Profiting from Apprenticeship

Yes, but can I profit from him?

The apprenticeship training systems in Germany and Switzerland are similar, but they produce very different benefits for the companies. While a Swiss company shows a benefit at the end of a three-year training stint that exceeds costs by EUR 2,700, a comparative German company clearly bears net costs, the latter exceeding benefits by a whopping EUR 22,600.

These are the findings of a joint study by the Federal Institute for Vocational Education in Bonn and the University of Berne that has just been released as a CESifo Working Paper. CESifo Researcher Stefan Wolter, Professor at the University of Berne and one of the paper’s authors, explains that “our findings show that three factors can explain the difference between both countries: different relative wages, different amount of time spent by trainees on the shop floor and their assignment of productive tasks.”

Most of the ca EUR 25,000 net cost difference between both countries is accounted for by the benefit side. Benefits are twice as high in Switzerland as in Germany. An important factor is the difference in relative wages between both countries: apprentice wages in Switzerland are significantly lower than those of skilled workers as compared to Germany. 

Even more important, however, is the participation of apprentices in productive processes. While in Switzerland apprentices spend much time engaged in actual production, those in Germany concentrate mostly on training exercises. This clear difference in the way apprentices are tasked explains more than 60 percent of the benefit differences.

“In Switzerland companies faced with net costs like those in Germany do not provide apprenticeship training at all”, says Swiss education expert Wolter, referring to further analyses. The differing behaviour can be accounted for largely by the different flexibility of the respective labour markets. In the case of German companies, the labour market permits them to profit from former apprentices even after the apprenticeship has ended. For the future, however, it remains to be seen whether this training model will be compatible with the changes taking shape in the labour market.

An Ifo study shows that relative apprentice wages in Germany have risen markedly since the early 1990s, while the amount of time spent by apprentices in production has sunk. “It is not only that Switzerland teaches us how to create more apprentice positions”, Ludger Woessmann, head of the Human Capital and Innovation Department at the Ifo Institute, explains: “We used to do it differently ourselves.” Since the gaining of competency is much more effectively achieved by qualified work in actual production than by rote training exercises, Mr Woessmann recommends that Germany rethink how apprentices are used in companies.

Regina Dionisius, Samuel Muehlemann, Harald Pfeifer, Günter Walden, Felix Wenzelmann, Stefan C. Wolter: Cost and Benefit of Apprenticeship Training – A Comparison of Germany and Switzerland, CESifo Working Paper 2287

• Other CESifo Working Papers dealing with apprenticeship
• Other CESifo Working Papers by Stefan C. Wolter
• CESifo Working Papers published in the past three months