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The purpose of this paper is to investigate and recommend formal guidelines for the initial design of country-level or sectoral payroll levy systems that are intended to incentivize new firm training. The paper presents and illustrates two necessary conditions for new training to be stimulated, one involving transaction costs and the other the incentive payback. Ultimately, the purpose is to guide more successful designs for such systems in future.

The paper is principally theoretical, but the South African levy-grant system of the late 1990s is used as a case study. The paper illustrates how World Bank data may have been used to guide the design.

The paper demonstrates how during the design phase, policy makers can employ knowledge of pre-incentive training levels of firms, and possibly also estimates of unit transaction costs, to estimate the number of employees that may be positively affected. In the South African case, the actual system used may have been underspecified and unlikely to reach many employees with new training.

Future research may employ these guidelines in empirical studies of the relative success of payroll levies.

The practical value of the paper is formal guidelines for policy makers seeking to implement such payroll levy systems.

Better design for these systems may have positive implications for productivity and social externalities while avoiding unnecessary waste.

While there have been several more general reflections of payroll levy systems, and empirical investigations of their efficacy, this is the first paper formally modeling and testing design guidelines that can be implemented practically in the pre-implementation phase.

Decision theoretic utility analysis has long been proposed as a method for analyzing the monetary impact of training. Increasing complexity in the training environment requires, however, that additions be made to the basic algebraic assessment formulas. One such addition may include the effect of levy‐grant systems that stem from legislation and are designed to incentivize employer provided training EPT). The impact of such incentive systems on the bottom‐line of a company is a vital consideration in what training to apply and whether to participate in the grant incentive activities. Interest in the range of evaluation techniques is increasing. This article accordingly adjusts the basic decision theoretic utility analysis techniques for the special case of a levy‐grant incentive, using South Africa as a case study. It is hoped that the principles used here can thus be extrapolated to other skills development systems, allowing both organizations and policy makers to make optimal decisions.

Although South African landowners have been subject to various forms of land tax in the past, the ownership (or occupation) of agricultural land is not taxed at present. Despite the fact that white agricultural landowners are strongly opposed to the possible introduction of a rural land tax, political and fiscal pressures in present‐day South Africa seem to suggest that the imposition of such a tax is inevitable. It is suggested that it could be equitable, and would be administratively feasible, to levy, assess and collect a rural land tax at local government level within the commercial farming sub‐sector, but that levying such a tax on subsistence farmers occupying communal land poses serious problems.

Price/Earnings Ratios When the United Kingdom changed from a two‐tier system of company taxation (Income Tax and Profits Tax) to a single‐tier Corporation Tax in 1965, the investment community simultaneously adopted the American‐style price/earnings ratio as the standard yardstick for measuring the relative values of share prices.

The period since the Second World War has been one in which almost all Western countries have accepted the maintenance of a high level of employment as one of the first principles of economic policy. However, this has generally meant, inter alia, shortages of skilled manpower. Of course, Britain is not the only country to have suffered from such shortages nor the only one to be concerned at the apparent inability of the existing voluntary training arrangements to solve the problem. Severe criticisms of the traditional pattern of industry‐based apprenticeship training as the main method of preparing young people for skilled work have been made in Britain on the grounds that such on‐the‐job training was comparatively inefficient, that there was little form of quality control to ensure a reasonable standard of training, and that it fostered restrictive practices by increasing the barriers between one skilled trade and another. Criticisms were also voiced that too many employers were merely content to ‘poach’ skilled labour rather than carry out the necessary training themselves and that formal apprenticeship agreements were mainly limited to males in certain craft trades which tended to deprive females and males entering other occupations of systematic training.

Understanding the concept of a knowledge‐based economy; having a vision to make a new knowledge economy competitive; and creating and implementing a strategy to achieve that vision, would all seem to be fundamental steps for any economy striving to compete in the new global knowledge marketplace. While such issues may appear obvious, how many economies have actually responded effectively to these challenges? This paper first examines the concept of a knowledge‐based economy and then evaluates the relative performance of Australia across a profile of key knowledge‐based performance indicators. Finally, the paper addresses some key challenges facing Australia, and most other OECD economies, as they try to compete in this knowledge race in the new millennium.

Appraises the scope for cost‐effective government intervention into the mobilization of resources for training, examining measures catalytic in nature as well as direct interventions. Asserts that economic recession and shrinking government revenues have led to a reconsideration of the role played by the state in training provision and to a growing acknowledgement and appreciation of the role of the private sector. Suggests that although the documentation is incomplete, the government is, and has always been, the junior partner. Discusses how training is financed by the private sector. Analyses situations where privately financed training provision may be sub‐optimal in scale and where there are grounds for government intervention. Addresses the issues of how best to provide financial incentives and mobilize the resources required for financial intervention.

Progress under the Industrial Training Act The Industrial Training Act, 1964, has three main objectives: 1. To ensure an adequate supply of properly trained men and women at all levels in industry. 2. To improve the quality and efficiency of training. 3. To share the cost of training more evenly between firms. To achieve these objectives, the Secretary of State for Employment and Productivity is empowered to establish Industrial Training Boards and to give these boards certain responsibilities for the promotion of training in any activities of industry or commerce. The boards have three main ways of helping employers in their industries to meet demands for trained manpower: (a)They have the power to raise a levy from employers and to pay grants to those providing training to approved standards. Table 1 shows the latest estimated levy yields of the boards. (b)They issue guidance to their industries, particularly in the form of training recommendations, on the nature, length, content and standards of training for particular employments and on other related matters. (c)They provide training adviser services to employers and, as may be necessary, special facilities such as training centres or training courses.

an account of the steps taken by the Iron and Steel Industry Training Board Until 31 March 1970 the Iron and Steel Industry Training Board, established in July 1964, operated a COST‐BASED grant scheme. Over this period the levy increased as a result of several influences: an increase in the number of categories for which grant was paid; an increase in the numbers receiving training; an improvement in training schemes and a continuous upward trend in costs themselves. By 1969/1970 the levy had reached a figure of £24.50 per employee. Now the Board is holding in abeyance the greater part of grants that could be paid, together with the levy that would be required and has devised a new system of training assessment. This is a major step in disengagement from levy. For 1970/1971 the maximum levy will be £6 a head with certain exemptions and abatements. In this article Mr Duncan gives a factual account of developments in the Board's activities and contributes some personal viewpoints.