Chapter 2. Should employers receive financial incentives to provide apprenticeships?

This chapter considers the issue of employer-focused financial incentives within apprenticeship policy. It explores the public interest in apprenticeship provision and describes how countries make funding available to employers through tax incentives, subsidies and levy systems. The chapter describes the challenges and risks associated with financial incentives, before exploring other means by which governments can make apprenticeships more attractive to employers, including mechanisms designed to improve in-company training and to reduce administrative costs. The chapter ends with a consideration of the additional apprenticeship costs typically encountered by small employers.

    

Issues and challenges

Encouraging apprenticeship provision is a challenge in many countries

Many countries have been grappling with the challenge of getting employers on board to support apprenticeships. Employer support is often the key challenge in either improving or expanding existing schemes, or building new apprenticeship schemes from scratch. A key question is how much public support should be given to apprenticeships and what form it should take to effectively encourage employers to take on apprentices.

The benefits of apprenticeships to society underpin the rationale for public support

When companies offer high-quality youth apprenticeships, they shoulder the burden of training and guiding young people through to employment. The skills developed involve a mix of firm and occupation-specific skills, as well as generic skills (e.g. teamwork, literacy, numeracy), which will carry individual workers through their careers and help them adapt to changing requirements. However, some of the benefits will also be more widely shared, impacting on the state and society in the form of higher employment rates and productivity, better health, lower reliance on welfare measures and reduced criminality rates. One study from the United States estimates that over the career of an apprentice, social benefits outweigh the social costs by over USD 49 000 (Reed et al., 2012[1]). These wider benefits to the state and society strengthen the rationale for public financial support for apprenticeships.

For the state, apprenticeships tend to cost less than school-based options

From the perspective of public spending, apprenticeships are a cost-effective way of developing workplace skills. The alternative often involves teaching practical skills in school workshops, where specialised equipment and teaching staff are costly. Even taking into account the cost of government subsidies, the cost of apprenticeships to the state can be less than that of school-based vocational education and training (VET) (Westergaard-Nielsen and Rasmussen, 1999[2]). In addition, apprenticeships yield wider benefits that are hard to realise for school-based programmes (e.g. connecting apprentices to employers, allowing learning on the latest equipment) (OECD, 2010[3]).

One form of support is state-funded school-based learning for youth apprenticeships

In countries where apprenticeships mainly serve young people, they form one of the routes to an upper-secondary qualification, alongside general or school-based vocational programmes. If school-based pathways receive state funding, public support for apprenticeships is partly a matter of fairness. Across OECD countries, the school-based component of apprenticeships at the upper-secondary level is typically funded by the state and offered free of charge to apprentices. The issue is somewhat different in countries where most apprentices are adults (e.g. Canada and the United States), and where apprenticeships are an alternative to employee training or a route to a post-secondary qualification.

It is fair to expect employers to bear some of the costs of apprenticeship provision?

Given that the benefits from apprenticeships are shared with employers and more widely, governments should not be expected to cover all the costs involved. Employers should also contribute as they reap benefits when taking on apprentices (see Muehlemann (2016[4]) for a review of the literature). Some benefits to employers are realised when apprentices contribute to productive work while in the company. Initially, untrained apprentices contribute little, and they tend to earn very low wages, but more experienced apprentices have productivity levels closer to that of a skilled employee, and they still cost less than skilled workers (see Chapter 3 for more on apprentice wages). In addition, once the apprenticeship is completed there is another opportunity to benefit: companies can save money on recruitment by selecting and recruiting as employees the strongest apprentices at the end of training, rather than hiring from the external labour market (this is further discussed below).

The key question is how best to support apprenticeships with public resources

Beyond supporting apprenticeships through the school-based component, governments sometimes offer incentives to promote apprenticeships in two broad forms:

  • Financial incentives: direct subsidies or tax breaks (Table 2.1 provides an overview of financial incentives used in selected OECD countries).

  • Non-financial incentives: measures designed to reduce the costs of offering apprenticeships or increase the benefits without financial transfers.

Information and evidence on such incentives and their effectiveness is set out in Table 2.1.

Table 2.1. Financial incentives designed to encourage employers to offer apprenticeships

Tax incentives

Subsidy

Levy scheme

Australia

No

Yes, a range of payments are made to eligible employers under the Australian Apprenticeships Incentives Program.

