July 23, 2015

Are apprenticeship systems the solution to youth unemployment crises?

Currently, global youth unemployment levels are incredibly high—50% in Greece and Spain, 40% in Italy, 16% in the UK, 12% in the US. Business leaders and policymakers need to look for new methods to combat such high levels of unemployment within the youth population to prevent a “lost generation” of unskilled, unexperienced young people facing a long struggle to enter the labor market.

The lowest percentage of young people not in education, work or training is in Germany where unemployment in their 16-24 age category is below 8%. This is impressive considering that some of their European neighbors cannot provide jobs for half of their youth population.

How has Germany recession-proofed their labor force, and kept youth employment at over 90% despite the struggles across Europe? The answer arguably lies with their robust and highly successful apprenticeship schemes.

Nearly two-thirds of young Germans enter into apprenticeships once they leave full-time education, which provides excellent on the job training and sets them up with a job for life—nine out of ten young trainees get a permanent job at the end, with others being offered shorter-term contracts. The vocational training schemes are delivered after close consultation between employers, educators, and the government, who shoulder a share of the cost, making the schemes even more appealing to future employers.

Germany’s commitment to investing in the skilled labor force of the future has continued despite periods of economic turmoil besetting the Eurozone, including the "flat-lining" of the European economy.

In the US, Starbucks CEO Howard Schultz is tackling youth unemployment by offering 100,000 apprenticeships through participating in a new scheme entitled “Opportunity 100,000.” This initiative is committed to helping young people develop the skills needed to progress to better, higher paid positions as their career progresses, thus it is a sustainable long-term vision.

This is one example of how governments can learn from the German system; education and training infrastructure needs to prepare young people for the jobs of the future, offering high school students the choice between higher-education or a well-organized and government endorsed vocational track.

Bill George of Harvard Business School says: “If we can train people for skilled jobs in computer graphics and programming, skilled trades like electricians and carpenters, or running complex machines, companies can and should pay them much more for their efforts. In doing so, they can fill many of the four million vacant jobs companies report having.”

Thus, apprenticeships can not only successfully bring millions of out-of-work young people into the labor force, but these schemes can be tailored to fill vacant positions, create a more highly-skilled workforce, and start to heal the economy.

IZA World of Labor author Robert Lerman writes in his article, on the benefits of apprenticeships, that “The apprentice’s contribution to production is large enough to offset most costs to firms,” therefore vocational training for young people benefits both the youth population and businesses.

Lerman adds that, “By retaining most apprentices, firms benefit substantially from low recruitment and training costs.”

Policies which enable an increase in vocational training for the current “at risk youth” population would cannot be implemented successfully without the buy-in of large businesses and industries. Gaining commitment from business leaders is essential, and the evidence demonstrating positive effects upon businesses, the economy, and the workers of the future, should be instrumental in persuading stakeholders from multiple sectors that German-style apprentice systems could be the answer to current and future youth unemployment crises.

Learn more about Howard Schultz and Opportunity 100,000 here.

Read Robert Lerman's article Do firms benefit from apprenticeship investments? here.

More IZA World of Labor articles on education and training are available here.