Market failure in skills

The concept of market failure has been key to the development of UK vocational education and training (VET) policy at national level over the last two decades. It is the chief reason adduced for greater levels of government intervention within, and public subsidy for, the VET system. Policy makers argue that market failures have led UK employers and individuals to under-invest in skills, to the detriment of our long-term economic prospects. Policy responses to market failure include the expansion of post-compulsory education, attempts to demonstrate that investment in skills leads to...  [+] Show more

The concept of market failure has been key to the development of UK vocational education and training (VET) policy at national level over the last two decades. It is the chief reason adduced for greater levels of government intervention within, and public subsidy for, the VET system. Policy makers argue that market failures have led UK employers and individuals to under-invest in skills, to the detriment of our long-term economic prospects. Policy responses to market failure include the expansion of post-compulsory education, attempts to demonstrate that investment in skills leads to higher wages and greater productivity, and state-funded entitlements to minimum levels of certified learning for adult workers. This [Sector Skills Development Agency] SSDA Catalyst examines the notion of market failure, discusses the advantages and dangers of basing policy interventions on it, and draws out clear implications for future policy development.

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