My presentation on benefits of Investing in Vocational Training for companies delivered during the Workplace Learning session at EDULEARN 2018, Mallorca. Why Apprenticeships deliver results for companies especially SMEs? It also features examples of the German Dual System and its applicability in the 'non-dual' contexts.

1. Session : Workplace Learning
Why Companies Invest in
Vocational Training & Apprenticeships?
EDULEARN18
Pooja Gianchandani
German Chancellor’s Fellow
Alexander Von Humboldt Foundation
02 July 2018, Palma de Mallorca, Spain

2. JOB or CAREER?

3. YET,
• 40% employers are struggling to
fill positions due to a shortage
of skilled workers.
• 192 million youth in working age
group (15 – 25 years) were
unemployed in 2017.
Source : Manpower Group’s Annual talent Shortage Survey 2017

4. Skills Disruption : 35% of skills demanded for jobs will
change by 2020
Source : World Economic Forum, Future of Jobs report Source : Manpower Group’s Annual talent Shortage Survey 2017

5. Apprenticeships make sense – right?
“Systematic, long-term training with alternating periods at the
workplace and in an educational institution or training centre.
The apprentice is contractually linked to the employer and
receives remuneration (wage or allowance). The employer
assumes responsibility for providing the trainee with training
leading to a specific occupation”
CEDEFOP, 2014

6. 6
Every $1 Invested in Skills Development pays back 10
fold in economic growth
(UNESCO)
Who pays for VET and How?
&
Is there a business case for private sector to
invest in Vocational Education & Training?

7. “Investing in Vocational Education & Training (VET) has long
term social and economic benefits for
Industry, Learners and Government”
Research Topic

8. An immersive research experience involving
Qualitative Research
74+ Interviews with
Experts, HR Heads,
Trainers, Social Workers,
Representatives of Trade
Unions, Chambers, Councils
Attended 35 + National &
International workshops,
seminars, training
programmes
Communication
Sustained Communication
based on experience in Indian
market on the German Dual
System through :
▪Articles, Editorials
▪Contribution to Papers
▪Online & Social Media
▪TV Shows like Hunnarbaaz
Practical Experience
Participated in
Apprenticeships immersion
in Retail sector
Observed Qualification
development process for e-
commerce trade

9. Finance flows for VET in conventional, fragmented
markets :
Private training markets:
- Offered either by firms or
training service provider.
- Immediate needs of the
companies, mostly pre-
employment / entry level
courses
- Non-subsidized, Fee based,
- Competitive
Public training markets:
- Offered at public training
institutions.
- Structured, pre-employment
training largely for formal sector
- Financed by Government
allocations , nominal fee
- Low linkages between training
and job market.
Source : IZA Policy Paper No. 110, April 2016

10. Conventional financing frameworks have become inadequate,
obsolete & outmoded
Demand driven, Private Sector led Supply driven, Public Sector led
(work-based learning)
(outsourced training)
Private Training
Institutions
Students,
Trainees,
Workers
Enterprises
Course Fee
Course Fee
LowWages
Government
Public Training
Institutions
Enterprises
Donors
Students,
Trainees,
Workers
Nominal fees
Course Fee
Source : IZA Policy Paper No. 110, April 2016

11. Co-funding VET is an advantage for both Public & Private sector
Demand driven,
Private Sector led
Supply driven,
Public Sector led
(work-based learning)
(outsourced training)
Private Training
Institutions
Students,
Trainees,
Workers
Enterprises
Course Fee
Course Fee
LowWages
Government
Public Training
Institutions
Enterprises Donors
Students,
Trainees,
Workers
Nominal fees
Course Fee
Co-Funded by
Public & Private sector
Enterprises Government
Training
Mechanism
Students,
Trainees,
Workers
CareerServices
Contract

12. 12
“The Dual Systems (German & Swiss) offer a case of
Companies & Government Co-Investing in VET at a systemic
level”
Dual Track VET

13. Dual VET puts Industry in the drivers seat – How?
70% of VET in Company 30% of VET in vocational school
In-company training:
• Legal basis : Training contract
• Company pays trainee a
"training allowance"
• Company provides systematic
training under real-life working
conditions
• All training related expenses
financed by company
Vocational school education:
• Legal basis: compulsory
education law
• Vocational schools offer lessons
in vocational (2/3) and general
education (1/3)
• Course Fees, Facilities,
teachers, raw material etc.
financed by local Government
Approx. duration of Dual VET: 2 – 3.5 years
Source : GOVET, Ministry of Education & Research, Germany

