Published: 3-01-2012, 05:18

Financing of Adult and Lifelong Learning

Adult learning is a wide-ranging phenomenon and accordingly its financing. It engages individuals, organizations, communities, and nations. It is pursued for a wide variety of purposes and in a wide variety of ways.

Theoretical foundations for principles of financing adult learning, as well as other types of activities, will be found in the literature of economics. In that literature, market failures are often highlighted as a motive for government funding of learning. However, a more fundamental concern has been social justice and distributional aspects. The market approach has been criticized for being too restrictive.

While economic principles may remain unchanged over time, political practice has to focus on the varying problem areas as they turn up, more recent adaptations to globalization, the knowledge economy, new information and communication technologies, and globalwarming.Therefore, in empirical practice and studies, different financing mechanisms will eventually be brought to the fore.

This article offers a few introductory comments on financiers and funding statistics. Financing principles and mechanisms are reviewed. In addition, the development of practical financing experiences in the Organization for Economic Co-Operation and Development (OECD) countries is described as an illustration to general funding problems in many countries.

Financiers and Funding Statistics

In most countries, the government is an important financier of adult learning. However, in federal states, not only will there be national governments, but also regional and local governments, each with its special financial responsibilities. Furthermore, within a government often several ministries are involved in the financing of adult learning, typically the Ministry of Education (formal learning including literacy), the Ministry of Labor (training for the unemployed), and the Ministry of Social Affairs (training for other disadvantaged groups).

Most of the public funds have traditionally been channeled to public learning institutions or sometimes to nongovernmental organizations (NGOs). The latter often receive funding from many different sources, public and private, including fees from participants. This sector includes much nonformal learning as exemplified by the folk high schools and study circles in the Scandinavian countries.

The social partners influence adult learning in different ways. An important factor can be collective agreements which regulate employee training possibilities, as in Germany and Austria. Besides that, employers, of course, engage in training their employees often purchased from private providers.

Needless to say, fundamentally, individuals remain responsible for their own education and training, not least the self-directed learning.

Some Statistics

Comparative statistics of expenditure on adult learning are not available. Not even for individual countries do complete statistics exist. (For participation in adult learning comparative statistics do exist (cf. e.g., Kailis and Pilos, 2005 for European Union (EU)-25 participation in both formal, nonformal and informal learning, and the OECD 2006 for nonformal job-related education and training). The most developed financing statistics concern labor market training and private enterprise training (OECD, 2006; EU-RA, 2004). The EU is preparing an adult education survey for 2008, including private costs for formal and nonformal adult education (SCB, 2007). Still, two financial aspects will be illustrated in this section: to what extent are individuals interested in financing their learning, and do governments fund adult training for the labor market.

Private financing

In 2003, the lifelong learning Eurobarometer charted the attitudes of individuals toward financing their own learning. The survey was directed to individuals aged 15 plus in the old EU-15, Iceland, and Norway (Ramprakash et al., 2005).

Overall, 43% of the respondents were willing to pay for their own education and training. This average varied from 33%to 68%. The awareness of the importance and utility of adult learning thus greatly differs even between these European countries. Respondents in Denmark and Iceland were most prepared to invest in learning. Other countries with high figures were Germany, Sweden, and the United Kingdom. In contrast, respondents in Belgium, France, Spain, and Portugal were less willing to pay for their training.

Making a distinction between education for workrelated and nonwork-related purposes, on average, there were no great differences. The same countries came out with high figures for work and nonwork training: Iceland, Norway, and Luxemburg. In case of nonwork, Sweden and Denmark should also be added to this group. For both purposes, a middle group included Germany and Ireland (and Sweden for work purposes). Low investors in both cases were again Belgium, Spain, and Portugal.

Judging from these financial statistics, much more of a learning culture seems to exist in some countries, such as the Nordic countries of Iceland, Denmark, Norway, and Sweden, than in other countries, such as Belgium, Spain, and Portugal, with Germany, the United Kingdom, and Ireland in an intermediate position.

