1 UNDERSTANDING THE IRISH VET SYSTEM - SSRN papers

UNDERSTANDING THE IRISH VET SYSTEM: BEYOND NEOCLASSICISM

David O’Donnell Intellectual Capital Research Institute of Ireland 7 Clonee Road, Ballyagran, Limerick County, Ireland. TEL: +353876821032 Email: [email protected]

Thomas N. Garavan University of Limerick, Ireland Email: [email protected]

Alma McCarthy National University of Ireland, Galway, Ireland Email: [email protected]

(Paper prepared for International Journal of Manpower,Vol. 22 No. 5, 2001) ABSTRACT

Neoclassical approaches continue to dominate evaluations of national skill-formation systems. This paper argues for the benefits of including alternative interdisciplinary and theoretically grounded approaches in any evaluation of the Irish system as it relates to its economic system. This broader focus, it is argued, could lead to more informed policy formulation and implementation. Following the "societal effect" approach (Maurice, Sellier and Silvestre, 1986), we argue here that VET systems can only be adequately understood with reference to the set of inter-relationships between the education system, industrial training system, the organizational structure of industry, the industrial relations system and the class and status relations of the wider society as reflected in its political system. Keywords:

Irish VET system; Ireland; Cost-Benefit Analysis; Societal Effect; Neoclassicism.

INTRODUCTION The economy of the Irish Republic has grown faster than any other region in the EU during the past decade (see Table 1.). From a position of massive emigration of skilled labor in the 1980s, it is now experiencing low unemployment, immigration, and the growing pains of a rapidly developing knowledge economy. A theoretical focus on the Irish skill-formation or Vocational Education and Training (VET) system, as Ireland moves up the international value chain, is opportune at this time. Evaluations of national or regional VET systems continue to be dominated by neoclassical economic theory. In this paper, we argue for the potential benefits of including alternative interdisciplinary approaches in any evaluation of the Irish VET system as it relates to its economic system and institutional heritage. Broadly following the "societal effect" approach (Maurice et al., 1984;1986), we argue here that VET systems can only be adequately understood with reference to the dynamic set of interrelationships between the education and training systems, the industrial relations system, the organizational structure of industry, and the class and status relations of the wider society as reflected in its political system. Our intention here is not to give a detailed description of the Irish VET system, nor is it the intention to give a detailed analysis of the various theoretical approaches 1

introduced, nor to attempt to apply these to the Irish system in any great detail. Rather, a more macro approach is utilised in assessing the usefulness of Cost Benefit Analysis (CBA), as related to human capital theory (Becker, 1964) and neoclassical economics in general, in comparison to other theoretical approaches. Radical, Institutionalist, post-Keynesian and Societal approaches can complement our understanding of the development of specific VET systems in their historical and international contexts. Good overviews of the Irish VET system can be found in Durkan et al., (1999); Garavan et al., (1995); IMF, 2000; OECD (1995, 1999); Roche and Tansey (1992), O'Connell (1999) and Sexton and O’Connell (1997). Other documents such as the White Paper on HRD (Department of Enterprise and Employment, 1997) and Shaping Our Future (Forfas, 1996) provide detailed information and in general contain both explicit and implicit assumptions about the need to invest in human capital. The paper, however, is based in the assumption that an Irish VET system actually exists. There is some debate as to the unity of such a system, but there is clear evidence in the Irish context of a range of structures, systems and agencies that play a significant role within VET. A brief outline of this system will therefore suffice for the purposes of this article. At a policy level, there exists some unity on the principles that govern vocational learning in Ireland. These principles primarily relate to issues of access at all levels, recognition of achievements, progression to higher levels, quality, relevance and partnership in delivery, the espousal of a learner orientation as central to the VET process and the promotion of lifelong learning. There also exists some agreement as to the priority areas. Less unity exists in terms of structures and delivery. This level of the system is characterized by a range of public, private, voluntary and community sector providers. Much VET activity is delivered in cooperation between agencies and frequently in institutions such as vocational schools, technological colleges, FAS training centres and FAS externally provided programmes. An agency to provide coordination and operate a national qualifications framework is currently in the final stages of initiation. All of the agencies are ultimately concerned with the explicit argument of the White Paper on Human Resource Development: "Increasing the quantity, quality and effectiveness of the national education and learning effort will raise national economic growth and provide the essential foundations for economic expansion." The central argument presented in this paper is that although CBA is a useful analytical tool, it is by itself incapable of providing a deep understanding of why and how a country’s VET system develops in a certain manner with particular outcomes, or who and what are the major actors, institutions and forces leading or shaping the dynamics of this developmental process over time. VET systems cannot be understood in isolation (CLMS, 1999). To fully understand such developments, it is essential that historical, institutional, radical and societal perspectives are also included in the analysis. States, cultures, and social and political foundations matter. The fundamental weakness of neo-liberalism as an economic, political or strategic doctrine is "its self-limitation to two mechanistically opposed sources of social order, state and society, and its conceptualisation of the latter as a system of voluntary contractual relations" (Streeck, 1989, p.98). As we demonstrate throughout the paper, cost-benefit analysis is capable of providing good insights but these are

