Slovakia is contemplating ways to motivate companies to teach and instruct high school students. In an interview with the business daily Hospodárske noviny, IZA Director Klaus F. Zimmermann comments on potential lessons to be learned from Germany’s dual system of education and vocational training.
How do firms in Germany benefit from the dual system?
The German dual apprenticeship system combines general, transferable skills acquired during class-based vocational education with structured learning on the job and actual work experience. Hence, apprenticeship graduates acquire occupation-specific skills that render them employable not only by the training company, but also other employers. A dual apprenticeship system is expected to be less prone to problems of educational mismatch early in the career as firms can timely adapt their training curricula to changes in the skills demanded.
What kind of financial incentives could be provided to promote training in firms?
Establishing an efficient dual apprenticeship system depends crucially on the willingness of firms to participate. In order for firms to provide both specific and general training, the cost of general training is to be borne by the worker. This could be implemented by either providing state-funded school-based general education or firm-based general training, with workers paying for their training costs. Furthermore, firms could be incentivized to participate if they were able to recoup part of their investments by contractual arrangements ensuring that apprentices accept a wage lower than their marginal productivity during their training period, or if they are able to tie apprentices to the firm beyond the training period. Direct subsidies, however, do not appear as a desirable solution as they may distort incentives beyond training provision. Instead, a major part of the practical solution in Germany is that the costs of the school-based part of the dual apprenticeships are borne by the government.
But wouldn’t targeted subsidies motivate firms to offer practical training for students?
As argued above, there are more intelligent ways for governments to incentivize training provision than directly giving money to the firms (for example, by financing and providing vocational schools for the school-based part of the dual apprenticeships). The example of Germany clearly demonstrates that firms do invest in general training despite incurring a net cost during the training period. Potential reasons include, for example, that firms like to learn about the worker’s ability during the training period, or that firms like to ensure their own future skill supply through the provision of training.