Public financing

For public financing of adult learning, there are OECD statistics for employment training. In 2001, the OECD (2004) concluded that the funds for adult education would, in view of their comparable small share of total education enrolments, at best equal labor market training expenditure. In the late 1990s and 2000, expenditure in support of labor market training ranged from 0.20% to nearly 1.00% of gross domestic product (GDP) in 9 of 25 countries for which data were available.

The 2007 edition of OECD Employment Outlook contains financial statistics for as many as 28 countries for the years 2003–05. The figures for public expenditure on training as a percentage of GDP are now spread over:

  • a low range 0.01–0.05;
  • a middle range 0.10–0.25; and
  • a high range 0.30–0.54.

Overall, the financing is now lower than in the 1990s. Moreover, if there are any changes over the 3 years covered in these data, they point in the direction of a lowering of expenditure.

In the low range, we find not only the Central and Eastern European countries such as Poland, the Slovak Republic, the Czech Republic, and Hungry, but also Mexico, Greece, Australia, Japan, Korea, and the United States. In the middle range are not only a number of European countries such as Luxemburg, the United Kingdom, the Netherlands, Spain, Belgium, Italy, and Ireland, but also Canada and New Zealand. On top of the list are the Nordic countries: Finland, Sweden, Norway, and Denmark. Other countries with rather high expenditures are Switzerland, Germany, Austria, France, and Portugal.

Many people seem to be interested in financing their adult learning – in some countries even a majority. Whether they do so or could be stimulated to do so we do not know. However, private interest in financing adult learning and actual government spending on training seem to go hand in hand (cf. the Nordic countries), but at a rather low expenditure level. Only a very small share of GDP is devoted to public spending on learning for the labor market.

Few aspects of the funding of adult learning are covered by statistics. This lack of financial statistics must be a drawback for the development of rational adult learning policies.

Efficiency Principles and Financing Mechanisms

In economic literature, there are two main reasons for government funding of adult learning: distribution and efficiency motives (Barr, 2001; Bohm, 1987). Arguments for governments to support a social infrastructure, including one for adult learning, have also been added (North, 1981; Rosenberg and Birdzell, 1986).


The efficiency, or allocation and economic growth motive, for public funding of adult learning, through individuals, institutions/organizations, or employers, is based on the idea of market failures. For a number of reasons – positive external effects, uncertainty, lack of information, and competition – individuals and firms acting on their own on markets would not achieve enough learning from a socioeconomic point of view. These market failures are often supposed to be more difficult when it comes to basic skills and less so for higher-level competences.

The government may consider financing socially profitable learning investments, that is, investments that are profitable when also social benefits are included. Privately profitable investment might be left to private investors. For tertiary education and certain adult training for the labor market, the arguments in favor of public funding are thus not so strong. Individuals and employers, to a large extent, reap the benefits from such training and should therefore bear at least part of the costs. For basic skills, the opposite is true; the main benefits of having a basically trained and trainable population and labor force are largely social.

Education and training for the unemployed, disabled, and other groups that have problems getting a foothold on the labor market can also be motivated by efficiency reasons. It may be better for society to help unemployed people to find a job. In this case, there are no opportunity costs in terms of foregone production during training.

Some arguments have also been put forward to motivate government funding of training in small- and medium-sized enterprises (SMEs). Much similar to individuals, they may not be aware of the benefits of training and existing learning opportunities and have problems financing training.

Sometimes governments also have to handle market distortions they have created themselves. Taxes introduced for financial reasons may, for example, inadvertently hamper investments in learning. Besides, the government has to carefully choose financing mechanisms not to introduce new distortions, efficiently targeting disadvantaged groups, not crowding out private investments, and avoiding fraud. Selective measures may target specific groups and be cost efficient, while general, more all-inclusive measures are more costly but leave no one out.


The distribution motive, for one thing, is also associated with basic learning. In a democratic society, all children should have access to at least primary schooling and in modern societies secondary education is also more or less a prerequisite for citizenship. In the same vein, it can be argued that public funding of second-chance education for adults at these levels is motivated.

In addition, a democratic society should arguably aim at making cultural and humanistic values accessible to all citizens.

From a viewpoint of social justice, investing in young and old people would be valuable. From an efficiency perspective, the government had better focus funding on the learning of young people with a longer time period for reaping the benefits of training.


