Bundesinstitut für Berufsbildung (BIBB)

In-company vocational training as part of the employment system

For years, the argument has been put forward in the education policy discussion that Germany's "dual" vocational training system (which combines part-time vocational schooling with work experience) is becoming less and less attractive for trade and industry and other qualification pathways are consequently becoming increasingly important (see GEISSLER 1991; HEIDENREICH 1998; BAETHGE 2000; EULER/SEVERING 2006). As substantiation, the proponents of this position cite the drops in the number of in-company training places being offered, the growing numbers of youths entering the "transitional system" and the increase in the number of unplaced applicants from previous years in the training place market. In the authors' view, this situation is not due to dual vocational training having become generally less attractive for enterprises but rather to the effects of the crises in the employment market and labour market. In contrast to school-based and university-based qualification pathways, dual vocational training is part of the employment system.

Consequently, unfavourable developments in the employment system have a direct impact on the number of in-company training places being offered and on the chances youths have of commencing in-company vocational training. On the other hand, graduates from other qualification pathways also are  concerned by difficult labour market conditions - after having completed their education -, in the form of deteriorating chances of making the transition to the employment system.

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Supply of in-company training places viewed in the context of economic and demographic trends

Studies on the general development of Germany's dual vocational training system in the years since 1960 provided the starting point for the following analysis (see TROLTSCH/WALDEN 2007). During this time there were special phases 0 for example, in the 1980s in West Germany 0 when enterprises responded first and foremost to the growing demand for training places and increased the number of training places they offered accordingly. For the phase after the year 2000, in the above study the thesis is put forward that the employment trend and the labour market situation now play the central role in the provision of in-company training places for youths (see ibid.; also TROLTSCH/WALDEN 2010). This is possibly the result of the shareholder culture in German trade and industry which has become increasingly strong since the mid-1990s (see BAETHGE 2010).

Findings from studies on falling costs in in-company vocational training also show that enterprises have been paying more attention in recent years to integrate their trainees to a greater degree into their production / business operations (see SCHÖNWALD et al. 2010). Looking at Germany as a whole, there can be little doubt about the dominance of company-related factors in recent years (see chart). For example, the number of in-company training places changes in parallel to the employment trend and share of enterprises that provide in-company vocational training. In comparison to this, the demographic trend and the relatively constant level of interest youths have in undergoing in-company vocational training (measured against the development of the number of school leavers and training place applicants) apparently carry no weight.¹ Starting from the year 2004, it may well be assumed that enterprises have also been responding to the decline in the demographic trend in order to ensure their stock of skilled labour in the medium term.

This article will now examine whether and to what extent the above findings regarding the vocational training places market's dependence on the employment trend (supply side) can also be empirically confirmed on the basis of regional data. Not only the supply side but also developments in the demand coming from youths and regional framework conditions will be examined. The question of whether enterprises have "slept through" recent demographic developments and have not to date prepared on a sufficiently timely basis for the imminent shortage of skilled labour (see GRÜNERT/LUTZ/WIEKERT 2007) will also be examined. These questions are important particularly for education policy-related considerations on ensuring that the regions have a sufficient supply of in-company training places for youths and regarding the pre-professional qualification of training place applicants (see BEICHT 2009).

Chart:  Development in the number of in-company training places being offered by enterprises in Germany, by selected conditions
(Change over the base year 1999)

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Data pool and methodology

Analyses that examine the regional development of in-company vocational training are usually carried out as cross-sectional analyses with relatively highly aggregated regional units. This is due primarily to the fact that the amount of official data being generated or made available with a suitable regional structure continues to be inadequate and to the fact that data presented for policy advice tends to be geared to describing problem areas. For this reason, relevant publications predominantly contain analyses of the east-west problems in Germany's vocational training system or extensive studies that focus on the state level.² Education-related analyses are rarely conducted at local employment agency level. The analyses presented here drew upon the employment agency-based pupil and population statistics issued by the Federal Statistical Office, the training market, unemployment, employment and business statistics issued by the Federal Employment Agency and the chamber survey conducted by the Federal Institute for Vocational Education and Training for the period from 1999 to 2008.³ Although data at this level is more homogenous than data used in state-level analyses, local employment agencies (which, being political and administrative territorial units, were drawn up primarily in relation to labour market policy and the labour market administration) exhibit significant differences in terms of economic conditions and in terms of population, employment and, most particularly, education statistics. Using a regression analysis (see box), the following section examines which factors strongly influence regional training place markets.

Changes in the number of new training places offered each year are of particular interest for regional analyses. These changes provide the best indication of enterprises' direct responses to current developments in the conditions found in the respective employment agency. One measure for trade and industry's long-term participation in in-company  training is the aggregate supply of all filled training places at local employment agency level (total number of trainees). The percentage changes over the prior year will be analysed for both of the above variables and correlations with possible variables will be examined in the following section. On the demand side of the regional training place markets, the developments seen in training place applicants, school leavers from general secondary schools and in the age cohort of youths below the age of 20 were used as variables. The company supply side was operationalized using the changes in the stocks of employees and of enterprises that provide in-company vocational training ("training companies"). The respective degree of tertiarisation, population density and developments in the regional labour market were used as the structural attributes of the employment agency districts.

