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Education and Labour Market: EU policies and adverse-selection

April 3, 2018

 

Talking about the relationship between the European Union and education policy is quite a tough task. As stated in Article 6 of the Treaty on the Functioning of the European Union (TFEU), “[t]he Union shall have competence to carry out actions to support, coordinate or supplement the actions of the Member States. The areas of such action shall, at European level, be: […] education, vocational training, youth and sport”. This legal statement is far from being exhaustive or precise.

 

Still, the article puts it clear that the EU can do little with respect to education policy at the community level. In fact, education falls within the so-called Supporting competences (which rank third after Exclusive and Shared competences).

 

Therefore, what could the EU do in order to improve the connection between education and the job market? A first, short answer to this question would be: support, coordinate or supplement the actions of the Member States. In fact, it is easy to appreciate how basically any action carried out by the Union is effectively described by this synthetic sentence.

 

For instance, the Erasmus+ programme provides a platform enabling various national education and training systems to collaborate. It allows students and professionals to benefit from an exchange in another Member State. Moreover, empirical evidence suggest that the programme is effective in fostering its participants’ skills.

Still, ultimate service-providers are specific national entities and not the programme per se. Furthermore, if on the one side the budget of the programme is able to pay for (a consistent part of) mobility costs, on the other, the selection of the participants is carried out at the university or local lever.

 

Similarly, the Investment Plan for Europe provides a platform removing obstacles for investors to contribute to a variety of projects. However, such a scheme does not fund anything by its own. In fact, both the revenue and the expenditure sides are totally determined by private third actors: It relies entirely on capitals coming from private donors which will be used to finance projects elaborated by local communities.  

 

Despite its benevolent scope, the current way of operating of the Union raises some concern. If the Union wants to foster socioeconomic convergence across its Member States, its action falls short from this objective.

This is not meant to say that the EU is guilty for something in particular. In fact, it operates according to the Treaties. Nevertheless, highlighting the mismatch between goals and available tools is crucial. It is essential to realise that such a discrepancy can be only partially filled by re-designing current projects. Rather, Member States should reform the Treaties, allowing, for example, for some form of cross-country redistribution through programmes, a practice currently forbidden under present EU Law.

 

This claim is justified by the observation of basic macroeconomic figures. In fact, job markets appear to be still far from achieving convergence. As it can be appreciated by looking at the chart below, reporting data on unemployment rates, stark cross-country differences are still present and likely to be persistent.

Consequently, in order to improve the connection between education and job market at the Union level, a potential policy should be diversified depending on the Member States in which it is implemented.

Therefore, no, support and coordination may not be enough for education and training policies to be effective at the EU level.

 

In addition, current policies, by working as platform rather than being countercyclical investments, may even end up fostering divergence. It is in fact easy to imagine how more advanced regions may be more capable of benefiting from programmes like Erasmus+ or the Investment Plan for Europe. In richer areas people are more likely to learn foreign languages, this way being more prone to undertake an exchange programme in another EU country. In addition, the greatest part of beneficiaries of the Erasmus+ programme are people attending secondary education, an elite vis-à-vis the rest of the European population. Similarly, greater capital availability and awareness from project designers may increase consistently the benefits of the Investment Plan for Europe.

Such a suspicion is confirmed if we look at expenditure on education (as % of total government expenditure) across European countries. In fact, by observing the graph below, it is easy to appreciate how those countries which are better performing in terms of unemployment reduction are the same which are spending more on education.

Therefore, those who need more are not receiving enough expenditure on education from their National Government. It could be said that some Member State is consuming less expenditure on education than the optimal level. It goes without saying that the EU as a whole would benefit from having a more educated population.

How could the Union make (some of) its Member States internalise the positive externalities that an increase in expenditure on education would produce?

It cannot force them.

It cannot (systematically) redistribute resources across them.

It cannot modify national educational systems.

 

As a conclusion, it comes quite straightforward that the only way for designing a real European Policy on Education and Training is having all Member States sitting on a table. The only way we have to go further is a reform of the TFEU. Education should become a Shared competence between the Union and its Members. Otherwise, (a great part of) those who would benefit most from education and training programmes at the European level would be inevitably excluded from them.

 

 

 

 

 

 

 

 

 

 

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