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limited without being complemented by insights from a broader institutional framework. Broadly following the "Societal effect" approach of Maurice et al., (1986) it is argued here that the Irish skill formation system can only be adequately understood with reference to the dynamic historical set of inter-relationships between the education system, the industrial training system, the organizational structure of industry and the class and status relations particular to Irish society and reflected in its political system. The paper is structured in the following way. First, it briefly describes the context. This is followed by a discussion of theoretical approaches and we concentrate specifically on neoclassical insights and on the added value of including interdisciplinary approaches. The remainder of the paper specifically argues the benefits of adopting a broad societal effect approach to the analysis of the Irish skillformation or VET system. THE CONTEXT

Ireland, a very small open economy, is a semi-peripheral, late-industrializing member of the EU. Up to 1922, Ireland was a peripheral region of the United Kingdom (UK), which with the exception of a small area around Belfast, did not participate in Britain’s "Industrial Golden Age". It acted as a peripheral agricultural breadbasket supplying the industrial centres of population on the British mainland and it remained a predominantly agrarian society up to the middle of the twentieth century. Its two main exports were "four-legged" and "two-legged" as a popular rural adage goes - the four-legged being cattle exports and the two-legged being mainly cottier and poorly educated working class emigrants leaving an Ireland that could not support them economically. Kennedy (1994) refers in particular to the failure of both "states" on the island of Ireland in the twentieth century to fully support either population growth or to keep pace with the growth of economic development in other small European societies. Only in the 1990s can Ireland claim to have sustained a Kuznetsian period of both economic and population growth (see Table 1). One can quite reasonably argue that the entire island of Ireland, at least up to EU entry in 1973, can be visualised as a peripheral, (post)colonial region of a major economic power in decline. Mjøset (1992) suggests that Ireland became a "free rider" on Britain’s economic decline and further that Ireland’s economic dependence on Britain was little affected by the partial political independence achieved in the 1920s. Ireland and Britain can also be viewed as a common labor market. Begg and Mayes (1994) suggest that this market has worked more efficiently between the Irish Republic and Britain than it has across the island of Ireland and they further highlight the underdeveloped nature of the economic links between Ireland and Northern Ireland (see also Bradley, 1995; Teague and McCarthy, 1995). It is envisaged and anticipated that the new north-south institutional arrangements based on the principles of mutual benefit, cooperation and agreement, will, over time, assist in improving this situation. Cost benefit analysis and neoclassical economics in general would be of little use in attempting to explain or understand such phenomena nor indeed would an orthodox Marxist perspective be in attempting to explain the dual nature of the education system in Northern Ireland or Britain’s failure to realise a more integrated system or alleviate the disparities in educational achievement between the communities (see Drudy, 1991).

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The Irish state, Ireland, adopted an isolationist, protectionist and autarchic approach to economic development from 1932 to 1958 by adopting a program of Import Substituting Industrialization (ISI). In the late 1950s a small "modernizing elite" succeeded in abandoning economic isolationism. Ireland embarked on a process of export-led-industrialization (ELI) based on foreign direct investment (O’Malley, 1989). This policy shift has radically changed the nature of Irish society in the intervening years. O’Hearn (1989) suggests that this change was facilitated due to a combination of rising dollar trade deficits; external political pressures tied to Marshall aid and European integration; economic recession; and massive emigration throughout the 1950’s. It is in the intervening period since then that the major changes and expansion of both the industrialisation process and the VET system have taken place and is the period on which this paper concentrates. In this period, the Irish class and occupational structure changed from one primarily based on property ownership to one based on educational credentials and wage employment (Breen et al., 1990; Fahey, 1995). O’Connell and Rottman (1994, p.219) outline how "family resources rooted in the old agrarian class structure facilitated acquisition of the credentials and qualifications that governed access to the new class positions in services, industry and the welfare state". Those elements of the original class structure who adapted to the new regime of credentialism obtained the major benefits. Those who, for whatever reason, failed to obtain their share of the educational spoils are now considered Ireland’s major losers. Lynch (1987) provides an excellent critique of the "essentialist, consensualist and meritocratic" ideological nature of the Irish VET system and the industrialisation process is comprehensively outlined by Breen et al., (1990) and Goldthorpe and Whelan (1994). THEORETICAL APPROACHES IN CONTEXT The remainder of this paper presents a critique of traditional cost-benefit analysis as an approach for evaluating the Irish VET system. Arguments are also presented highlighting the limitations of utilizing any one theoretical approach for assessing the development of VET systems. We conclude that a broad societal analysis approach (Maurice et al., 1986) provides a useful complementary theoretical framework for explaining and understanding national VET systems. We stress that this complements, rather than replaces, the dominant neoclassical approach. With the advent of the knowledge society, e-commerce and ideas of increasing, as distinct from diminishing, returns to human resource utilization (O'Donnell et al., 2000), the increasing awareness that the quantity and quality of human and intellectual capital available within a society has a quantitative and qualitative relationship, however ill-defined, to both its international competitive advantage and future societal well-being raises the theoretical issue to one of critical importance. If one cannot comprehensively understand the development of a region’s VET system, it is difficult to formulate potentially successful policies for its future enhancement. In the Irish case, where the goal of a more equitable, highly skilled and intellectual capital creating economy and society may now be possible for the entire island, theoretical issues may be crucial in policy formulation and implementation. Where one stands or what one knows determines what one sees or what one chooses to be relevant (von Krogh and Roos, 1996). Human capital, the education and training of the workforce, was virtually ignored up to the early 1960’s in Ireland. Tansey (1990) describes how the work of Schultz (1960) and Becker (1964) created a minor revolution in economic growth