The importance of the infrastructure for economic transactions has been highlighted, generally and also in case of learning. It includes basic laws and regulations as well as attitudes and institutions. If one is to rely on markets, there has to be market regulations and surveillance of competition fostering economic security and efficiency in adult learning markets. Information about learning opportunities has to be available. To be able to develop certificates, a national qualification framework may be necessary. Teacher training as well as research and development are also important.

This is not to say that the government itself has to provide all these services. The duty of the government is to ensure that they are available and adequately provided.

The economic literature has produced arguments for certain learning activities to be financed by the government but no exact amounts are prescribed. How to balance investments motivated by social justice, distributional, efficiency, and infrastructure effects against each other and against other types of public expenditure is a fundamentally political or even philosophical question.

Financing Mechanisms

Whatever the purpose of the spending, financing mechanisms have to be carefully chosen according to efficiency properties (OECD, 2000, 2001, 2004, 2005).

Increasing efficiency in direct public funding of institutions

Traditional public service relies on bureaucratic hierarchies, confidence, and consensus. The mechanisms that have recently been introduced in public education and training services to increase efficiency belong:

  • different types of incentives, for example, in the form of output-based funding to gain more value for money;
  • decentralization of financial decisions, giving more autonomy to education and training institutions that are supposed to have better knowledge about local conditions; and
  • competition for government contracts or stimulation of public institutions to rely on tenders – the requirement to buy education and training services from different providers may be linked to infrastructure in terms of lists of publicly accredited institutions and programs. 

Education and training institutions may also be permitted to use fees to finance their provision. This can be a way of testing individual demand for learning. For distributional reasons, however, some types of courses may be exempted from fees and some groups of individuals may have a right to tuition-free courses.

Efficiency through partnership and co-financing

Financial co-sharing arrangements can be an efficient way to investigate whether there is any private demand and willingness to pay for certain services. At the same time, the public sector can benefit from private information as to production and distribution alternatives for these activities. Examples are requirements of co-financing from individuals, employers, or municipalities for subsidies to be paid to education and training projects, and formal public private partnerships (PPPs) to finance investments.

Voluntary co-financing schemes can also be introduced mainly to raise private funds for learning, then normally requiring a subsidy element. There may be three-party versions – government/employer/individual – or twoparty versions – government/employer or government/ individual. Examples are individual development accounts (IDAs) and individual learning accounts (ILAs) with matched contributions by individuals, employers, and the government and publicly supported train-or-pay systems for employers.

Employers can also be stimulated to create sector- or branch-specific funds to finance common training. Such pooling of employer resources for training can be of special interest to SMEs and also an efficient way to handle poaching (in addition, or as an alternative, to pay back clauses in employment contracts).

Parafiscal funds are compulsory measures to raise funds and may, for example, be created by payroll levies on employers, eventually combined with public funding; they are an alternative to taxes. Some part of the funds may be used by the employer himself and some collectively (such as the levy/grant schemes). An additional purpose for such funds may be to raise awareness as well as to stimulate employer interest in training.


For individuals, two types of learning costs are involved: direct costs and costs of living. Public incentives for individuals to train – to make up for market failures and handle distributional problems – take many different forms in addition to co-financing schemes:

  • Individual drawing rights, entitlements, or training vouchers. In these cases, both direct and indirect costs may be covered. These incentives can be targeted and constructed so as to stimulate competition among education and training providers. Such arrangements are often combined with an infrastructure of information, advice, and counseling services sometimes at learning centers where the individual also can have access to accreditation of prior learning, a library, and education at a distance.
  • For direct training costs, tax exemption and tax brakes can be used to stimulate participation though, of course, only individuals with a taxable income can profit from such measures.
  • For indirect costs, grants and loans, mixed loan–grant models, or income-contingent loans (ICLs) are often available. The ICLs mean that the repayments of the loans are related to future incomes, which reduce individual risks.
  • A legal right to training leave where the costs (direct and/or indirect) are supported by the government and/ or the employer (with or without tax brakes for employers) also exists in some countries. Training leave without at least (partial) funding may not be very successful in raising participation. 

Training for unemployed people is often free of charge while the individual can live off his or her unemployment benefits. Such training may be compulsory though the individual can have some choice as to actual training.


