Vocational Education and Training in Bulgaria

Chapter 3. Funding of vocational education and training in Bulgaria

Abstract

This chapter analyses the funding of vocational education and training (VET) in Bulgaria. It first sets out how funding is an important tool in achieving high quality provision and describes key principles with which funding arrangements should comply. Funding decisions underpin the design and delivery of VET which is efficient, effective and equitable. The chapter further assesses the challenges in Bulgarian funding arrangements in the context of what is a comparatively a low level of funding of VET, as well as a low involvement of firms in the training. Both school level financial autonomy, and capacity to act upon increased flexibilities, are modest. The chapter argues that potential exists to strengthen collaboration between schools and employers to achieve increased cost sharing between government and private firms. And lastly, more can be done to improve equity in VET delivery within the existing funding formula.

Background: Funding of VET

Well-crafted funding arrangements can help achieve better quality in education

While on average across OECD countries, the public sector continues to provide the majority of financial resources for schools, decisions surrounding the allocation, management and use of the funds are shared among an increasingly wide range of actors within processes of financial decentralisation. Such approaches are driven by recognition that it is not only the level of funding, but the means by which funds are allocated, which drive the effectiveness and efficiency of provision. Funding arrangements create behavioural incentives for schools and it is therefore an important mechanism for the government to steer school provision. Broadly speaking across OECD countries, schools are usually provided with a per capita funding from the state, as well as additional direct funding from the local government (OECD, 2017[1]).

Efficiency in funding arrangements

As the funding of schools in most cases is public and the resources are limited, one objective of funding is to ensure value for money, targeting resource to enhance the performance of the greatest number of students (OECD, 2017[1]). Aiming for efficiency is not about cutting the costs, but getting the most out of the resources to achieve better outcomes (The Scottish Government, 2017[2]). Both centralised and decentralised funding systems can have efficiency advantages: for example, delivering economies of scale or making use of local knowledge in securing best value for service provision.

Funding systems should take equity in consideration

A challenge in many countries can be to ensure equity in the school provision across the nation. Excessive focus on efficiency within provision can easily undermine fair access to education. Students in poorer regions, for example, should have the same access to high quality education and training as students from wealthier areas. By including weights to distribute additional funds in recognition of the different costs and barriers preventing fair access, funding formulas can play an effective role in aligning the distribution of resources with national educational priorities. Carefully crafted funding arrangements should take into account differences in revenues across the regions (Kuczera and Field, 2010[3]) as well as identifying vulnerable groups in potential need of targeted measures. There are two approaches to equity in funding; horizontal equity allocating similar levels of resources to similar types of provision, and vertical equity allocating different levels of resources to student groups with different needs (OECD, 2017[1]; Fazekas, 2012[4]).

Funding arrangements should be accountable, transparent and sustainable

Well-designed funding formulas are informed by consistent principles. They are transparent, simple and easily understood. Overly complex funding can contribute to lack of openness and distort decision making. Keeping funding simple and transparent helps in assessing the impact of spending decisions (The Scottish Government, 2017[2]). Further, funding should be subject to periodical reviews and be determined through consideration of reliable data and transparent criteria, allowing accountability. There is also a strong argument for making funding predictable, so that school or local authorities can make – and confidently resource - long term plans (UK Department for Education, 2016[5]; OECD, 2017[1]).

Many countries use funding formulas to distribute funds

The use of funding formulas has proven to be particularly effective in distributing funds in an efficient and transparent manner. A funding formula provides objective criteria to allocate resources among schools. Positive results depend, however, on how the funding formula is crafted (OECD, 2017[1]). Funding formulas can contribute to accountability and sustainability, but also efficiency and equity. Fazekas (2012[4]) identifies four main criteria commonly used in a funding formula across the OECD countries:

1. student number and grade level

2. student needs, for instance disadvantaged learners

3. curriculum or educational programme

4. school characteristics.

In addition, some countries use output and outcome-based related criteria (Fazekas, 2012[4]).

Why focus on the funding of VET?

