Apprenticeships Are More Profitable for Firms than Expected

It is often asserted that the costs of apprentices considerably exceed their productivity. However, in comparison to the alternative to hire unskilled or semi-skilled employees, this is not the case for most occupations. This is the result of a representative study by the Centre for European Economic Research (ZEW) in Mannheim and the University of Zurich. The study shows that particularly apprentices in the commercial occupations as well as in the trade and construction occupations are more profitable for firms than unskilled or semi-skilled employees. The situation is different for apprentices in the industrial occupations. There the cost-benefit ratio is worse for apprentices than for unskilled or semi-skilled labour. However, apprentices with industrial occupations only account for 30 percent of all trainees in the dual apprenticeship system.

The study by the ZEW and the University of Zurich does not calculate the exact costs and benefits of the dual apprenticeship training. It rather examines how the profits and the productivity in a firm change if the share of apprentices is increased, in comparison to an increase of the share of unskilled or semi-skilled employees. The study differentiates between several occupational groups. It shows that increasing the number of apprentices in commercial occupations as well as in the trade and construction occupations influences the firm’s profit and productivity positively. According to that result, apprentices can substitute unskilled or semi-skilled labour. The apprentices’ relative productivity is higher than the relative costs. In contrast, increasing the share of trainees in industrial occupations reduces the firm’s profit while the productivity remains unchanged. The cost-benefit ratio for apprentices in the industrial sector is therefore worse than the one for unskilled or semi-skilled employees.

There are several reasons why we observe these differences between the occupational groups. Apprentices in the trade and construction sector reach a relatively high level of productivity at an early stage of their training. On the other hand, apprentices in the commercial sector find new employment in other firms rather easily. Therefore, the firms employing apprentices want to make sure that the costs for the apprentices are covered by a relatively high productivity in the last years of apprenticeship training. In the industrial occupations, the apprentices reach their productivity rather slowly and receive a relatively high salary during their apprenticeship. The firms employing apprentices with these occupations accept the relatively high costs for the training because it is rather difficult for them to find skilled employees. The firms hope that the skilled employee will continue to work for them after having completed their apprenticeship in order to re-earn their training investments.

Contact

Prof. Dr. Thomas Zwick, Phone: +49/621/1235-131, E-mail: zwick@zew.de