ZEW President Franz on the Apprenticeship Training Levy

This article appeared in the December edition of the ZEWnews.

Against the backdrop of the tense situation on the vocational training place market—according to the Federal Employment Office, there are still some 15,000 training places missing (excluding youths who have not yet registered and who have dropped out of an agreed apprenticeship or have not started it)—the trade unions in particular are calling for a levy to be set on companies that do not provide in-company vocational training, which would benefit the companies that already provide in-company vocational training. We should urgently advise against the implementation of such a training levy.

Neither increased charges nor taxes create new jobs or additional apprenticeship training positions. And hardly anyone seriously considers burdening companies with a "job levy" because they have not been providing enough jobs. On the contrary, the implementation of an apprenticeship levy would run counter to all efforts by the Federal Government to increase Germany’s attractiveness as a business location via improving supply conditions.

Apart from this principle counter-argument, there are plenty of other reasons against a training levy. For example, it would be difficult even to determine an appropriate base tax. The number of employees can’t be used for it, since this would simply penalises companies that create new jobs albeit no training places, which would be diametrically opposed to employment reduction efforts. Furthermore, although the companies providing training would receive a subsidy for each training place—provided that the revenue from the training place levy is actually passed on to the companies providing training and is not used for other purposes—this would not, however, and in light of the deadweight effects, result in any automatic allocation of new training places. Experience with the compensatory levy when the number of severely disabled employees falls below the prescribed number also gives rise to fears that companies would rather buy themselves out of setting up training positions. And even if companies set up training positions merely to avoid the training levy, there is a danger that the company providing the training will not actually provide appropriate support for the trainees, who deserve to be welcomed, not incidentally spurned. Also worth noting is the companies' complaints that, despite intensive efforts, they cannot find suitable trainees, even when modest standards for skills learned at school and integration opportunities regarding professional life are applied. However justified these lawsuits may be in individual cases, the ones worth putting on a pedestal deal with limited extent for school leavers i.e. those who are able and willing to train. Last but not least, the collection and redistribution of the training levy would involve considerable bureaucratic effort, regardless of whether the state undertakes this task or shifts it to the chambers or associations.

No matter how you spin it, introducing a training levy is ultimately counter-productive. Instead, training regulations should be made more flexible and differentiated—for example, in the form of much shortened training courses for less demanding activities. Another important cost factor is training allowances, which amounted to around 600 Euro per month in western Germany in 2002, averaged over training occupations and training years (eastern Germany: around 500 Euro). That would be a starting point for a significant reduction in costs.

But companies should also bear in mind that short-term cost considerations with regard to the provision of training places just might amount to shooting themselves in the foot, for a shortage of apprenticeship training places today is the shortage of skilled workers tomorrow.