At upper secondary level spending on vocational programmes tends to be higher than on general programmes

Delivering VET is often more expensive compared to general education, especially when programmes require expensive, up-to-date equipment (Hoeckel, 2008[6]). Moreover, VET students often tend to come from a more disadvantaged background than their counterparts in general programmes, often presenting weaker academic profiles (Kis, 2016[7]). This is also the case for Bulgaria, as the Programme for International Student Assessment (PISA) data show that a large share of disadvantaged students are enrolled in VET programmes compared to other countries participating in PISA (OECD, 2015[8]).

Comparative OECD data are available on total expenditure on educational institutions per full-time equivalent student (Figure 3.1). These show that in most countries expenditure on vocational programmes is higher than on general programmes. However, these data do not capture spending on VET outside educational institutions, such as subsidies to employers that hire apprentices or spending within companies on the wages of apprentices or apprentice supervisors. Such costs constitute a major element in overall expenditure in countries which make extensive use of work-based learning (including apprenticeships) at upper secondary level (OECD, 2018[9]).

Figure 3.1. Expenditure per student on upper secondary education, general and vocational programmes

Note: Total expenditure on educational institutions per full-time equivalent student (2015). In equivalent USD converted using PPPs for GDP, direct expenditure within educational institutions, by level of education, based on full-time equivalents.

Source: Adapted from OECD (2018[10]), “Indicator C1 How much is spent per student on educational institutions?” in Education at a Glance 2018: OECD Indicators, https://doi.org/10.1787/eag-2018-21-en.

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There are differences between countries in how VET is funded

OECD countries vary as well in how they fund their VET systems. Generally, the public authorities fulfil the main responsibility to fund learners, but there are also other sources of funding available. Apprenticeship systems often involve a cost sharing arrangement between the authorities and employers. Apprentices typically spend three or four days in the employer’s workplace, building productive skills through training and practice (OECD, 2018[9]). In some countries, governments offer employers financial incentives to take on training responsibilities. In school-based systems, it is common that the authorities undertake the main costs of the training, but with employers contributing through provision of work-based learning which can amount to placements of several months’ duration. Some countries also have a substantial proportion of private providers (particularly with regard to adult learners) who usually receive public funding. In some cases costs are also shared with the learner who has to pay a fee (Kuczera, 2017[11]).

The cost and benefits of providing apprenticeships for employers vary between countries, sectors and occupations

To encourage employers to provide apprenticeships, governments and sometimes social partners promote apprenticeships through a wide range of incentives, including financial incentives such as subsidies and tax breaks as well as non-financial incentives such as adjustments in apprenticeship design to make provision more attractive to employers. While financial incentives are common, review of international evidence suggests their effect is often modest (OECD, 2018[9]). If incentives are too large, they can distort the link between vocational provision and actual labour market demand, if too small, impacts on employer behaviour are modest. Incentives are difficult to get right because the costs and benefits to employers of training apprentices varies significantly between sectors and occupations. Therefore, well designed apprenticeships balance attractiveness to apprentice and employer within a sectoral context – leading to variation in apprenticeship length and apprentice salary (Kuczera, 2017[12]).

Issue and challenges: Funding of VET in Bulgaria

VET funding arrangements in Bulgaria

The funding of VET schools and adult education providers

In the funding of VET schools, the Ministry of Education and Science sets the resource per student in VET in co‑operation with the Ministry of Finance. This resource per student in VET was in 2017/2018 between EUR 1 000 and EUR 1 500 per year. The variation depends mostly on the characteristics of VET programmes delivered. The amount covers for instance contributions towards the costs of school buildings and infrastructure, teachers’ salaries and social security. The funding of schools is determined, therefore, by a formula that includes criteria that take into consideration differences in costs between VET programmes, the number of learners enrolled on programmes and differences between the regions in Bulgaria. There are, however, no criteria related to drop-out or inclusion of vulnerable groups which is common in other countries. A large majority of the VET schools are public. Only 11 out of 354 VET schools were private in 2017-18, and these schools can apply for state funding as well (Cedefop, 2018[13]).

In addition to funding from the state budget, schools receive funds from the municipalities. They can also receive funding through donations and raise their own revenues, for example, through participation in national and international programmes.

