Training levy law avoided by pact

In June 2004, the German government and representatives of employers and business signed a pact on apprenticeships. This deal has put on hold threatened legislation imposing a compulsory training levy on companies. In the new pact, employers have committed themselves to creating new opportunities for apprentices and less qualified young people over the next three years. The training levy law has been shelved for the duration of the pact. In autumn 2005, the government will assess the success of the agreement and decide if additional legal measures will be taken.

On 16 June 2004, the federal government and representatives of employers and business signed a voluntary pact on apprenticeships (Ausbildungspakt), whereby the the government has agreed to shelve controversial legislation to impose a levy on firms that do not hire enough trainees, which had been passed in the lower house of parliament (Bundestag) on 7 May 2004 (DE0406103N). For months, the government had been haggling over this law, which would have required many companies to pay a 'fine' if the number of apprentices fell below 7% of of their workforce. Wolfgang Clement, the Minister of Economics and Labour at the Federal Ministry of Economics and Labour (Bundesministerium für Wirtschaft und Arbeit, BMWA), announced the agreement with employers and business only a few days after the upper house of parliament (Bundesrat), which represents Germany’s 16 states, rejected the training levy law (Berufsausbildungssicherungsgesetz, BerASichG). The bill currently remains under consideration in a parliamentary mediation committee (Vermittlungsauschuss).

Contents of the agreement

Under the new training accord, business and employers' associations have committed themselves to creating new opportunities for apprentices and less qualified young people over the next three years. In particular, companies will try to provide, on average, 30,000 new apprenticeships annually in each of the next three years. In addition, business has vowed to provide 25,000 work experience opportunities (Einstiegsqualifizierungen) annually until 2006 to young people whose qualifications are considered to be insufficient for apprenticeship positions, to enable them to qualify for such positions. These latter places will involve an accommodation subsidy, paid by the Federal Agency for Employment (Bundesagentur für Arbeit, BA), and will be subsidised additionally by the government.

The pact states that the new apprenticeships may be used to replace positions which are lost 'for economic or other reasons'. Moreover, young people without training places in September each year will be invited to participate in a 'clearing system' (Nachvermittlungsaktion) organised by employment agencies and chambers. If these young people do not accept this invitation, they will no longer be counted as applicants for apprenticeships. Amongst other measures, the federal government has also announced plans to increase the number of apprenticeships in the federal administration by around 20% in 2004. Assessments of the impact of the training accord, which will be carried out by the government by autumn 2005, will help to determine whether or not the government still regards a training levy law as necessary or whether it needs to take other action.

Reactions

Commenting on the pact, Chancellor Gerhad Schröder said that 'this is a good day for young people and the cooperative forces in society'. He hopes that the pact will help to give young people as many training opportunities as possible.

Ludwig Georg Braun, the president of the German Association of Chambers of Industry and Commerce (Deutscher Industrie- und Handelskammertag, DIHK), promised to implement the pact 'meticulously'. As a result of the accord, 800 new advertisers will start work on gathering details of apprenticeships in companies. Reinhard Göhner, managing director of the Confederation of German Employers’ Associations (Bundesvereinigung der Deutschen Arbeitgeberverbände, BDA), made clear, however, that the 'new apprenticeships do not automatically mean additional apprenticeships'. Dieter Hundt, the president of BDA, also emphasised this point: 'We cannot give any guarantees. The pact says that German business and employers will undertake every effort so that companies will create 30,000 new apprenticeships. This means that the 30,000 slots will be created by companies that, up until now, have not created apprenticeships or that need to create additional apprenticeships. On the other hand, because of economic difficulties, apprenticeships could be dropped.' It should be noted that the decision to hire apprentices remains the decision of individual enterprises, he stated.

Michael Sommer, the chair of the Confederation of German Trade Unions (Deutscher Gewerkschaftsbund, DGB) said that he opposed the agreement and that, in his view, 'it means that businesses can, with the politicians’ blessing, shake off their responsibility to give all young people a chance for the future.' He claimed that the federal government had given away an 'effective tool to eliminate a national crisis'. Moreover, he called the approval of the pact by employers’ federations and business 'applause from the wrong side'. According to the United Services Union (Vereinte Dienstleistungsgewerkschaft, ver.di), the current agreement clearly represents the 'worst solution'.

By contrast, Heinrich Alt, a member of the executive board of the Federal Agency for Employment, said that the new training pact offered a real chance that all young people will have found a training job by the end of the school year. This would allow each young person a successful start in a professional career.

Commentary

The apprenticeship pact certainly has weaknesses, as it does not directly address the causes of the difficulties in the vocational training market in Germany. These, it is thought, lie in a worsening of the cost-benefit relationship for companies of providing apprenticeships due, amongst other factors, to a relatively strong rise in the costs of apprenticeships for employers in recent years, the declining educational standards of many applicants, and the currently generally poor prospects of the German economy due to cyclical problems. To tackle the present problems more fundamentally, the government should listen even more closely to what private companies cite as the most important barriers to recruiting young apprentices (DE0305103F). Nonetheless, the new pact can help to improve the situation somewhat and does not - as a training levy, according to many experts, would be very likely to do - worsen the current difficult situation in the German apprenticeship market. (Lothar Funk, Cologne Institute for Business Research, IW)

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