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The economic reasons why firms engage in apprenticeship training are twofold. First, apprenticeship training is a potentially cost-effective strategy for filling a firm’s future vacancies, particularly if skilled labor on the external labor market is scarce. Second, apprentices can be cost-effective substitutes for other types of labor in the current production process. As current and expected business and labor market conditions determine a firm’s expected work volume and thus its future demand for skilled labor, they are potentially important drivers of a firm’s training decisions. Empirical studies have found that the business cycle affects apprenticeship markets. However, while the economic magnitude of these effects is moderate on average, there is substantial heterogeneity across countries, even among those that at first sight seem very similar in terms of their apprenticeship systems. Moreover, identification of business cycle effects is a difficult task. First, statistics on apprenticeship markets are often less developed than labor market statistics, making empirical analyses of demand and supply impossible in many cases. In particular, data about unfilled apprenticeship vacancies and unsuccessful applicants are paramount for assessing potential market failures and analyzing the extent to which business cycle fluctuations may amplify imbalances in apprenticeship markets. Second, the intensity of business cycle effects on apprenticeship markets is not completely exogenous, as governments typically undertake a variety of measures, which differ across countries and may change over time, to reduce the adverse effects of economic downturns on apprenticeship markets. During the economic crisis related to the COVID-19 global pandemic, many countries took unprecedented actions to support their economies in general and reacted swiftly to introduce measures such as the provision of financial subsidies for training firms or the establishment of apprenticeship task forces. As statistics on apprenticeship markets improve over time, such heterogeneity in policy measures should be exploited to improve our understanding of the business cycle and its relationship with apprenticeships.

We present a model with heterogeneous inputs and constant elasticity of substitution to examine the possible effects of a supply shock in the market for apprenticeship training. The model’s predictions are tested using data from a German high school reform that led to a one-time increase in the supply of highly educated apprentices. A difference-in-differences estimation strategy exploits regional variation in the timing of implementation, and an instrumental variable approach identifies the supply shock effects. We find that apprenticeship contracts among individuals with a high school degree increased by 7.8%, while apprentice wages were unaffected by the supply shock. Moreover, we find no evidence of substitution effects, as the number of training contracts among individuals with a lower-level school degree remained unchanged. Our model predicts that such effects may occur when wages are sticky for apprentices with a high level of education relative to their productivity, which signals inefficiencies in the market for apprenticeship training.

A firm’s expectation about the future business cycle is an important determinant of the decision to train apprentices, especially as German firms typically offer apprenticeships to either fill future skilled worker positions, or as a substitute for other types of labor. The current coronavirus crisis will have a strong and negative impact on the German economy, according to the current business cycle expectations of German firms. To the extent that the training decisions of firms depend on these perceptions, we expect a downward shift in firm demand for apprentices and consequently also a decrease in the equilibrium number of apprenticeship contracts. To assess the impact of changes in business cycle expectations, we analyze German data on the apprenticeship market at the state-level and at the occupation-level within states from 2007 to 2019. We apply first-differences regressions to account for unobserved heterogeneity across states and occupations, allowing us to identify the association between changes in two popular measures of business cycle expectations (the ifo Business Climate Index and the ifo Employment Barometer) and subsequent changes in the demand for apprentices, the number of new apprenticeship contracts, unfilled vacancies and unsuccessful applicants. We find that the German apprenticeship market prior to the current crisis can be characterized by excess demand for apprentices (although there are matching problems in some states, with both a high share of unfilled vacancies and a high share of unsuccessful applicants). Taking into account the most recent data on business cycle expectations up to June 2020, we estimate that the coronavirus-related decrease in firms’ expectations about the business cycle can be associated with a predicted 8% decrease in firm demand for apprentices and a 6% decrease in the number of new apprenticeship positions in Germany compared to 2019 (− 30,000 apprenticeship contracts; 95% confidence interval: ± 8000).

Purpose The purpose of this paper is to compare a firm’s net cost and post-apprenticeship benefits of providing apprenticeship training in Austria and Switzerland: two countries with many similarities but some critical institutional differences. Design/methodology/approach The authors draw on detailed workplace data with information on the costs and benefits of apprenticeship training, as well as on hiring costs for skilled workers from the external labour market. The authors use nearest-neighbour matching models to compare Austrian firms with similar Swiss firms based on observable characteristics. Findings On average, a Swiss firm generates an annual net benefit of €3,400 from training an apprentice, whereas a firm in Austria incurs net costs of €4,200. The impetus for this difference is largely a higher relative apprentice pay in Austria. However, compared with Swiss firms, Austrian firms generate a higher post-training return by retaining a higher share of apprentices and savings on future hiring costs. Practical implications The authors demonstrate that apprenticeship systems can exist under different institutional environments. For countries currently in the process of establishing or expanding apprenticeship systems, the comparative analysis clearly shows that policymakers should consider more than just one country’s particular apprenticeship model. Originality/value The authors provide a first comparative analysis between two apprenticeship countries that empirically assesses a firm’s costs and benefits of training during an apprenticeship programme and also provides a monetary value of a particular type of post-training benefits that firms can generate by retaining former apprentices as skilled workers (i.e. savings in future hiring costs for skilled workers).