The same regulations apply also for the VET adult learning centres that provide adult education (Cedefop, 2018[13]). These centres, however, also receive funding from other sources, particularly from employers and the learners themselves. National authorities indirectly finance the centres through a voucher system. Both employed and unemployed people can under certain conditions be eligible to receive vouchers. The voucher amount depends on the EQF level at which the training they enrol in is set. Training at EQF level 2 can be covered by a voucher with a value set at EUR 300, EQF level 3 at EUR 600 euros and EQF level 4 at EUR 900. In addition, financing is also available from European Structural Funds (ESF) through the Operational Programme Human Resources managed by the Ministry of Labour and Social Policy. Funding can be combined in different ways: learners might cover all the costs of a programme, the employer might cover the costs, or there might be a cost-sharing arrangement. Training for unemployed people is usually totally funded through the voucher system (Cedefop, 2018[13]).

Financial incentives directed towards learners

Younger learners can receive some financial incentives during their education. High performing learners can receive a scholarship, while some disadvantaged learners who, for instance, have a special educational need or who are orphans can receive social support. These grants are offered monthly and are set at between 5% and 10% of the national minimum wage level. Apprentices enrolled in a dual VET model receive remuneration directly from the employer which provides apprenticeship placement (Cedefop, 2018[13]).

Funding of work-based learning – incentives for employers

Bulgaria is currently piloting several apprenticeship programmes and has introduced financial support to attract employers to take on a training responsibility. The national authorities cover health insurance for apprentices for up to 36 months. In addition, the state also covers costs associated with the theoretical training provided by training institutions as well as mentoring costs.

The overall funding of VET is relatively low, and the Bulgarian employers’ involvement in VET is low

Resources spent on education are lower than the European Union average - and are falling

Public expenditure in Bulgaria on upper secondary education is substantially lower than the European Union (EU) average. This is to some extent explained by a lower level of GDP than other members of the European Union. However, even when considered as a proportion of GDP, Bulgaria still spends less resources compared to the average of the EU countries; in 2015 Bulgaria spent 4% of its GDP on education and training, while the EU average is 4.9% (European Commission, 2017[14]). In 2016, expenditure on education fell substantially, a drop in real terms equalling 9.1%. Expenditure as a percentage of GDP fell to 3.4% in Bulgaria, significantly below the EU average of 4.7%. The drop, which was linked to a reduction on capital spending in educational infrastructure, is partly explained by decreased funds from the EU. This shines a light on how such spending in Bulgaria is dependent on EU funds (European Commission, 2018[15]). The tendency of lower expenditure can also be seen in upper secondary VET. In 2014, Bulgaria spent 0.47% of the GDP on such provision, compared to 0.54% across the EU – nearly 15% lower than the average across the community (Cedefop, 2017[16]).

Bulgarian employers involvement in upper secondary VET is low

Employers’ involvement in VET varies greatly between OECD countries. Figure 3.2 shows the share of employers with 10 or more people employed that provide work-based learning to students, either through apprenticeships or work placements. The differences are to a large extent explained by different models of VET. Countries with apprenticeship system have generally a high level of involvement, for instance seen in the top four countries, Germany, the Netherlands, Austria and Denmark which all have apprenticeship systems. In Bulgaria, fewer than 10% of employers are involved in upper secondary VET, (Figure 3.2).

With low comparative levels of involvement from employers to share the costs in Bulgaria, it is especially important to focus on efficiency and accountability to ensure that resources are optimally spent in contributing to positive outcomes.

Figure 3.2. Percentage of firms employing more than 10 people providing work-based learning opportunities to learners enrolled in upper secondary VET, 2015

Note: Enterprises employing initial vocational education and training participants by size class - percentage of all enterprises.

Note by Turkey: The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey shall preserve its position concerning the “Cyprus issue”.

Note by all the European Union Member States of the OECD and the European Union: The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.

Source: Adapted from Eurostat (2015[17]), Eurostat, Education and Training Statistics, Indicator [trng_cvt_34s] (database), https://ec.europa.eu/eurostat/web/products-datasets/product?code=trng_cvt_34s.

