Design and Implementation of Redeployment Programs
Retraining is often the biggest element of a redeployment program, and often the most costly. Retraining can be provided for both formal employment and self-employment. The record of such programs has been mixed. Retraining needs to be targeted and made demand driven if it is to be effective in cost and outcome.
Retraining programs to facilitate formal sector employment are a common element in redeployment programs (box 5.24). Courses usually combine a mix of practical and theoretical training and include:
Generally, training costs are about US$200–$500 per worker in middle-income countries (see Fretwell 2002). In Brazil's rail restructuring, however, the average cost of training was about US$900 per worker, and similar costs were reported for group training in Hungary (O'Leary 1995). Uptake varies considerably but is generally relatively modest– typically 15 to 30 percent–and depends on labor market conditions, the relevance of the training, and the level of incentives (stipends) to workers.
It should also be pointed out that governments may not want to offer redeployment and training, perhaps in circumstances where the broader reform goal is to reduce a culture of dependence on government for services, assistance, and subsidies. There may be a policy of offering a generous onetime severance package and encouraging a clean break between workers and government:
We don't want to offer redeployment and retraining. We have offered a generous separation package, and workers are leaving quietly. If we offer them retraining, they will then expect a job at the end of it, almost a government guarantee (adviser to prime minister's office, developing country).
The Retraining Program for Displaced Workers is a pilot project organized recently by the government of Chile with the financial assistance of the Inter-American Development Bank Multilateral Investment Fund. The program is mainly designed for skilled adult workers displaced by industrial restructuring and technological progress. The program is currently focusing on the retraining of more than 1,000 redundant coal miners. The program managed by the Production Development Corporation includes subsidies for counseling, retraining, and employment intermediation services for displaced workers. The private agencies that provide these services are selected on the basis of competitive bidding and receive a maximum subsidy of approximately US$2,000 per reemployed worker. Enterprises that hire retrained workers receive a subsidy of approximately US$900 per worker. The retraining and reemployment program is part of a broader plan for industrial restructuring in the coal-mining region that offers a series of incentives for private investment in labor-intensive projects.
Source: Espinoza 1997.
Most training for redundant workers has focused on training for jobs in the formal sector. In part this has reflected aspirations of government, implementing agencies, unions, and workers alike. But retraining for self-employment is also relevant, especially where formal jobs are scarce. Training for self-employment can address upgrading workers' skills for the "informal sector" of casual employment and trading, and is best linked to broader small- and medium-size enterprise support. Reasons to focus on the informal sector are that:
From a policy perspective, support for self-employment is an approach that can stimulate labor demand without distorting other aspects of the economic reform process (through subsidies, for example). As with retraining for employment, programs to encourage self-employment also suffer from dead-weight loss effects and will benefit from measures to select participants. For example, an evaluation in Hungary and Poland, based on more than 5,500 follow-up interviews, indicated that many of those receiving financial and training assistance for self-employment would probably have gained reemployment without government help.