PurposeWorks councils have the legal right to participate in a firm’s training process and, where necessary, call for a replacement of training instructors. The purpose of this paper is to empirically test whether works councils are associated with a higher quality of apprenticeship training – or its inputs or outputs – in Germany.Design/methodology/approachThe authors use two representative cross-sectional surveys of German workplaces in 2007 and 2012/2013 that were conducted by the Federal Institute for Vocational Education and Training in Germany. To account for selection on observables, the authors apply nearest neighbor matching models to estimate the extent to which works councils are associated with training quality.FindingsThe results shed light on the influence of works councils on the quality of apprenticeship training in Germany. Based on a quality model, the authors show that works councils are associated with a (moderately) higher output quality of apprenticeships, particularly with respect to the share of retained apprentices. However, the authors do not find empirical evidence for a positive association between works councils and input- and process-quality indicators.Research limitations/implicationsAlthough the identification of causal effects due to the existence of works councils is difficult and cannot be fully addressed in the analysis, the authors can use a number of important control variables at the workplace level. The results suggest that a works council only plays a moderate role in enhancing the quality of the German apprenticeship system.Originality/valueThe authors provide the first direct empirical evidence of how the existence of a works council is associated with the input-, process- and outcome-quality measures of the German apprenticeship system.

We provide new empirical evidence on the magnitude and determinants of a firm’s hiring costs when filling a vacancy for skilled workers. In Switzerland, the average hiring costs amount to about 16 weeks of wage payments. The main components of hiring costs are post-match hiring costs, resulting from the initial low productivity and formal training needed for a new hire (53%), and disruption costs, resulting from the informal instruction of a new hire (26%). Pre-match hiring costs (i.e., search costs) account for just 21% of a firm’s hiring costs. Moreover, we find that search costs are positively associated with labor market tightness (i.e., the v/u ratio), both in the cross-section and over time. Our results will help to calibrate the hiring cost parameter in search models.

In this article, we use workplace-level data to analyse the costs of filling an apprenticeship vacancy in Germany. We find that such recruitment costs amount on average to €600 per hire (almost one month’s pay of an apprentice or approximately 1–2 % of a workplace’s training expenditures), but costs are heterogeneous across workplaces and vary strongly by training occupation. Our results suggest that a high degree of competition among training workplaces in the region is associated with an increase in recruitment costs. Furthermore, we find that workplaces with a works council or an investment-oriented training strategy incur higher recruitment costs. Our results are important in light of the increasing competition for talented school leavers induced by demographic change.

Purpose The purpose of this paper is to simulate the potential costs and benefits for Spanish firms providing dual apprenticeship training. Design/methodology/approach The paper conducts simulations of ten training occupations in six different industries in Spain. For these simulations, the authors combined Spanish wage data and the existing training curriculum regarding instruction times in vocational school in Spain with data from Swiss firms offering training in similar occupations. These data contain information regarding the amount of workplace training, relative apprentice productivity, and the relative importance of non-wage training costs (such as training equipment). Findings The authors found that training occupation, training scenario, and firm size are important determinants of the authors’ simulations for the expected net costs of apprenticeship training in Spanish firms. Consequently, the break-even level of apprentices’ wages differs significantly by training occupation and training scenario, suggesting that one prescribed apprentice wage for all sectors and occupations would be detrimental to the willingness of many firms to provide training places. Practical implications Dual apprenticeship training may improve the labor market transition for Spanish youth. The paper provides guidelines for regulatory frameworks that allow firms to provide apprenticeship training without having to bear net training costs – an important condition given that apprentices are free to leave the training firm upon graduation. Social implications The authors’ simulations show that Spanish firms would be able to provide high-quality apprenticeship training programs that would also appeal to more talented youth because of the combination of a decent earning opportunity during the apprenticeship and good future career options. Originality/value This paper provides novel and direct empirical evidence regarding the framework conditions within the Spanish apprenticeship system, thus incentivizing both firms and individuals to participate in dual apprenticeship training programs.

In countries with an apprenticeship system, training firms typically make a significant investment in general human capital of apprentices in addition to paying an apprentice wage, even though such training contracts are limited for the duration of the apprenticeship period. While a firm’s training costs may be offset by the productive value of apprentices during the training period, firms may also recoup their initial investment by retaining apprentices as skilled workers after graduation. From an individual perspective, high-quality apprenticeship training may be a viable alternative to general education, as direct educational expenditures, and opportunity costs in particular, are lower compared to school-based programs, while lifetime earnings may be equally high. Focusing on apprenticeship training, we discuss the main factors that affect the training decision of firms and individuals, as well as the role of the state. Moreover, we review the recent empirical literature on the relevant economic outcomes of apprenticeship training programs.

The author discusses the success of the Swiss system of apprenticeships. The famous German apprenticeship system requires that firms make an investment in their students, he writes, but the interesting Swiss system makes it possible to recoup such investments by the end of the training period without substantial state aid. High training standards contribute to a significant return on their education for apprentices.

This paper analyzes the structure of hiring costs of skilled workers in Germany. Using detailed and representative firm-level data on recruitment and adaptation costs of new hires, we find that average hiring costs amount to more than 8 weeks of wage payments (€4700). The structure of hiring costs is convex, as an increase in the number of hires by 1 percent increases hiring costs by 1.3 percent. We find moderate effects of labor market institutions on the magnitude but none on the structure of hiring costs. Furthermore, we provide evidence in favor of monopsony power in the German labor market.

This article analyses how the costs of hiring skilled workers from the external labour 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 1 standard deviation increase in average external hiring costs increases the number of internal training positions by more than half of a standard deviation.