The Cost-benefit Analysis Of Enterprises’ Participation In Vocational Education And Training

Currently,two emergent challenges are faced by Enterprises’participation in vocational education and training (EP-VET):firstly, although most companies hold a positive attitude towards EP-VET, and express a strong willingness in being involved, actually few of them really take practical actions; secondly, for those that have already started a business, the depth of participation is far from enough thus the effect of EP-VET is less satisfactory. The status in quo, in a long-term, puts a high risk on hindering companies from constantly cooperating on vocational education and training (VET). In sum, the breath and width of companies’engagement in VET needs to be further developed to better resolve the tough problems stand in the way of the cultivation of skilled talents.Theoretically, companies are self-financed "economic entities" which value highly on profits, meanwhile focus on service and operation of production and business. When making the decision of taking part in VET, they usually weight on cost and benefit of all the plans beforehand in order to maximize profit. In this respect, it is necessary for us to conduct investigations on specific constitutions and amount of cost and benefit in EP-VET. To address these questions, in the current project, we use a combination of case interview, focus group and large scale survey along with kinds of analytics software commonly used in statistics and econometrics to perform in-depth experimental analysis. Steps for elaborating our ideas include:In the first step, we organized case interview and focus group to companies in or not-in cooperation with vocational schools, to gather information on constitutions and influential factors of EP-VET cost and benefit. On this basis, we constructed theoretical model to analyze influents of companies’engagement in VET base on the theory of planned behavior. Then 350 questionnaires were given to companies to collect data and Structural Equation Model (SEM) was used to measure the path coefficients of cost, benefit and risk on companies’decision of involving in VET.Next, a set of cost-benefit analysis methods were used to build ROI, NPV and IRR models for EP-VET with and without risk, and a short-term cost-benefit model for EP-VET without risk. Then we provide concrete measurements to value each element of cost and benefit of EP-VET.In the next move, we designed questionnaires based on our models and investigated 160 companies, following which computations were made on the mean short-term ROI, NPV and IRR. At the same time, we provided monthly dynamic distribution trends of these variablesFourthly, we created a regression equation including companies’basic features, human resource strategies and educational characteristics in EP-VET to analyze the relationships between these variables and ROI, NPV and short-term ROI of EP-VET, with a further attempt to uncover the regularities behind these relationships.Our main findings include:First, cost-benefit played the most vital role in EP-VET. For the costs, there were companies’expenses on information-gathering and decision-making, payments to students, trainer-related fees, expenditures of workplace and materials, and cost on research and development of new-products. The benefits of EP-VET contained: short-term profits brought by students, long-term human capital returns, market returns, utilization of facilities of partner schools and subsidies from the government.Second, based on cost-benefit analysis, we constructed ROI, NPV and IRR models for EP-VET. We calculated that ROI, NPV and IRR for EP-VET are 18.6%,4573.2RMB and 12.7% separately. Moreover, nearly 50% of the EP-VET companies saw negative or below benchmark rate figures on short-term ROI, NPV and IRR, in another word, these companies were in net losses in EP-VET. A monthly analysis suggested that companies experienced negative gains at the beginning of EP-VET (first 3 months), then started to benefit from this point.But from point of the payback period, EP-VET take back all the short-term costs at 9 months.Third, there were different components in short-term EP-VET costs and benefits. Short-term costs were consisted of direct or indirect expenditures on students (66.0%) and trainers (27.9%), while short-term benefits of EP-VET mainly included short-term profits brought by students (95.8%), which could be further divided into productivity created by students (66.3%) and savings of labor cost (33.7%).Fourth, long-term benefits were much dependent on the retention of the trainees, which in our results, had an average rate of 39.5%. This result didn’t seem very optimistic actually. And our measurement on the risk of EP-VET further supported this conclusion: companies scored highly (4.11) on the risk of losing trainees after their graduation.Fifth, results of regression equation showed that basic features of companies, human resources strategies and educational features of EP-VET totally could explain 69.3% variance in ROI,66.4% in NPV and 59.3% in IRR. Specifically, the influence of ownership property, industrial sectors, stage of development, with or without full-time trainers, numbers of trainees, retention of trainees, and satisfaction towards EP-VET on ROI, NPV and IRR reached significant levels but varied on extent. But operation period only produced negative effect on short-term ROI and NPV and independent training department only affected short-term ROI and IRR. Types of cooperation solely related to short-term ROI and internship period affected no other than short-term NPV. No significant results were found between other variables.Based on the analysis above, we suggest on policies to establish a system to constrain and encourage EP-VET:Firstly, cost-benefit status of EP-VET should be taken into consideration when determining which sectors deserve encouraging policies, i.e. manufacture, construction, logistics and restaurant and hotel may become suitable candidates for encouraging. However, the decision should also be made on specific positions in different sectors, for instance, mechanics in auto repair and service industry may both be qualified.Secondly, an appropriate cost allocation mechanism should also be built up according to levels of human resource expenses in EP-VET, and special allowance to certain personnel may also be allowed. This may include:set up special subsidies for students in a cooperative program in order to share costs related to trainees (standard of this could refer to wage level of skilled workers and average productivity of trainees in a certain industry); set up special allowance to part-time trainers so as to encourage them to teach (standard may refer to productivity losses of skilled workers).Thirdly, government may set up special allowance based on the wear and tear in different companies in order to expand the opportunities for students to participate in training.Fourthly, tax discount could be offered to companies according to their short-term present value of costs in EP-VET, which could act as another attractive measure as long as these benefits are strictly assured. At the same time, "Five Insurances" waiver for a short period could also be applied to students that are retained.Fifthly, government could establish EP-VET appraisal system to monitor training activities out school and grant honors to those perform excellently, aiming at recognizing models and promoting enterprises’images. On the other hand, a trainers pool could also be established, which could both offer extra training to skilled workers and allow assessment and evaluation about their work. Allowance to trainers could also be clipped to evaluations on this pool, so as to guarantee their training quality.Sixthly, restrictions also have to be exerted on companies in EP-VET. Flexible but appropriate training periods should be stipulated in accordance to the requirement in separate industries, and government should try best to balance interests between students and companies. Within these periods, proportions of learning and practicing should be carefully considered, as should ratios between skilled and half or non-skilled work. Avenues for students to comment on trainers and companies should also be built to protect students’ rights to acquire skills, and "One vote" could be implemented.Seventhly, approaches could be developed to make the best use of school resources. This could maximize profit for companies meanwhile create chances for student to practice their skills. Moreover, school resource service efficiency could be enhanced as well.Eighthly, employer credit archives could be introduced to increase cost of leaving the company. It is also a good measure to optimize labor utilization, in order to reduce risks on losing trainees and expand long term benefit.