14. • Contribute €7.7bn (= overall net cost of Dual
VET; gross cost = € 25.6bn)
• Hire 66% of Dual VET trainees as employees
after training
• Invest on average €18,000 per apprentice per
year (62% of which is training allowance).
• Recurring expenditure for Dual
VET: €5.4 bn
• €2.9bn for 1,600 public vocational
schools providing part-time VET
• €2.5bn for steering, monitoring and
further supporting measures.
Source: BIBB Datenreport zum Berufsbildungsbericht (2017)
GovernmentEmployers
Apprentices
• Receive a monthly training allowance of
~ 854 € gross per month (2016)
• Attend vocational schools free of charge
• Incur opportunity costs
How are costs in the German dual system shared?

15. Apprentices’
benefits
(~ 62 %)
Training allowance
Social benefits
Fringe benefits
Salaries of trainers
(~ 23 %)
Full-time trainers
Part-time trainers
External trainers
Gross costs
Chamber/examination
fees
Other costs
(~ 10 %)
Training documents/
media
Protective gear
Administration
External training
Equipment
(~ 5 %)
Training workshops
In-company lessons
Workplace (Tools,
machinery,
materials)
Productive
contributions during
apprenticeship
50% simple tasks
→ Savings for unskilled or
semi-skilled staff
47% skilled tasks
→ Savings for skilled staff
Benefits
~ 1,5 % production in
training workshops
~1,5 % public subsidies
During apprenticeship
(short term)
Cost – Benefit for Companies of Investing in VET
Source: Kosten und Nutzen der Dualen Ausbildung aus Sicht der Betriebe.
Ergebnisse der fünften BIBB-Kosten-Nutzen-Erhebung, 2016

16. → 11.352 € = average net costs in 3 year apprenticeships
Net costs decline
Productivity of apprentices
increases
Development of costs over a three year training period
Source: BIBB Datenreport zum Berufsbildungsbericht (2017)

17. Roughly one third of companies achieve
a net benefit already during the apprenticeship
Profession Gross costs
Productive
contributions
Net costs
Duration
in years
Average 17.933 € 12.535 € 5.398 € 2 - 3,5
IT specialist 20.562 € 15.074 € 5.488 € 3
Auto mechatronic 14.327 € 9.733 € 4.595 € 3,5
Electrician 12.358 € 13.721 € -1.363 € 3,5
Retail salesperson 16.923 € 13.997 € 2.926 € 3
Hotel manager(ess) 13.411 € 13.839 € - 428 € 3
Gardener 13.959 € 11.956 € 2.002 € 3
Baker 12.572 € 15.818 € - 3.246 € 3
Sectoral examples of Costs/Benefits
Source: BIBB Datenreport zum Berufsbildungsbericht (2017)

18. 18
In Summary :

19. Motivations of Companies to Invest in Vocational Training :
Production motive: Companies train mainly because they want to benefit from
the apprentices’ productive contribution (Lindley, 1975)
Investment motive: Companies train because they want to retain the apprentices
after training and ensure the skills of future employees
(Merrilees, 1983)
Screening motive: Companies use the training period to observe the
apprentices and choose the best for retention (Stevens, 1994)
Social responsibility: Companies train because they want to give young people the
possibility to integrate in the labor market (e.g. Beicht et al,
2004)
Reputation motive: Companies expect that clients, potential employees, and
suppliers have a better image of the firm when they train (e.g.
Niederalt, 2004)
Source: BIBB paper on Cost – Benefit of Dual System

20. Considerations in ‘non-dual’ contexts
• Engaging Small & Medium Enterprises (SMEs)
• Engaging entrepreneurs and micro SMEs from informal sector
• VET for workers of Gig economy
• Integrated funding models – incentivizing private sector
participation
• Challenges of Scale – esp Africa, Asia, Latin America
• Are Apprenticeships aspirational ?

22. www.twitter.com/theskillspundit
www.theskillspundit.com
pooja@atomadvisory.in
Let´s Connect
www.youtube.com/poojagianchandani