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China needs proper skill-formation model to upgrade manufacturing industry

WANG XING | 2017-05-25 | Hits:
(Chinese Social Sciences Today)

A teacher gives instructions on how to operate the numerically controlled machine tool at a senior vocational school at Yongji City, Shanxi Province.


In recent years, empirical research by many sociologists has supported the hypothesis that human capital investment and social inequality—especially in terms of stratification in the labor market—are not directly associated. More importantly, though people generally agree that public financial investment will help the disadvantaged social group gain access to education, thus reducing social inequality, it is not an inevitable cause-and-effect relationship. Rather, other essential systems need to be in place, including the skill-formation system, in order to address the issue.

An increasing number of scholars have recognized the skill-formation model is not only the basis of national innovation and a channel for the working class to share their experience and fit into society but also a powerful tool to strike a balance between economic growth and social equality.


Broadly speaking, a nation’s skill-formation program can mean its entire education system. Nevertheless, in most cases, the concept is discussed in a particular context and refers to the labor-training system, including vocational and on-the-job training. This article will adopt the latter definition for discussion.

In early research literature, the standards for classification of the skill-formation system varied on a national basis. For example, in the United Kingdom and Germany, there are programs aimed at low-skill and high-skill vocations. Others classify the process based on training location, with some learning skills from schools and others from hands-on training at factories.

On a global level, it is more common to divide skill-formation programs into three types in accordance with the model of skill supply and acquisition: national, market and collective skill-formation systems.

A national skill-formation system means that the government directly invests in and oversees the training mechanism. To be more specific, the government supports vocational education through public finance, and the public expenditure on educational training is high as a proportion of GDP. Training is mainly provided by various vocational schools, and enterprises are usually marginal participants or entirely uninvolved.

In terms of the course setting, skills taught at various vocational schools are generalized and standardized. This type of education is keen on mobility and openness. It is committed to creating an institutional linkage between vocational and academic education, and it often encourages students to further their education in academic institutes.

The market-oriented skill-formation program refers to a type of system in which the supply and accumulation of skills depend mainly on market mechanisms. Under such a program, whether it is labor skills or the recruitment of skilled workers by the employer of the enterprise, it is all accomplished through the market mechanism.

Compared to academic education, the government only sponsors a small proportion of the funding in vocational schools, whereas enterprises and trainees themselves are the main investors. Typically, the program relies on various vocational and community schools to carry out training. In the meantime, though the lessons offered are general and standard, they follow market guidance and will be adjusted according to actual demand. Needless to say, there is fierce competition among workers. On the whole, vocational schools are underappreciated, and integration with higher education is rare due to differences in cultural traditions and the institutional framework.


In contrast, a collective skill-formation program involves the government and private companies. The government makes a heavy public financial investment in vocational education, while enterprises shoulder most of the training costs. The dual system combines vocational schools and hands-on training with both parties assigned clear responsibilities.

As a result, workers are equipped with skills that are applicable to the nationwide labor market. Unlike a market-oriented skill-formation model, collective programs could better meet enterprises’ demand for general and specialized workers thanks to the deep involvement of the private sectors.

Under such a system, the intermediary organization plays a greater role. The government empowers enterprises or union organizations to participate in the management of the skill-formation system, thus, in a way, restricting the movement between vocational and higher education.


Socioeconomic consequences
Different types of skill-formation programs lead to different socioeconomic outcomes.
Under the system of national skill formation, the redistributive function of public finances to education weakens the influence of the family on the social inequality of labor force because workers are paid similarily and they basically have the same social status. However, due to the lack of enterprise involvement, the problem of skill mismatch is prominent, which results in a rigid labor market and high unemployment among young workers.

When the skill-formation programs are left to the market, individuals and enterprises are the main players in training with little support from the government. This type of program emphasizes increasing the resilience of the labor market through the widening of the wage gap of skilled workers, which enhances the employment opportunities for young people and is conducive to encouraging flexible and creative workers in the country’s aggressive innovative industries, such as the information industry. However, the social inequality of the working class is very high, so it is easy to intensify social contradictions and impact social stability.

In collective skill formation, it is vital to balance government intervention and market regulation, so both have a say in workers’ wages. First, the program will make sure the wage is high enough to attract young people to take on manufacturing jobs. In addition, it controls the income gap between skilled and entry-level workers, which promotes a high level of social equality among members of the working class. Employers and workers maintain a good relationship and they could commit to each other in training. Thus, the constant supply of high-quality skilled labor in turn benefits the overall national innovation ability. However, this program also reduces young people’s employment opportunities, to some extent, and it relies too heavily on intermediary economic and social organizations.

In reality, each program has pros and cons and various countries implement different policies to bring out the comparative edge of different programs.


Long way to go for China
In this respect, it is hard to classify China’s skill-formation practice. Though academics strive to construct local concepts and avoid the pitfalls of exceptionalism, we have to admit that the general socioeconomic rules apply to China. Upon analyzing China’s skill-formation process, we found the following pressing issues need to be tackled.

For one, the Chinese government has made manufacturing innovation a national strategy, but it gives weight to the freedom and flexibility of skilled workers in the labor market. Short-term employment and the popularity of scouting will fundamentally undermine the basic skills acquisition needed for manufacturing innovation.

Also, the government is well aware of the importance of vocational education for national innovation capacity, but at the same time, it is expanding the enrollment scale of higher education, and even introducing policies to enhance the mobility of vocational education to academic education, which reiterates the lower status of vocational schools and makes it difficult for them to provide a highly trained labor force that matches the demands of industrial upgrading.


What’s more, there is a tendency to blindly follow the example of Western countries. For example, when we introduced Germany’s dual system, we failed to establish associations and unions that are qualified to provide skill appraisal and certification, which has dampened the enthusiasm of Chinese enterprises and workers for participating in construction of theskill-formation system.

Without systematic reflection, we only learn the surface and fail to get the essence when borrowing experience from developed countries and it will not solve urgent issues such as shortage of skilled workers caused by skills mismatch.

Also, we continue to design and develop a variety of training courses and projects to cultivate the skilled workforce to meet the needs of Chinese manufacturing industry. At the same time, it widens the income disparities among skilled workers, largely ignoring the rights protection of the entry-level workers. This not only causes the polarization of skilled workers, but also makes the entry-level workers socially disadvantaged groups. Thus the entry-level positions are becoming less attractive to young people.

In conclusion, the systemic conflicts lead to fragmentation in China’s skill-formation system, posing a deep-rooted obstacle to China’s labor protection and the improvement of the country’s manufacturing innovation capacity. Going forward, if we are unable to reconcile those internal conflicts through policy innovation, the socioeconomic consequences will be severe.

Wang Xing is from the Zhou Enlai School of Government at Nankai University.