Bundesinstitut für Berufsbildung (BIBB)

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11/ 2004
Bonn, 31.03.2004

 

Training levy burdens large firms in particular!

BIBB presents study on costs and benefits of providing in-company vocational training

Training pays for companies - and is a worthwhile investment in the future. There are however enormous differences between companies when it comes to the level of their training costs and the time it takes until these costs pay off. This is made clear by a detailed analysis ⁰¹ of the costs and benefits of in-company vocational training in Germany which the Federal Institute for Vocational Training ("BIBB") prepared on the basis of a representative survey of companies in Germany and has just released. The findings provide important information for assessing the training levy that the German government is planning.
The survey determined that:

• Some of the companies surveyed already benefit financially from providing training - in other words, from the productive work that trainees and apprentices perform during their course of training - irrespective of whether the particular trainee or apprentice is hired upon completion of their training. This tends to apply more to smaller firms.
• By contrast, the other set of companies generates a profit from the training they provide only later - long after the training has been completed. These companies provide training to ensure that they have enough skilled labour to cover their needs on a long-term basis. For this reason, they also hire a large percentage of their trainees and apprentices following completion of their training. Larger companies tend to be found in this category.

Smaller companies in particular meet the seven-percent minimum training place rate stipulated in the Federal Ministry of Education and Research's draft wording for a training levy bill; large companies usually fall short of it. Companies with a training place rate that exceeds seven percent are to receive financial compensation for their expenses, while companies with a lower rate are to pay a levy. Applying the above findings to the training levy that the German government is planning to introduce results in the following picture:

• Large companies in particular (which usually fall short of the seven-percent rate) will bear the brunt of the training levy - on top of the substantial costs they incur in training apprentices for specific occupations (such as mechatronics fitter or machine fitter) which can be recouped only on a long-term basis after the apprentice has been hired.
• By contrast, small firms will benefit from the training levy: Many small companies that provide training are involved in occupations that do not entail costly training (such as bakers, hairdressers). In addition, apprentices and trainees generate a profit for these companies during their training. Besides this, these companies would also receive additional financial assistance in the event that the training levy is introduced.  

In summary: The planned training levy will burden first and foremost those areas in which training is very expensive and the timeframe for investment in training to pay off is very long. By contrast, the training levy will favour areas in which training costs less and the companies providing the training hire a smaller proportion of apprentices upon completion of their training. This could have dire consequences for companies' training behaviour: Given that for large companies the amount of the training levy to be paid for each apprentice or trainee it does not train is usually less than it would cost to provide a complete course of training, it can be assumed that large companies will reduce even further the number of additional apprenticeships they have been offering beyond their actual requirements out of a sense of social responsibility and cut back on their training activities. On the other hand, the training levy would offer smaller firms with very low training costs positive incentives to train more apprentices. In the process, the training level would lead to fundamental changes in the patterns of the occupations offered by Germany's vocational training system. The BIBB study Kosten und Nutzen der betrieblichen Berufsausbildung in Deutschland (costs and benefits of in-company vocational training in Germany): 

• Takes a nuanced look at the cost structures in various sectors and for different skilled occupations,
• Analyzes the fundamental factors impacting the level of training costs,
• Examines the importance of the various utility dimensions and the most important factors influencing them, and
• Establishes a relationship between in-company vocational training and a company's economic productivity and comes to the conclusion that attaching great value to the training one provides pays off in the marketplace.

The German-language publication Kosten und Nutzen der betrieblichen Berufsausbildung in Deutschland by Ursula Beicht, Günter Walden and Hermann Herget was published by the Federal Institute for Vocational Training ("BIBB") and can be ordered for €19.90 from W. Bertelsmann Verlag GmbH & Co. KG, Postfach 10 06 33, 33506 Bielefeld, Germany; Tel. +49 521 - 911 0111, fax +49 521 - 911 0119, e-mail: service@wbv.de.
For further information regarding the study, please contact at BIBB: Günter Walden (Tel.: +49 228 - 107 1315, e-mail: walden@bibb.de), Ursula Beicht (Tel: +49 228 -107 1314; e-mail: beicht@bibb.de) or Hermann Herget (Tel.: +49 228 - 107 1312, e-mail: herget@bibb.de).