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theory. This timing in the Irish case is vital, as it coincided with the 1958 shift in Irish macro-economic policy. Contemporary Irish society originates from this time (Breen et al., 1990). Ireland is therefore an interesting test case for the theory itself. The expansion of the Irish VET system and the rise in influence of human capital theory are contemporaneous. This theory forms the explicit theoretical foundation on which the Irish VET system was first evaluated by a joint Government/OECD report in the mid 1960s. This review, titled "Investment in Education" heralded a major expansion whose objective was primarily economic. Performance measures from this time are shown below in Table 1. Table 1. Historical Performance Measures (Average Annual Percentage change) 1961-70

1971-80

1981-86

4.2 4.7 2.1 Real GDP Real GNP 4.2 3.9 0.1 Unemployment Rate (level) 4.8 13.6 10.8 (end of period) 5.6 7.0 17.1 Current balance as a ratio to GNP (level) -3.31 -6.1 -7.5 (end of period) -4.7 -11.1 -3.6 1 1962 to 1970 Source: adapted from OECD (1999, p.26).

1987-93

1994-98

4.8 4.1

9.2 8.3

12.9 15.7

2.1 7.7

0.5 4.4

2.9 2.2

NEOCLASSICAL INSIGHTS The neoclassical economic approach, in very simple terms, represents economic growth as a function of labor, physical capital and human capital. With this model, investments in human capital yield returns at different levels: first, a private rate of return which will result in greater earnings to the individual; second, a social or general rate of return which will result in higher national growth rates; and third, an "organization specific" rate of return which has been the subject of much research and contention internationally but where empirical research is in its infancy in Ireland. The OECD (1995) estimates that human capital contributed 0.8 per cent to Ireland’s growth rate between 1960 and 1985. Over this period, total factor productivity, which includes the impact of human capital formation, grew faster than in any other OECD country. A strong correlation within the OECD area between the growth of human capital and the rate of both labor and total factor productivity (see Table 2) is suggested by the OECD. The Irish labor force has experienced phenomenal employment growth over the past five years. Between April 1994 and August 1999, the total labor force has increased by 37 per cent from 1.2 million to 1.7 million. Male employment has increased by 29 per cent over this period and female employment by 50 per cent. The female employment rate has increased very significantly from less than 30 per cent in 1988 to over 45 per cent in 1999 (FAS, 1999).

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Table 2. Contributions to Output Growth.

Output Growth of which - Labor - Capital - Total factor productivity

1962 - 1973 Ireland OECD average 4.6 5.1 -0.1 1.8 2.9

0.3 2.0

1974 - 1979 Ireland OECD average 4.1 2.6 0.4 2.0

0.2 1.6

2.7 1.7 0.7 Source: OECD (1995, p.59).

