Can German apprenticeships fix Spain’s youth job crisis?

German-style apprenticeships are touted as a solution to widespread youth unemployment in Spain and other southern European countries. It is certainly a good idea for European countries to learn from each other. However, there is no one-size-fits-all solution.

Spain has a youth job crisis – although reports that half of Spanish young people are looking for jobs paint a misleading picture. A more accurate reading suggests that 20% of young Spaniards are not in education, employment or training. The corresponding rate for Germany is a more manageable 8%.

Nor is youth unemployment the sole result of the euro crisis, as is sometimes suggested. Europe’s youth employment statistics started to deteriorate around the turn of the millennium. And the persistence of youth unemployment in many EU countries – Spanish youth unemployment, for example, was worryingly high even during the good years – implies that growth alone will not fix the problem. Deeper reforms are needed.

No reform is more popular at the moment than the introduction of German-style apprenticeship systems. Germans refer to their system as a dual education system because it combines schooling (at least one full day a week) with on-the-job training. Over a quarter of German companies train apprentices towards a range of standardized qualifications. Costs are shared between business and government. Since apprenticeships usually last three years, the companies benefit from the contribution of their young workers once they get the hang of their task.

The focus on apprenticeships is relatively new. Not too long ago, European politicians wanted to see an ever-growing share of each generation go to university. But although unemployment rates among graduates tend to be much lower than those for people with lesser education, a university diploma is no longer a job guarantee. In Spain, 40% of thirtysomethings have a university degree today. Yet one in six of the more recent graduates cannot find a job. Spain still has a lot of low-skilled jobs in services such as construction and tourism, where a degree is not an advantage.

Many employers would prefer a well-trained apprentice to an overqualified graduate. But Spain’s apprenticeship system does not seem to deliver. According to a recent McKinsey study, the transition from education to employment works most smoothly if:

• Educators and employers work together continuously and closely
• Education and work are not distinct phases of life but people work and study at the same time
• Companies take an active interest in the education of young people they have hired or intend to hire

On all counts, the Spanish system can be improved. Vocational education takes place almost exclusively in schools, with only a tiny bit of on-the-job training towards the end of the typical two-year degree. Firms are not much involved in writing training curricula, or indeed in paying for the courses. Some firms offer so-called training contracts that involve workplace training but these are not officially recognized. There is no coherent quality assessment of the whole process.

While in Germany people with vocational training have much better chances of getting a job than those with general secondary education, this does not hold for Spain. Moreover, Germany is the only country where, according to the McKinsey survey, vocational degrees are held in as high regard as university ones.

Since companies and young workers in Spain consider the vocational track as unpromising, it is perhaps no wonder that the country has one of the lowest participation rates in vocational training in the OECD.

The European Commission has launched an Alliance for Apprenticeships to help EU countries learn from each other. And Germany has set up a centre (called BIBB with its German acronym) that helps Spain and other countries build dual education systems.

Although Spain and other countries are right to study the German success, there are many features that are not easily replicated and others that are not worth copying.

One reason why youth unemployment in Germany is so low is demographics: because of persistently low birth rates, fewer young Germans are entering the labour market. This might alleviate labour market pressures today but it will put a huge burden on the economy and social security in the future.

Another reason for the success of Germany’s apprenticeship system is, curiously, red tape. While Spain is under much pressure to deregulate its labour market, Germany’s dual education system relies on a thick web of regulation. More than 300 professions are accessible only to people with formal qualifications. In other words, no apprenticeship, no job. Such entry regulations have some benefits as they push up general skill levels, which in turn make it easier for young workers to switch jobs later. But they also make labour markets more rigid and prevent innovation.

The heavy reliance of Germany’s dual education system on company-based training also involves risks. Historically, companies in manufacturing and traditional services trained most apprentices. While these sectors have been shrinking, fast-growing sectors such as IT or social services have created far fewer places for on-the-job training. This is one reason why the share of students who get vocational training has fallen from 80% in 1995 to less than half in 2011.

Vocational degrees make it easier to enter the labour market. But they do not necessarily guarantee a great career. Research shows that as workers get on in life, a general education can provide a better insulation against unemployment. The reason is probably that in a fast-changing labour market and technological environment, those with general skills are more adaptable (and seen to be so) than those with narrowly focused technical skills.

Finally, it is not clear whether apprenticeships are the right way to ensure that young people find employment. Globalization and technological change are causing a bifurcation of the labour market into highly skilled, well-heeled professionals and low or unskilled workers who earn little. That trend is more pronounced among young people than among older workers. In other words, already, the share of young people working in low-skilled jobs is rising very fast, and there is also a rise, although less pronounced, in highly qualified technical or knowledge jobs. Mid-skilled jobs – of the kind that vocational training is needed for – are shrinking fast.

There is no doubt that close cooperation between employers and educators will be needed to alleviate Spain’s long-standing youth job crisis. The government needs to rethink its part too (for example, Spain tends to subsidize jobs for young workers, rather than invest in training). Germany, with its still well-functioning and long-established apprenticeships system, can certainly offer advice and help. But it cannot offer a panacea.

Author: Katinka Barysch is Director of Political Relations, Allianz SE, Germany. She is also a World Economic Forum Young Global Leader. The views expressed here are her own.

Image: People wait to enter a government-run employment office in Madrid REUTERS/Susana Vera