How Can Advanced Economies Benefit From Germany’s Skills Training Model?

19 July 2017
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Germany's model of dual vocational training is a key contributor to its strong economy, low youth unemployment and high competitiveness. How can other advanced economies develop and implement a similar system?

Germany’s model of dual vocational training – combining company-based training with complementary education at vocational schools – is often cited as a key contributor to the country’s strong economy, low youth unemployment and high competitiveness. The system faces multiple challenges, including decreasing numbers of apprentices and companies offering dual training. Yet this training model, especially for Germany’s manufacturing sector, is still a success story.

It comes as no surprise that other countries are looking at Germany’s training system and asking themselves: Can we develop and implement a similar system? The U.S. is one such example. The Obama Administration, as well as the current government, have shown an interest in vocational training. The total number of apprentices in the U.S. has increased to 530,000 in recent years.  But Germany has about 1.3 million apprentices. Relative to the size of their respective labor forces – 43.4 million in Germany compared to 162.5 million in the U.S. – the German economy has ten times more apprentices than the U.S.

At a time when skilled labor is in short supply globally, why is this successful training model not more common outside of Europe? And what steps can help develop and expand the apprenticeship system to provide young workers and students with sustainable and promising opportunities?

The way that governance institutions have evolved in each nation has a lot to do with the development and growth of its apprenticeship model. The German economy has institutionalized its VET (Vocational Educational Training) system over centuries, with all stakeholders – employers, unions, and the government – recognizing their common interest in preserving and improving it further.

The institutionalization largely eliminates the traditional reluctance of employers to invest their own resources in skilling workers, for fear that they will then leave to join a competitor. Otherwise, the size of the investment – companies in manufacturing invest about 50,000-80,000 EUR [USD 57,000 – 92,000] in one apprentice for three years of training – can be a big obstacle in convincing companies to invest in skills training to their workforces. There are two other aspects to the VET system that help circumvent the “free rider” problem: First, the years of training are not only important for providing skills, but also have the benefit of creating a mutual loyalty between the worker and the business. When workers see the company investing in them, they have a lesser incentive to leave. Second, employers know that workers who have been trained by a competitor are equally skilled. That means they can hire talent even if a worker decides to leave the business that provided the apprenticeship.

Based on the German experience with VET, the following components are essential when figuring out what might work in other economies and institutional frameworks:

First, companies must have an interest or be given incentives to invest in their workforces for the long-term. Retaining knowledge has been a key component of the success of German businesses and it helps them stay globally competitive.

Second, training must take place in the company and in schools. The German formula is 70% company-based training and 30% in-school training. Whatever formula countries might adopt in their training systems, it is important that the major part consists of practical training in the firm, but also the requisite education.

In order to make this successful, two other conditions have to be met.  First, companies and schools have to develop a mechanism for exchange of information, so that the theoretical knowledge apprentices acquire in schools is complementary to their in-company training. Without that coordination, businesses and workers end up with a skills mismatch where workers are over or under-skilled for the job, or their skills are irrelevant to the profession. That also means that you need highly qualified teachers and trainers who know the profession and come from companies with practical experience.

One other, often overlooked, ingredient instrumental in the success of the German VET is its comprehensive approach. Young people do not just acquire technical skills during their vocational training. They are also taught methodical, social and personal skills to solve problems, communicate, work in teams, and take responsibility.

So, where should nations begin with adapting the dual-training model to their existing systems? For the U.S., the existing college system can be a starting point — with two years of training and determining which sets of qualifications apprentices need for specific professions. Curricula should be developed jointly by companies and colleges. Since many companies are smaller in size and face the challenge of investing first, creating a network and alliances with other companies can help minimize costs and risks.

Finally, there must be political support for investments in quality public education from which to build the VET. Government, either at the local or federal level, must also ensure quality standards for apprenticeships and the regulation of professions. If left to the companies alone, there would be no standardization with different quality levels of training and eventually very varied skill sets and restricted mobility of workers. A government-issued training certificate would ensure that training requirements for a certain profession have been met. It would also allow for increased worker mobility in a sector as the certificate would be universally recognized by all employers in the specific field.