Vocational training reduces youth unemployment, IW study finds
Published: 24 August 2004
At the end of July 2004, the Cologne Institute for Business Research (Institut der deutschen Wirtschaft Köln, IW [1]) published a study [2] that praises the German 'dual system' of vocational training - which combines on-the-job training with vocational school attendance on the 'sandwich course' principle - for its comparative success. Despite a weak labour market and a high proportion of teenagers with educational problems, it has been possible to provide the majority of young persons aged from 15 to 24 (inclusive) with higher secondary education, and this has helped to keep youth unemployment relatively low.[1] http://www.iwkoeln.de/[2] http://www.iwkoeln.de/data/pdf/pub/direkt43-04iwd.pdf
In July 2004, the Cologne Institute for Business Research (IW) published a study which finds that Germany’s 'dual system' of vocational training has proved to be an effective tool in reducing youth unemployment. According to the research, in comparison with OECD averages, Germany's dual training system reduces youth unemployment and leads to an above-average number of people achieving a higher vocational qualification. However, companies are widely in favour of improvements to the system.
At the end of July 2004, the Cologne Institute for Business Research (Institut der deutschen Wirtschaft Köln, IW) published a study that praises the German 'dual system' of vocational training - which combines on-the-job training with vocational school attendance on the 'sandwich course' principle - for its comparative success. Despite a weak labour market and a high proportion of teenagers with educational problems, it has been possible to provide the majority of young persons aged from 15 to 24 (inclusive) with higher secondary education, and this has helped to keep youth unemployment relatively low.
International comparisons
In comparison with many other industrialised countries, youth unemployment in Germany is low. In 2002, the unemployment rate amongst 15 to 24 year olds averaged 9.7%, which was only a fifth higher than the unemployment rate for 25 to 54 year olds. Only those countries that, in general, have relatively few labour market problems had a better record. For example, in Switzerland the unemployment rate for 15 to 24 year olds was 5.7%. On the other hand, in Italy, Greece and Spain, approximately one in four people of this age was looking for a job. The situation was not much better in Finland and France, both of which had youth unemployment rates of nearly 21%.
Germany’s comparatively good record on youth unemployment is, in the IW study authored by Axel Plünnecke and Dirk Werner, attributed first and foremost to its dual training system. Trainees undertake a great deal of their training on the job, whilst vocational training schools provide the theoretical background. Young people are prepared for working life in a similar fashion only in Denmark, Austria and Switzerland, it is stated. According to the study, the dual vocational training system reduces youth unemployment on average by 5 percentage points in a comparison of Organisation for Economic Cooperation and Development (OECD) countries. The authors argue that the reasons for this reduction are: first, the improved exchange of information that results from the trainees’ direct contact with companies; and, second, the ability, within a limited time span, of both parties to ascertain whether or not continued employment after the training would make sense.
Moreover, according to the report, thanks to the dual training system, an above-average number of German people are able to obtain a higher vocational qualification: in 2002, 85% of 25 to 34 year olds had achieved at least a completed apprenticeship or an Abitur (the school-leaving exam and certificate giving access to university) or a university of applied sciences (polytechnic) qualification. Amongst OECD countries, the average was only 74%.
Recent pressures
In spite of these successes, there has recently been a reduction in the number of apprenticeship places available (DE0305103F): in 2003 there were about 15,000 fewer apprenticeship places than there were in 2002; while in 2002, the number of places had fallen even more, by 48,500. According to the IW study, the availability of training places in Germany has been under pressure as a result of the low level of economic growth in recent years and industrial restructuring that has led to a trend away from occupations with a high level of dual training. However, the willingness of sectors with a tradition of intensive training to increase training opportunities as well as increases in the amount of training provided by some service sectors have made it possible to keep the overall number of trainees relatively stable compared with 1995, the authors argue.