No

Austria

Abolished in 2008 and replaced by subsidies

Yes, per apprentice (amount depends on the year of training) and for additional training, supervisor training, apprentices who excel in final assessments, measures for apprentices with learning difficulties, and measures for equal access of men and women.

A levy fund in the construction sector covering all regions and in the electro-metallic industry in one province (Vorarlberg). Negotiated by the employers and trade union.

Flanders (Belgium)

Payroll tax deduction

Yes, depending on the number of apprentices and programme duration, including bonuses for the mentor and apprentice.

No

Denmark

No

No

All firms pay a contribution to the Employer Reimbursement Fund (AER) based on the number of full-time employees. Firms with apprentices get their expenses refunded when apprentices are at VET college. AER also pays grants to encourage the provision of additional training places.

England (United Kingdom)

No

Contributions from employers who pay the levy are topped up with a 10% contribution from the government. Grants to firms and education and training institutions offering apprenticeships to 16-18 year-olds.

Universal levy set at 0.5% of payroll, applying to the proportion of payroll above GBP 3 million.

Germany

No

No

In the building sector. Negotiated by employers and trade unions.

Netherlands

Abolished in 2014

Yes, to employers providing apprenticeships (maximum EUR 2 700 per student per year), depending on the duration of the apprenticeship and the number of training companies asking for subsidies.

No

Norway

No

Yes, per apprentice depending on apprentice characteristics (e.g. age, disability, school performance, migration status, gender, previous education) and sector characteristics.

No

Switzerland

No

No

All companies within some economic sectors are required to contribute to a corresponding vocational and professional education and training (VPET) fund. The Confederation may declare some VPET funds to be of general interest and therefore mandatory for all companies within a given economic sector.

Note: Tax incentives reduce either the tax base or the tax due. They include: 1) tax allowances (deducted from the gross income to arrive at the taxable income); 2) tax exemptions (some particular income is exempted from the tax base); 3) tax credits (sums deducted from the tax due); 4) tax relief (some classes of taxpayers or activities benefit from lower rates); and 5) tax deferrals (postponement of tax payments).

Source: Kuczera, M. (2017[5]), “Striking the right balance: Costs and benefits of apprenticeship”, OECD Education Working Papers, No. 153, http://dx.doi.org/10.1787/995fff01-en.

Financial incentives to encourage employers to take on apprentices should be used with caution

There is a strong argument for governments to dedicate public resources to support apprenticeships, given the role of apprenticeships in preparing individuals for a job and a career, and the wider social benefits that apprenticeships yield. Many countries face the challenge of securing enough apprenticeship placements in firms. As a result, financial incentives have been widely used to encourage employers to offer more placements. Whether the use of financial incentives is desirable depends partly on the targeted policy objective.

Financial incentives may be offered to reward firms that recruit apprentices in recognition of the fact that by doing so they shoulder a burden that would otherwise be carried by the state: the task of preparing young people for a career. This rationale may underpin incentives offered to all firms that take apprentices, regardless of the impact of the incentives on the provision of apprenticeship places.

However, international experience suggests that financial incentives should be used with caution and carefully evaluated.

  • Universal incentives give all firms that take apprentices a fixed sum, and have a small impact on firms’ provision of apprenticeship places.

  • Targeted incentives are designed to focus resources on placements that would not be offered in the absence of incentives. They may reward firms that take apprentices with certain characteristics (e.g. disadvantaged youth, disabled people) or be available only to certain sectors or types of firms (e.g. small firms). In theory such incentives may have more impact, but they are costlier to implement and their effectiveness will depend on how precisely the scheme is designed. When targeted incentives are used, their impact should be carefully evaluated and compared to alternative tools (e.g. supporting training capacity in firms).

  • Employers may have an interest in setting up a levy to share the costs of training between firms when the labour market is tight and it is hard to find skilled employees on the external labour market, and when employers face a high risk that their fully trained apprentices will be poached by other firms. Money collected through a levy may then be used to offer incentives to employers that take on apprentices.

Policy argument 1: Universal incentives are likely to have little impact

Financial incentives make a difference only at the margins

A universal incentive scheme offering all firms a fixed sum for taking on an apprentice has its appeal – for government it is cheaper to administer, for employers it is easier to understand. However, such schemes are bound to have limited overall impact because a small incentive spread across many apprenticeships will only change the behaviour of the small minority of employers who can be coaxed into taking an apprentice, or more apprentices, by a small financial reward.

