Economics and Governance of Vocational and Professional Education and Training (including Apprenticeship) (E-Book)

Theoretical and Empirical Results for Researchers and Educational Policy Leaders

Uschi Backes-Gellner, Ursula Renold, Stefan C. Wolter

• Publisher: hep verlag
• Year: 2020
• Print ISBN: 9783035516777
• eBook ISBN: 9783035516784
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This e-book contains high-resolution graphics and tables that can only be read on e-readers capable of enlarging images.This book provides an overview of selected research results on the economics and governance of Vocational and Professional Education and Training (VPET), particularly apprenticeship training. It compiles over 25 research articles published in leading peer-reviewed journals, places their results in a broader context — thereby making them accessible to practitioners — and refers to newer research that has not yet been published. All of this research covers the role and functions of the three most important actors in VPET: firms, individuals, and the state/institutional frameworks. Given that the decisions and interactions of these three players are critical for a successful VPET system, this book addresses both decision makers at all VPET levels and researchers interested in the economics and the management of VPET systems.Focusing on not only the dual VPET systems of Switzerland and Germany but also other VPET systems worldwide, the research presented here analyzes and discusses the preconditions involved in all three roles. The results lay a foundation for future VPET research and for VPET practitioner and policymaker decision-making in countries with existing VPET systems. These results also help to shape policy-making in countries that are about to start or have just begun to establish VPET systems and to create an agenda for establishing VPET research.

Chapter 1: Introduction

Uschi Backes-Gellner, Ursula Renold, Simone Tuor Sartore, Stefan C. Wolter

Worldwide attention has recently turned to Vocational Education and Training (VET) in general and to countries with well-functioning Vocational and Professional Education and Training (VPET) systems in particular. This interest is due to these countries’ better youth employment rates and closer links between their education systems and the employment systems. Moreover, this interest particularly applies to countries with “dual VET” or VET that takes place largely within training firms (referred to in this book as “apprenticeship training”), with the rest in Vocational Schools. Both of the two parts of dual VET follow the same well-defined and highly coordinated curriculum for each occupation.

However, little research from an economics, management, or governance perspective has focused on the preconditions of a successful VPET system. Although some economic models and theories had been developed in the 1960s and 1970s (Becker, 1962, 1964), economists started to analyze dual VET more in detail only at the end of the 1990s (see, e.g., Harhoff & Kane, 1997; Acemoglu & Pischke, 1998), focusing mainly on the poaching problem. However, starting in the late 1980s, dual VET was also analyzed from a management perspective, pointing out reputation effects for firms participating in apprenticeship training (Sadowski, 1980) or optimal inventory strategies for firms training apprentices and thereby investing in an inventory of skilled workers (Backes-Gellner, 1996).

Meanwhile, governance, the role of the state, and the institutional framework of VPET were discussed in the social sciences as early as the late 1980s (Greinert, 1988; Lauterbach, 1995; Ryan, 2000). More recently, research on the economics, management, and governance of VPET in general and of dual VET in particular has increased substantially, with a special focus on countries such as Germany and Switzerland with their dual VPET systems.

This book provides an overview of this research by, first, reprinting a selection of publications that deal with fundamental questions, thereby providing initial theoretical and empirical evidence, and, second, summarizing ongoing research and preliminary results. While concentrating on evidence from Switzerland (and sometimes Germany or other countries), the book also includes international comparative studies and studies of selected countries with evolving VPET systems. In addition to presenting original research papers, this book also provides policy briefs and formulates lessons that other countries can learn if they are interested in implementing or improving their own dual VET systems. As Switzerland and Germany have very different labor market regulations and governance structures—with Switzerland deregulated and Germany regulated—the results presented in this book provide insights for countries with more deregulated or liberal market economies (e.g., Australia, the UK, the U.S.) and for countries with a more coordinated market economy (e.g., Austria, Japan, Sweden).

