The economics of apprenticeship training: Seven lessons learned from cost-benefit surveys and simulations

This text summarises the seven most important findings that have been gleaned using detailed cost-benefit surveys of apprenticeship training programmes in various countries and subsequent cost-benefit simulations for other countries over the last 20 years. The costs incurred by the firms providing training were measured, as were the benefits they can generate in the short term through the apprentices’ work in the company and the medium- term benefits obtained because apprenticeship programs help companies avoid costly recruitment from the labour market. These surveys and simulations mainly concern European countries. However, they have also been applied to non-European countries.1 Specifically, the following statements refer to cost-benefit surveys from Switzerland, Germany and Austria and cost-benefit simulations run for England, Italy and Spain. The cost-benefit measurements in the three German- speaking countries were also used for comparative studies, i.e. studies that investigated the causes and effects of the differences in the costs and benefits of apprenticeship training in the three countries (see point 2). The findings we draw from the cost-benefit measurements and the corresponding simulations are summarized in seven lesson

Apprenticeship training in Italy: a cost-effective model for firms?

In times of rapid technological progress and increasing digitalisation in many areas of work and life, it is more important than ever to provide young people with the best possible skills for their entry into the world of work. It is certainly important to provide them with a solid theoretical knowledge base. However, it is also important to impart practical skills to ensure that they are able to adapt to the needs of the labour market. Post-school education in Italy, while providing good formal skills in this respect, is not sufficiently responsive to the needs of the labour market. With this in mind, dual training models have become politically more attractive in Italy and are already being implemented. But despite political support and the reforms in recent years, the popularity of dual training models has hardly increased. From an international point of view, this development is hardly surprising. On the one hand, interest in dual vocational training is increasing: learning a trade at two locations – in a company and at a part-time vocational school – means that apprentices gain valuable professional experience while they are still training, which enables a smoother transition to the labour market. As a result, there is less youth unemployment and a better supply of skilled labour for industry. On the other hand, reforms of this kind often encounter a major obstacle when it comes to practical implementation: a lack of commitment by the companies, especially in countries where an in-company apprenticeship tradition is absent. First and foremost, companies see training as an operational loss: why pay to train an apprentice when qualified employees can be recruited directly on the labour market? What businesses often fail to see is that in-house training does not merely incur costs, but that it also results in monetary benefits, and sometimes in net profits before training has even been completed. However, the question is: under which conditions? The costs and benefits of training are not invariables, they depend on a wide of variety of parameters such as the level of apprentices’ pay, the industry in question, the duration of training, recruiting costs for qualified skilled workers on the labour market – not to mention the quality of the training course. To examine the situation, this study uses simulations to investigate how these parameters would have to be designed in Italy in order to make dual training more attractive for Italian businesses. The conclusions derived in this report are intended to assist Italian policymakers and employers to make more evidence-based decisions, to ensure that Italy’s labour force investments are more likely to yield positive returns

Hiring Costs of Skilled Workers and the Supply of Firm-Provided Training

This paper analyzes how the costs of hiring skilled workers from the external labor market affect a firm's supply of training. Using administrative survey data with detailed information on hiring and training costs for Swiss firms, we find evidence for substantial and increasing marginal hiring costs. However, firms can invest in internal training of unskilled workers and thereby avoid costs for external hiring. Controlling for a firm's training investment, we find that a one standard deviation increase in average external hiring costs increases the number of internal training positions by 0.7 standard deviations.hiring costs, apprenticeship training, firm-sponsored training

Regional effects on employer-provided training: Evidence fromapprenticeship training in Switzerland

"This paper uses regional variation in labor markets, the industry structure and the education system to explain the training decisions of firms. Using a representative firmlevel data set, the results show that firms are less likely to provide training if the number of competing firms situated in the same geographical area is high. Furthermore, the supply of potential apprentices affects the training decision positively through an improved matching process. In addition, the expected ability of apprentices also has a positive impact, whereas a more developed system of full-time schooling options for young people who have completed their compulsory schooling reduces the likelihood of a firm providing training." (Author's abstract, IAB-Doku) ((en)) Additional Information Kurzfassung (deutsch) Executive summary (English)Betrieb, Ausbildungsverhalten, betriebliche Berufsausbildung, regionale Disparität, regionale Faktoren, regionaler Arbeitsmarkt, Wirtschaftsstruktur, Wettbewerb, Berufsbildungssystem, duales System, schulische Berufsausbildung, Personalpolitik, Bildungsökonomie, Schweiz

Regional Effects on Employer Provided Training: Evidence from Apprenticeship Training in Switzerland

This paper uses regional variation in labor markets, the industry structure and the educational system to explain the training decisions of firms. Using a representative firm-level data set, the results show that firms are less likely to offer training if the number of competing firms situated in the same geographical area is high. Furthermore, the supply of potential apprentices affects the training decision positively through an improved matching process. In addition, the expected ability of apprentices also has a positive impact, whereas a more developed system of full-time schooling options for school leavers reduces the likelihood of a firm to offer training.apprenticeship training, regional labor markets

Monopsony Power, Pay Structure and Training

Although interest in monopsonistic influences on labour market outcomes has revived in recent years, only a few empirical studies provide direct evidence on it. This paper analyses empirically the effect of monopsony power on pay structure, using a direct measure of labour market 'thinness'. We find that having fewer competitors for skilled labour is associated at the level of the establishment with lower pay for both skilled labour and trainees, but not for unskilled labour. These findings have potentially important implications for the economic theory of training, as most recent models assume that skilled pay is set monopsonistically but both unskilled and trainee pay are determined competitively. Our results support those assumptions for skilled pay and unskilled pay, but not for trainee pay.monopsony, wage differentials, firm-sponsored training

Apprenticeship Training and the Business Cycle

Dual apprenticeship training is a market-driven form of education at the upper secondary level, taking place in firms as well as in vocational schools. So far, little is known about the impact of the business cycle on the number of apprenticeship programs offered by firms. Using panel-data of Swiss cantons from 1988-2004, we find that the influence of the business cycle is statistically significant, but small in size. Instead, supply of apprenticeship programs is driven to a much greater extent by demographic change. Conversely, the number of first-year high school students is not affected by the business cycle. We find, however, that enrollment increases if the population at age 16 grows, but access to high schools does not become more restricted in times of negative growth.apprenticeship training, business cycle, high school enrollment