FCR(98-99)51

For discussion
on 4 December 1998

HEAD 176 - SUBVENTIONS: MISCELLANEOUS
New Capital Account Subhead "Grant to Employees Retraining Board"

Members are invited to approve a capital grant of $500 million to the Employees Retraining Board to enable it to continue, expand and improve its training programmes for the unemployed.

PROBLEM

The Employees Retraining Board (ERB) needs additional resources to continue providing adequate retraining for the unemployed and improve the quality of its programmes.

PROPOSAL

2. The Secretary for Education and Manpower proposes to provide a capital grant of $500 million to the ERB so that it will have adequate resources to support its existing training programmes, expand its training capacity, and enhance the quality of its training courses and related services for the unemployed.

JUSTIFICATION

3. The need to provide a capital grant of $500 million to ERB stems mainly from two causes. Firstly, ERB has to substantially increase its spending in 1998-99 so as to cope with the increasing demand for its services. Secondly, ERB requires additional funding to enhance the quantity and quality of its activities from 1999-2000 onwards. These causes are elaborated below.

Increasing demand for ERB's services in 1998-99

4. Increased unemployment since early 1998 has led to an increasing demand for ERB's retraining places. Between 1 April 1998 and 31 October 1998, 60 807 retrainees registered for ERB's full-time and part-time courses, representing an increase of 49% over the same period last year.

5. Since April 1998, ERB has been stepping up its efforts in helping retrainees re-enter the labour market. In addition to providing the existing courses, ERB has helped individual employers develop tailor-made on-the-job retraining programmes. Such programmes normally comprise four to six weeks' classroom training at a training body during which the trainee receives a maximum retraining allowance of $4,000 per month, an on-the-job training period at the workplace of the employer where the trainee receives on-the-job training allowance of $2,000 per month for up to three months, and 12 months' post-employment follow-up services provided by the relevant training body. So far, ERB has identified 2 000 job vacancies for this purpose. The total training cost for these programmes in the next two years is estimated at $40 million¹.

6. ERB had an opening balance of $603 million as at 1 April 1998. According to its 1998-99 estimates which were drawn up in late 1997, ERB originally planned to spend a total of $301 million to provide 73 000 retraining places. However, to help ease unemployment, ERB has decided to increase its training capacity to 79 000 in 1998-99. ERB estimates that it has to spend an additional $95 million on these 6 000 additional training places, comprising -

1. $78 million for 1 000 places under the special nine-month full-time Certificate of Skills Training (Service Industries) Course which is being jointly organised by ERB and the Vocational Training Council (VTC) for the unemployed, as part of the Government's package of measures to ease unemployment; and

2. $17 million for the remaining 5 000 training places, which include some 1 750 places for full-time training courses lasting for two to four weeks and some 3 250 places for part-time training courses normally lasting for 40 hours.

As a result of the above, ERB estimated that it would only have a balance of $207 million at the beginning of 1999-2000, which would be inadequate to maintain even its normal level of activities in a year, let alone provide more and better services.

Enhancing the quantity and quality of ERB activities from 1999-2000 onwards

7. Given the prevailing economic environment and labour market situation, we expect to see a continued and strong demand for retraining, especially for those who have not yet completed secondary education. The demand for part-time training courses will also continue to increase, as the employed would need to acquire more basic skills to sustain their employability in the market. This, together with the measures to ease unemployment² which will continue to be implemented in 1999-2000, necessitate the provision of additional funding to ERB in 1999-2000, so that it can continue to meet the demand in retraining as it has done in 1998-99.

8. At the same time, ERB is developing a new strategic plan which aims at improving the quality of retraining from 1999-2000 onwards. It seeks to involve employers' associations more closely in the course evaluation process, foster a closer collaboration with training bodies, review evaluation system and performance indicators, and place a greater emphasis on training in "soft skills" which include such skills as job search techniques, work ethics, interpersonal skills, and team-work attitude. In conjunction with the VTC, the ERB will also prepare for the development of a qualifications framework for the two organisations' retraining programme which seek to provide each employed or unemployed person with a structured channel to further his education and training. The effective implementation of all these measures requires additional resources.

9. With the proposed grant of $500 million, ERB will have an estimated balance of around $700 million at the beginning of 1999-2000. This, together with its recurrent income from the employees retraining levy (around $8 million in 1998-99), interest income (around $31.3 million in 1998-99) and income from part-time training courses (around $18.5 million in 1998-99), should enable the ERB to have adequate funding to plan and implement its activities during the coming two years. It is also necessary to seek this $500 million capital grant now, so as to give ERB an early commitment of additional funds, and enable it to plan its activities for 1999-2000 in time.

10. As regards the funding of ERB's activities in the longer term, we will examine this in the context of a fundamental review on all public expenditure related to training and retraining, under the mid-term phase of the Government's Enhanced Productivity Programme.

FINANCIAL IMPLICATIONS

11. If Members approve the proposal, we shall offset the supplementary provision required by deleting an equivalent amount under Head 106 Miscellaneous Services Subhead 789 Additional commitments.

BACKGROUND INFORMATION

12. ERB was established in late 1992. It administers a wide range of full-time and part-time courses, mainly to help displaced workers aged 30 or above adjust to changes in the labour market, and upgrade or acquire new skills to find alternative employment. Eligible employees may also apply for part-time or evening retraining courses on basic general skills such as computer application or languages. ERB is funded by a recurrent income from the employees retraining levy from employers of imported workers at the rate of $400 per worker per month. On 6 November 1992 and 10 May 1996, Members approved grants totalling $600 million to the Board. On 14 February 1997, Members approved a further grant of $500 million to the Board as Government's contribution to employees retraining.

13. ERB administers retraining programmes through a network of training bodies. At present, there are 56 training bodies with 124 training centres. The courses fall into three main categories - job search skills, job specific skills and general skills. Full-time courses range from one week to nine months. Half-day and evening courses normally range from three to six months. Apart from employees displaced as a result of the economic restructuring, participants include home makers, people over the age of 50, people with a disability, industrial accident victims and the chronically-ill who wish to rejoin the employment market, and serving employees who meet the relevant eligibility criteria and wish to update their basic general skills. With effect from 31 January 1997, new arrivals are also eligible to apply for retraining under the Scheme. Since its inception, ERB has provided a total of over 260 000 training places for over 140 000 persons, and the average overall placement rate of those full-time graduate trainees is 70%.

Education and Manpower Bureau
November 1998



1.The average unit cost per retrainee of these tailor-made on-the-job retraining programmes is $20,000. The total estimated cost therefore amounts to $40 million. The breakdown is as follows -

Training places	Retraining cost per head	Retraining allowances per head	On-the-job training allowances per head	Total cost per head
2 000	$8,000 - $10,000	$4,000 - $6,000	$6,000	$18,000 - $22,000

2. These measures include the development of special tailor-made retraining courses mentioned in paragraph 5 above, and the operation of one-stop service for employers and employees in matching such retraining opportunities.