The balance at the end of an apprenticeship varies across firms and occupations

One reason for the small impact of a general subsidy is that the net benefits of apprenticeships to employers are very variable. Financial incentives will make a difference only for firms that initially found apprenticeships not worthwhile and for whom the extra money changed the balance from negative to break even or slightly positive, which is likely to be a relatively small share of employers. Net benefits to employers from apprenticeships vary a lot according to occupation (Figure 2.1 shows data from Switzerland), and firm size (Mühlemann, 2016[4]). The nature of the occupation matters: apprentice gardeners can make themselves useful at work quickly, but would-be electronics technicians need substantial training with expensive equipment before being productive.

Figure 2.1. In Switzerland, the net benefits of apprenticeship to employers vary widely between different occupations
picture

Note: Reference year 2009.

Source: Mühlemann, S (2016[4]), “The cost and benefits of work-based learning”, OECD Education Working Papers, No. 143, https://doi.org/10.1787/5jlpl4s6g0zv-en.

 StatLink http://dx.doi.org/10.1787/888933828391

International evidence offers limited support for universal financial incentives

In Denmark, subsidies have only had an impact in some sectors: manufacturing, office and retail (Westergaard-Nielsen and Rasmussen, 1999[2]). In Australia and Austria, subsidies seem to have only had a small impact on apprenticeship provision by employers (Wacker, 2007[6]; Deloitte Access Economics, 2012[7]). Research based on Swiss data suggests that costs influence a firm’s decision to train, but once a firm has decided to train these costs have little impact on the number of apprentices it takes on. To have a significant impact, the subsidy should concentrate efforts on firms that do not train and exclude those that already have apprentices – while this may be attractive on theoretical grounds and has been tried in some countries, it might be seen as unfair and unfeasible from a political and practical point of view (Mühlemann et al., 2007[8]).

Policy argument 2: Targeted incentives may have more impact, but they are hard to implement

Targeting financial incentives where they make a difference is appealing in theory

In the economist’s ideal world, the money would only go to those companies where extra money shifts the net benefits of apprenticeships from negative to break even or slightly positive. The amount of the incentive would be set at a level that just makes the difference, so that employers change their minds and hire another apprentice – one euro more would be a gift from the public purse to the firm, one euro less would fail to make a difference.

But effective targeting is difficult

Identifying apprenticeship placements that would not have been offered without the extra money is a challenge. Some schemes focus on additionality. For example, Germany introduced a scheme in 2008 that targeted young people who failed to find an apprenticeship, but it was scrapped two years later due to a lack of impact (Bonin, 2013[9]). Additionality tests can be hard to enforce given the churn of turnover. It may also be seen as unfair if funding does not go to employers with a stable and long-standing commitment to apprenticeships. Other schemes focus on apprentices or occupations where policy makers expect fewer available apprenticeship placements in the absence of support. In Austria, Australia and Norway, employers taking on disadvantaged apprentices qualify for extra subsidies. France allows a higher tax break for such firms (see Chapter 6). Sometimes specific occupations are targeted, such as shortage occupations in Australia, or small crafts in Norway (Kuczera, 2017[10]).

Targeted incentives risk moving training efforts from one group to another

Offering financial incentives to target a specific group may increase one type of training at the expense of others. Such effects are sometimes intended, since funding criteria are designed to set priorities. However, sometimes there are unwanted effects. For example, in the Netherlands, a 1998 tax law sought to encourage the training of older workers through a higher tax break if training was offered to workers over 40. Research found that the overall training volume barely changed and that training was redistributed from workers slightly below the age of 40 to those just over 40 (Leuven and Oosterbeek, 2004[11]).

Policy argument 3: Sectoral levies may support training in some sectors

Levies are a special case, with money coming from employers

Training levies typically collect money for financial incentives from employers instead of all taxpayers. The costs of levy-funded financial incentives fall on employers collectively, making some employers winners and others losers. The winners are those who pay little into the scheme but take advantage of it, for example by having many apprentices supported by levy funding. The aim of levy schemes is to reward employers that offer apprenticeships and make those who benefit indirectly (by poaching skilled workers trained by other firms) contribute to the cost of training. The overall amount of training should increase towards a more optimal and socially efficient level since the measure corrects for the market failure involved in this free riding. Some effects are not strictly economic. Levy schemes that require employers to be directly involved in managing the fund and identifying priorities are commonly intended to give employers a stronger sense of involvement and ownership in the training.

