Understanding the return on investment (ROI) in VET provides governments with information on the performance of the system and justification for public expenditure. It can help enterprises and individuals to measure productivity improvement in firms or to determine increases in the employability of individuals following training investment. However, the measurement of ROI is not straightforward. This report introduces a conceptual framework for defining what is involved in the ROI calculation and provides a guide to what type of information and data are required to calculate the returns to training for government, employers and individuals.
About the research
This report is the result of research collaboration between NCVER and the UNESCO-UNEVOC International Centre for Technical and Vocational Education and Training (TVET) in Bonn (Germany) and presents a conceptual framework for understanding the return on investment (ROI) equation in TVET from different stakeholder perspectives.
The framework uses three main stakeholder groupings – individuals, business and the economy. Although the framework separates these three perspectives, they are not independent of each other. There are flow-on effects. To provide a complete ROI picture both economic and social impact dimensions are featured. Understanding the interaction between the economic and social benefits is important in assessing the true and full value of TVET. The key indicators were selected on the basis of their usefulness, practicality and capacity to value-add along with the ability to apply to different types of training and contexts.
The authors highlight the following key observations:
- The key types of ROI for individuals arising from TVET are primarily employment and productivity supporting higher wages. Attainment of employability skills and improved labour force status are also highly valued job-related returns. Non job-related indicators focus on well-being such as self-esteem and confidence, foundation skill gains, along with social inclusion and improved socio-economic status.
- The key indicators of ROI for employers arising from TVET cover employee productivity, business profitability, improving quality of products and services and business innovation. Businesses operate similar to small communities and as such generate social and environmental benefits. In particular employee well-being, employee engagement (which reduces absenteeism and staff turnover), a safe workplace and environmental sustainability practices are key non-market indicators of business returns.
- The key indicator of ROI in the economy from TVET is economic growth. This relates to labour market participation, reduced unemployment rates and a more skilled workforce. TVET returns to education and training, bring other benefits to society, including improved health, social cohesion (increased democratisation and human rights), and improved social equity particularly for disadvantaged groups and strengthens social capital.
The report recognises that analyses of ROI in TVET can result in highly variable estimates; and that it is particularly difficult to untangle the financial and non-financial benefits of training. Further, the ready availability of data to populate such a framework is a challenge for it to gain greater practical value and allow estimates of ROI across economics.
Dr Craig Fowler
Managing Director, NCVER