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School autonomy is low and the collaboration with employers can be strengthened

The degree of school-level financial autonomy is low

Bulgarian VET schools receive a delegated budget from the national authorities (Cedefop, 2018[13]). Decision making over how funds are spent is heavily prescribed. Many detailed rules and regulations in Bulgaria steer how schools can spend resources, for instance how much to spend on teacher training, the standards for the size of classrooms and the equipment used. Therefore, there are questions to be asked about the degree of financial autonomy at the school level. If the main part of spending is already predefined through regulations, there is little room for schools to adjust expenditure according to local circumstances. During interviews conducted by the OECD with stakeholders in Bulgaria, the low level of school financial autonomy was raised as a concern. Schools have financial autonomy only over limited tasks, such as the repair and upgrading of school buildings. Opportunity exists to increase flexibility of spending which is more directly linked to provision. VET schools might in many cases be better placed to prioritise funding according to local needs, channelling more students and thereby funding towards VET programmes where there is an explicit need for qualified workers in the local labour market (OECD, 2017[1]).

Collaboration between schools and employers can be strengthened

Schools are currently responsible for collaboration with the local labour market, for instance in arranging work-based learning for the students. Such collaboration with employers can be an important means of sharing the costs of education and training. Bulgaria recognises the added value of work-based learning in companies for its VET students, but historically has struggled to organise it and to engage employers. Collaboration between schools and employers is all too often dependent on proactive individuals, rather than being systematised (Bulgarian Ministry of Education and Science, 2016[18]). The authorities have, in recent years, initiated projects with promising results that have aimed to increase employer engagement and the proportion of students in short work placements and further efforts in this field are to be encouraged (Kovachev et al., 2014[19]). Bulgaria is not alone in struggling to engage employers systematically to provide work-based learning placements within school-based systems. Recent OECD analysis of Sweden (Kuczera and Jeon, 2019[20]) has highlighted similar challenges related to over-reliance on subject teachers to source and manage work-based learning. Opportunity exists for VET systems to work more methodically with employers at municipal or regional level, making use of intermediary organisations to reduce costs while maintaining the close engagement of teaching professionals.

Schools in Bulgaria are mainly funded directly by the national authorities, but are also allowed to raise additional funds, for instance, through donations from employers. Some schools receive such donations through equipment for use in workshops. Employer investment in education is very positive, but can also raise issues of vertical and horizontal equity as schools in wealthier, urban areas tend to have a higher chance of accessing state-of-the-art equipment because of geographic proximity to companies, compared to schools in rural areas where the labour markets are more limited (OECD, 2017[1]). Moreover, if schools depend excessively on employers’ contributions, there is a risk that provision becomes linked to the equipment used by a specific employer, which can have consequences for the overall relevance of learning to the broader labour market.

More can be done to tackle the issue of equity

There are issues about equity in the Bulgarian education system

In Bulgaria, where many students underperform, educational outcomes are closely connected with students’ socio-economic background. Analysis of the Programme International Student Assessment (PISA) data at the lower secondary level show that on average, 15-year-old Bulgarian learners score lower than the OECD average in mathematics, science and reading. In Bulgaria, the socio-economic background of students has a stronger impact on their proficiency than in other OECD countries (OECD, 2016[21]).

The share of early school leavers in Bulgaria increased from 12.5% in 2013 to 13.8% in 2016 and then in 2017 dropped back to the level of 12.7%, which is still higher than the EU average (Eurostat, 2018[22]). There are significant regional differences with the challenges with early school leavers greater in smaller towns and rural areas than in cities. Bulgaria faces particular issues related to the integration of its Roma population into education and work. There are challenges in defining the Roma population as some Roma people do not define themselves as such because of social stigma. Many consider themselves as Bulgarians or ethnic Bulgarian Turks. According to official figures from 2011, 4.9% of the Bulgarian population was Roma (European Commission, 2014[23]). In 2016, 67% of this Roma population1 aged 18-24 were early school leavers and 65% were NEET (neither employed nor in education or training) (European Commission, 2017[14]; European Union Agency for Fundamental Rights, 2016[24]).