Sectoral levies tend to have stronger employer support

Few countries have levy systems specifically designed to support apprenticeships. In Denmark and France, all employers share the cost of apprenticeships. Recent reforms to introduce a national levy for larger employers to support apprenticeships in England (United Kingdom) are being watched with interest. Often not all employers contribute to levies. Sectoral levies are established when employers in the same sector see apprenticeships as being in their collective interest. In this case, they may opt to work together to support training through a levy. Employer commitment to sectoral levies is usually high, and such schemes exist in many European countries. Employers have strong incentives to set up such a levy when apprenticeship training is costly, the labour market is tight and it is hard to find skilled recruits on the external labour market, and when firms face a high risk of their employees being poached by others. Employers tend to be more sceptical of universal levy schemes, which they often perceive as a tax, and where companies have little control over how the money is used (Müller and Behringer, 2012[12]).

Box 2.1. Sectoral training levies in Switzerland

Professional organisations can request that the Federal Council sets up a mandatory sectoral fund, with all companies in the sector paying solidarity contributions for the provision of VET (e.g. development of regulations, pedagogical and teaching materials). The amount of contribution depends on the company payroll. Currently, nearly 30 funds are in place. Companies reported that the role of the fund was to increase solidarity in sharing the cost of VET. An evaluation showed that the setting up of such funds is easier in well-organised sectors/industries, that the administrative cost of contributing to the fund incurred by the company should be as low as possible, and that the use of funds should be transparent. The impact of funds on apprenticeship provision and its outcomes has not yet been evaluated.

Source: SEFRI (2009[13]), Évaluation Des Fonds En Faveur de La Formation Professionnelle, Secrétariat d'Etat à la formation, à la recherche et à l'innovation, Confédération suisse, www.sbfi.admin.ch/sbfi/fr/home/bildung/berufsbildungssteuerung-und--politik/berufsbildungsfinanzierung/fonds-en-faveur-de-la-formation-professionnelle-selon-art--60-lf/evaluation-des-fonds-en-faveur-de-la-formation-professionnelle.html; SEFRI (2017[14]), Fonds En Faveur de La Formation Professionnelle Entrés En Vigueur Selon l’art. 60 LFPr, Secrétariat d'Etat à la formation, à la recherche et à l'innovation, www.sbfi.admin.ch/sbfi/fr/home/bildung/berufsbildungssteuerung-und--politik/berufsbildungsfinanzierung/fonds-en-faveur-de-la-formation-professionnelle-selon-art--60-lf.html.

Policy argument 4: Financial incentives may have undesirable side effects

Large companies are better placed to benefit from financial support

Another challenge associated with financial incentives is that they tend to benefit large employers disproportionately (Müller and Behringer, 2012[12]). To benefit from financial incentives, employers need to be informed about available schemes (e.g. criteria of eligibility and application procedure), build training plans accordingly and file applications and follow-up with documentation as required. This is often easier for bigger employers with dedicated departments and training staff, especially if they go through the same procedure for several apprentices. This means that small firms may struggle to access available funding opportunities. When financial incentives are offered, it is therefore important to assist small firms with access to funding.

Regulations need to ensure that financial incentives are not used to sustain low-quality apprenticeships

Financial incentives – particularly large incentives - can sometimes encourage firms to offer apprenticeships for the wrong reasons. Apprenticeships involve costs, for which employers can make up by ensuring apprentices become highly productive, contributing to production and sometimes staying on as an employee after completion. This requires commitment to quality on-the-job training. With subsidies in the picture, apprenticeships may become financially appealing to employers even if they offer little training. This seems to have happened in Australia, where the withdrawal of a subsidy led to a fall in apprenticeship placements in some sectors, such as services (Pfeifer, 2016[15]). In the affected sectors employers rarely hired apprentices upon completion and poor employment outcomes were pointing to quality problems (Mühlemann, 2016[4]).

To encourage employers, governments should aim to improve the apprenticeship cost-benefit balance through system design, support and capacity building

Attention should focus on non-financial incentives that improve the cost-benefit balance to employers, such as readjusting the design of apprenticeship schemes and enhancing training capacity in companies. Governments and social partners can support smaller employers by:

  • Encouraging employers to find ways to share the responsibilities and risks associated with the provision of apprenticeships.

