Vocational Lessons from Germany and France

Together with countries such as Switzerland or Austria, Germany is usually praised for its model of vocational training (or apprenticeship). Some would say the best evidence is Germany’s low youth unemployment rate of just above 6 percent. Others would argue that this number can be also explained by Germany’s aging population, but this merely provides extra incentive for companies to secure a supply of qualified future employees through vocational training.

On the other side of the Rhine, France – with a youth unemployment rate of 22 percent – has long known that its vocational training system needs fixing. A new government reform has generated lots of publicity but on closer inspection appears to be quite timid, carefully refraining from changing anything fundamental in the traditional French model.

A comparison between these two great European economies may provide useful lessons for countries that want to establish or improve their own vocational training systems. The goal is to build economies that are more dynamic, innovative and youth-inclusive.

Dual system

Germany is known for its “dual system” of vocational training: for two days a week, trainees attend classes in a vocational school (spending about a third of their time on general education and two thirds on technical theory for their jobs), then gain hands-on experience by spending the other three days at a business, for a duration of three years on average. More than half of all young people follow this path, which is deeply embedded in a culture that still prizes practical work (as opposed to “purely theoretical” education).

Such on-the-job training is designed to teach responsibility, problem-solving, and a spirit of initiative – summed up in the German term Handlungskompetenz, or “competence in action.” This approach turns apprentices into highly skilled workers and is integral to Germany’s top-notch standards in manufacturing and services – the key to its export-led economic model.

German vocational training is thus not a “sideline” for failing or difficult students. The model involves a tracking system that begins rather early (when pupils are about 12 years old) but remains quite flexible, since it is possible to switch tracks and return to general education. Each year, roughly 1.5 million young Germans choose the vocational track, or 48 percent of all pupils in the second stage of secondary schooling in 2014. About 55 percent of young people aged 16-24 had chosen vocational training in 2012, while more than half of the German workforce holds a vocational degree. On average, about two-thirds of trainees get jobs at the companies that trained them. This makes German vocational training virtually a preemployment system.

After primary school, pupils and their families can choose between three tracks, partially depending on school results. Gymnasium is the general, nonprofessional track leading to a traditional A-level degree (Abitur) and university. Only about a third primary school graduates choose this path. More than 40 percent go to a Realschule, which can lead to vocational training, professional schools or the second cycle of Gymnasium, depending on the individual pupil’s results. And less than a fourth of primary school leavers go to a Hauptschule (usually with an inferior academic reputation and level), which leads to vocational training.

Working together

The German system is largely the product of a 1969 law on vocational training and appears to be based on a kind of “harmonized” decentralization. It is harmonized in the sense that employers, trade unions, states (Laender) and the federal government work together through industry-wide commissions within the Federal Institute for Vocational Training (Bundesinstitut fuer Berufsbildung, or BiBB). This allows standardization of content, practices, curricula and professional qualifications at the federal level. Each entity has very specific and clear competencies and detailed statistical documentation is produced – an essential tool for evaluation and adjustment to ensure training programs remain efficient.

Also important here is the German tradition of building consensus between employers and unions, whether at the company, industry or national level. Shared standards ensure that apprentice training is not confined to the narrow context of a single company’s needs, but encompasses an entire trade (one of about 330 covering most sectors of the economy). This increases the mobility of trained employees between companies, enhancing their usefulness to the whole industry and the national economy.

Subsidiarity rules

The whole system is inspired by another traditional German principle: subsidiarity. Stakeholders closest to the ground are the ones most involved in decision-making. The BiBB is the system’s hub, but the Laender are left in charge of implementing national policy and managing vocational schools (these Berufsschule cost taxpayers about 2,200 euros a year per trainee in the early 2010s). Regional business chambers are responsible for certifying company training programs.

Perhaps the crucial element of the German system is how it assigns direct responsibilities to the companies themselves. In terms of education, firms plan and organize the training, set the number of apprentices and handle the financing. Company-paid costs per trainee averaged 17,933 euros in 2014, 61 percent of which went to apprentice salaries (an average 975 euros per month). Other costs included trainer salaries (23 percent) and equipment (5 percent).

Apprentices comprise anywhere from 4.7 percent to 6.3 percent of the German workforce, depending on the specific industry. About 60 percent are employed in the service sector. Companies of all sizes hire trainees, but large companies (80 percent) are much more likely to do so than small ones (20 percent).

The subsidiarity principle has a certain built-in flexibility for responding to needs. Groups of companies can create an association (Ausbildungsverein) to hire and share apprentices. A company can send one of its apprentices to train at a partner company and share the cost (Leitbetrieb mit Partnerbetrieben). Training consortia (Ausbildungskonsortium) enable trainees to experience training at several companies. The outcome of this sharing is a broad diffusion of know-how and skills, which helps German companies keep up to date and prepares them for innovation.

All this explains why Germany, like Switzerland, is held up as a model and benchmark for vocational training in the rest of the world. France could also benefit from its example.

