Academic Literature

Apprenticeship / Leads to substantially lower unemployment rates research finds

How to best prepare non-college bound youth for the labor market? asks Matthias Parey in Vocational Schooling versus Apprenticeship Training — Evidence from Vacancy Data on (Adapted chosen excerpts by Job Market Monitor to follow).

Different approaches compete in this field, including firm-based apprenticeships, full-time vocational schooling, and on-the-job learning. Little is known about how effective these methods are, and comparisons of means are uninformative due to the selection of individuals into different streams. In this paper, the author exploits the idea that variation in apprenticeship availability affects the opportunities individuals have when they grow up. He presents a small open economy model in which price shocks affect the local number of apprentices, without a differential effect on factor rewards; this motivates an instrumental variable strategy to compare labor market outcomes between labor types, which is implemented exploiting differences in training availability. He documents how variation in vacancies for apprenticeships affects educational choice. He shows that at the margin, individuals substitute between apprenticeship training and full-time school-based vocational training. He exploits this variation to study how this formation period affects later labor market outcomes at ages 23 to 26.

The results show that firm-based apprenticeship training leads to substantially lower unemployment rates; investigating this pattern over time, the evidence indicates that former apprentices have a transitory advantage which fades out over time. He does not find significant differences in wages. This suggests that these alternatives confer similar overall levels of productivity, and that apprenticeship training improves the early labor market attachment relative to vocational schooling. He investigates the responsiveness to negative shocks in an experiment based on firm closures. The results are found to be robust in a number of specification checks, and he investigates the validity of the functional form in a semiparametric analysis.

Institutional background on the German educational system: a brief review

When aged between 10 and 12, students are typically tracked into three school streams: the Gymnasium as the track for later university students, and the lower and medium school (Hauptschule and Realschule) leading towards vocational education. Mobility between tracks is rare; since this paper focuses on vocational education, we limit attention to the lower and medium schooling track. Figure 1 shows the structure of the educational and vocational system for these groups. Students complete general secondary school after grade nine or ten, and usually enter vocational education after that. The dual apprenticeship system is particularly well known. In this system, young adults can train and obtain a vocational degree in one of a large number of occupations. Apprenticeships have a full duration of at least two years, with most apprenticeships having a full duration of three, or three and a half years. Apprentices and firms write a contract, which is registered and supervised by the Chambers of Industry and Commerce or the Chamber of Handicrafts. The contract typically specifies an initial probationary period, after which firing from the firm’s side is difficult. Apprentices spend about one third of the time in school-based instruction, which typically amounts to one or two days per week and is run by the regional government. Two thirds of the time are spend in the firm, where the apprentice works and the employer provides training. The three most frequent apprenticeship degrees are ‘motor vehicle mechatronics technician’, ‘industrial mechanic’, and ‘management assistant for retail services’.

Full-time vocational schooling is an alternative form of vocational preparation. These schools have a duration ranging from one to three years. One-year vocational courses (Berufs- grundbildungsjahr or Berufsvorbereitungsjahr) are preparatory courses and do not lead to voca- tional degrees on their own, but can typically be credited towards further vocational training, especially apprenticeship training. Two or three year courses lead to a recognized occupational certificate, and can lead to the same occupational degrees as apprenticeship training. There are a number of vocational degrees which can only be obtained in these full-time vocational schools. These programs lead to a degree as ‘assistant’ in a range of different occu- pations. For males, the most common ones are ‘technical IT assistant’, ‘commercial assistant’, and ‘carer for the elderly’.

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Full text @Vocational Schooling versus Apprenticeship Training — Evidence from Vacancy Data

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