Dual VET : Costs and benefits aspects

Dual VET :Costs and benefits aspects Vocational Education and Training in Germany

Contents 1. The financing of the German dual system 2. Overview of different costs and benefits 3. Vocationaleducationandtraining– whataretheactualcostsandbenefits? 4. Is external recruitmentcheaper than training? 5. Dual training – a worthwhile model Appendix: Special arrangement in the construction sector

1. The financing of the German dual system a)Why do companiesprovidetraining? b) How do employerscalculate? c) Who will payforwhat? d) Howarethecostsshared?

1.a Why do companiesprovidetraining? Motivation of the employers "I needworkerstobe loyal tomycompany." "I wantemployeeswhocancompetentlyfulfilthetasksanddutiesneeded in mycompany, bothnowand in thefuture." "I wantto save jobfamiliarisationandretrainingcosts." "I am convinced of the financial advantages of training." "I needtheproductiveand innovative contributionsof trainees." "I have a socialresponsibilitytooffertraining." Why do I provide training? "I wanttoprovidetraining." Because investing in training pays off in the long term.

1.b How do employerscalculate? The abstract calculation of employers Grosscosts Benefits Net costs

1.c Who will payforwhat? Twolearningvenues Sharedresponsibility Company Vocationalschool 70 % 30 % Quelle: Ministerium für Bundesangelegenheiten, Europa und Medien des Landes NRW Quelle: BIBB • Learning in production process • Legal basis: Apprenticeship contract • Company establishes conditions for learning at the workplace (trainers, workshops, etc.) • Company pays allowance to apprentices • Companies shoulder the costs • Lessons at the vocational school • Legal basis: School laws • States/communities finance vocational schools (buildings, teachers, etc.) • Lessons are free for the apprentices • Government shoulders the costs +

1.d Howarecosts in the dual systemshared? Employers Government • 427,227 out of a total 2.16m companies provide training (20%), most of them SME • Contribute €7.7bn (= overall net cost of Dual VET; gross cost = € 25.6bn) • Train more than 500,000 new trainees every year • Hire74% of Dual VET trainees as employees after training • Invest on average €18,000 per apprentice per year(62% of which is training allowance) • 70% of investment is refinanced by the productive contribution of trainees during the training period • Shares expenses for VET system with employers • Public expenditure for Dual VET in 2018:€6,84bn • €3.07bn for 1,550 public vocational schools providing part-time VET • €2.34bn for steering, monitoring and further supporting measures • Receive an average training allowance of 908 € gross per month (2018) • Visit vocational schools free of charge Apprentices Source: BIBB Datenreport zum Berufsbildungsbericht (2019), StatistischesBundesamt

Companies‘ costsandbenefits 2. Overview of different costs and benefits a) What gross costs do trainees cause? b) What causes benefits?

2.a Grosscosts of apprenticeshiptraining Gross costs Personnel expensesfor apprentices (~ 62 %) Salaries of trainers (~ 23 %) Other costs(~ 10 %) Equipment (~ 5 %) Training allowance Training documents/ media Workplace (Tools, machinery, materials) Full-time trainers Social benefits Training workshops Part-time trainers • Professional and protective clothing Fringe benefits Administration In-company lessons External trainers External training Source: Wenzelmann, Felix; Jansen, Anika; Schönfeld, Gudrun; Pfeifer, Harald Kosten und Nutzen der dualen Ausbildung aus Sicht der Betriebe. Ergebnisse der fünften BIBB-Kosten-Nutzen-Erhebung, 2016. Chamber/examinationfees

2. b Short termbenefits of apprenticeships Benefits During apprenticeship(short term) Productive contributions during apprenticeship 50% simple tasks  Savings for unskilled or semi-skilled staff 47% skilled tasks Savings for skilled staff ~ 1,5 % production in training workshops ~1,5 % public subsidieswhere applicable* * European SocialFund, Federal Employment Agency

3. Vocationaleducationandtraining–whataretheactualcostsandbenefits? a) What are the average costs of a 3 year apprenticeship? b) What does a trainee cost per year? c) What are the longer-term benefits?