The number of employees in the engineering and electrical industries fell by just under 10% between 1995 and 2002. In other manufacturing industries, the number of employees decreased by more than 20%. The decrease in the number of apprentices was, however, considerably lower: in the engineering and electrical industries, apprenticeship numbers fell by just under 3%; while in other manufacturing industries, the decrease was about 10%. As a result, the percentage of all employees in these sectors who are apprentices has actually increased - see table below.
| Occupations | % change in the number of apprentices between 1995 and 2002 | . Apprentices as % of all employees in sector | |
| 1995 | 2002 | ||
| Metalworking and electrical industries jobs | - 2.8 | 11.3 | 12.3 |
| Other manufacturing industry jobs | - 9.6 | 6.8 | 7.7 |
| Primary service sector jobs (eg commerce and catering) | 18.5 | 4.4 | 5.1 |
| Secondary service sector jobs (eg media and healthcare) | - 1.1 | 4.0 | 3.6 |
| Technical and science jobs | - 22.4 | 1.9 | 1.5 |
| Total | 2.7 | 5.6 | 5.9 |
Source: IW 2004.
A greater willingness to offer apprenticeship places was shown, above all, by primary service sectors, such as commerce. Whilst total employment in this sector increased by 2% between 1995 and 2002, the increase in the number of apprentices was 18.5%. However, secondary service sectors, such as the media and healthcare, and technical/natural science reduced their already low level of apprenticeships as a percentage of total employment even further. In total, however, there was a small increase of 2.7% between 1995 and 2002 in the number of apprentices, and there was an increase in the proportion of all employees who were apprentices by 0.3 percentage points to 5.9%.
Need for reform
The problems of the last few years and surveys of companies have clearly shown, in the eyes of many parties, that reforms of the dual training system are needed to ensure that there will be a sufficient number of training places available in the future (DE0407105F). According to a representative survey of 785 firms conducted by IW in spring 2004, companies say that the skills of many applicants are too poor to satisfy their growing need for qualified workers. According to those firms surveyed, improvements, in particular, in schools and labour market policies, as well as intensive qualification efforts by employers, would help to close the gap between the shrinking demand in the German apprenticeship market and the growing shortage of qualified workers (DE0406106F).
Nearly all of those establishments that offer apprenticeship places which reported in the survey either an actual or an emerging shortage of skilled workers are attempting to reduce this shortage by increasing the apprenticeships provided in their own establishments (91% of cases) and by intensifying the further training of their own workers (80%). Moreover, at least one in two such firms wants to offer work experience for school children and apprentices as well as work placements and contracts for students in order to ease the choice of careers for young people. Companies, however, would wish to see, among other changes, their efforts to train the next generation of employees being more strongly supported by the other participants in the training process. They have made, for example, the following suggestions:
61% of the establishments surveyed regard more intensive advice for youths about their career choices as particularly important;
54% of companies surveyed demanded that proficient trainees should have more opportunities during the training period to gain additional qualifications. A corollary of this is that one in two of those surveyed thought that firms should have greater discretion in the organisation of their training; and
47% wanted to see a greater emphasis placed on the practical aspects of the training within a shorter training period for those trainees performing less well.
According to the survey, in order to make vocational training more attractive to both employers and trainees in the future, it will be vital: first, to encourage the participation of those groups of young people who have been difficult to place in the past; and, second, to coordinate the training with tertiary education institutes better. Less able youths will have to be better integrated than in the past by, for example, including them in vocational courses that lead to qualifications that place less emphasis on theory. Training policy has already made a start in this regard: from 2004, there will be two new, two-year-long vocational qualifications for motor vehicle mechanics and machine and plant operators. More competent trainees will, on the other hand, receive more specialised training courses - in the form, for example, of dual vocational courses at universities of applied sciences. One aim, in particular, is to reduce training costs. According to IW calculations, every apprentice incurs costs of, on average, EUR 8,700 per year over and above any financial benefits that they may bring, if the attendant costs of the trainers, tools and materials are taken into consideration. A reason for this cost, according to the study, is that apprentices spend, at the moment, only 30% of the training time in a productive way in the firm.
Commentary
For a long time, there has been a consensus within comparative policy debates that Germany’s dual system of training is more effective in solving youth unemployment problems than the training systems in many other countries. However, in order to stay successful in this regard and to improve the current rather good but certainly not fully satisfactory performance of the dual training system, the reforms mentioned above by representatives of companies should be implemented as soon as possible. (Lothar Funk, Cologne Institute for Business Research, IW)
Eurofound recommends citing this publication in the following way.
Eurofound (2004), Vocational training reduces youth unemployment, IW study finds, article.
