Share of students enrolled in combined school and work-based vocational programmes

ASSESSMENT AND RECOMMENDATIONS OECD ECONOMIC SURVEYS: ESTONIA © OECD 2017 43 recommended in the 2015 Economic Survey OECD, 2015; Table 7, might mitigate this problem. To encourage business participation, Vocational Education Training VET institutions may allocate to companies up to 50 of the funds paid to the school for the study place. Consideration should also be given to reducing employers’ social security contributions or to introducing a lower minimum wage for apprentices. A rapidly changing environment and longer working lives make lifelong learning central to maintaining workers’ competences and ensuring they can find and keep good jobs. The Lifelong Learning Strategy 2020 set ambitious targets for adult education, including a 20 participation rate by 2020 vs. 16 in 2016 and a reduction in the share of adults without professional qualification to 25. A vast range of training opportunities are provided, including continuous training and retraining measures to prevent unemployment, introduced in 2017. Measures have already started to bear fruit, with a significant increase in participation in lifelong learning in 2016 Figure 28, Panel A. To ensure the quality of training courses and their effectiveness in upskilling participants, monitoring of lifelong learning programmes should be reinforced by using ex post evaluation, including of labour market outcomes of participants. Also, the accreditation system should be extended to all training suppliers subsidised by the public sector. Training of low-skilled workers remains below average, and the take-up of measures targeted to this group is likely to be low Figure 28, Panel B; Browne et al., 2017. To counter this, training vouchers should be provided to all low-educated workers; these could be directed towards training in core skills ICT, language. In addition, programmes should be more targeted at small companies who are less likely to see the need for training of their workforce or to have a training plan Kitching and Blackburn, 2002. An outreach mechanism targeting small-business managers should be developed to provide them with information and support in identifying appropriate training. Expanding access to funding Access to funding has not been a major obstacle to investment in Estonia see Figure 8. Nevertheless, economic literature shows that low competition in the financial system is likely to limit credit supply, in particular for young andor small innovative firms. The Estonian banking sector is dominated by two systemically important, foreign-owned banks Swedbank and SEB, and the relatively high mark-ups in the sector – measured by the difference between output prices and marginal costs, relative to prices – reflect weak competition Cuestas et al., 2017. Market power magnifies credit constraints for SMEs Carbo-Valverde et al., 2009; Love and Peria, 2012. In addition, foreign-owned banks and large banks with complex and hierarchical structures tend to engage less in relationship lending compared to domestic banks, thereby lending less to SMEs and start-ups Stein, 2002; Havrylchyk, 2012; Havrylchyk et al., 2012. Entry of new players into Estonia’s financial system is difficult, given the absence of a proper credit information-sharing scheme. Negative information on borrowers non-repayment andor loan restructuring is available from private credit bureaus, but the major banks do not share positive information loan conditions and repayment, resulting in incomplete information for lenders. A well-designed credit information-sharing scheme should be established: one covering all borrowers firms and individuals, collecting both positive and negative credit information. Such an institution would lower the cost of intermediation and improve access to credit by reducing adverse selection bias Brown et al., 2009. Access to such data could also assist the Financial Supervision Authority in assessing the health of banks.