3.a Costsof a three-yearapprenticeship Development of costsover a threeyeartrainingperiod Productivity of apprenticesincreases Net costsdecline • 11.352 € = averagenetcostsin 3 year apprenticeships

3.b What does a trainee cost per year? Roughlyonethirdof companiesachievea netbenefitalreadyduringtheapprenticeship

3.c What are the longer-term benefits? Benefits aspects After and during training period (long term) Not measurable benefits • Custom-fit training •  Teaching company-specific know-how Selection  Avoiding of wrong appointments Avoiding skilled-labour shortages Better employee loyalty Image, CSR

4. Is external recruitment cheaper than training? a) What types of costs occur when hiring externally skilled workers? b) What are the actual costs for the recruitment of one skilled worker?

4.a Recruitmentcostsbysectorandcosttypes Recruitment costs for an externally trained skilled worker *Inductioncostsaccountfordifferences in productivityandforincumbents‘ effortstointroduceandtraintheirnewcolleagues. Theyare on average 83% of all recruitmentcosts. Source: BIBB-Kosten-Nutzen-Erhebung 2012/13

4.b Recruitmentcostsbyoccupation Recruitment costs for an externally trained skilled worker Quelle: BIBB-Kosten-Nutzen-Erhebung 2012/13

5. Dual VET – a worthwhile model a) Revenues and benefits at a glance b) Weighing up costs and benefits c) Benefits summarized d) Why do companies train young people?

5.a Revenuesandbenefits at a glance Revenues and benefits aspects During apprenticeship(short-term) After and during training period (long-term) Productive contributions during apprenticeship Savings Not measurable benefits 50% simple tasks  Savings for unskilled or semi-skilled staff Recruitment costs Induction costs • Custom-fit training •  Teaching company-specific know-how Differences in productivity Job ad costs 47% skilled tasks Savings for skilled staff Selection  Avoiding of wrong appointments Further training Shortlisting process Avoiding skilled-labour shortages ~ 1,5 % production in training workshops Interviews Incumbents’ deficiency during induction of new colleagues Better employee loyalty ~ ~1,5 % public subsidieswhere applicable* Final selection Advertising costs Image, CSR * European Social Fund, Federal Employment Agency

5.b Weighingupcostsandbenefits • Selection of staff • Image, CSR • Improvedemployeeloyalty Other costs~ 10 % Avoidingshortage of skilledlabour Kosten Costs Benefits

5.c Benefitssummarized Company loyalty Long-term savings Custom-fit know-how Securingthefuture Flexible handlingofvacancies Image Innovation capacity

5.d Why do companiestrainyoungpeople? Production motive: companies train mainly because they want to benefit from the apprentices’ productive contribution (Lindley, 1975) Investment motive: companiestrain because they want to retain the apprentices after training and ensure the skills of future employees (Merrilees, 1983) Screening motive: companiesuse the training period to observe the apprentices and choose the best for retention (Stevens, 1994) Social responsibility: companiestrain because they want to give young people the possibility to integrate in the labor market (e.g. Beicht et al, 2004) Reputation motive: companiesexpect that clients, potential employees, and suppliers have a better image of the firm when they train (e.g. Niederalt, 2004)

Food forthought “There is only one thing in the long run more expensive than education: no education.“ John F. Kennedy

Appendix: Special arrangementconstructionsector Training levy All companies in theconstructionsector pay 2,1 % ofthe total gross wage into a trainingfundregardlessofwhethertheytrainor not Training companies will bereimbursed: • Large parts of trainingcosts in thecompanyor at inter-company trainingcenters • Reimbursement of costs* in commer-cialandtechnicaloccupations, e.g.: for 10 months in thefirstyear for 4 or 6 months in thesecondyear for 1 month in thethirdyear accordingtotheincreasingproductivityoftheapprentices *Training allowances and social expenses

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Dual VET : Costs and benefits aspects