The Pay-Off for Firms of Apprenticeships

Robert Lerman is a Professor of Economics at American University and an Institute Fellow at the Urban Institute.

Countries like Germany, Switzerland, and Austria tend to have low youth unemployment rates. They also are known for high-quality training programs — known as apprenticeships — that are run by many of their companies. So why aren't more companies pursuing this path to secure more jobs for youth and develop their human capital? That's a question that Robert Lerman — Professor of Economics at American University and an Institute Fellow at the Urban Institute — recently studied.

Lerman tells the JKP that typically firms worry that they won't be able to recoup all or most of their costs within the apprenticeship period, and after that, their apprentices might move to another firm. But his study shows that most firms gain from the apprentice's contributions to production, reduced turnover and training costs, and greater certainty that all workers have the same high levels of expertise. Moreover, although firms in Germany, for example, don't fully recoup their costs during the apprenticeship periods, they recoup them soon after because a fairly high percentage of those workers stay with the firm.

At this stage, the OECD and the European Union are calling for major expansions of apprenticeship programs — with success no doubt hinging on how well these programs are structured, something the Swiss do extremely well as they manage to combine training with extensive use of apprentices in production.

(For more on the topic, see Lerman’s policy note “Do firms benefit from apprenticeship investments?” For IZA’s World of Labor.)

This post was first published on the Jobs Knowledge Platform.