Costs and Benefits of Apprenticeship Training*

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1 Costs and Benefits of Apprenticeship Training* * Data taken from the BIBB-report on costs and benefits of apprenticeship in DIHK, Berlin

2 1. Training motive for companies a. Costs/benefits during the period b. Apprenticeship as an investment for the future 2. Economic and social aspects of apprenticeship 2

3 Why do companies train? a. Costs/benefits during the period b. Apprenticeship as an investment apprenticeship Cost-benefitanalysis Analysis of all costs incurred and revenues generated in connection with the apprentice During the period After the period Analysis of all revenues generated in connection with the apprenticed and the apprenticeship Positive profit margin in total 3

4 Costs of apprenticeship a. Costs/benefits during the period b. Apprenticeship as an investment apprenticeship Gross Expenses Personnel costs for apprentices Personnel costs for trainers Equipment- and material costs Other costs Regular wage payments Employee benefits compensation for food, travel costs or living expenditures Full-time trainers Part-time trainers (for the period of instruction where they cannot work productively) External trainers Workplace (tools, appliances, material) Training workshop In-house classes Learning material IHK-fees Workwear and protective clothing External Training administration Recruitment costs 4

5 Revenues generated during the period a. Costs/benefits during the period b. Apprenticeship as an investment apprenticeship The apprentice as a part of the value chain Productive contributions of the apprentice during the period: Unskilled labor: Saved personnel costs for an unskilled worker Skilled labor: Saved personnel costs for a skilled worker (considering the lower productivity of the apprentice) 5

6 Gross expenses and revenues Cost-benefit-relation over the period a. Costs/benefits during the period b. Apprenticeship as an investment apprenticeship Gross expenses Net expenses Productive contributions Net revenues Expenes < > Revenues? Gross expenses + wage increase - decrease in the involvement of personnel Productive contributions + strong increase after the teach-in phase Training period 6

7 The average German company (Apprentice/Year in ) a. Costs/benefits during the period b. Apprenticeship as an investment apprenticeship Gross expenses Revenues Over the entire period the average German company incurs net expenses of /Year However: 1/3 of the companies generates positive marginal profits over the 7

8 Net expenses of individual professions a. Costs/benefits during the period b. Apprenticeship as an investment apprenticeship 8

9 Net expenses of different occupational fields a. Costs/benefits during the period b. Apprenticeship as an investment apprenticeship Gross expenses Revenues Net expenses In total Industry and commerce Handcraft Agriculture Free professions Public service 9

10 Net expenses classified by other characteristics a. Costs/benefits during the period b. Apprenticeship as an investment apprenticeship Region West Germany East Germany Size of company 500 and more employees employees employees Net expenses Revenues Gross expenses 1-9 employees Training workshop Training workshop No workshop

11 Benefits through employing the trained and the itself a. Costs/benefits during the period b. Apprenticeship as an investment apprenticeship Revenues generated by apprentices Productive contributions of the apprentice during the period Benefits (Opportunity costs of avoiding to train) Benefits through employing the trained and itself Saved recruitment costs Saved instruction costs Tailor-made Screening by Higher employee loyalty Corporate image benefits - Job-ads - Processing interviews - Further of new workers - Lost production until a new worker is found Teaching of firm-specific skills Informational advantage about the quality of apprentices (Avoidance of miscasts) Lower turnover-rates - Proving to be socially responsible - Positioning oneself as an attractive employer 11

12 Weighing up costs and benefits a. Costs/benefits during the period b. Apprenticeship as an investment apprenticeship (Gross)expenses and the productive contributions of the apprentice during the period are (relatively) cleary monetary quantfiable This hardly applies to the future benefits through employing the in-house trained skilled worker By not considering these benefits in the economic efficiency calculation, the investment oriented sense of is ignored 12

13 Weighing up costs and benefits a. Costs/benefits during the period b. Apprenticeship as an investment apprenticeship Application procedure Further education in the period of vocational adjustment Achievement gap in the period of vocational adjustment Recruitment costs The saved recruitment costs (see graph) already cover the bigger part of the investment for most of the companies Further benefit factors (tailormade, possibility to screen), even though not quantifiable, are however even more of a value This applies especially in times of skills shortage, when appropriatly skilled workers can hardly be found on the external labor market 13

14 Weighing up costs and benefits 1. Concerning economic and social aspects of apprenticeship 2. Training motive for companies a. Costs/benefits during the period b. Apprenticeship as an investment In the short-run is (in most of the cases) an investment in the long-run it always pays off! Gross expenses Benefits 14

15 Concerning economic and social aspects of apprenticeship a. Costs/benefits during the period b. Apprenticeship as an investment apprenticeship Sustainable social stability Competitive and fast growing economy - Successful transition of young persons in working life - High degree of long-term professional flexibility due to a high skill level - High degree of acceptance of the and the trained due to an involvement of all social partners - Large pool of well trained workers - Innovative and productive companies Practical and tailor-made that ensures the teaching of labor-market relevant qualifications through the participation of industry and commerce 15

16 Greece Spain Portugal Italy Slovak Republic Ireland Hungary Poland France Sweden United Kingdom Slovenia Estonia Belgium Czech Republic Luxembourg Finland New Zealand Turkey OECD-Total Chile United States Canada Denmark Iceland Israel Australia Netherlands Mexico Korea Austria Norway Switzerland Germany Japan Youth unemployment worldwide (in %, OECD 2012) a. Costs/benefits during the period b. Apprenticeship as an investment apprenticeship

17 Conclusion during the a. Costs/benefits during the period b. Apprenticeship as an investment apprenticeship Independent of company size and occupational field (except of public services) and even without considering factors that are not monetary quantifiable, the net costs a company has to bear for are very small! 17

18 Fazit nach der Ausbildung a. Costs/benefits during the period b. Apprenticeship as an investment apprenticeship Considering not-monetary quantifiable benefit factors emphasizes the positive Return on Investment of in-house Through a rising number of better trained workers within the firm, the productivity of other workers increases as well and yields a stronger productivity growth in total Furthermore, by a company contributes to a more stable social environment and a more competitive economy 18

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