1980 - 1990 Ireland OECD average 3.9 2.6 -0.2 1.3

0.5 1.1

2.8

1.0

Following on from the 1966 OECD report, "free" secondary education was introduced and a national training agency was established in 1967; a Higher Education Authority was established in 1968; and Institutes of Technology were established in 1970. This resulted in a massive increase in participation rates, expenditure and human capital formation. The Irish occupational structure has been radically transformed (Breen et al., 1990; Corcoran and Sexton, 1993, Dineen, 1994; Goldthrope and Whelan, 1994). The expansion of higher education, for example, has made Ireland second only to Japan in the proportion of young adults with an engineering or scientific qualification (OECD, 1995), despite weaknesses in science and technology at both first and second levels. This has contributed to a situation where Ireland is now the largest exporter of computer software in the world, followed by the United States, with a vibrant indigenous software sector also developing in the past fifteen years. It can, therefore, be argued that human capital theory was, is and continues to be, a major factor contributing to the development of the Irish VET system. In a paragraph titled "Why human capital is essential for Ireland", the OECD (1995, p.56) emphasize this fundamental premise of neoclassical ideology: Human capital - the value of incomes that stem from education, training and other investments in human development - is an important element enabling countries to move from a low to a high level of income. However, despite its critics and acknowledging its imperfections, the kernel of the human capital thesis has a high degree of validity (see Ashton and Green (1996) and Maurice et al., (1986) for concise yet critical reviews). Tansey (1990, p.48) cites an OECD (1989) review of the literature that states that: The empirical research evidence of the past two decades offers support for the human capital perspective as a partial explanation of the education and economy nexus …Overall, the evidence accumulated over the past two decades does underline the importance of educational attainment as a variable influencing economic performance. It affirms the association between schooling and labor productivity and is linked in turn to positive impacts on macro-economic performance and individual well-being. However, the evidence is not definitive about the precise nature of the relationship between educational attainment and labor productivity. The relationship seems to depend in part on the real productivity enhancing value of schooling, but it depends also on education acting in other ways through screening, sorting and 6

socialization as a mechanism for the allocation of labor. (emphasis added by the authors) Further evidence of the centrality of the Irish VET system to economic performance is provided by Durkan, FitzGerald and Harmon (1999, p.125). They refer to the Solow growth model in their analysis of the role that education has played in Ireland’s recent economic boom. This model decomposes growth as follows: Growth rate = α (growth in labor) + (1-α) (growth in capital stock) + (technical change)

where the labor force and the capital stock are weighted by their relative importance in output (α, and 1-α respectively). The difference between the growth in labor and the growth in capital stock is termed the Solow residual, represented as technical change in the equation, but it is more commonly referred to as Total Factor Productivity (TFP), although methods of calculating TFP vary. Table 3. Growth in Output, Employment, Capital and TFP, 1986-1996. Growth Contribution of Labor Capital Labor Capital (EAE) (EAE) 5.3% 2.7% 2.25% 1.8% 0.8% 4.8% 2.3% 2.25% 1.5% 0.8% 5.8% 3.2% 2.25% 2.1% 0.8% Source: Durkan, FitzGerald and Harmon (1999, p.131). GNP 1986-96 1986-91 1991-96

TFP 2.7% 2.5% 2.9%

Table 3 outlines the trends in GNP, labor and capital growth in Ireland over the past decade and identifies some of the factors that have contributed to these very impressive growth levels. It is evident from Table 3 that education-adjusted employment (EAE), or human capital, made a significant contribution to the growth in GNP from 1986 to 1996. From 1986-1991, human capital accounted for 1.5 per cent of the growth in GNP, this figure rising to 2.1 per cent in the period 1991-1996. Durkan and his colleagues (1999) argue that the increase in the growth rate over the past decade has resulted from the faster growth in education-adjusted employment and in the rise in total factor productivity. In macro terms there has unquestionably been a major increase in the stock of human capital in Ireland since 1965. O’Grada and O’Rourke (1995) suggest that Ireland does reasonably well in international comparisons of educational expenditure, moving from 3.1 per cent of GNP in 1961 to just over 6 per cent in the 1990s. They suggest that Ireland’s poor economic performance, in comparative terms up to 1988, cannot be attributed solely to lack of investment in education. Tansey (1990), a solidly neoclassical Irish economist, provides a concise explanation of human capital theory and a cogently argued example of how it can be applied to the Irish case in a paper on the social costs and benefits related to third level educational investment and the loss of human capital due to emigration up to the recent growth period. Walshe (1993) further suggests that the high rate of investment in human capital in Ireland has not yielded the expected growth performance and he attributes such low returns to ineffective utilization of human capital and the loss of skilled workers due to emigration. Ireland is presently, however, experiencing significant immigration for only the second time over the past one hundred years.

