BIBB REPORT Edition 5/08

Findings from research and work conducted by the Federal Institute for Vocational Education and Training

Klaus Troltsch, Naomi Gericke, Susanne Saxer

One out of every six firms can imagine making additional training places available - when adequate financial assistance is provided - for youths who have been seeking a training place without success for at least one year. This would not come into question however for half of the enterprises surveyed. These are the findings from a company survey on the training bonus conducted by the Federal Institute for Vocational Education and Training (BIBB) in the spring of 2008. The training bonus system foresees government assistance for enterprises which take on unplaced applicants from previous years. The analyses from this survey show which firms will make use of the training bonus and which company parameters could be conducive to increasing the number of training places being made available to unplaced applicants from previous years.

Training bonus as part of the government's qualification campaign

The some 626,000 new training contracts signed in 2007 signalled an initial easing of the tight training place market (ULRICH/ FLEMMING/ GRANATH/ KREKEL 2008). Nonetheless, even this development has not been able to date to change the fact that hundreds of thousands of young people who left school in previous years have not yet been able to find a training place. The share of unplaced applicants from previous years out of all registered training place applicants grew to more than 50% and totalled nearly 385,000 persons last year (ULRICH/ KREKEL 2007; ULRICH et al 2008).

Following its decision to extend the Training Pact until 2010, the German government decided to introduce a temporary 'training bonus' as part of its qualification campaign. Designed to benefit disadvantaged youths in particular, the training bonus is to be paid to firms that create additional training places. The sole target group is to be unplaced training place applicants from previous years who completed intermediate secondary school with a final grade of 'satisfactory' or lower in German or Mathematics or who have completed no more than lower secondary school or who have been categorized by the Federal Employment Agency as having learning difficulties or as being socially disadvantaged. The training bonus ranges from € 4,000 to € 6,000, depending on the amount of the training allowance paid the trainee learning a skilled occupation. The bonus is paid to the respective enterprise in two instalments: the first after completion of the probationary period and the second after completion of half of the training programme.

The German Bundestag approved the amended "Fifth Act to Amend the Third Book of the German Social Code - Improvement of the Training Opportunities of Young People Who Require Assistance" on 6 June 2008 so that, once the Bundesrat process has been concluded, enterprises could already receive bonuses for the 2008/2009 training year. The aim is to generate some 100,000 additional training places by the year 2010 through the payment of training bonuses. A total of € 450 million has been earmarked for the three years this assistance will be available. These funds will come from the unemployment insurance contributions paid to the Federal Employment Agency.

Although the German government's initiative has generally met with support, trade unions and industrial associations continue to be sceptical even after the revision of several points in the original bill. A particularly critical issue here appears to be the broad discretionary powers which the respective Employment Agency has when deciding whether to grant the training bonus additionally for young people who have an intermediate school leaving certificate or fundamentally only for applicants who have been looking for a training place for more than two years. According to critics, the latter approach could lead to weaker 'first-year' applicants being edged out.

For this reason, the BIBB Board also argued in a formal opinion in favour of narrowing the criteria for defining the problem group and thus counteracting the risk of 'crowding out' and 'free-rider' effects (BIBB 2008a). It additionally expressed doubts about the sustainability of this measure because it is not possible to ensure that the training youths will receive thanks to the training bonus will be for occupations that are actually in demand on the labour market.

The following section outlines the findings from the BIBB-AusbildungsMonitor, a company panel survey that extends less than a calendar year and was conducted by BIBB.¹ The spring survey asked, inter alia, what effects a training bonus could have from the standpoint of the companies surveyed. The aim here was to obtain a snapshot of the level of fundamental willingness among enterprises to take on unplaced training place applicants from previous years as trainees. Ultimately, it is not possible to judge on the basis of this information whether and to what extent such training places will actually be generated for the 2008/2009 training year, particularly since one third of the personnel managers could not assess at the time of the survey whether assistance of this type would even be an option for their company. Despite this, the group of firms with a fundamental interest in the training bonus can be narrowed down and described with greater precision on the basis of the survey's findings.