  • Promoting bodies that work with groups of small employers to co-ordinate training.

  • Supporting small employers with the administration and provision of apprenticeships.

International evidence offers limited support for the use of financial incentives, but there are many other ways of making apprenticeships appealing to employers. Design features of apprenticeship schemes can be adjusted so that they work better for employers (as set out in Chapter 1), and these can be augmented by capacity-building measures, which aim to support employers and get the best out of apprentices.

Policy argument 1: Supporting employers that offer apprenticeships can help them achieve a more favourable cost-benefit balance

Apprenticeships can be promoted by making firms better at training

One way of helping employers achieve a better return from apprenticeships is to help them improve their in-company training. Better training yields higher benefits for the firm: through careful management, apprentices can be better integrated into the production process, they develop skills faster and contribute to production with their skills earlier. Training capacity within a firm depends on the quality of trainers, as well as the training methods and equipment used. Measures to improve training capacity may have a particularly large impact on small firms that lack dedicated training staff, and make it easier for them to offer apprenticeships. Policy measures that develop training capacity in firms are further discussed in Chapter 5.

External bodies may also offer further support to employers

Several countries have established external bodies that take over some of the tasks generated by the provision of apprenticeships. This may include the search for a suitable apprentice, or dealing with administrative tasks. In some countries, such bodies even sign the contract with the apprentice and hire out apprentices to employers for training. Such arrangements can make it easier and cheaper for employers to offer apprenticeships. Some aim to match firms to individuals looking for an apprenticeship position. Depending on the country, these bodies are run and managed by employers themselves, or by a third party.

Box 2.2. External bodies supporting apprenticeship training

Australia

Group training organisations (GTOs) are predominantly not-for-profit organisations supported by public authorities, with some charges to host employers. GTOs employ apprentices and hire them out to host employers, sometimes focusing on a particular industry or region. Their tasks include: selecting apprentices adapted to the needs of employers; arranging and monitoring training both on and-off-the job; taking care of administrative duties; and ensuring that apprentices receive a broad range of training experience, sometimes by rotating them to different firms.

Source: OECD (2010[3]), Learning for Jobs, OECD Reviews of Vocational Education and Training, https://doi.org/10.1787/9789264087460-en.

Norway

Training offices (opplæringskontor) are owned by companies and funded through state grants (firms typically pay half of the apprenticeship subsidy they receive to training agencies). They aim to establish new apprenticeship places, supervise training firms, train apprentice supervisors and deal with administrative tasks. Many training offices organise the theoretical part of training and sign the apprenticeship contracts on behalf of firms. About 70-80% of firms with apprentices are associated with training offices. Research shows that training offices played an important role in supporting apprenticeships and ensuring their quality.

Source: Høst, H. (2015[16]), Kvalitet i fag- og yrkesopplæringen, Sluttrapport, Fafo-rapport 2015:32www.fafo.no/index.php/zoo-publikasjoner/fafo-rapporter/item/kvalitet-i-fag-og-yrkesopplaeringen-sluttrapport-2; Høst, H., A. Skålholt and A. Nyen, (2012[17]), The OECD International Survey of VET Systems, 2007 – Norway (unpublished).

Regulatory measures can encourage apprenticeship provision

The simplest type of regulatory measure is a workforce requirement. For example, a new requirement in England (United Kingdom) is that larger (more than 250 employees) public sector providers should have at least 2.3% of their workforce as apprentices. Companies providing apprenticeships can be rewarded with preferential treatment in the award of public contracts. The evaluation of this policy in Switzerland (Leiser and Wolter, 2017[18]) found that it increased apprenticeship provision among small firms and in sectors where public procurement represents a large share of the business, while maintaining training quality. While preferential treatment in the award of public contracts looks promising given its relatively low cost and the positive impact, there are some potential drawbacks: 1) some highly specialised firms have niche skilled jobs that will not correspond to any widely recognised apprentice qualification, and they may be discriminated against in the public procurement process; 2) there may be discrimination against small firms when a limited pool of qualified applicants for apprenticeships are scooped up by larger firms; and 3) the policy may lead to too many apprenticeships in certain industries or occupations (such as construction) where public procurement is widespread (Mühlemann, 2016[4]; Leiser and Wolter, 2017[18]).

