Reforming Vocational Education and Training To Meet Private Sector Skill Demands - Egypt

Source: ILO/World Bank

• Introduction

• The Supply of Skilled Workers

• The Demand for Skilled Labour

• Reforms and Obstacles

Table 1. Education Enrollments (1990-1995)
Table 2. Employment and Education
Table 3. Demand Supply Imbalances in the Private Market for Skilled Workers

Introduction

State-led economic growth in the 1960s and 1970s that averaged 4.5 percent annually slowed down to 0.5 percent by the mid-1980s. High growth occurred during an era of high petroleum prices and protection for agricultural and manufactured products and services. During the 1980s, however, oil prices fell, public debt became burdensome and worker remittances declined as labor in the Gulf was replaced. Adjustment to these problems was necessary, but the Mediterranean world changed in the 1990s and a return to previous policies was infeasible.

Over the past five years, the government has undertaken an economic reform and structural adjustment program (ERSAP) that has achieved remarkable results in terms of macroeconomic stabilization as well as correcting the major relative price distortions. Private sector development is at the center of ERSAP. Egypt is moving from a centrally planned public sector dominated economy towards a competitive market based one in which the private sector is to play the leading role. But slow output and employment growth in the public and formal private sector mean that the supply of skilled workers exceeds its demand.

The Supply of Skilled Workers

Until the 1990s, the main sources of supply of skill workers for private enterprises were public enterprises, informal apprenticeships, the formal education system, and returning migrants. More recently, though, these sources have begun drying up.

The formal education system

The education system is four-tiered: elementary (5 years), preparatory (3 years), secondary (3 years), and tertiary (2, 4, or more years). The elementary and preparatory levels constitute primary education (see table 1). About 90 percent of general secondary enrollment is in government schools, though there are almost 300 private general secondary schools. At the secondary level, the Ministry of Education (MOE) administers or regulates technical and vocational education programs. Higher level technical and managerial skills are taught in universities, and technical and commercial postsecondary institutes. Technical institutes offer 2-year programs after general secondary schooling, universities offer 5-year engineering programs after general secondary, and management and accounting courses. Enrollment in technical institutes has risen by more than 10 percent annually during some years, but this is due to government attempts to ease the pressure on universities rather than to meet private sector skill needs.

Table 1. Education Enrollments (1990-1995) (thousands)

Training in ministries and parastatals

Vocational training in some ministries such as industry and housing competes with MOE vocational education. The Ministry of Industry's Productivity and Vocational Training Department (PVTD) administers programs for vocational training, productivity and management development in 40 centers. These have an annual enrollment of roughly 40,000 in 3 year programs and short "made-to-order" programs. These programs use a "dual system": in the third year, about 80 percent of training is in participating enterprises, some of which are private. Other ministerially-managed training centers include TOMOHAR, the Training Organization of the Ministry of Housing and Reconstruction with an enrollment of about 70,000 in more than 50 centers. The Ministry of Employment and Training provides short courses for the unemployed, mostly graduates of industrial, commercial, and agricultural secondary schools. Another supplier of semi-formal training to facilitate employment is the Ministry of Social Affairs, which has 56 major training centers. Other ministries and parastatals also have their own training units. Large and medium enterprises provide or pay for training for their employees.

Other sources for private enterprises

Due to falling public-private wage differentials - the ratio of public to private earnings fell from 1.5 in 1976 to less than 1 by 1990 - technicians, supervisors, and professionals could be bid away from public enterprises. But this source has dried up: worsening employment conditions in the public sector imply that only the least qualified job-seekers now join the public sector. In an economy dominated by small and micro-enterprises, apprenticeships have been a major supplier of skills. In the construction sector, for example, more than 80 percent of skilled workers had been trained as apprentices. While emigration led to a drying up of skill supplies in the past - most migrants were secondary school and college-educated - the return of 0.7 million migrants after the Gulf war proved to be a major source of skilled workers for some years. But most of these workers choose to be self-employed, so that at current wage levels their skills are unavailable to firms.

The Demand for Skilled Labour

Government agencies and enterprises, with a total employment of about 4.5 million workers, are the largest demanders of educated workers (see table 2). In the public sector, hiring policies reflect social safety concerns. In the private sector, less than 20 percent of workers have secondary or higher education.

Table 2. Employment and Education (percent, unless specified)

Large enterprises and multinationals

In general, large enterprises demand managers with a mix of management and technical skills, supervisors, and maintenance workers. The demand for skilled workers varies by sector. In manufacturing, the demand for managers, administrators and professionals is largely met. Private entrepreneurs in manufacturing complain that while the demand for foremen and engineers has begun to rise, the "High Industrial" institutes produce workers with neither engineering nor supervisory skills. In trade, finance, and services, where there is more frequent client contact, entrepreneurs felt that specialists with better language skills are in great demand.

Small and micro enterprises

The economy is dominated by small firms and microenterprises, sometimes collectively referred to as the "informal sector". While the share of the informal sector in total employment was about 40 percent in 1986, its share in private employment was more than 80 percent. In sectors such as construction, virtually all private sector employment is informal. It is likely that skills for the informal sector are developed primarily through informal mechanisms such as traditional apprentices and learning by doing. Employer federations representing small enterprises felt that the demand for semi-skilled workers and technicians was increasing rapidly, but trained technicians and otherwise competent workers were in short supply. In microenterprises, credit availability and regulation were considered the main constraints; skill demands were small and relatively easily met.

Reforms and Obstacles

VET reform in Egypt is constrained by several factors.

Pre-employment VET

Even in unrealistically optimistic scenarios, the likely supply-to-demand ratios for university and secondary school graduates are greater than 400 percent. Taking into account the roughly 2 million secondary school graduates who are currently unemployed, at an annual employment growth rate of 10 percent it would take almost two decades to simply absorb existing job-seekers. The system is inequitable as well: Egypt spends almost 45 percent of its education budget on 0.7 million university students, while primary and secondary schools enroll about 12.5 million students. The annual unit costs per student are about LE 500 for technical secondary schools, though private school estimates indicate that about LE 2,500 is needed to provide moderate quality technical education.

Enterprise-Based training

Guaranteed public employment and narrow skill differentials in administered wage systems distort incentives to invest in skills. In the absence of broad regulatory reform, compensatory interventions such as partial public subsidies or tax rebates have been considered. However, the current state of tax administration may not be suitable for introducing such schemes. The most important barrier to enterprise-based training is uncertainty about government attitude towards private sector investment. Training is a long-term investment for both employers and workers, and the market for such investments - either in human or physical capital - is thin.

Apprenticeship schemes

Aiming to use the German dual system to revive the tradition of apprenticeships that was stifled in a command economy, the "Mubarak-Kohl Initiative" was launched in 1991. The initiative has met several obstacles. Unreasonable expectations on both supply and demand sides are perhaps the most important constraint. While international experience shows that technicians are less than 10 percent of the workforce in most manufacturing industries, government and business aims for twice this ratio. The quality of students is another constraint: vocational education is reserved for those who consider themselves as having ‘failed already’. Finally, while the German dual system relies heavily upon private financing, Egyptian firms are less willing to make such investments mainly because the private sector does not foresee immediate benefits.

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