Findings from the BIBB company survey

One out of every six (16.7%) of the personnel managers surveyed² could imagine providing in-company vocational training - with the assistance of € 6,000 per unplaced applicant from a previous year - for one or even several youths in their companies and creating additional training places for this (Table 1).³ However exactly half of the firms surveyed did not consider such a measure to be an option. At the time of the survey, one third of the firms were not yet able to judge whether the training bonus might be a suitable measure for them.

In addition to the level of fundamental willingness to go beyond their original plans and create additional training places for unplaced applicants from previous years, the potential number of additional training places is of particular interest. To determine this, the surveyed firms were asked to indicate the number of additional training places they might create.⁴ Their responses indicated an average increase of nearly 29% over the number of training places that they had already planned to offer.⁵

The following section will examine the attributes of firms that are particularly willing to create in-company training places for unplaced applicants from previous years. The most important attributes include an enterprise's provision of in-company vocational training, its plans for providing training places for the 2008/2009 training year, the number of training contracts that it has already signed with youths, its own skilled labour and training needs, and structural information regarding the company itself.

Provision of in-company vocational training for the current training year

One out of every four enterprises that already provide in-company vocational training is fundamentally willing to take on unplaced training place applicants from previous years under the given conditions and increase the number of its training places with the help of the training bonus by another 20% on average (see Table 1). These firms would account for 55% of all additional training places being generated. Compared to enterprises that currently do not or no longer provide in-company vocational training, these firms also have the lowest 'negative response' rate toward the training bonus.

The level of willingness to create additional training places falls markedly among firms that were not providing in-company vocational training at the time they were surveyed. Only one out of every six firms in this group said they would be willing to provide additional training places for unplaced applicants from previous years. Despite this, in their own estimation, these firms would provide 40% of all additional training places. This represents a capacity increase of nearly 150% over this group's plans for the 2008/2009 training year. However, this enormous rate of increase is due primarily to the fact that these firms' original plans foresaw only a small number of training places. Only 4% of those companies that had provided in-company vocational training for youths at some earlier point in time would consider offering more training with the help of the training bonus. This group would however account for only 5% of the additionally generated training places.

Training place plans for the 2008/2009 training year

Before being surveyed about the training bonus, the participating companies were asked whether and to what extent they planned to offer training places for youths in the coming training year.⁶ One out of every four firms that wanted to offer training places for the 2008/2009 training year said it would create additional training places in order to provide in-company training to unplaced applicants from previous years. Based on this, the total number of training places on offer in these companies could be increased by approximately 14% with the help of the training bonus. Firms that stated at the time of the survey that they had not made any final decision on how they were going to proceed for the coming training year also considered it conceivable that they would seek young people to fill training places during the course of the remaining placement year.⁷ Up to 41% of these companies said they would be willing to think about making use of a subsidy for unplaced applicants from previous years.

This could lead to an increase in the number of new training agreements of more than a third. To be added to this are those firms that fundamentally did not know yet in March whether they would be able to offer any training places at all. One out of every five these companies however indicated that it would be willing to include in its considerations the possibility of making use of this type of assistance.⁸

It will not be possible to persuade many of firms that were certain as of March of this year that they would not be providing vocational training for youths to change their plans and offer training places for unplaced applicants from previous years. Only 9% of such companies would consider this option whereas 28% had not developed a final opinion on this subject. For the large majority - 63% - the training bonus does not pose an incentive to consider offering corresponding training places. Despite this, this group of firms would theoretically account for approximately one quarter of the potential additional training places for unplaced applicants from previous years.

Number of training contracts signed with training place applicants

The decision to claim the training bonus at the start of the new training year will also depend on the extent to which firms have been able to fill the training places they offer by that time. In March of this year, one out of every four surveyed firms with concrete plans to provide in-company vocational training reported that they had already signed written training contracts with youths.⁹ The companies in this group reported less willingness to make use of the training bonus than firms that had not signed any training contracts. Furthermore, at just under 6%, the number of additional training places they would create above and beyond the number of training places they had originally planned to offer (and had in part already filled) also fell noticeably short of average. As a result, this group would account for only one in every five additional training places that would be made available for unplaced applicants from previous years. By contrast, the willingness to generate new training places with the help of the training bonus rose to nearly 27% among those firms that had not yet signed any training contracts with youths. This would lead to 23% additional training places being generated for unplaced applicants from previous years.