Public incentives for employers to undertake training resemble those for individuals. Vouchers, tax exemptions, tax credits, profit tax deductions, and subsidies have been used to stimulate employers to train their employees or make them benefit from training leaves. The idea is that this type of government-supported education and training should have wider purposes than the training the employer would normally be responsible for – basic skills training, non-work-related training, and general rather employerspecific training. The government may pay both training cost and wage compensation to the employers.

Aspects of the learning infrastructure that may interest the employers are easy access to information about training alternatives and flexible training providers.

Historically, government funding of adult learning has been supply oriented, that is, directed toward learning providers in various segments (e.g., further education, labor market training, and culture). Aspects of demand-led, market-oriented learning have been introduced to make the public providers more efficient and involve private providers in traditionally public education and training.

The market-oriented measures are supposed to increase efficiency through a better match between demand and supply and lower costs. Such measures, however, risk introducing segmentation and creaming in training markets reduce access to learning. In tendering, it may be difficult to balance equity, quality, and efficiency.

However, private co-financing has also been introduced to stimulate an overall growth in adult learning investments in light of shrinking public funding.

Learning markets rely on individual choice and competition. On the one hand, this means empowerment for individual actors. On the other hand, it means an alienation from an idealistic search for learning based on a public learning infrastructure.

Policy and Practice in OECD Countries

In 1996, the OECD launched the concept referred to as lifelong learning for all (OECD, 1996). It was motivated by major trends such as globalization, trade liberalization, the aging of the population, the growing ethnic and cultural diversity, the impact of information and communication technologies, and the changing nature of work. It was to address the fundamental objectives: personal development, social cohesion, and economic growth.

Closing the Gaps

A first analytical step was to try to estimate the existing gaps and the costs involved in closing them (OECD, 1996). For adults, this proved to be very difficult but a few examples were given. Scenarios for extending lifelong learning to adults with low literary proficiency, based on the literacy surveys of International Adult Literacy Survey (IALS) and available figures for training costs, were used. For Sweden, the costs were estimated to be around 4% of GDP, in the Netherlands 5%, and in Germany between 6% and 12%.

More cost calculations were produced later on (OECD, 2000). This time they were based on country reports and participation targets. The Netherlands came up with a well-documented assessment. Now closing the participation gaps for adults was estimated annually to require public costs corresponding to 0.3% of GDP. Hungry made calculations both for public and private costs. For public costs, they were estimated annually to reach the level of 2.8%of GDP and, for private cost, 7.6% of GDP.

There seemed to be something like a natural progression. When targets for initial, primary or pre-primary, secondary, and tertiary education had been reached, lifelong learning for adults might be a reasonable target. For countries that had not achieved that stage, the challenges were daunting. For the central and eastern countries, these were also newly (re)discovered needs in response to the transition to a market economy.

Financing Lifelong Learning

Later OECD (2001) publications concentrated on how to make strategies for lifelong learning for adults affordable. Different ways of reducing costs, increasing benefits, and putting incentives to work were scrutinized. Still, the OECD ministers were convinced that the targets could be reached and in 2001 they declared that more resources had to be raised (OECD, 2004).

A project Financing Lifelong Learning was started. Participating countries submitted background reports, were visited by OECD review teams that wrote country reports, and produced material for further discussion.

However, by the mid-1990s it was evident that, although formal education systems were expanding, they were not able to ensure lifelong learning for all. One important shortfall, besides provision for young children, concerned adults, in particular those with low levels of qualifications.

The recurrent education of the 1960s and 1970s had never become a widespread practice. Training markets had not developed adequately in spite of government initiatives to stimulate supply and demand for adult learning. Neither training levies or collective agreements had spurred supply nor had vouchers for individuals or levy-exemption schemes for employers, noticeably stimulated demand.


Now the OECD narrowed down the perspective. Lifelong learning for adults should not be financed but co-financed (OECD, 2003b, 2004).