Policy argument 2: Small employers require special attention

Small employers face particular barriers

Many countries are concerned that smaller employers may be reluctant to offer apprenticeships, and it has been argued that funds from training levies are often exploited by larger employers (Johanson, 2009[19]; Dar and Whitehead, 2003[20]; Cedefop, 2011[21]; Müller and Behringer, 2012[12]). Some smaller employers may lack the capacity to plan and determine training needs, and they will be less efficient in offering training. Large firms, however, can train several apprentices using one instructor and it is easier for them to bear the fixed costs of dealing with administrative requirements. Small firms may also be unable to train for the full range of skills required by a particular apprenticeship qualification. International evidence suggests that small firms are indeed less likely than large firms to offer apprenticeships. In Switzerland, participation in training greatly increases with size of enterprise (Bliem, Petanovitsch and Schmid, 2016[22]). Whereas around 25% of companies with fewer than 10 employees provide apprenticeships, it is 80% of large firms employing 100 people or more (Mühlemann, 2016[4]). Simulations for apprenticeships in England (United Kingdom) found that firms with fewer than 10 employees struggle to reap net benefits, so in sectors where the role of apprentices is crucial, targeted measures may be needed to encourage their engagement (Wolter and Joho, 2018[23]).

Small employers rely on the prospect of long-term benefits less than large ones

In the short-term balance (i.e. during apprenticeships), large firms do not achieve better results than small firms. This is because while large firms may be more efficient in offering training, this is counterbalanced by their tendency to train more in costly technical fields (Mühlemann, 2016[4]). The difference in terms of expected benefits lies in the longer term: the scope for reaping benefits by retaining apprentices upon completion is less for smaller firms. One reason is that the bigger the firm, the more likely it is to retain apprenticeship graduates as skilled workers (see Figure 2.2 for data from Germany and Switzerland). This may be because small firms cannot offer a job to their qualified apprentice as a skilled worker, or because their apprenticeship graduates prefer to work for larger employers with better career prospects. Even when small employers retain apprentices as skilled employees, the savings realised by the recruitment will be smaller because these savings depend on the cost of the alternative option (i.e. hiring an external recruit), and hiring costs tend to be smaller in smaller firms. This is partly driven by the nature of the jobs offered: larger firms are more likely to operate in technical sectors where new recruits need costly training at the start, so hiring costs are higher. Also, small firms often train only one apprentice at a time, so it would be risky to rely on the prospect of recruitment to make up for the costs involved. For example, if after three or four years of training the apprentice decides to take up a job offer elsewhere, it would take the firm another three or four years to fill a vacancy (Mühlemann, 2016[4]). A larger firm that trains several apprentices takes less of a risk – if one apprentice opts for a job elsewhere, they can still hire one of the remaining apprentices. The implication is that in the absence of long-term benefits from recruitment, many small firms will only provide apprenticeships if they can recoup their investment by the end of the training period.

Figure 2.2. Company retention rates of apprentices (by number of employees)
picture

Note: 2012/13 for Germany and 2009 for Switzerland.

Source: Adapted from Mühlemann, S. (2016[4]), “The cost and benefits of work-based learning”, OECD Education Working Papers, No. 143, https://doi.org/10.1787/5jlpl4s6g0zv-en.

 StatLink http://dx.doi.org/10.1787/888933828410

Small employers can play a major role in providing apprenticeships

Despite these hurdles, across OECD countries small employers are major providers of apprenticeships. In countries with available data from the Survey of Adult Skills, a product of the Programme for the International Assessment of Adult Competencies (PIAAC) (i.e. Austria, Australia, Canada, Denmark, the Netherlands), over half of all apprentices work in firms with 50 or fewer employees (Kuczera, 2017[10]). In Germany, 39% of apprentices work in firms with fewer than 50 employees (BIBB, 2017[24]).

This reflects both the large share of small firms in OECD economies and the fact that when small firms train apprentices, they tend to do it in a more “intensive” way than larger firms. In some countries with large apprenticeship systems, the ratio of apprentices to total employees (training ratio) among firms that offer apprenticeships is larger in small firms and decreases with firm size. In Switzerland, the ratio of apprentices to total employees (the training ratio) was between 7.5% and 9% in training companies with fewer than 10 employees, 4% in training companies with 50-99 employees, and 3% in training companies with over 1 000 employees. In Austria, the training ratio was 5% in training companies with fewer than 50 employees but just under 4% for training companies with more than 50 employees (Bliem, Petanovitsch and Schmid, 2016[22]).

