The economics of vocational education and training from the perspective of the firm

With more than half of a cohort of Swiss pupils who exit compulsory schooling enrolling in a dual apprenticeship program each year, this type of education is the most widely applied approach to prepare young adults for the work force in Switzerland. Unfortunately, despite the fact that an apprentice will spend the majority of the training program within a firm, a fundamental focus of economic analysis has been long neglected - the economics of apprenticeship training from the perspective of the firm. Chapter 2 discusses the dual apprenticeship system in Switzerland. In addition, relevant economic theories that can be used to analyze issues that arise in the dual vocational education and training context are discussed in some detail. Chapter 3 explains in detail the methodology of the cost-benefit surveys, which constitute the data base for this thesis, and also provides descriptive statistics of the overall cost and benefit of apprenticeship training, as well their sub-components. In chapter 4, the expected net costs of training are estimated for training and non-training firms based on observable and unobservable factors, using maximum-likelihood selection models. The results show that expected net costs of training are an important determinant of the firm’s decision to offer apprenticeships. Chapter 5 analyzes the firm’s demand for apprentices with respect to the expected net cost of training. Parametric and semiparametric estimation methods are used to account for the possibility of simultaneity and sample selection problems that can arise in order to identify a demand function. Chapter 6 examines the firm’s likelihood in providing apprenticeship training in dense local labor markets, where there may be a high probability that workers can be poached by other firms after training. The analysis uses an innovative definition of regional labor markets for Switzerland, which are defined based on travel time rather than travel distance or political borders. Finally, chapter 7 compares the cost-benefit situations from the perspective of the firm in both Germany and Switzerland. Despite the fact that the two training systems are rather similar, previous analyses based on aggregate data have shown that the net costs of training apprentices are substantially higher in Germany than in Switzerland. The reasons for these differences will be analyzed by applying econometric matching models to simulate changes in important parameters with respect to the costs and benefits of apprenticeship training.