The book analyzes the three most important actors and institutions for VPET: firms, individuals, and the state and institutional frameworks (i.e., national governance structures and institutions). The decisions and interactions of these three actors are critical for a successful and well-functioning national VPET system. The book analyzes their decisions from the perspectives of economics, management, and systemic governance.

In Chapter 2, “Socially Constructed Concepts—Methodological Problems in Comparing VET Programs,” Ursula Renold elaborates on the challenges involved in internationally comparing education and training systems and the theoretical foundations of solving those problems. Identifying and understanding the socially constructed concepts used in most social science studies is a necessary prerequisite for comparing VPET systems. The chapter introduces the problem of country-specific terminology used for designating socially constructed concepts such as “apprenticeship.” The chapter discusses the problems inherent in the terms used in research papers and official documents, and suggests critically questioning the extent to which results of studies based on certain socially constructed concepts may be relevant in other societies. By identifying the functional equivalents within a specific unit of analysis—in this case, a VET program—the chapter provides an analytical framework for examining the main functions underlying strong VPET systems across contexts.

In Chapter 3, “Firms,” the book investigates the role of firms as the supplier of apprenticeship training and thus an essential element of dual VET. Without the participation of firms, a dual VET system cannot exist. Firms providing job openings for apprenticeship training (hereafter, “training places”) fulfill three main functions: First, they are responsible for and carry out apprenticeship training. Second, they make a financial commitment to pay for both the training services and apprentices’ wages. Third, in most cases, they recruit and select the apprentices themselves. With the recruitment of the right number and type of apprentices for a specific occupation, firms fulfill a main task of a functioning VET system. For policy makers who want to create a successful dual VET system, the important questions to answer are thus when and under what conditions are firms willing to assume these responsibilities and provide a sufficient number and quality of apprenticeship training places.

To answer the question on when and under what conditions firms are willing to offer apprenticeship training, the papers presented in Chapter 3 look primarily at the cost-benefit ratio. During apprenticeship training, firms bear costs in terms of the wages of the apprentices, the costs of the training personnel, and other expenses (e.g., materials). At the same time, firms achieve a return on their investments in the form of the apprentices’ productive contribution. Important for the willingness to train is the relationship of the costs and benefits, that is, the net costs or net benefits of apprenticeship training. With net benefits, firms are of course more willing to train. Yet even with net costs, firms may be willing to train if they are able to generate other long-term benefits from participating in apprenticeship training. Firms can benefit from apprenticeship training after the training period by hiring their highly skilled VET graduates as employees, by saving recruitment costs, and by additional positive effects of VET workers, such as innovation or reputation.

The empirical results in Chapter 3 show that in Switzerland both on average and the majority of training firms achieve a net benefit during apprenticeship training (Wolter, Muehlemann, & Schweri, 2006). Although training firms bear some costs during apprenticeship training (wages of apprentices, costs of training personnel, etc.), the productive contribution of apprentices is considerable—and for most firms large enough to offset these costs.

However, the empirical results in Chapter 3 also show that, in addition to the short-term benefits of training, there are also non-negligible longer-term benefits. Backes-Gellner and Tuor (2010) show, for example, that apprenticeship training is a clear signal for high-quality workplaces and good career prospects, and that apprenticeship training therefore increases firms’ recruitment success from the external labor market. Backes-Gellner, Rupietta, and Tuor Sartore (2017) show that having VET graduates among a firm’s workforce also increases the productivity of other types of workers, e.g., those with a university degree. Moreover, VET makes a significant contribution to a firm’s ability to innovate and to its innovation outcomes (Rupietta & Backes-Gellner, 2019; Bolli, Renold, & Woerter, 2018). By participating in apprenticeship training, small firms in particular gain access to important knowledge from the innovation frontier, because that knowledge is embedded in the regularly updated training curricula. An important prerequisite for this relationship is the participation of firms from the innovation frontier in a regular updating process, one that takes place in both Switzerland and Germany (for more information, see Backes-Gellner, U., & Pfister, C. 2020).

