Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
After the financial implosion of the past half decade, along with relative stagnation of the U.S. economy ex housing bubble since the early ’00s, many are looking at Germany as a compelling mix of private enterprise, government, and worker i.e. a more balanced form of “capitalism”. Unlike U.S. corporations, large German companies have labor represented on their corporate boards. Unions in the private sector still are viable entities as they have a vested interest in long term success of companies. After the integration of East and West Germany a lot of very difficult labor reforms took place, and German wages have adjusted downward to compete globally. Obviously the country has a benefit from the “lower than it would if Germany was independent” currency, but Germany seems to be doing a lot of things right economically. One area is in unemployment where the German rate has been below America’s for quite some time. This was highlighted in 2010 when I asked if we could dare to learn anything [Oct 1, 2010: German Unemployment Down to 7.2% after Peaking at 8.7%; Can we Learn Anything?]
BusinessWeek takes a closer look at one intriguing part of the German model: German style vocational apprenticeships. Would they ever be accepted in the U.S.? Most likely not – at least in the current environment – where corporations would push back against the added cost (and regulation), and the view on businesses are more as independent global entities rather than part of American society. That said, I have read of a few individual companies starting small pilot programs of this type but nothing large scale.
Either way, it’s an interesting question to ask if they would benefit the society as a whole versus the current system of students taking on enormous debt for “going nowhere” degrees, concurrent with corporations complaining of a lack of applicable skills in the workforce. In a perfect “free market” students should be figuring out on their own what those skill sets are that are needed in the U.S. corporate world and putting themselves into those type of educational programs to benefit – but there seems to be a disconnect somewhere in the chain. Since the Germany model has education designed by industry rather than “the ivory tower set” there is a lot to be said for this form of training, and a substantial benefit to companies. But certainly someone has to pay the cost of it. It also puts to question the larger system in the U.S. – should large business care about the domestic economy at all or is it simply profit at all cost with little worry about the impact of a local economy? With a global labor pool these questions are much more important than they would have been 50 years ago where business was much more tied to the country they were located in.
- In a world of high youth unemployment, where the supply of skilled labor often fails to match employer demand, Germany believes help can be found in its Dual Vocational Training System (TVET)—a time-tested economic model now incorporated into the Federal Republic’s law. This program, many supporters believe, is the reason why Germany has the lowest jobless rate among young people of any industrialized nation in the world—around 7 percent or 8 percent. With so many Americans struggling to find employment after graduating high school and college it might be worth asking: Can the German approach be brought to the U.S.?
- The German concept is simple: After students complete their mandatory years of schooling, usually around age 18, they apply to a private company for a two or three year training contract. If accepted, the government supplements the trainee’s on-the-job learning with more broad-based education in his or her field of choice at a publicly funded vocational school.
- Usually, trainees spend three to four days at work and one to two in the classroom. At the end, the theory goes, they come out with both practical and technical skills to compete in a global market, along with a good overall perspective on the nature of their profession.
- They also receive a state certificate for passing company exams, designed and administred by industry groups—a credential that allows transfer to similarly oriented businesses should the training company not retain them beyond the initial contract.
- The advantages are clear. TVET ensures there’s a job ready for every young person enrolled in vocational school, because no one is admitted unless an employer has already offered a training contract. No job offer, no admission. In this way, there is less risk of heartbreak when years of hard work in university go unrewarded by an unforgiving market. Students also know what they’re getting before the first day of class. This contrasts with the U.S., where many young individuals take on exorbitant amounts of debt to attend college and grad school, only to find no placement on the other end
- But the apprenticeship model faces significant obstacles in the U.S. “Thus far, the U.S. corporate sector does not see technical and vocational training as one of its key responsibilities,” says Andreas Koenig, Head of Section, Vocational Training & Labour Markets at the Economic Development & Employment Department in Germany. “It is therefore not yet ready to invest in technical and vocational education and training that goes beyond a few weeks of induction or learning on the job.”
- Indeed, a need to change the culture of the industrialized world is a point Koenig and his colleagues made repeatedly during a presentation of the TVET model at the German Mission to the U.N. in New York last week. To create an effective system, many advanced nations must lose the stigma attached to vocational and technical school as a fallback for those who have failed in higher education. Rather, the training system should be embraced because it works, as the German youth unemployment rate shows.
- Also standing in the way of the dual system’s acceptance is the antiregulatory fervor shared by many American corporations. As Yorck Sievers from the German Chambers of Industry and Commerce points out, efforts of private industry must be harmonized to fund and make the system effective. Companies would have to accept state oversight of training, which generates overhead expenses.
- But to proponents, the immediate cost pays for itself in the form of a more skilled economy. “German VET builds competence and real ability in blue and in white collar jobs,” writes Sievers, who says the trainees benefit from their acquired technical abilities in a globalized market economy. “They find jobs easier these days, get paid better, and work under much better conditions.”
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