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O’Connell and Lyons (1995) provide an excellent example of the usefulness of CBA in their evaluation of the Training Support Scheme, which is sponsored by the state and administered through FAS - the national training agency. They find that the net effect of the scheme has resulted in an increase in training for very small firms with its effect on larger firms being marginal. They conclude that a more efficient targeting of state aid towards smaller firms (SMEs) would reduce this "deadweight" effect thus increasing the overall level of training and leading to a more efficient utilization of both exchequer and European funding. Neoclassical approaches have, therefore, some validity and do provide useful insights in terms of our understanding of VET systems. INTERDISCIPLINARY APPROACHES CBA does not have the conceptual power, however, to fully explain some fundamental concerns regarding the Irish VET system itself and its relationship to the wider labor market, economy, political system and society. CBA has difficulty in addressing issues such as: the continuing weakness of the vocational/technical component of the secondary education sector; the failure to realise the "equity" and "meritocratic" objectives outlined in 1966; the poor record of the national training agency since its inception, primarily due to inept, poorly planned ad hoc State directives focused on grappling with both increased unemployment and the changing nature of the labor market in the early 1980s; the failure of industrial learning processes to take root and grow within indigenous Irish industry or the limited amount of structured training that takes place in the workplace, particularly within part of the indigenous SME sector; the fact that Irish women have one of the lowest labor force participation rates (~45 per cent) in the EU, despite very significant increases in the past ten years, prompting the recent individualization of tax bands to loosen an increasingly tight labor market (see Callender, 1990; O’Connor, 1998; FAS, 1999); or the truly abysmal record of the Irish government in facilitating continuing adult education, with the first junior government minister for this sector appointed only in 1998 and the first Green Paper for this sector published only recently. It cannot explain why the low level of technological and marketing sophistication in indigenous industry recognised by a CIO report in 1961, with a concentration on low-skilled, lowvalue-added activities, persisted in some indigenous sectors well into the 1990’s (O’Sullivan, 1995). Psacharopoulos (1995) argues that an interdisciplinary approach is essential for a more comprehensive comparative evaluation of national ET systems. In a comparative study of "early leavers" from the VET systems of Ireland, the UK and the Netherlands, Hannan et al. (1995, p.325) argue that "the implicit criteria of educational adequacy have in recent times been set by the labor market; that standards have changed greatly … but that different educational and labor market institutions lead to different implications in different countries". Purely formal definitions of VET systems yield no useful comparability as the institutions of education and training across different countries are too diverse (Ashton and Green, 1996; Goodwin, 1997; Hannan et al., 1995; Maurice et al., 1986; Teague and McCarthy, 1995). Maurice et al. (1986, p.204), suggest that comparative social analysis is impossible unless two conditions are met: First, the collective structures that occupy such an important place in any capitalist society must be studied in and for themselves as independent

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theoretical objects. Such structures include the firm, the educational system, the occupational structure, and the system of professional and labor organizations. Second, these collective structures must not be studied merely one by one. It is important, rather, to study their relations to one another, for it is in these relations that one may discover phenomena of sufficient generality to permit comparison between one society and another…..Neoclassical economic theory is incapable of meeting both of these conditions simultaneously. Haughton (1995) highlights some of the weaknesses of both the "nationalist dependency" theorists and "Radical/Marxists" in a discussion of that truly dismal particularity, namely Irish economic history. Despite their shortcomings, however, neither nationalist dependency theorists nor radical theorists should be ignored in an Irish context, however unpalatable their appeal to dominant Irish elites. Crotty (1986), O’Hearn (1989) and Jacobsen (1994) provide cogently argued assessments of Irish development based on modified versions of these perspectives. The Irish welfare state, unlike other European welfare states, is essentially a middle class construct and the middle classes have obtained, and continue to obtain, the major educational benefits. O’Connell and Rottman (1994, p.239) outline how the Irish welfare state was "shaped to attract the support of the middle classes; it was not targeted at the working class, as it has been in other European countries from the late nineteenth century onwards". Hannan and Commins (1994, p.103) explain how the smallholding farmer class has successfully adapted to the new educational demands of the labor market with the rise in credentialism and further how this class has "consistently won the competition with the working class for industrial jobs, as well as for upward educational and social mobility for its children". Neoclassical approaches alone are considered totally inadequate in explaining these outcomes or developments which both impact on and are derived from the VET system and are linked to the class and status relations of Irish society as a whole and their historical evolution. Breen et al. (1990: 159) demonstrate how "a marginalised underclass is being reproduced through the education and training systems while being sustained by social welfare provision". Irish children from the lower socio-economic classes are almost five times more likely to leave school with low qualifications and in the early 1990s faced a 50 per cent probability of being unemployed one year after leaving school (Clancy, 1995; Müller and Karle, 1993; OECD, 1995). The fact that there has been little lessening of class disparities, despite massive increase in levels and participation rates, in educational outcomes in Ireland can be viewed as reflecting the organizational crystallisation of class relations and processes of social mobility within the Irish VET system. Radical perspectives are rarely applied (Lynch, 1987), and radical theorists in general rarely employed, in Ireland. Neoclassical economics would suggest that the market for radical ideas in Ireland is somewhat limited! The decision, in 1995, to abolish fees for third level education was again directed to win the political support of the middle classes. Lane (1995) suggests that this is a transfer from those who do not attend third level institutions (the lower classes and underclass) to those who do (mainly middle class) and that this is likely to be regressive in its distributional effect. The following example illustrates the necessity of taking broader perspectives. The attempt by the Irish state to introduce a strong secondary vocational sector was thwarted by the influence of the religious leaders in the early 1970s mainly due to issues of control and ownership. This process would have required the amalgamation