Yet, Wolter, Muehlemann, and Schweri (2006) also show that non-training firms in Switzerland—in comparison to similar training firms—would not have the same cost-benefit ratios were they to provide apprenticeship training. Instead, the empirical results show that non-training firms would typically end up with net costs. The main reason for the net costs are lower benefits because these firms do not have enough (skilled) work for apprentices (due to, for example, the business cycle or the size of the firm). These results help explain their decision not to train and points out the difficulties that countries should consider as they attempt to initiate dual VET systems and need to recruit training firms.

Conversely, the results for Germany also show that there may be different equilibria from the firm’s perspective: Even the average training firm ends up with net costs during apprenticeship training and a country comparison points towards possible explanations (Dionisius et al., 2009; Muehlemann et al., 2010). For example, German apprentices spend a great deal of time on non-productive training activities, thereby reducing benefits during the training period. This result is consistent with the finding that most training firms in Germany follow an investment training strategy, recouping training costs only after the training period by retaining graduates and using them in highly productive workplaces. This approach only works if the firms find mechanisms for keeping their trained workers and avoiding poaching. Mohrenweiser, Zwick, and Backes-Gellner’s (2019) empirical results on poaching show that German firms are indeed mostly able to retain their apprentices, and that poaching is not widespread in Germany. Alternatively, another empirical study shows that one means of retaining apprenticeship graduates is to use performance pay components (Rinawi & Backes-Gellner, 2020).

Taken together, these comparisons of Switzerland and Germany clearly show that a well-functioning VPET system is possible in different institutional contexts and with different governance structures. However, each country must have a sustainable equilibrium that allows firms to recoup training costs either during or after the apprenticeship training phase.

Recent research uses simulation models to calculate training costs and benefits for firms in countries that do not yet have a (functioning) dual VET system (Chapter 3.12). The results identify the challenges that arise if the apprentice wage is too high, if the skill premium (skilled vs. unskilled worker) is too low, or if recruitment of skilled workers from the labor market is too easy. Thus, these hurdles have to be overcome on the way to a functioning VET system (see Muehlemann, Wolter, & Joho, 2018; Wolter & Joho, 2018; Wolter & Muehlemann, 2015).

Overall, results on the role of firms show that a favorable short- or long-term cost-benefit ratio for firms is a prerequisite for a well-functioning VET system and that apprenticeship wages, the ability to allocate apprentices to productive work, and the involvement of organizations representing firms’ interests in curriculum development processes help to ensure such a favorable cost-benefit ratio. Nonetheless, dual VET can be successful only if participation in apprenticeship training is also a favorable decision from the individual apprentices’ perspective because they (and their parents) are the ones who decide whether to begin their post-compulsory educational career with apprenticeship training.

Therefore, in Chapter 4, “Individuals,” the book focuses on potential trainees, analyzing both the decision to start VET and the future career and labor market prospects of VPET graduates as compared with those of workers with other types of education. Young people choose (dual) VET if this type of education guarantees a good initial education, offers valuable educational career options, and leads to attractive short and long-term labor market outcomes. Like firms, individuals compare expected costs and expected benefits (both monetary and non-monetary) when deciding how to start and how to further develop their educational career paths.

The research presented in Chapter 4 examines different decision points in an educational career and investigates factors affecting the students’ outcomes. The chapter covers the challenge of finding an apprenticeship position, successfully finishing VET, and having a smooth transition into the labor market. Results show ...

Table of contents

• Cover
• Copyright
• Table of Content
• Chapter 1: Introduction
• Chapter 2: Socially Constructed Concepts—Methodological Problems in Comparing VET Programs
• Chapter 3: Firms
• Chapter 4: Individuals
• Chapter 5: State and Institutional Frameworks
• Chapter 6: Monitoring the Youth Labour Market Situation Around the Globe
• Appendix A: Glossary
• Appendix B: Further Readings on PVET