The funding formula does not include criteria to tackle the issue of equity

Historically, Bulgaria’s funding formula that decides upon resourcing per student to schools has not included criteria related to either dropout or equity. This means that there are no financial incentives in place to recognise the additional costs entailed in meeting the greater needs of more disadvantaged learners. The funding formula does nothing to encourage schools to put extra effort to make sure that all students succeed, including vulnerable students, such as those with Roma background, students with special needs or students coming from a disadvantaged socio-economic background. According to a recent European Commission review of education and training (European Commission, 2017[14]), the authorities in Bulgaria are planning to revise the funding formula to begin acknowledgement of equity by channelling more resources towards disadvantaged schools. This is a welcome development.

Policy message

Place greater effort on achieving increased equity, efficiency and accountability within the funding of VET by:

• Considering revision of the funding formula to improve equity and the inclusion of vulnerable groups, taking into account that some students need more support than others.

• Experimenting with increased financial autonomy for schools, while building up mechanisms to confidently assure the quality of provision and capacity to make effective use of the autonomy.

• In order to further share the costs of VET with employers, increasing co‑operation between VET schools and employers at a local level, through expansion of work‑based learning elements within school-based programmes as well as expanding successful apprenticeship programmes.

• Considering, should the current pilot apprenticeship scheme prove to be successful, a full analysis of the costs and benefits of apprenticeships to learners and employers. Potential government financial investment should be based on evidence of the costs and benefits of providing apprenticeship by sector and be designed to optimise productive skill development of learners.

• Regularly monitor and review the funding arrangements to schools.

Policy argument

The funding formula should ensure equity and at the same time be transparent and accountable

The challenge for funding formulas – transparency versus complexity

The funding formula used in Bulgaria has been based on student numbers, differences in the costs of educational programmes and regional economic differences. A recent innovation has added a new criteria linked to skills shortages. A list of professions that are in high demand in the labour market has been developed and VET schools providing training for these priority professions will receive more funding. Bulgaria is also considering adding outcome-based criteria by giving increased funding to schools that offer provision that corresponds to labour market need.

Dilemmas can often occur when deciding which criteria to use in setting up a funding formula. One of them is being able to strike the right balance between transparency and complexity. Keeping funding formula simple and understandable helps to make it transparent, while adding many criteria to make it sensitive towards the specific needs of each school can make it overly complex and burdensome. Funding formulas generally are not expensive to operate, but require regular monitoring and reviewing. At the same time, increased complexity in the funding formula can increase costs and require administrative and technical capacity to handle (Fazekas, 2012[4]).

Use the funding formula to ensure equity

In Bulgaria there are substantial challenges with equity. There is a close connection between students’ socio-economic background and how they perform at school, as well as an ethnic group (the Roma) that is systematically over-represented among drop-outs and NEETs. Using funding arrangements more strategically can help to reduce these differences, ensuring that resources are available to tackle deficiencies in earlier schooling.

In the allocation of funds to either subnational authorities or to schools, it is important to consider the perspective of equity. Regional differences in revenues are commonplace. Schools in poorer regions face specific funding challenges with costs often higher than in urban areas. Authorities can therefore take this into account when distributing funds. Denmark for instance, responds to this challenge by channelling additional funds towards schools in remote areas (Nusche et al., 2016[25]).

The World Bank (2014[26]) has argued that Bulgaria should use its funding formula to tackle the issue of equity by adding criteria to reach disadvantaged and ethnic minority groups. Equity is an important issue in VET as many disadvantaged groups with weaker initial education tend to be enrolled in VET compared to general education programmes. Resourcing should recognise the additional demands of addressing weak literacy and numeracy of such students (OECD, 2012[27]). The Bulgarian government should therefore consider including the issue of equity more strongly within its VET strategy, setting targets at the national and local levels and incentivising schools to reduce drop outs (from all backgrounds) while acknowledging higher costs linked to ensuring the educational success of the most disadvantaged learners. Some countries have introduced specific targets to try and ensure that learners from all backgrounds have opportunity to benefit from vocational education. An example of a target on equity in VET is in the strategy for apprenticeship implemented in England (United Kingdom) where the government aims to increase the share of ethnic minorities (which have been historically underrepresented) in apprenticeship by 20% by 2020 (Department for Business, Innovation and Skills, 2015[28]).

