Apprenticeships: a public option

Apprenticeships raise the labour-market entry level for young people—but they need to be available in bad times as well as good.

As countries across the globe have been easing lockdown measures, the economic consequences of Covid-19 are gaining increasing attention from policy-makers, alongside health issues. Major economic institutions predict a sharp contraction of the economy and young people are set to be among those most severely affected.

Those who plan to enrol in—or return to—higher education might not be able to enjoy for some time the full university experience, as some distancing rules are likely to still be in place across European universities at the start of the next academic year. But this disruption may well be relatively minor compared with the challenges Covid-19 poses to those young people who plan to embark on vocational training—particularly if this depends on firms’ willingness to offer apprenticeships.

Sobering moment

Economic crises offer a sobering moment to reassess the viability of the apprenticeship model common to several continental-European and Scandinavian countries, which policy-makers elsewhere in Europe often try to replicate. Granted, the model offers unique advantages. Training is broad and deep. The involvement of trade unions and employer associations in the design of curricula and delivery of training ensures the skills taught are broad enough for workers to move between jobs within a sector but are also highly relevant for individual firms. And the fact that firms decide which apprenticeships to offer is a further guarantee that training takes place in occupations in demand.

However, this crisis also unveils a weakness of the model—its cyclical nature. It is well-established that the willingness of firms to train goes hand in hand with the economic environment: when an economic crisis hits, an apprenticeship crisis—in which demand for apprenticeships far outstrips supply—often follows. Apprenticeship crises have social consequences, via rising rates of youth unemployment and of young people not in employment, education or training (NEETs). These come with several worrying correlates and disproportionately affect already disadvantaged groups, such as the lower-skilled and migrants.

Several countries have dealt with crises of the apprenticeship market during downturns over the last two decades. Policy responses to past crises offer interesting insights—notably, that an inclusive system can provide high-quality training to young people who fail to land an apprenticeship. Austria has been particularly successful at designing such a system.

Supra-company apprenticeships

Against the backdrop of a protracted apprenticeship crisis, which started in the late 1990s, Austrian labour organisations successfully lobbied for a system of supra-company apprenticeships, which was eventually institutionalised in 2008. This runs in parallel with the traditional apprenticeship system and caters for young people—often from disadvantaged backgrounds—who have not secured an apprenticeship. The supra-company system combines school-based and practical training but the latter takes place not in-firm but in workshops managed between the unions and the public employment service. Trainees can cross over into regular apprenticeships or finish their training in the alternative system.

Crucially, training in supra-company apprenticeships last as long as in regular apprenticeships and upon completion trainees from both systems are awarded the same qualifications. A tripartite council, comprising representatives of unions, employers and the employment service, decides on the training to be offered at the local level. This ensures that curricula are in line with labour-market demands, while the public setting gives unions the confidence of oversight that training is delivered to high standards.

As a result, despite their initial opposition, firms have come to appreciate graduates of the supra-company system. Next to its quality, the system displays a second crucial virtue: it is counter-cyclical, given that the offer of training places is not decided upon by firms but by the public sector and it can therefore be decoupled from the economic context as indicated in the chart below. While the number of regular apprenticeships declined from 2009 to 2017, the number of supra-company apprenticeships first increased and then remained high in the context of rising unemployment. Only when the Austrian economy started recovering after 2016, and companies resumed hiring regular apprentices, could the participant numbers in the public option be reduced.

Now it seems about time to expand the public option again. Indeed, at the peak of the Covid-19 crisis and with youth unemployment jumping from 8 per cent in February to almost 13 per cent in April, Austrian labour organisations called for a doubling of the number of training slots to be offered via the supra-company system.

Through its high-quality and counter-cyclical nature, the Austrian system is therefore able to endow young people with valuable skills, including in times of downturn. Conversely, if alternatives are of poor quality and do not directly lead to certifications valued by employers—as with the pre-vocational measures which are part of the so-called transition system in Germany—apprenticeship crises may well turn into social crises, given that an increasing share of young people receive training of little future value. The Austrian system ensures that young people whose only fault is to enter the labour market right after a downturn are not punished by poorer quality training or a prolongation of their school-to-work transition.

Reasons for hope

The Austrian example offers reasons for hope. The apprenticeship model is notoriously hard to replicate, as it depends to a large extent on tight co-ordination on the side of firms—in turn the product of an institutional infrastructure which is lacking in several countries and difficult to build from scratch. A system of supra-company apprenticeships, on the other hand, does not need buy-in from individual firms to succeed. Its success lies in combining social partners’ proximity with the labour market, to ensure that training is relevant and of high quality, with government provision of an appropriate physical and financial infrastructure: equipment, training workshops and salaries for trainees.

Governments, employers and unions should have a strong interest in this policy option. It promotes social inclusion among young people by investing in their skills. Firms can benefit from a larger pool of skilled workers. And, for unions, it not only contributes to a smoother school-to-work transition for young people but also provides an opportunity to recruit young members—who can otherwise be difficult to unionise in today’s labour-market conditions.