 56.1 34.4 2.3 3.1 4.1Reilongjiang 100.0 46.0 36.0 1.3 12.1 4.6

Suianghai 100.0 74.4 8.2 6.0 0.0 11.4Jiangsu 100.0 51.0 30.7 6.4 3.5 8.4Zhejiang 100.0 55.4 27.9 4.4 5.4 6.9Anhui 100.0 43.6 25.8 6.6 21.6 2.4Pujian 100.0 39.2 19.6 17.6 9.9 13.7Jiangxi 100.0 28.9 27.9 10.3 15.2 17.6Shandong 100.0 52.9 31.5 4.1 8.4 3.2

Henan 100.0 56.5 31.1 1.1 8.0 3.2Hubei 100.0 60.5 17.8 5.0 2.6 14.1Bunan 100.0 53.3 24.3 3.0 9.8 9.6Guangdong 100.0 36.1 24.1 14.3 16.2 9.2Guangxi 100.0 50.3 8.7 6.3 17.9 16.8Hainan 100.0 46.2 2.9 5.8 9.1 36.0

Sichuan 100.0 57.3 20.8 6.5 10.8 4.6Guizhou 100.0 47.1 23.8 3.1 16.4 9.7Yunnan 100.0 61.0 19.2 0.5 6.2 13.0Xizang

Shaanxi 100.0 58.5 15.2 1.5 3.8 21.0Gansu 100.0 41.2 32.7 0.7 4.2 21.1Qinghai 100.0 46.2 41.0 1.7 4.5 6.6Ningxia 100.0 56.7 27.5 0.9 6.8 8.1Xinjiang 100.0 59.3 18.9 2.2 10.9 8.7

Total 100.0 51.4 26.3 5.3 8.9 8.1

- 96 -

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