Box 3.1. Examples of countries using equity criteria

The Flemish and French Communities of Belgium have added criteria in the funding formula to increase equity. The allocation to schools includes weightings for student socio-economic characteristics, special educational needs and for the location of the school. Schools can also receive additional targeted funding for specific student groups, including students from disadvantaged backgrounds, newly arrived immigrants and refugees.

In Chile, the funding formula also includes weights based on certain characteristics, such as students from highly disadvantaged socio-economic backgrounds, for schools in rural or highly isolated areas and for special educational provision. In addition, schools can receive earmarked grants for students with special educational needs and from disadvantaged backgrounds. Also teachers can receive higher salaries if they work in schools with additional challenges, related to geographic location, social marginalisation or extreme poverty.

In Estonia, the funding formula includes criteria on equity, for instance for students with special educational needs and weightings for school location. In addition, targeted funding exists for students whose mother tongue is not Estonian and for newly arrived immigrants.

Source: OECD (2017[1]), The Funding of School Education - Connecting Resources and Learning, OECD Reviews of School Resources, https://doi.org/10.1787/9789264276147-en.

Funding criteria based on employment outcomes can be helpful, but should be accompanied with good quality data about such outcomes alongside consideration of other criteria and should be monitored closely

In the Bulgarian strategy for VET from 2015-2020, the national authorities aim to introduce some form of outcome-based criteria into funding formula. The intention behind the proposal is to increase funds to schools that provide vocational education and training that best corresponds to labour market needs (Bulgarian Ministry of Education and Science, 2018[29]). This initiative is important since one of the main purposes of VET is to equip students with the cognitive and technical skills that will facilitate their integration into the labour market. Thus, VET systems need to be responsive to the needs of the labour market and adapt to the changing skills’ demands.

Each year, VET schools decide which VET programmes they will provide and how many students they will accordingly recruit by programme area. This is approved by the ministry. The whole process presents challenges. In practice, schools’ decisions often depend upon factors other than local employer demand, such as the existing capacity of the school, the availability of competent teachers as well as the equipment which is available. Basing these decisions on such factors raises concerns: it may prevent VET schools from adapting to the rapid changes taking place in the labour market and placing the focus on the employability of their students which should be the main priority. Funding formula are not the only means of encouraging greater responsiveness to labour market demand. Important mechanisms open to governments to help ensure that VET systems are delivering the knowledge and skills demanded by employers include, as discussed elsewhere in this report, governance structures that engage members of the economic community in the planning of VET provision and the requirement for work‑based learning placements which clearly limits the availability of VET courses to those that are in labour market demand (Box 3.2). In some countries, such as Denmark, the number of places for learners on programmes with limited attractiveness in the labour market are reduced (Fazekas, 2012[4]).

Some countries are also making use of funding formulas to take account of the effectiveness of VET programmes in terms of completion rates and drop-out rates, and student outcomes in terms of progression into employment or continuing education. As reviews of international literature show, the use of such criteria in secondary education is still relatively uncommon and the evidence on the effects of such outcome-based criteria is mixed (Fazekas, 2012[4]). An OECD review (OECD, 2017[1]) of school funding identified practice in secondary education. In Finland, approximately 2% (or EUR 20 million) of the entire funding of VET providers is set using a performance-based formula. The funding is based on an index consisting of three main indicators, with relative weights indicated in brackets: 1) effectiveness, including job placement (40%) and further studies in higher education (15%); 2) process, including levels of dropout (15%) and qualifications awarded to learners entering programmes (13%); and 3) staffing, including formal teaching qualifications (11%) and staff development (6%) (OECD, 2017[1]). The Slovak Republic has introduced a mechanism for determining the funding of individual upper secondary VET programmes based on whether there is high or low skills need in the labour market. After close collaboration with the social partners, the Ministry of Education issues VET schools with details of financial incentives for high-demand VET programmes equal to a per capita increase of 10%, with a corresponding disincentive for low-demand VET programmes (Vantuch and Jelinkova, 2014[30]).