Firms were also asked to provide information regarding the level of schooling or type of school previously attended by the applicants with whom they had already signed a training contract.¹⁰ Given adequate subsidization, approximately 47% - an above-average portion - of those companies that had already signed training contracts with lower secondary school leavers said they would be willing to provide training places to youths who were disadvantaged in the training place market. By contrast, the level of willingness to provide training places to this target group fell to as low as 9% when the particular firm had already signed training contracts for the coming training year with intermediate school leavers or applicants who had earned qualification for university admission.

This indicates that only a few training places could be created for unplaced applicants from previous years in companies that have higher qualification requirements or had signed training agreements early in the year. This considerably narrows the group of firms that are willing to take on unplaced applicants from previous years - particularly in light of the fact that the group of firms that said they could not currently judge the value of the training bonus for their own operations had, at the time of the survey, already accepted youths with qualification for university admission for slightly more than half of the training places they had filled up to that time and intermediate secondary school leavers for 35%.

Firms' skilled labour and training requirements

A company's willingness to create additional training places for unplaced applicants from previous years increases in tandem with its manpower needs. For example, one out of every four enterprises that firmly expects to be able to fill their training places in the next two years said it would be willing to create additional training places above and beyond the originally planned number. Less than 1% of those firms that see no manpower needs could imagine generating additional training places. Seventy per cent of this group were firm in their negative response to the training bonus.

The firms were also asked whether, in the event they had corresponding manpower requirements, they wanted to hire workers who had completed formal vocational training (dual vocational training, full-time vocational school), workers with a degree from a university or university of applied sciences, or only semi-skilled or unskilled workers in the next two years. It turns out that a company's willingness to create additional training places that are financed through the training bonus diminishes as the skill requirements for the jobs to be filled rise. Conversely, the lower a firm assesses its skill requirements, the more likely it is to make training places available for unplaced applicants from previous years as well. Nearly one out of every three companies that wants to fill positions that do not require completion of formal vocational training said that a marked increase in the number of training places it offers would be conceivable.

Differences by sector, company size and region

Very small companies with up to nine employees and small firms with ten to 19 employees show an above-average interest in receiving financial assistance for creating additional training places for unplaced applicants from previous years. These firms would increase the number of training places they offer by up to 66%. Thus, firms with fewer than 20 employers would account for 85% of all additional training places. However, smaller and larger medium-sized enterprises also see chances for signing additional training contracts with unplaced applicants from previous years. Large enterprises with 500 or more employees tend not to show any interest in this matter.

More than 40% of all additional training places would be generated in the Agriculture, Hunting and Forestry; Transport, Storage and Communication; Hotels and Restaurants sectors and in other services (such as in the waste management, cleaning or personal hygiene branches). At 30% or more, the level of willingness to take on unplaced training place applicants from previous years is particularly high among firms in these sectors. Another group comprised of firms in the consumer goods and producer goods industries and in the Health Work and the Construction sectors would generate a further 23% increase. In all other sectors, the share of enterprises willing to generate additional training places is smaller than average. A negative response to the training bonus is particularly widespread among companies in the Financial Intermediation and Insurance and Pension Funding sectors and bodies in the Public Administration sector.

Generating enough training places for unplaced applicants from previous years in those areas of Germany's eastern Länder which have not been able to offer a sufficient number of in-company training places for some time now due to their financial situation (BMBF 2008b) would be especially important. Despite this, only one out of every ten firms in the eastern half of the country has a fundamental interest in receiving financial assistance for taking on an unplaced applicant from previous years. Among firms in the western half of the country - which would make 80% of all additional training places available - one out of every five could imagine offering more training places than originally planned in the coming training year.

Can the backlog of unplaced applicants be reduced through the training bonus?

Using an aggregate model, the following section examines the influence that the attributes outlined above have on a firm's willingness to create additional training places for unplaced applicants from previous years with the help of the training bonus (Table 2). Compared to firms that offer in-company vocational training, the chances - as seen in the breakdown above - that additional training places will be generated for unplaced applicants from previous years are smaller in firms that have never offered in-company vocational training or have offered this type of training only once in the past. The chances that an unplaced training place applicant from a previous year would land a subsidized training place in either group of firms are markedly smaller. Looking at companies that had definite plans to offer training places for the 2008/2009 training year, the chances that additional in-company training places would be created were 2.9 times greater in such companies than in enterprises that at the time of the survey did not want to sign any new training contracts for the coming year. The influence of these attributes was also strong when companies had not made any final decisions. In these cases the chances that a company would offer additional training places rose 3.2-fold.