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Results: Central importance that employment and the labour market have for a region's supply of training places

The number of new training contracts increases primarily when positive changes can be seen on the supply side of regional training place markets (see Model 1 in table). The two most important factors that positively influence the supply of new training places in the respective employment agency district are (1) increases in employment and (2) increases in the number of enterprises that begin providing in-company vocational training for the first time or in the number of enterprises that resume providing in-company vocational training after not having provided training in the previous year. An increase in the stocks of trainees leads to a decline in the number of the training places offered applicants in the following year. The special importance of economic conditions and operational considerations is underscored by the influence exerted by general economic growth. Differences between economic sectors have an effect as well. The larger the share that the service sector constitutes in the respective employment agency district (degree of tertiarisation), the greater the decline in the number of new training places. By contrast, demographic developments, developments in the number of school leavers and training place applicants, and direct labour market conditions at employment agency level do not play a role in the number of new training contracts.   

Table: Development of regional training place markets between 1999 and 2008 at employment agency level, by selected variables

The level of trade and industry's overall participation in the provision of in-company vocational training (see Model 2 in table), measured in terms of the changes in the total supply of in-company training places in the employment agency districts, is influenced 0 as in the first analysis 0 primarily by supply-side factors, with the difference that here, first and foremost, growth in the number of enterprises which always provide in-company vocational training is more important for the regional training place market. Enterprises that begin providing in-company vocational training for the first time do not play a role here. The demand side however is certainly important as well because demographic-related, school leaver and training place applicant trends can also be shown to have an influence.

Looking at the possible influence that declines in potential demand could have on a regional training place market, it can be said that training companies increased their number of new training contracts in the respective reporting year whenever it became evident at their employment agency that there would be a decline in the 19-and-younger age cohort which is relevant to demand levels. The greater the decline, the more training contracts were signed.

In this respect, training companies 0 assuming that they take information concerning regional developments into account 0 certainly appear to respond at least in the short-term to coming developments in the number of school leavers. Otherwise, they adjust their provision of in-company vocational training to the current upward or downward demographic movements in their particular region. Based on the analyses conducted here, it could not be determined whether training companies develop plans that extend beyond the coming year, are more investment-oriented or more long-term. In this connection, it is necessary to supplement the remarks made at the start of this article regarding the overall development of the training place market in Germany because the demand-side variables already led to changes during the period under study in the amount of in-company vocational training provided.

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Is a decline in the number of enterprises providing in-company vocational training once again imminent?

Supply- respectively employment-related variables constitute the key influencing factors and most important operating mechanism of regional training place markets, even in employment agency districts whose structures vary greatly from region to region. When the stocks of workers who are subject to social security contributions increase over the previous year's level, the number of trainees and training contracts increases concurrently. On the other hand however, enterprises' longer-term responses to declines in demographic and school leaver numbers at employment agency level could not be verified in the period under study. 

Due to the anticipated demographic declines, vocational training might however be at a turning point which could also change the relative importance of the individual determinants. In the authors' opinion, the current situation seen in the vocational training field is comparable to the phase seen in the dual vocational training system between 1985 and 1995 when extreme drops in the size of the age cohorts that are relevant to demand for vocational training, together with strong demand for skilled labour, initially led to an enormous surplus of unfilled training places and ultimately to a decline in the number of in-company training places being offered. Although the number of school leavers has since increased markedly and the demand for skilled labour is growing, the level of trade and industry's provision of in-company vocational training has remained at this comparatively low level ever since. Enterprises apparently had to make use of other strategies for recruiting skilled labour during these ten years and have continued in this recruitment-specific path dependence ever since.

This raises an important research question in light of the demand and supply projections for the period to 2025 (see HELMRICH/ZIKA 2010): In view of the decline that is expected in the number of training place applicants and the narrowing of the choices available to enterprises, will the level of trade and industry's provision of in-company vocational training decline once again, as it did 15 years ago?

In this regard, should the employment trend continue to exert a strong influence on Germany's regional training place markets, the coming years could see the start of a phase during which the downward trend on the demand side could have a negative influence on the number of training places enterprises offer. It is by no means certain that the number of training places enterprises offer will remain constant or that the chances of making the transition to in-company vocational training will improve for all youths in the future. The authors consider it unlikely that it will be possible to integrate youths who are currently in the transition system (unplaced applicants from previous years) into regular vocational training without additional assistance measures.

Instrument variable regression for panel data based on HAUSMANN/ TAYLOR

Using this method, statistical correlations between dependent and independent variables are examined for identical units on the basis of time series data. The advantages this method offers include 0 in addition to the possibility of causal statements and a differentiation between endogenous and exogenous influencing factors 0 control of unit attributes that are not observed, such as individual heterogeneity (regarding the derivation of this method, see GREENE 2008; regarding its application see TROLTSCH/WALDEN 2010).

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Literature

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Last modified on: December 15, 2010