Innovative financing: A catalyst for success in secondary vocational education and training

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Students in an electronics class in Gambia as part of a technical and vocational education program Students in an electronics class in Gambia as part of a technical and vocational education program. Copyright: Jason Florio/World Bank

The 2024 Education Finance Watch emphasizes that, in light of pressing fiscal challenges and rising debt, countries must prioritize enhancing the adequacy, efficiency, and equity of their educational expenditures.

A major challenge for low- and middle-income countries, especially in Sub-Saharan Africa and South Asia where the youth population is rapidly increasing, is to find cost-effective, flexible, and relevant alternatives for secondary education.  This is particularly crucial due to the high levels of youth economic disengagement and the limited access to secondary education in many of these countries. Additionally, there is a growing demand for skills in critical industries such as manufacturing, services, and higher value-added agriculture, as well as in self-employment.

Secondary education provides students with essential knowledge and skills, fosters critical thinking and problem-solving abilities, and prepares them for further academic pursuits or vocational training. But access is not yet universal, and countries seek to expand its access especially among the most vulnerable students, who often drop out due to a lack of academic readiness, high opportunity costs, or because they believe secondary education lacks relevance, especially if they do not plan to pursue further education.

Secondary vocational education and training promotes youth economic engagement

One of the existing approaches to make secondary education more relevant (and to decrease dropouts) is to offer a vocational track within secondary education. The availability of secondary vocational education and training (VET) varies significantly across developing regions, from 25% in Europe and Central Asia to less than 10% in South Asia and Sub-Saharan Africa.

Offering secondary VET programs decreases the share of youth who are not in education, employment, and training (young people not employed nor in education training, or NEETs). This suggests that secondary VET is associated with higher levels of youth economic engagement (Figure 1).

For secondary VET to be successful, evidence shows it must ensure close coordination with employers, allow students the option to choose the VET track, and provide flexible pathways in and out of the VET route, especially for individuals who opt to become technicians in the short-term, but may wish to reengage in academic or professional education tracks later. 

Figure 1

The World Bank

 

Source: ILOSTAST. 


Innovative financing options to boost the success of secondary VET

Public education systems, even in higher-income countries, often faces challenges in aligning with employer needs, forecasting labor market demands, and integrating new technologies. Moreover, technical education requires specialized technological approaches in teaching methodologies, infrastructure, and program design, which must evolve at the pace of industry advancements.

Considering these challenges and the limited funds available for VET systems, exploring innovative financing such as public-private partnerships (PPPs), is a policy option that could enable public education systems to organize and manage secondary VET systems more swiftly and efficiently. Undoubtedly, the establishment of public-private partnerships (PPPs) for education delivery must be approached with caution, as it requires a robust system capacity to ensure effective implementation and oversight. Furthermore, such initiatives must be accompanied by efforts to strengthen traditional public education delivery systems.

Linking financing and results for better outcomes

Charter schools represent a potentially effective model for delivering secondary VET. This PPP framework combines public funding and oversight with private service provision and could be particularly promising if it incorporates results-based contracts. Such contracts would ensure that payments to private providers are contingent upon achieving specific outcomes. These outcomes could include active employer participation in developing and updating curricula, integrating cutting-edge technologies into the learning process, and ensuring that students acquire relevant industry certifications and gain practical experience through work-based learning opportunities.

Research on vocational charter schools in the United States underscores the significance of incentive structures in enhancing educational outcomes. Specifically, adopting performance-based strategies—which link financial incentives and engagement to concrete achievements like obtaining industry certifications and gaining hands-on experience—has shown promising results. Public-private partnership frameworks can play a critical role by combining public funding with private sector governance to better align educational outcomes with industry needs. The active role of employers in curriculum development and governance ensures that students receive training in skills that are directly applicable to the job market, including the integration of advanced technologies and practical work experiences.

Voucher programs can broaden access

Voucher programs are another option that would allow students who lack the ability to pay out-of-pocket fees to enroll in higher performing public and private institutions.

Experience from Colombia shows the promising results of vouchers programs. Under the Program to Improve Secondary Education Coverage (PACES), the government of Colombia used lotteries to distribute vouchers in Bogota city, which partially covered the cost of private secondary school for students who maintained satisfactory academic progress. The voucher program's design incorporated two critical elements: parents supplemented the voucher to fully cover school fees, fostering greater investment in their children's education. Additionally, students who were held back a grade forfeited their voucher eligibility. This provided strong incentives for beneficiaries to improve their academic performance.

Three years following the lotteries, the short-term impacts were evident. Voucher recipients exhibited a 10% increase in 8th-grade completion rates, mainly due to a reduction in grade repetition, and their achievement in standardized test scores improved by 0.2 standard deviations. In the medium run, the PACES program increased secondary school completion rates by 15 to 20 percent as well as scores in college access exam. For students in VET secondary schools only, the voucher increased the likelihood of enrolling in university and degree completion, and increased wages in the formal sector 13 years after receiving the voucher.

In conclusion, the effective implementation of secondary VET has the potential to significantly enhance the educational and employment prospects of young people worldwide. Achieving high-quality VET demands flexibility, a proactive approach, and robust partnerships with industry stakeholders. Leveraging structured PPP models and exploring innovative financing strategies could offer viable solutions to expand access and elevate the quality of VET on a global scale, in a cost-efficient manner.

 

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Maurice D. Kugler

Professor of Public Policy in the Schar School of Policy and Government at George Mason University

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