In considering outcome-based funding, it is important that the special needs of rural areas and of disadvantaged students are considered. This is to ensure that enough resources are channelled to avoid regional disparities, to support VET schools in poor socio-economic environments and to avoid penalising schools working with students in greatest need of support (Fazekas, 2012[4]). High quality data are, therefore, essential to ensuring that formula funding serves the purposes intended by policy makers. The availability of data on student characteristics, VET provision and student outcomes can also provide learners and their parents with information needed to make informed choices (OECD, 2010[31]). The OECD (OECD, 2017[1]) has argued that any such funding should be sufficient to draw attention to output measures and provide institutions with the desired incentive to improve educational quality without encouraging an excessively narrow focus on specific performance measures. As there is limited evidence on the labour market outcomes linked to educational provision in Bulgaria (see Chapter 2) and there are substantial challenges relating to equity in the composition of the VET student body, a first step can be to improve the data and evidence on the outcomes of VET and the capacity for use of evidence within decision making.

Monitor and evaluate funding arrangements

An important principle in governing a funding arrangement is to monitor and evaluate its results and make adjustments accordingly. By setting clear objectives beforehand, the authorities must also ensure that funding actually helps to secure these goals and to identify any potential unintended effects. Challenges in this regard include having access to adequate information about comparative institutional performance and outcomes of the system in relation to both quality and equity (OECD, 2017[1]).

The OECD (2017[1]) argues for a specific focus on monitoring and evaluating the impact and sustainability of investment from external funds, as well as making sure that the aim of such resources is in line with a country’s educational objectives. This is particularly relevant for Bulgaria, as a substantial part of the funding in the Bulgarian school system stems from the EU’s Erasmus+ fund. The Bulgarian Operational Programme “Science and Education for Smart Growth” (SESG) is funded by the European Regional Development Fund and the European Social Fund for the period 2014-2020 and co‑funded by Bulgarian national budget. The total budget is EUR 673 million, of which EUR 596 million stems from the EU budget (European Commission, 2019[32]). All EU countries receive these funds. Other OECD countries such as the Slovak Republic, Lithuania and Estonia have used these funds to enhance VET, for instance through the improvement of the content of VET and setting up vocational training centres.

School autonomy and cost sharing with employers can provide greater efficiency and better labour market outcomes

Where capacity is sufficient to make effective use of resource, increased financial autonomy for the subnational level and schools can increase the labour market relevance of VET

Across OECD countries, subnational governmental bodies are in charge of distributing on average almost 60% of funds to individual schools (OECD, 2017[1]). In Bulgaria, by sharp contrast 87% of the funds to schools stems from the national government (Eurydice, 2018[33]). With the central government in Bulgaria responsible for the majority of VET schools, municipalities play a very limited role in distributing funds. Where it does occur, financing is still to a large extent prescribed by the central government. Such practice generates risks of inefficiencies, potentially reducing local authorities’ willingness to raise money through local tax efforts. A high dependence on central funds can also create incentives for the local level to overspend because of the common expectation central governments will cover the costs anyway (OECD, 2017[1]). Increasing the responsibilities of municipalities for VET schools, as discussed in Chapter 2, can be complemented by consideration of increasing the municipalities’ role in distributing funds and raising additional funds through taxes.

Overly prescriptive legislation and centrally set requirements can steer funding towards specific causes, including national priorities. Typical tasks for more autonomous schools might involve setting up a budget, making staffing decisions, determining teacher hours, maintaining the school’s infrastructure and co‑operating with the local labour market on resource issues and work placements for the students. Less autonomous schools may have a very small budget that they decide over themselves, have a limited opportunity to make decisions that fit local needs, to raise additional funds, or to develop strategies on how to improve (OECD, 2017[1]).

Capacity challenges are a predictable issue in cases of decentralisation and especially for smaller authorities. Financial autonomy comes with demands for technical skills and administrative capacity in order to plan budgets and manage finances in a sound way. Smaller units, both municipalities and schools, can expect to encounter problems in taking advantage of economies of scale and may lack the management capacity and expertise to which larger units have access. Increased collaboration and creation of networks between smaller actors, such as municipalities or schools, can be way of building up capacity (OECD, 2017[1]).

