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Apprenticeships key to reducing youth unemployment

  • Firms should be obliged to take on apprenticeships in proportion to their size, report argues
  • Longer training periods would result in better qualified young people and lower youth unemployment
  • Lessons from German industry show need for longer-term investment in people and products

Youth unemployment could be drastically reduced if businesses were obliged to employ a certain number of apprentices in relation to their size, a new Civitas report urges.

British firms employ apprenticeships equivalent to less than 1% of their workforce, compared with about 5% in Germany. German apprenticeships are also three times as long in duration, on average.

The result for Germany is a better skilled workforce, higher productivity and lower youth unemployment, which has been running at less than half the rate of that in the UK in recent years.

The analysis comes in a detailed study by businessman Christopher Simpson, who has worked with major German companies since the 1960s and is now a leading analyst of that country’s economy.

He argues that the training of industrial apprentices, which has traditionally been much more highly valued in Germany than the UK, has a direct impact on economic performance and international competitiveness.

Simpson recommends:

  • Obliging all businesses to accept responsibility for the training of young people in relation to their size

Although there is no direct obligation in Germany (except in the construction industry), in practice the majority of companies accept a number of apprentices proportionate to their size. Usually this is equivalent to about 5% of the workforce for medium and larger firms – though some employ many more – and at least one apprentice for the smallest businesses.

“This is in stark contrast to the UK and provides a ‘level playing field’ with all companies exercising their responsibility, rather than a situation where cynical companies just poach skilled personnel from others having made no contribution themselves,” Simpson writes.

Britain has only one apprentice for every 104 employees, compared with Germany which has one for every 22 employees, figures from the UK Sector Skills Development Agency show.

  • Reducing pay for people in training so that they are more affordable to companies

German apprentices earn only about three-quarters of that of their British counterparts, meaning that German firms are more willing to employ them.

Simpson writes: “There is a strong argument that in the UK, the result of external pressures, driving up pay, has priced many potential apprentices out of the market.”

  • Extending the duration of apprenticeships

The average duration in the UK is one year, compared with three in Germany. “As a reflection of the quality and duration of the training provided, young German people come out of their training period significantly better qualified,” he says.

As a result, youth unemployment has consistently been much lower in Germany than in the UK and other nations. While it has been running at more than 20% in the UK in recent years, according to Eurostat, the equivalent figure for Germany has been under 10%.

“A further outcome of Germany producing a higher number of skilled young people is that youth unemployment is very low. This is most important from a wider social perspective and has obvious further consequences in terms of crime rates and social security costs,” Simpson writes.

In ‘The Environment for Business in Germany: A commentary’, he calls for radical change in the UK’s approach to the economy and industry which faces up to the long-term damage of its huge current account deficit, low levels of investment and declining productivity.

“Clearly it is not possible to consider transferring elements of the German economic and industrial structures without taking into account the culture and history that have allowed these to develop; and some certainly cannot easily be emulated,” he writes.

“But there are areas of opportunity where practices could be reformed and wider acceptance secured within all areas of the political, educational and media establishments, as well as wider society, that manufacturing is vital to the future of a modern economy.”

He identifies chronic short-termism as the fundamental problem facing the British economy and a failure to judge profitability over a sensible timescale. This is underlined by the “malign influence” of sections of the UK’s large finance sector, particularly through leveraged buyouts.

“Effectively the growth of financial services has resulted in the decimation of British industry,” he argues.

“It is not just the trading aspects that do so much damage; the whole of the predatory mergers and acquisitions business is predicated on selling short term with total disregard for the damage it does to the companies and the people whom they employ.”

Notes

The full report, ‘The Environment for Business in Germany: A commentary’, can be downloaded below.

Christopher Simpson is Managing Director of Simpson Associates, an international engineering consultancy providing advice and support to companies in the UK, USA, Germany and other European countries on strategy, new product and process introduction, performance improvement, project management, acquisitions and other business development. He has held directorships with major manufacturing corporations in the UK and Germany and has wide experience of working in the USA and Europe. His specialist areas are advanced manufacturing and financial management. He has a first degree in engineering and is a Sloan Fellow at the London Business School.

For further information contact:

Daniel Bentley
Director of Communications
T: 0207 799 6677
M: 07715 770352
E: daniel.bentley@civitas.org.uk

Civitas: Institute for the Study of Civil Society is an independent, cross-party think tank that facilitates informed public debate on important issues of the day. It is not affiliated to any political party and receives no state funding.


The Environment for Business in Germany: A commentary

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