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Apprenticeship: remaking an old idea for a new era

Hilary SteedmanSenior Research Fellow
The London School of Economics

Hilary Steedman has been researching apprenticeship, vocational training and labor market transitions since the early 1980s, first at the National Institute for Economic and Social Research (NIESR) and subsequently as a Senior Research Fellow of the Centre for Economic Performance at the London School of Economics. She has a first degree and doctorate from the University of Cambridge and a Masters in Education from the University of Manchester.

A number of developed countries, including the United States, the United Kingdom, and France, are confronting a new and frightening phenomenon: a “lost generation” of young adults unable to find a job. But the story of high and rising levels of youth unemployment is far from universal. Of the ten Organisation for Economic Co-operation and Development (OECD) countries with the lowest levels of youth unemployment in 2010, five—Australia, Germany, Austria, Switzerland, and the Netherlands—have programs in place to ensure that at any one time, 15 to 20 percent of 16- to 24-year-olds hold workplace-based apprenticeships. To put it another way, each of the countries in which apprenticeship is widely available is among those with the lowest youth unemployment of the OECD countries.

The virtues of apprenticeship in providing young people with jobs and skills have long been appreciated by countries eager to promote growth and ease the transition from full-time education to work. In both France and England, about 5 percent of 16- to 24-year-olds hold apprenticeships, and both countries have made strenuous efforts to expand these numbers. But placement remains insufficient to meet the huge demand—or to have much impact on youth unemployment. In both these countries, the youth-unemployment rate is currently approximately 20 percent, compared with less than 10 percent in Austria, Germany, and Switzerland.

Why is it so difficult for governments and business to expand apprenticeships? Apprenticeship is one of the oldest social institutions, but in its contemporary incarnation, it has ambitious aims: to enhance general education and develop technical knowledge and skills to internationally competitive standards. Its implementation in complex modern labor markets requires high levels of trust and cooperation among public authorities, employers, and young people.

For centuries, apprenticeship was a private arrangement between workers and employers. Today, however, it almost always requires government intervention. Over the past 100 years, governments in countries such as Austria, Germany, and Switzerland have sought to rebalance the potentially unequal relationship between employer and apprentice by granting apprentices legal status and the right to acquire a general, transferable education and skills, alongside firm-specific competencies. Such governments also pay for this component of apprenticeship, thereby becoming major players in the apprenticeship bargain.

At this point, employers may ask what their interest is in partnering with the state to provide apprenticeships. Resolving this question, and maintaining the delicate balance among multiple interests through changing economic circumstances, is the key to fostering a vibrant culture of apprenticeship. It is widely accepted that in Germany, apprenticeship works because of that nation’s particular history and traditions. Of course, this also means that Germany’s apprenticeship system cannot simply be copied by other countries. But countries in which apprenticeship is thriving can help us ask the right questions and identify broad principles to guide successful implementation.

Perhaps the most basic of these principles was set out in “The Jobs Study,” a recent OECD report based on 16 countries. In this report, the OECD maintained that employers, not governments, must be the key players in the organization and management of apprenticeship. This means empowering employer organizations to:

  • Determine the relevance of training content
  • Control the training process
  • Control costs

Employers’ power, however, must also be subject to checks and balances provided by government legislation protecting apprentices’ interests. Ideally, government works with employee representatives in crafting legislation. Then, within that legislative framework, apprentices and employers agree on a mutually acceptable apprentice wage and apprenticeship duration, such that both bear the costs of training and capture a share of the returns. Successful apprenticeship thus depends on achieving some measure of equilibrium among the three partners: apprentices, employers, and government.

In the real world, particularly in the past two decades, the pressures of globalization and the growth of the knowledge economy have knocked that equilibrium off kilter. Recently, for example, in countries such as Germany, Austria, and Denmark, many young people with basic qualifications who in the past would easily have found apprenticeships have failed to do so.

To right this imbalance, all three partners in traditional apprenticeship countries must pay a price. With employers now demanding good or very good academic records from those seeking apprenticeships, young people have been forced to upgrade their qualifications or face a long wait for placement. Less-qualified candidates have had to undergo a period of remedial education after compulsory school and as a result, the age at which youth enter apprenticeship has risen.

Governments have had to pay short-term targeted subsidies to compensate companies for the additional cost of taking apprentices who might otherwise prove hard to place. They have also lengthened the school day and restructured curricula to address the problems of the less qualified. Government and employers have struck a new bargain whereby leading employers and employer organizations pledge to provide more apprentice places, while in return, some training regulations are relaxed to lower employers’ costs.

Employers, meanwhile, have had to fend off the threat of government intervention in their management of apprenticeships by increasing their cooperation with public authorities. Still, the three interest groups appear to have achieved a new equilibrium without fundamentally compromising the leading role of employers.

Governments in countries where youth unemployment is high and demand for apprenticeship far exceeds supply might also consider new strategies. Apprenticeships leading to qualification at ISCED Level 3 (English A-Level/NVQ3 or the French Bac, for example) significantly boost subsequent earnings. However, these high-quality apprenticeships are costly for companies to deliver, and the wage companies can offer is often insufficient to cover the apprentice’s living expenses. A bold solution would be for governments to offer loans—repayable from subsequent earnings—to 18-year-olds seeking apprenticeships, in much the same way that loans are offered to new undergraduates in England.

The prizes would be a boost in skills and a drop in youth unemployment—a tempting prospect for, say, France and the UK, where youth unemployment is nearly twice that of the apprentice countries. These and other governments should transfer more responsibility to employers, invest more in the education of low achievers, and use government subsidies strategically. If handled correctly, their efforts could help to put a lost generation to work.

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