Work-based learning has multiple benefits, including the sharing of costs with employers

Work-based learning is beneficial for students’ learning, as well as being a means to increase the labour market relevance of the provision as employers’ willingness to provide such training reflects their need for skills (OECD, 2010[31]). As well as ensuring high quality and relevant training, combining school-based training with work-based learning is cost effective (Kuczera, 2017[12]). Ensuring high quality VET provision is generally more expensive than general education and this is especially the case with school-based provision. The overall public expenditure on an apprenticeship programme tends to be lower than the cost of a comparable VET programme provided in schools as apprentices spend more of their time in work placements, even after taking into account the fact that many countries choose to subsidise companies which provide training. There are a number of factors that drive up costs, for instance that VET requires up-to-date equipment and adequate space in the school buildings for workshops. Also VET schools have challenges in ensuring a teaching force with recent and relevant experience from the labour market. At the same time, schools will always lag behind employers in providing the most relevant training. Schools cannot always meet the same standards in provision of equipment as employers, or compete on salaries to attract candidates with relevant occupational experience. Employers already have access to state-of-the-art equipment and infrastructure, which means that students on work placements get the opportunity to gain relevant experience (Kuczera, 2017[12]). Increased efforts to include work-based learning elements in school-based system can relieve the need for schools to provide up‑to-date equipment and a teaching workforce with specialist industrial skills. Schools can also, to a larger extent, rely on part-time teaching workforces from industry (OECD, 2010[31]; OECD, 2014[34]).

Box 3.2. Mandatory work-based learning in school-based VET in Sweden

In Sweden, work placements have become mandatory within three yearlong school-based upper secondary VET programmes. Students must have a minimum of 15 weeks of work placement with an employer. By law, the work placement should be guaranteed before the learner begins their programme of learning. While this is a positive development which has increased the engagement of local employers with schools in VET, it has been difficult to achieve in practice and schools often assist students who have not secured a placement before the start of the programme, to find one. Schools in Sweden are highly autonomous and are ultimately responsible of organising and managing work placements. In order to increase the supply of placements and reduce demands on teaching staff the OECD has recently recommended that consideration be given to greater institutional collaboration at a regional level (Kuczera and Jeon, 2019[20]).

Potential funding to employers should be based on evidence relating to employers’ anticipated costs and benefits

With the support of Switzerland, Bulgaria is currently piloting apprenticeship schemes within a dual model system. In designing an apprenticeship scheme, financial incentives to employers are often the subject of debate. Bulgaria has introduced tax exemptions for employers that take on an apprentice. In addition, the central government covers the employers’ costs associated with the learner, for instance health insurance. While an apprenticeship is potentially beneficial to students, employers and economies, many countries face difficulties in encouraging employers to provide apprenticeship places, and individuals to enter them. For employers to invest in VET, it is important that the costs and benefits are balanced over the long term (Mühlemann, 2016[35]). Employers have costs associated with training, but also experience benefits when the apprentice conducts productive work within the apprenticeship period. It can also be cost-efficient, moreover, for employers to recruit employees through the apprenticeship scheme as they can ‘try before they buy’ and consider hiring only the best candidates at the end of the training. In deciding on how to incentivise employers to engage with apprenticeships, it is enormously helpful for governments to understand more about the potential costs and benefits that employers face in undertaking a training responsibility and how these vary. Analysis from Germany and Switzerland shows how the costs and benefits vary by occupational area and highlight the importance of engaging social partners to balance the interests of employer and prospective apprentice in ensuring that the duration and pay level of apprenticeships are genuinely attractive to both parties (Kuczera, 2017[12]).

Universal financial incentives have been proven to have limited impacts. Because programme and economic areas vary significantly, financial incentives aimed at employers should be based on a cost and benefit analysis of employers’ real costs. Schemes that target specific sectors tend to be more successful. However, non-financial measures focussed on increasing benefits (and reducing costs) to employers can be especially helpful in increasing the provision of apprenticeships. Many countries also make use of levy systems, securing employer contributions, to fund training programmes (Kuczera, 2017[12]; OECD, 2018[9]). These are elements which will demand consideration should Bulgaria’s initial exploration of apprenticeships mature into sustained provision.

References

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Note

← 1.  The findings are based on a survey in nine EU countries, where the respondents are identified through self-identification.