In the case of firms that had already signed training contracts with applicants at the time of the survey,¹¹ the level of willingness to generate additional training places declined.¹² However, in those cases where training contracts had been signed with lower secondary school-leavers or lower secondary school pupils, there was definitely a chance that these firms would make additional training places available for unplaced applicants from previous years as well at the start of the new training year .

Even without receiving any financial assistance, firms have also offered in-company vocational training in past years to youths who had been unsuccessful in their search for a training place. One out of every four companies surveyed had trainees who fall into this category. For this reason, these firms exhibit an above-average level of willingness - 33% - to create additional training places with the help of the training bonus. By contrast, the negative response rises to 77% among companies that are not providing in-company vocational training this year for unplaced applicants from previous years.

Skilled labour needs also play an important role in a direct comparison of the different determinants. In this connection, the chances that a firm will create additional training places is 1.5 times higher among enterprises that expect with relative certainty to need workers and skilled personnel in the coming two years than at firms that do not or only possibly expect to fill jobs in the next two years. This particularly appears to be the case for firms where positions for individuals with formal vocational qualifications are to be filled with qualified workers in tandem with unskilled or semi-skilled workers.

Compared to firms without any manpower needs, companies that will require

• not only academically trained workers but also semi-skilled and unskilled workers,
• only skilled workers who have completed formal vocational training or
• workers from all three categories

in the future offer a favourable starting situation (see also TROLTSCH 2008). As a result, training opportunities for unplaced applicants from previous years could also develop over the medium term in such firms.

The level of willingness to provide in-company vocational training for unplaced applicants from previous years is 2.7 times greater at small firms with fewer than 50 employees than at larger medium-sized or large firms. In light of this, the training bonus could foster an increase in the amount of in-company vocational training provided by small firms with fewer than 50 employees, which, compared to the 1980s and 1990s, have been training ever-fewer youths. More than 90% of all additional training places could be created by this group of companies. This could possibly also be the case for the service sector which has had lower training rates than the manufacturing sector for years. With 73% of the firms in the service sector being willing to create new training places, the service sector would account for the lion's share of all potential additional training places. This could lead to a further adjustment of the dual vocational training system to reflect Germany's development toward being a service society (WALDEN 2007).

Conclusion

All in all, the answers and assessments provided by the companies surveyed draw a relatively consistent picture of the areas in which additional training places could be generated. And even if only some of the firms that gave positive answers in this regard were to create additional training places, this would be a partial success that should not be underestimated in light of the large numbers of applicants from previous years who remain unplaced. The second part of the BIBB-AusbildungsMonitor survey in September will show if and in what ways the firms surveyed have actually used the training bonus to create additional new training places and take on unplaced applicants from previous years. This could provide insight into the extent to which this type of government assistance actually results in youths who are at a disadvantage in the marketplace receiving a training place.

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Imprint BIBB REPORT

BIBB REPORT Volume 2, Issue 5, July 2008 ISSN Internet: 1869-2761 ISSN Print: 1865-0821 Published by Bundesinstitut für Berufsbildung (BIBB) The President Robert-Schuman-Platz 3, 53175 Bonn Publishing house, advertising, distribution W. Bertelsmann Verlag GmbH & Co. KG Postfach 10 06 33, 33506 Bielefeld Tel: +49 (0) 521 91101 11 Fax: +49 (0) 521 91101 19 http://www.wbv.de/ service@wbv.de Print version The print version of this publication can be ordered from W. Bertelsmann Verlag GmbH & Co. KG. Further Information www.bibb.de/en/imprint.htm

Editors Dr. Günther Walden, Dr. Elisabeth Krekel, Dr. Eckart Strohmaier (verantw.) Editorial assistant Anne Obertreis Tel: +49 (0) 228 107 2824 E-Mail: bibbreport@bibb.de Copyright Reproduction of this publication - in part or in whole - is prohibited without BIBB's prior permission. Point of contact regarding content Klaus Troltsch E-Mail: troltsch@bibb.de