Our recent report Automation and a Changing Economy describes the challenges and opportunities that automation presents to American workers. But the effects of automation aren’t limited to the U.S. Automation is a worldwide trend, and countries are taking a variety of approaches to helping workers adjust to the transitions that automation—and other economic disruptions—bring about in the workplace.
Intensive Services for Displaced Workers
Advance notice of layoffs, coupled with intensive in-person services, can help displaced workers transition to new jobs.
Like the United States—and in contrast to many other developed countries—it is relatively easy for businesses in Denmark to fire their workers. But Danish law requires that employers provide significant notice prior to layoffs: absent an individual contract or collective bargaining agreement, employees must be given between one and six months’ notice prior to layoffs. Additional rules apply to mass layoffs. By contrast, in the United States, the WARN Act requires businesses to only provide 60 days of advance notice, and only in the event of a mass layoff or plant closure.
The Danish model of advance notice allows for early career counseling interventions. Danish workers must report to municipal “Jobcentres” within two weeks of being laid off, and must appear at least once a month to receive career counseling and job-seeking assistance. As appropriate, unemployed workers are then placed in a wide variety of programs, including worksharing, job rotation, apprenticeships, practical work training, and wage subsidies.
Sweden uses a similar approach. Swedish employers must provide at least six months’ notice prior to a layoff. And workers are immediately connected to the network of Job Security Councils (JSC), which provide workers with financial support and career counseling during the notice period. The JSC network is funded by a 0.3% payroll tax paid by businesses and created in partnership with trade unions, and though it is a private institution, they cover around 80 percent of the workforce.
These interventions appear to be working. Nearly 90 percent of displaced Swedish workers find reemployment, compared to 72 percent of American workers. And while Danish workers have reemployment rates similar to Americans, American workers experience much larger wage reductions in their new jobs.
Lifelong Learning and Training Accounts
Worker-controlled Lifelong Learning and Training Accounts (LLTAs)—co-funded by workers, employers, and government—could help workers pay for education and training opportunities over the course of their careers.
Singapore and France have both created lifelong learning and training accounts to help provide their workers with training opportunities throughout their careers. Singapore’s SkillsFuture program, created in 2016, is a comprehensive program that modernized the country’s skills training system. A key component of the program is that the government provides all Singaporeans age 25 and older with an initial $500SGD credit to pay for approved skills training, and may provide additional credits on a discretionary basis. The eligible training options are available to workers on a centralized online platform run by the Singapore government.
Created in 2015, France’s personal training account (Compte personnel de formation, or CPF) policy began by allowing workers to accrue 24 hours of training for every year worked. Workers could then use the balance in their accounts to pay for up to 40,000 training programs that worker and business organizations have determined would lead to an in-demand professional qualification and further workers’ career paths. Businesses fund this benefit with a one-percent tax on payrolls. Over half a million courses have already been taken.
Recent legislation reformed the French CPF to operate more like Singapore’s: starting this year, French workers began accruing euros instead of hours and are granted 500€ each year, with the least skilled workers receiving 800€ each year. And a new mobile app provided by the government gives workers information on training programs outcomes, completion rates, and user satisfaction.
Canada is also in the process of adopting a Singapore-style lifelong learning accounts program. The proposed federal 2019 budget would provide all Canadians between 25 and 64 years old who earn between CA$10,000 and roughly CA$150,000 a refundable tax credit of $250 each year that they can use to pay for up to one half the cost of a training program. Workers could let the credit accumulate up to a maximum of $5,000.
Financial Incentives for Employer-Provided Training
The available data suggest that there has been a long-term downward trend in business training investments in the U.S. From 1996 to 2008, the percentage of workers receiving employer-sponsored or on-the-job training fell 42 percent and 36 percent, respectively. Financial incentives could encourage businesses to increase the amount of training provided to their workers.
Some countries use tax incentives or other subsidies to encourage businesses to train their workers. Italy provides a tax credit equal to 40 percent of the cost of the workers for the entire duration of certain types of training, up to 300,000€ per firm per year. Norway provides a business subsidy to cover the costs of training and the wages the businesses paid during the training, up to 70 percent and for a maximum of 26 weeks. France provides a business tax credit for entrepreneurs equal to the number of training hours multiplied by the minimum wage.
In addition, many countries—including France, Italy, Korea, the Netherlands, and Poland—use a “levy-grant scheme” in which each business must contribute into a fund, which is then distributed back to businesses to cover their training costs. A similar approach—used in Australia, Belgium, Canada (Quebec), Greece, Spain, and the UK—is a “levy-exemption scheme” in which a tax is assessed on businesses but can be partially or fully avoided if the business invests in worker training.
A National Skills Credential Framework
A well-functioning labor market requires that workers, trainers, and employers are able to effectively communicate to each other their needs and capabilities. Employers must be able to communicate the skills they’re looking for, both so trainers know how to design their programs and workers know which training programs to pursue. Workers, on the other hand, need to be able to communicate the skills they have, and know that the training they pursue will lead to the recognition of additional skills.
According to OECD researchers, “occupational credentials are subject to less central organization in the United States than in almost any other OECD country. The result is a proliferation of credentials at the regional and state levels: a recent report from Credential Engine estimates there are over 730,000 credentials nationwide, with many credentials lacking transparency regarding quality and outcomes, and may not be portable from region to region. As a consequence, the OECD researchers found that “greater clarity for both students and employers about the skills and credentials required for particular types of job […] cannot be obtained.”
Many countries have established national qualification frameworks to clarify study paths and qualification levels. For example, Australia’s Australian Qualifications Framework (AQF) has established a uniform framework of educational credentials, ensuring that worker skills are universally recognized and comparable throughout the country. Various bodies at national level are involved in the creation of this framework, and employers are represented in several of these bodies and on sectoral skills councils. This framework covers over 80 percent of occupations in Australia. Ireland and Belgium also employ similar frameworks.
Conclusion
As U.S. policymakers and other stakeholders consider how best to respond to the disruption associated with automation, it is worth evaluating how other countries are structuring their re-employment and skills-building systems. Policy structures exist in the context of specific institutions and cultural norms, and for that reason, it may not be feasible to simply export what another country is doing into the U.S. context. For example, many solutions (like Sweden’s Job Security Councils) are premised on a relationship between business and trade unions that may be unique to those countries.
But these examples are nonetheless instructive in that they remind us that the U.S. isn’t alone—many countries are facing similar challenges, and U.S. policymakers should learn from the various approaches that other countries are taking. Moreover, they prove that these challenges aren’t insurmountable, as countries have varying levels of success.