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of some secondary and vocational schools into community schools with subsequent loss of church control. The state owns the historically low status vocational schools (`~30 per cent) and the churches own the secondary high status grammar type schools (~70 per cent). The state funds all of them with the exception of a very small number of mainly private schools. "Because of the State’s lack of control over the system, combined, in this instance, with the introduction of one set of changes (that is, free secondary education) made the success of the other (that is, the move to a more vocationally oriented system) less likely" (Breen et al. 1990, p.137). The Irish state has now effectively abandoned any idea of developing a separate vocational education stream, as in most other EU states, within the secondary cycle. This makes the distinction between ET and VET problematic in the Irish case as the entire secondary cycle is now based on the "gold standard" of a general academic Leaving Certificate with optional vocational elements. This development owes more to historical, political and societal factors than to CBA although the social and private rates of return to academic/general education based on human capital theory could be used to justify it (see Table 4 ). Table 4. Average Returns to Different Types of Secondary Education across Countries Rate of Return Curriculum Type Social Private Academic / General 15.5 11.7 Technical / Vocational 10.6 10.5 Source: OECD (1995, p.83).

The focus on VET is mainly post-secondary cycle with second level retention rates now reaching over 90 per cent compared to 20 per cent in 1960. The state mainly succeeded in the technical sector with the formation of the Institutes of Technology and the new universities located in Limerick and Dublin. These form the strength and vanguard of the Irish VET system with spectacular increases in sub-degree, graduate and postgraduate programs in the last thirty years. A major expansion in the science, technology and business faculties in the older university sector has also occurred. This bodes well for the evolving Irish economy dominated by intellectual capital, technology and processes of value adding know-how. Hornsby-Smith (1994, p.288) suggests that the Church used its "moral monopoly" to keep educational polices of the state’s agenda for several decades and offers the apt advice that one "must proceed systematically to examine at each level who’s interests count in the determination of specific policy issues, who controls the economic, social and political agenda, and who can mobilize bias to include or exclude issues". In other words it is necessary to examine empirical instances of the "dialectic of control". Cooney's (1999) biography of Dr. John Charles McQuaid, whose influence on educational matters over a forty year period was immense, provides numerous instances of this "dialectic" related to the government departments of education and health. Jacobsen (1994) stresses that analysts must attend to the class origins, positional interests, and ideological stances of policy makers. Political ideas and economic theories are not neutral (Block, 1990; Habermas, 1987). There are implicit value positions embedded in any analysis of how social institutions operate which condition the choices made in any particular situation. Goldthorpe (1994, p431) suggests that the prospects of creating a more successful and equitable industrial society in Ireland could "only be enhanced by changes in political culture

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and organization that would encourage the real ideological alternatives that do in fact exist to be more vigorously explored and contested". Influences emanating from outside Ireland must also be considered when seeking to understand its institutional development. The five major influences in this area being: (i) the continuing social, economic, and political relevance of Irish-British relationships; (ii) European Union membership since 1973; (iii) the crucial dependence on and influence of the multinational corporations (MNCs), particularly from the US as Ireland garners forty per cent of all US FDI into the EU and as the US has now become Ireland's major export market; (iv) the influential nature of organizations such as The World Bank, the International Monetary Fund (IMF) and the OECD; and finally (v) the increasingly global nature of the market economy as the industrial gives way to an information, knowledge and intellectual capital based age. Haughton (1995) stresses that the neoclassical approach can go too far in neglecting political events and institutional arrangements, and that an institutional approach complements rather than supplants the classical view. The institutional approach is most associated with researchers from the NIESR in London who have carried out a series of comparisons of the relationship between training and productivity in Britain, France and Germany. These researchers suggest that it is the national system of training which is crucial and that this explains the wide disparities in skill levels identified. Hitchens and Birnie (1994), using this approach, carried out a comparative study on skill levels and productivity in Ireland, Denmark and The Netherlands. This study revealed skill gaps at all levels including shopfloor employees, supervisory management and higher managerial levels in indigenous Irish industry. There is, however, limited evidence on the extent and form of private sector training in Ireland (Garavan et al., 1995; Heraty and Morley, 1997; FAS, 1999; Fox, 1991), with estimates ranging from zero to over four per cent of total payroll invested in training. Aggregate figures, however, can lead to very misleading conclusions in Ireland, due to both the dual nature of the manufacturing sector (see Gunnigle et al., 1994;1997) and the small size of most Irish enterprises. O’Connell and Lyons (1995) suggest that 56 per cent employ less than 4 people and 85 per cent less than ten. Roche and Tansey (1992) argue that there is a high degree of complacency about the adequacy of skill-levels in Ireland and suggest that the real skill-gap is between existing Irish practice and the best practice of international competitor countries. Heraty and Morley (1997) find that only 60 per cent of indigenous Irish companies conduct a training needs analysis compared to over 90 per cent in the MNC sector. The need for a perspective broader than the NIESR approach is strengthened by the results of Birnie and Hitchen’s (1994) comparison of Irish indigenous and MNC manufacturing productivity. They suggest that the "low skills equilibrium" thesis (Finegold and Soskice, 1988) is equally applicable to the traditional Irish indigenous sector. This implies a situation where low levels of productivity, product quality, innovational effort and wages are mutually reinforcing. They show how, during the late 1980’s, levels of output per head in the modern MNC sector were about twice as high as those achieved in the UK. The fact, however, that both multinational and indigenous organizations recruit from the same labor market and VET system in Ireland signals the necessity of exploring external factors, such as transfer pricing, in explaining the huge productivity differentials between the MNC and indigenous sectors. One should not assume simple causal relationships between human capital and productivity (CLMS, 1999). 11

