So similar and yet so different. A firm’s net costs and post-training benefits from apprenticeship training in Austria and Switzerland
| DOI | https://doi.org/10.1108/EBHRM-08-2018-0047 |
| Published date | 05 August 2019 |
| Date | 05 August 2019 |
| Pages | 229-246 |
| Author | Luca Moretti,Martin Mayerl,Samuel Muehlemann,Peter Schlögl,Stefan C. Wolter |
| Subject Matter | HR & organizational behaviour,Global HRM |
So similar and yet so different
A firm’s net costs and post-training benefits
from apprenticeship training in Austria
and Switzerland
Luca Moretti
Department of Economics, University of Zurich, Zurich, Switzerland
Martin Mayerl
Österreichisches Institut für Berufsbildungsforschung, Vienna, Austria
Samuel Muehlemann
Munich School of Management, LMU Munich, Munich, Germany and
Institute of Labor Economics (IZA), Bonn, Germany
Peter Schlögl
Institut für Erziehungswissenschaft und Bildungsforschung,
Alpen-Adria-Universitat Klagenfurt, Klagenfurt, Austria, and
Stefan C. Wolter
Department of Economics, University of Bern, Bern, Switzerland;
Swiss Coordination Centre for Research in Education, Aarau, Switzerland;
Institute of Labor Economics (IZA), Bonn, Germany and
CESifo, Munich, Germany
Abstract
Purpose –The purpose of this paper is to compare a firm’s net cost and post-apprenticeship benefits of
providing apprenticeship training in Austria and Switzerland: two countries with many similarities but some
critical institutional differences.
Design/methodology/approach –The authors draw on detailed workplace data with information on the
costs and benefits of apprenticeship training, as well as on hiring costs for skilled workers from the external
labour market. The authors use nearest-neighbour matching models to compare Austrian firms with similar
Swiss firms based on observable characteristics.
Findings –On average, a Swiss firm generates an annual net benefit of €3,400 from training an apprentice,
whereas a firm in Austria incurs net costs of €4,200. The impetus for this difference is largely a higher relative
apprentice pay in Austria. However, compared with Swiss firms, Austrian firms generate a higher
post-training return by retaining a higher share of apprentices and savings on future hiring costs.
Practical implications –The authors demonstrate that apprenticeship systems can exist under different
institutional environments. For countries currently in the process of establishing or expanding apprenticeship
systems, the comparative analysis clearly shows that policymakers should consider more than just one
country’s particular apprenticeship model.
Originality/value –The authors provide a first comparative analysis between two apprenticeship countries
that empirically assesses a firm’s costs and benefits of training during an apprenticeship programme and also
provides a monetary value of a particular type of post-training benefits that firms can generate by retaining
former apprentices as skilled workers (i.e. savings in future hiring costs for skilled workers).
Keywords Personnel economics, Human resource development, Recruitment and retention, Labour economics
Paper type Research paper
1. Introduction
Apprenticeship training has received considerable interest from policymakers around the
world in recent years because it represents a promising educational pathway that ensures a
smooth transition from school to work; however, there is still a paucity of research that
Evidence-based HRM: a Global
Forum for Empirical Scholarship
Vol. 7 No. 2, 2019
pp. 229-246
© Emerald PublishingLimited
2049-3983
DOI 10.1108/EBHRM-08-2018-0047
Received 9 August 2018
Revised 18 November 2018
Accepted 22 November 2018
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2049-3983.htm
JEL Classification —J24, J31, J44
229
Firm’s net
costs and
post-training
benefits
addresses the underlying mechanisms of how apprenticeship systems generate positive
outcomes for individuals, firms and the broader society. Many comparative studies have
discussed the importance of institutions for the functioning of an apprenticeship system in
the context of Germany and often compare German institutions to those of more liberal
economies, such as the USA or UK (e.g. Hall and Soskice, 2001; Thelen, 2004). The
institutional setting in the two other Germanic apprenticeship systems, Austria and
Switzerland, has been studied to a much lesser extent, despite both countries’apprenticeship
systems being among the three largest in the world.
Austria and Switzerland are two small countries that share a number of similarities,
including the overall importance of its vocational education and training (VET) system,
training curricula, monitoring of training firms, certification for graduated apprentices and
cultural aspects. However, potentially important institutional differences exist regarding
minimum wages for apprentices, public subsidies for training firms and the control of employer
associations. The aim of our paper is to analyse whether institutional between Austria and
Switzerland can explain the observed differences in the costs, benefits and post-training
benefits of apprenticeships from the perspective of a firm. Our data provide comparable
measures for firms in Austria and Switzerland regarding a firm’scostsandbenefitsof
apprenticeship training, retention rates of apprentices and the costs of hiring qualified workers
from the external labour market –parametersparamount to explaining a firm’s willingness to
train apprentices (Becker,1962; Soskice, 1994).Unlike the comparative studiesin the literature,
we explicitly calculate a type of post-training benefit, that is, a firm’s savings from not having
to incur hiring costs for external hires when successfully retaining former apprentices.
We apply nearest-neighbour matching techniques to compare firms in Austria and
Switzerland of similar size that offer training in the same occupation, or occupations viewed
as similar by the relevant employer associations. Thus, we simulate a situation where an
Austrian firm faces the training and labour market environment of a Swiss firm while
holding other factors constant. Our main result shows that an Austrian firm makes on
average a significant net investment of greater than €4,200 per year and apprentice, whereas
a comparable Swiss firm generates a net benefit of €3,400 in the same occupations. We
observe that a different wage structure explains much of this difference in net training costs,
that is, a higher apprentice wage in relation to unskilled and skilled workers’wages.
The relatively high apprentice wage in Austria, however, likely also contributed to the
survival of firm-based apprenticeship training because, in Austria, apprenticeship training
and the school-based VET system (which is fully subsidised by the state) are in direct
competition. Thus, if training firms set apprentice wages at a low level, the outside option
for Austrian apprentices to enrol in school-based VET programmes becomes more
attractive and puts upward pressure on wages to ensure a sufficient supply of suitable
apprentices. Switzerland has school-based VET programmes too, but their limited scope
forces the large majority of apprentices to enrol in dual apprenticeship programmes.
Culpepper (2007) explains this outcome by the strong support for apprenticeships from
Swiss employer associations, that is, their interest in combining traditional apprenticeships
with the possibility of accessing higher education at the tertiary level, whereas in Austria,
particularly large employers favoured a school-based VET system.
Although direct public subsidies are granted to Austrian training firms with the goal of
increasing the supply of apprenticeship positions, we observe that firms can also recoup a
significant part of their net training costs by retaining former apprentices. An Austrian
training firm can generate post-training benefits in the form of saved hiring costs for skilled
workers (opportunity costs), which equals €8,500 on average, or 3.5 months of wages for
skilled workers (compared with 1.1 months for Swiss training firms). Thus, we can show
empirically that the sum of post-training benefits and public subsidies for apprentice wages
cover on average the entire net training costs of an Austrian training firm.
230
EBHRM
7,2
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