Businesses Engaging in Vocational Training Gain an Advantage in Terms of Information and Recruiting Skilled Labour

German businesses tempt the best apprentices away from the companies which have invested in the vocational training of these young adults, by offering high wage mark-ups. This is, at least, what one often hears. That there is little truth behind this, however, has been revealed by a recent study carried out by the Mannheim Centre for European Economic Research (ZEW).

This study suggests that firms investing in vocational training are often able to retain their best apprentices following their graduation, because these firms do not only know their apprentices' grades, but contrary to competing firms are also far better able to assess graduates' personalities and social competences. Vocational training ensures that companies benefit from the latest know-how and have access to young, skilled employees. Employers offering vocational training, are therefore interested in securing a professional relationship, between the best training graduates and their businesses. Due to the fact that apprentices receive convincing and credible graduation certificates from vocational schools, the chambers of industry and commerce, or from the chambers of commerce, the temptation for competing businesses to attract particularly highly performing graduates to their businesses, is significant. The ZEW study shows, however, that companies are only partially successful in their attempts to do this. On average, firms which have invested in vocational training, successfully retain their top-performing apprentices following their graduation.

"Many apprenticeship graduates remain with their training companies because, although they now have a valuable qualification certificate, these employers are better informed about the graduates' skills and capabilities than their competitors are," says Thomas Zwick, research professor at ZEW and Professor at the University of Würzburg. Firms are willing to pay wage mark-ups for graduates with top grades, who choose to transfer from their training companies to these headhunting firms. These grades tend, however, to reflect cognitive skills and capabilities. Social skills such as a talent for building strong relationships with customers and colleagues, or team spirit, are not examined, and are therefore not indicated by the apprenticeship certificate.

As a consequence, employers providing vocational training, gain a much better idea of what a graduate is actually worth as an employee, and they therefore offer higher starting salaries to graduates, who not only have good grades, but who also exhibit additional soft skills. Companies who do not offer vocational training do not have this advantage. Job interviews, for instance, leave them with an incomplete impression of a graduate's social skills. Such companies do not, therefore, offer potential employees above-average salaries based on above-average social skills. Training companies thus have an information advantage, which enables them to retain young professionals, trained in-house, with better social skills. These soft skills show positive correlation with other skills, which is why those graduates transferring to other companies, on average, also possess higher cognitive skills and better education qualifications.

The results of the study are based on analyses from the Ausbildungspanel Saar (Saar Vocational Training Panel). This dataset combines final apprenticeship grades, and further professional and individual skills, analysed by the chambers, with official social security data regarding income, career characteristics and employer characteristics. The dataset takes all of the approximate 20,000 apprentices, graduating between 1998 and 2005 in the Saarland, into account.

For more information please contact

Prof. Dr. Thomas Zwick, (ZEW and University of Würzburg), Phone +49(0)931/31 82755, E-mail thomas.zwick@uni-wuerzburg.de