Hollingsworth et al. (1994, p.3) stress that "while private property rights and free market exchanges make for the common elements of capitalism as an economic system, the social and political institutions surrounding them are the sources of differences among empirical capitalist economies" and further that "the socio-political environment within which economic activity is embedded is now commonly and insistently perceived to be related to differences in the economic performances among countries". The VET system is an essential component of this environment. Wolfgang Streeck (1989) is the writer most associated with this post-Keynesian approach which is based on the effectiveness of training practice in European corporatist or neocorporatist economic systems. Ireland, despite the experiments in neo-corporatism in place since the 1987 fiscal crisis, does not have a strong corporatist system although Irish trade union density is high in European terms (see Gunnigle, 1999; O'Connell, 1999). The Irish trade union movement has contributed little in the general area of HRD policy, with a concentration on pay and conditions along the lines of the British model (Garavan et al., 1995). A new awareness of a post-Keynesian potential, due probably to European influences among others such as the fear of falling trade union membership and the increasingly non-union nature of recent US high technology investment, emerged in the 1990s among the trade union leadership but this has not permeated to the level of the firm to any great extent. The dynamics of the continuous evolution of MNC involvement and the effects on industrial relations and training and development practices and policies is another crucial area of analysis. US corporations are much more likely than indigenous firms to have introduced sophisticated HRM techniques and increasingly adopt the characteristics of the non-union "unitarist" perspective in industrial relations policy and practice (Gunnigle et al., 1994, 1997; Turner et al., 1997). The orthodox view on Irish industrial relations which posits that MNCs coming to Ireland have conformed to local industrial relations practice and traditions is now often challenged with both "country of origin" and international sector effects becoming increasingly significant in recent times (see Roche and Geary, 1994; Turner et al., 1997). These must impact on both the form and structure of the Irish VET system. Policy initiatives by the Irish Congress of Trade Unions (ICTU) in the late 1980s led to some increase in the use of more sophisticated human resource practices by indigenous firms, and changes in policy by the state development agencies signal that changes are occurring in the Irish IR and VET systems. An understanding of the dynamics of this transformation as it impacts on the HRD policies and practices of both MNCs and indigenous firms cannot be acquired by cost benefit analysis alone. MNC employment in manufacturing now accounts for 50 per cent of the total, with the electronics, software and engineering sector accounting for nearly 50 per cent of the MNC total. Holingsworth et al. (1994, p.12) claim that there is increasing "convergence" within international industrial sectors and further that: Sectors may begin to converge towards a "best practice", as imposed by international competition irrespective of their politico-spatial location. Alternatively, they may concentrate in those places of the world where the historical heritage of governance arrangements is, for whatever reason, most sympathetic to their needs.