Not elite

French vocational training has traditionally been embedded in an elitist vision of education. The prescribed model of a general education is set forth in the official goal of having 100 percent of pupils pass their A-level examinations and 80 percent achieve a university degree. In this context, vocational training – at least in the context of secondary education – has come to be regarded as a voie de garage(sideline) for pupils who fail in the general education system. Pupils shunted into the “professional high school” apprenticeship track are usually those considered to lack the skills to make it elsewhere.

For more than a generation, this view has been reinforced by the policy of uniform schooling for the first four years of secondary education (ages 11-14). In practice, this means discarding any serious vocational training before the age of 15 or 16, reducing pupils’ freedom to choose their career paths and breeding frustration.

The biggest chunk (660,000 each year) end up attending professional high schools managed by the Ministry of National Education. These institutions are quite remote from the business world; consequently, their vocational track lacks the on-the-job training needed to provide almost certain employment at the end. Another 400,000 (about one-third the German total) are given hands-on instruction at companies under the supervision of the Apprentice Training Centers (CFA); however, most of these apprenticeships are in the less-skilled trades.

Tax this

The French system is inherently centralized. Instead of putting employers at the center, like the German system, companies follow the lead of the government, the national education system and the CFAs. Rather than having companies pay directly for their trainees, a labyrinthine system of indirect financing has been devised.

All companies must pay a vocational training tax (taxe d’apprentissage) amounting to 0.5 percent of their payroll, along with two other contributions. Together, these cover half the cost of the system, with the rest being paid by the general taxpayer. Most of the revenue from these levies (2.9 billion euros in 2016) is then redistributed back to companies by a complex, variable formula. From the employer’s point of view, this makes the financing of trainees uncertain. Combined with their general lack of empowerment, firms have little incentive to develop serious, sustainable training strategies. Indeed, most companies participating in the program are small businesses or even individual artisans.

In administrative terms, the system is also needlessly complex. Vocational training comes under the purview of three different ministries, with the overlapping responsibilities, redundancy and lack of accountability – all of which increase costs. The financing system is inefficient because there are too many intermediaries. Data are not tracked properly, and would be difficult to interpret in any case given the variety of subsidies, deductions and tax credits that are used to compensate companies for the vocational training tax.

All told, the annual cost of a trainee to French companies is about 8,000 euros a year in direct wages and 7,000 euros in taxes. Vocational training costs average about 2.6 percent of company payrolls, which is much higher than the European average. On balance, French trainees usually cost more than their German counterparts, though their average length of contract is much shorter (1.7 versus 3 years in Germany). It was thus high time for the French government to reform the system, which it did earlier this year.

Superficial reform

The May 2018 reform was intended to fine-tune the existing system. The CFAs were given more flexibility to devise training programs and receive financing on a contract basis. Companies will have an easier time terminating contracts with trainees, without having to go to labor court to settle the matter. These legal cases were costly and acted as a disincentive to hire trainees. Businesses and industry associations will also have more say in designing training programs, while the tax and subsidy funding system will be simplified.

As for trainees, they will benefit from a wage increase of 30 euros per month and a special 500-euro subsidy to help defray the costs of acquiring a driver’s license. However, the Ministry of National Education’s dominant position remains untouched, and it will stay in charge of the 660,000 pupils enrolled in professional high schools. This means that genuine apprenticeship programs will still take a back seat to general education, since the two tracks have not been merged in favor of the latter.

Possible scenarios

Two scenarios can be inferred from the French situation. The first is rather optimistic. More incentives for companies and trainees should increase the number of contracts, simplification of taxes and subsidies should introduce more transparency, and giving the CFA and industry associations more say should improve efficiency. Inserting these elements of flexibility into the system may well bring positive outcomes. If so, the youth unemployment rate should decline and more young people in France should contribute to innovation, competitiveness and economic growth in their country.

A second, more pessimistic scenario focuses on the consequences of the reform’s flaws. A sectoral rather than regional model has been followed, which minimizes the involvement of local groups and could accentuate the role of the trade unions, which do not always seek consensus. More important, the complicated “tax-and-redistribute” system of financing has been marginally simplified when it should have been scrapped. Incentives for businesses will not really change that much, while some smaller companies may even pay higher taxes.

Secondly, the vocational training system did not undergo a profound restructuring to put companies first. Its core remains the national educational system, not private employers. Experts see this as a fundamental error that will keep hundreds of thousands of young French people from finding jobs. Only 35 percent of the graduates of professional high schools managed by the Ministry of National Education are hired within seven months of getting their diplomas, as opposed to 77 percent of those completing CFA apprenticeships.

The long-term implications of these figures are dire for France’s ability to create jobs, innovate and compete in world markets. This suggests its social and economic situation will continue to worsen.

Emmanuel Martin is the General Manager of the French MOOC project “École de la liberté.”

The views expressed on AustrianCenter.com are not necessarily those of the Austrian Economics Center.
2019-01-14T05:45:54+00:00