Conclusion

This chapter questions whether employers should receive financial incentives to provide apprenticeships and argues that there is a case for public funding to support apprenticeships. It is fair that young people can expect comparable levels of support as they are prepared for working life, and the strong employment outcomes linked to apprenticeships lead to net savings for the state. Governments should consider incentives such as tax breaks and subsidies for employers, however, only with great caution as risks are high that funding will fail to drive the behaviour intended. One exception relates to employer levies, particularly in specific sectors, which can be designed to accentuate employer ownership over training. Governments are better served by targeting funding at measures that will increase the speed with which apprentices develop skills and so become productive. Such measures include help to improve the quality of in-company training and the reduction of administrative costs related to apprenticeships. Costs are structurally higher for smaller employers of apprentices and warrant special attention.

References

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[18] Leiser, M. and S. Wolter (2017), “Empirical evidence on the effectiveness of social public procurement policy: The case of the Swiss apprenticeship training system”, Labour, Vol. 31/2, pp. 204-222, http://dx.doi.org/10.1111/labr.12089.

[11] Leuven, E. and H. Oosterbeek (2004), “Evaluating the effect of tax deductions on training”, Journal of Labor Economics, Vol. 22/2, pp. 461-488, http://dx.doi.org/10.1086/381257.

[4] Mühlemann, S. (2016), “The cost and benefits of work-based learning”, OECD Education Working Papers, No. 143, OECD Publishing, Paris, https://doi.org/10.1787/5jlpl4s6g0zv-en.

[8] Mühlemann, S. et al. (2007), “An empirical analysis of the decision to train apprentices”, Labour, Vol. 21/3, pp. 419-441, http://dx.doi.org/10.1111/j.1467-9914.2007.00379.x.

[12] Müller, N. and F. Behringer (2012), “Subsidies and levies as policy instruments to encourage employer-provided training”, OECD Education Working Papers, No. 80, OECD Publishing, Paris, http://dx.doi.org/10.1787/5k97b083v1vb-en.

[3] OECD (2010), Learning for Jobs, OECD Reviews of Vocational Education and Training, OECD Publishing, Paris, https://doi.org/10.1787/9789264087460-en.

[15] Pfeifer, H. (2016), Firms’ Motivation for Training Apprentices: An Australian–German Comparison, National Centre for Vocational Education Research (NCVER), Adelaide, https://www.ncver.edu.au/research-and-statistics/publications/all-publications/firms-motivation-for-training-apprentices-an-australian-german-comparison.

[1] Reed, D. et al. (2012), Effectiveness Assessment and Cost-Benefit Analysis of Registered Apprenticeship in 10 States, U.S. Department of Labor, Employment and Training Administration, Washington, https://wdr.doleta.gov/research/FullText_Documents/ETAOP_2012_10.pdf.

[14] SEFRI (2017), Fonds En Faveur de La Formation Professionnelle Entrés En Vigueur Selon l’art. 60 LFPr.” 2017., Secrétariat d'Etat à la formation, à la recherche et à l'innovation, http://www.sbfi.admin.ch/sbfi/fr/home/bildung/berufsbildungssteuerung-und--politik/berufsbildungsfinanzierung/fonds-en-faveur-de-la-formation-professionnelle-selon-art--60-lf.html.

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[6] Wacker, K. (2007), Teure Neue Lehrstelle. Eine Untersuchung Zur Effizienz Des Blum- Bonus, (New Expensive Apprenticeship. Analysing the Efficiency of the “Blum Bonus” Apprentice Funding Scheme), Austrian Chamber of Labour of Lower Austria, Wien.

[2] Westergaard-Nielsen, N. and A. Rasmussen (1999), The Impact of Subsidies on Apprenticeship Training, Centre for Labour Market and Social Research, Universitetsparken, https://www.researchgate.net/publication/265272135_The_impact_of_subsidies_on_Apprenticeship_Training.

[23] Wolter, S. and E. Joho (2018), Apprenticeship Training in England – A Cost-effective Model for Firms?, Education Policy Institute, Bertelsmann Stiftung and JP Morgan Chase Foundation, https://www.bertelsmann-stiftung.de/fileadmin/files/BSt/Publikationen/GrauePublikationen/LL_cost_benefit_study_England.pdf.

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