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We argue, therefore, that both "country-of-origin" and "international-sector" effects may have become increasingly important, particularly in the knowledge and capital intensive sectors. The lowest corporate tax rates in the EU and an English speaking and skilled subset of the labor force are probably the main incentives for attracting FDI to Ireland (Hannigan, 1999). Due to Ireland’s dependence on such sectors, the role of the VET system in facilitating, retaining and attracting such sectors becomes an important economic consideration. Hollingsworth and Streeck (1994, p.272) stress the fact that "nation-wide systems of general and, perhaps more important, vocational education create similar constraints and opportunities for employers in all sectors of a national economy" and further that "differences in governance within sectors are often recognisable as national differences in that they follow a similar logic across sectors". They cite the work of Maurice et al., (1984;1986) in suggesting that these differences can be traced back to contextual or "societal" effects. This brings us to the kernel of the argument presented in this paper. Marc Maurice and his colleagues (1984, 1986) at the LEST school in Aix-en-Provence argue convincingly, based on empirical research conducted in France and Germany over a seven year period, that national training or VET systems are only understandable if considered in relation to the education system; the organizational structure of industry; the system of industrial relations; and the class and status relations of the society as a whole which includes the nature of the political system. This societal analysis approach provides a broad theoretical framework for explaining and understanding national VET systems and demonstrates conclusively that VET systems cannot be fully understood in isolation. Mjøset (1992, p.16) suggests that if a general formula is needed concerning relations between institutions and growth, it should focus on the inter-relationship between the broader institutional arrangements and the "national system of innovation" surrounding the 'development blocks', or clusters of important firms, of a particular economy". A national system of innovation can be broadly defined as the set of institutions and economic structures that affect the rate and direction of innovative activities in the economy. A societal analysis can incorporate elements of all the other theoretical approaches, including CBA, and yet has the power and flexibility to provide a general overview of broad "interrelationships" and map these onto a reasonably coherent and integrated picture. A detailed and rigorous societal analysis of the Irish skill formation system has yet to be attempted (O'Donnell, 1997). We are sympathetic to Maurice et al.’s (1986, p231) "opposition to deterministic theories of every ilk" and we reject the overly mechanistic and deterministic view of human nature often embodied in neoclassical discourse. Maurice et al.’s (1986, p.199) assertion that "worker mobility and its economic rewards are significantly influenced by many factors that cannot be reduced to the notion of human capital" is, in our opinion, valid. By incorporating historical, cultural, political and international influences into the societal analysis approach, it provides a conceptual and theoretical framework capable of describing, explaining and understanding the dynamics of the ongoing development of the Irish VET system. What is of even greater importance, however, is that the breath and depth of understanding possible with this approach could lead to more informed policy formulation in the area of HRD/VET in general.

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CONCLUSION Two major Irish economic policy reports (Culliton, 1992; Telesis, 1982) failed to consider the wider social and political dimensions of their proposed changes to the Irish VET system as part of industrial development policy. In recommending the much admired German VET model, the Culliton report failed to acknowledge that the German system is constructed on a distinctive historical, social, political, legislative, industrial and corporatist framework or indeed how the existing Irish social and political framework would compare, or fit, or could be adapted to this model. Dankbaar (1995, p.170) refers to the "close and highly structured co-operation among state agencies, employers’ associations, and trade unions in the development of regulations for workplace training and their co-ordination with the curricula for vocational schools" in the German model. In contrast, the NESC (1993, p.495) report indicates that "one of the most strikingly distinctive features of the Irish VET system, from an international perspective, is the limited amount of structured training which occurs in the workplace and the peripheral role of employers in the VET system". This fact, allied with the State’s policy position to essentially postpone most vocational training until after completion of the general academic secondary cycle, highlights deficiencies within the Irish macroeconomic system in terms of the institutionalist/post-Keynesian or societal approaches. This type of understanding must be explicitly demonstrated at the highest national policy making level. One cannot simply import foreign institutions or foreign attitudes under license (Lee, 1989) with O’Sullivan (1995) noting that how the social foundations are developed for the co-operation that is necessary between workers and managers, business and government, and competing enterprises, if such a system is to work effectively, is central to the viability of this type of policy proposal. Successful national strategies requires recognition of the inter-relationships between cultural, social, spiritual, intellectual, economic and political characteristics and the ability to perceive these inter-relationships is itself a key variable in formulating developmental strategy (Lee, 1989). As Maurice et al. (1986, p.196) suggest, we must succeed in "identifying the concepts necessary to restore the proper balance between the work of economists and the work of others who, using the tools of sociology and institutional analysis, have become aware of the importance of factors that cannot be reduced to market forces". Adherence to neoclassical ideology will, we believe, lead to endemic under investment in Irish skill creation and place restraining, yet avoidable, constraints on economic and social development. An understanding of these interrelationships and linkages is critical if the transition from the dominant "administrative logic" of the extant skill-formation system is to be steered in the direction of the type of "professional logic" exemplified by such highskill systems as Germany and Singapore. The predominantly low-skill market led model, as in the US and UK, is decidedly not the route to choose for a very small, very open, developmental state such as Ireland. The central argument presented in this paper is that although neoclassical economics provides useful analytical tools, it is in itself totally insufficient and in many cases incapable of examining or providing an understanding of why and how a country’s skill-formation system develops in a certain manner with particular outcomes or who and what are the major actors, institutions and forces leading or shaping the dynamics of this developmental process over time. The key issue is that the development of the Irish skill-formation system cannot be understood in isolation. 14

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