Fiscal pressure in the era of global competition made for less public resources and they alone could not provide the necessary funding for lifelong learning. A consequent search for new models of financing investment revolved around the issue of co-financing by individuals, governments, and employers. Various co-financing mechanisms are available for different aspects:

  1. For reducing direct costs to individuals. ILA and IDA (with matched contributions by individuals, employers, and the government), loans and vouchers to individuals and/or employers (subsidized by the government), and tax policy (deductions, credits, tax-sheltered savings supported by the government). 
  2. For reducing individual foregone earnings. Direct income support (from the government), ILA and IDA (with matched contributions), loans to individuals (subsidized by the government), collective agreements, and time accounts (with or without subsidies by the government). 
  3. For sharing risks. ICLs to individuals (subsidized by the government). 

Much of the co-financing discussion centered around ILA and IDA (OECD, 2004). A special network, the European Learning Account Partners (ELAP), prepared a catalog of recent lifelong learning co-financing initiatives (OECD, 2004). The ILA was to be used only for learning purposes, while the IDA could be used for different purposes, including education and training. There were two main arguments in favor of ILA and IDA. On the one hand, they made for three-party co-financing, and thus the possibilities to raise resources might improve. On the other hand, they fitted a desired development away from supplydriven toward demand-driven learning, a strategy with individual needs at center that might motivate poorly qualified and disadvantaged learners to participate in learning.

Besides co-sharing arrangements, another concept was also launched and much discussed at this time, a wholeof- government approach. If resources were to be used efficiently, adult learning policy had to be developed in a coordinate way and government ministries cooperate. The Swedish Adult Education Initiative was mentioned as an example of both co-financing and cooperation as these important learning projects were co-financed by different ministries (OECD, 2004).

However, the ILA never left the preparatory stadium. In the United Kingdom and the Netherlands, they were tried but abandoned. In Sweden, the government had set aside funds for their financing, but in the end no decision to introduce them was taken. In the United States of America, some states have introduced IDA, but they have not become general government policy. (A private insurance company tried to make a product out of competence insurance (OECD, 2004) but it failed.)

There were many concurring problems attached to the ILA. As they generally were supposed to have a wide coverage, they were expensive to governments and at the same time only contained marginal subsidies to individuals. Employers also seemed reluctant to invest in savings accounts that they did not fully control; and as regards less qualified individuals,would they really be interested in these accounts and stimulated by them to undertake training?

Promoting Adult Learning

Parallel to the upcoming failures of co-sharing arrangements, the OECD initiated the Thematic Review of Adult Learning. It ran over the years 1999–2004 and resulted in two publications (OECD, 2003a, 2005) with the telling titles, Beyond Rhetoric and Promoting Adult Learning. Here, we are back to basics: how to stimulate adult learning especially for the least qualified. This now seemed to be the most pressing challenge in response to globalization and new technologies, given the restrictions to public spending. Equal distribution of skills has a strong impact on overall economic performance, making the labor forced more productive.

The focal point is on:

  • financial incentive mechanisms and on policies to increase the participation of low-skilled adults;
  • financial constraints to participation by low-skilled adults; and
  • institutional arrangements that are conducive to investment by firms and individuals. 

Structural preconditions for learning – visibility of rewards, recognition of prior learning, national qualification systems, information, advice and counseling, flexible providers, and one-stop centers – are important to increase the participation of low-skilled adults.

Still, the context of policy fragmentation and the need for an integrated approach to adult learning policies, of course, have to be kept in mind. However, a more realistic aim might be advisory bodies and coordinators suggesting priorities rather than actual whole-of-government policymaking bodies.

The grand vision of lifelong learning for all, where adult learning was identified as an important missing link, was an overarching government approach to achieve everything from social cohesion and inclusion of marginalized groups, to jobs for the unemployed and continuous upgrading of the workforce, to competitiveness in response to globalization and cultural and democratic development, including a responsible reaction to global warming. For adult learning, it has turned into a more realistic, piecemeal approach. Reforms cannot advance ahead of institutional prerequisites, political support, and coherent strategies.

The lessons learned by the OECD countries have proved to be relevant to the post-communist countries in Central, Eastern and Southeast Europe (Gunny and Viertel, 2006) and are certainly also relevant to countries such as Brazil, India, China, and middle-income developing counties. Adult learning has to be tackled to reduce underemployment and informal employment (OECD, 2007).

See also: Adult Literacy Education; Evaluation and Accountability.

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