PEEP Semester Paper Differences in training between UK and Germany related to economic performance Rose Nelson “A major skills deficiency in the UK is the low number of people holding intermediate level vocational qualifications – 14% in the UK as compared, for example, with 46% in Germany. Productivity shows a corresponding gap, with the UK’s level 23% lower than Germany’s.” This paper will include an analysis of the vocational training systems in place within the UK and within Germany, focusing on schemes co-ordinated by the government involving work based learning or apprenticeships. The quote above states the case of this paper as the link between training within an economy and economic performance is made, this is taken from a government document regarding a consultation of the modern apprenticeship scheme within the UK. There is a large difference between the two countries and their approach towards training and after defining these differences the report will relate the outcome of the training schemes to economic performance relating to employment figures, economic growth and productivity and also the level held within the countries balance of payments to show the effect training has on the countries exports and imports. The UK system of training for young people leaving school and current employees has been subject of criticism in the past. The UK government has taken part in many ventures to encourage employees and employers to participate in training in order to increase the level of skilled workers within the UK labour force. In 1994 the government launched a modern apprenticeship scheme to improve the level of participation in work-based training at level 3 NVQ (National Vocational Qualification) and above. (www.dfee.gov.uk/ma.consultation) This comes from a long period of decline; in the 1980’s skills shortages were higher in the UK than in Germany and when a comparison was between similar institutions in the UK and in Germany it was found that UK productivity was lower due to the lack of training received by employees. (http://links.jstor.org, J Haskel, C Martin) also in 1980 2% of firms in the UK complained that productivity was restricted by a skills shortage, however this figure rose to 31% in 1989 highlighting the large decline of skills and training within the UK economy encouraging the government to employ new ventures to increase training and lead to a fall in skills shortage. The launch of the modern apprenticeship scheme involved the government encouraging the young people to participate in training after leaving school. The scheme introduced the concept of learning at an educational institution such as a college whilst participating in work with a firm. This allowed young people to start in an occupation and progress within it or take part in related higher education courses. This scheme intended to increase the amount of school leavers taking part in training and education to reduce the level of people leaving school with no qualifications in the UK. However the scheme faced criticism as due to the lack of information delivered to the employers taking part in the scheme. Therefore from participating employers and potential participants there was lack of commitment and demand for apprentices within firms. This conveys the government’s lack of structure and failure to create a high quality work based learning program within the UK. (www.informaworld.com, A Fuller, L Unwin) In the year 2000 it was stated that only one in five young people participate in any government based training scheme and those that do over half fail to complete the full apprenticeship. There are reasons developed that cause the low enthusiasm towards the scheme, one is the lack participants not taking advantage of “on the job” training and therefore not integrating the learning of key skills involved within the apprenticeship. Also one key factor is that trade unions have low regulatory power and are therefore not heavily involved in the participants work and interests. (www.dfes.gov.uk/ma.consultation) Although the UK government has made attempts in the past to achieve high training levels and standards within the work force it is clear that they have aimed a lot of their policy towards those who wish to carry on with education through university and colleges rather than those who wish to participate in work based learning or vocational training. This is clear through the UK government setting a target that involves 50% of people under 30 participating in higher education through university or college. This target has been subject to criticism as it is believed that this will not provide any benefit to the UK economy due to an over capacity within the workforce of over skilled staff and will not address the skills shortage problem within the UK. Also it has been put forward by businesses that the expansion of graduates will have an adverse effect on graduate quality throughout the UK. Another negative aspect of this target is that it will damage the vocational training system within the UK and an investment within vocational training and apprenticeships instead of aiming to meet the target will provide higher benefits to the economy and also reduce the skills shortage within the UK. (http://news.bbc.co.uk) It seems that investment in vocational training and apprenticeships would be a priority for the UK government as the apprenticeship system has been subject to disapproval in the past, potential employers of apprentices believe that the system does not meet the needs of their firm. This causes the UK to hold a low employer investment level in publicly funded training when compared to Germany. In 2002 the lack of reliable trade persons became an issue with consumers and businesses as it became increasingly difficult to find reliable workers to carry out skilled work for maintenance and running of the business. It was also reported that there are nearly twice as many plumbers leaving the profession as are joining it. This severe lack of skills in certain areas causes problems for the UK economy and will cause an increase in prices for the limited number of services that are offered. In 2002 the government launched a new education policy that would allow students from the age 14 to change from traditional school subjects to pursue vocational training through schools and colleges, this aims to ensure that the UK culture will no longer devalue vocational learning and encourage young people to use vocational talents. This expansion of vocational training within the education system is expected to cost the UK government £372 million in order to allow students to participate in learning and work placements. However in 2005 it was presented that the UK government policies were inadequate in filling the skills gap with 135,000 vacancies left unfilled, the director general of the Institute of Directors appealed for firms that invest in training for staff to face tax cuts in order to encourage training within firms and also an improvement of the apprenticeship system within the UK, this is a reoccurring criticism for the government. It is again believed that vocational qualifications that are achieved through the UK system do not fulfill the needs of employers. Key skills such as numeracy, communication and computer skills are seen to be insignificant to trainers throughout apprenticeships and are often ignored causing a great deal of problems for employers and employees in the future. A spokesman for the UK government answered this criticism by stating that the government will be introducing a reformed apprenticeship system that will be demand led and motivated by then needs of the employers this new system intends to increase the number of young people and employers taking part in apprenticeships to increase by three quarters in 2008. (http://news.bbc.co.uk) If the changes the UK government make are implemented well and supported by employers this could mean that the skills gap will be fulfilled causing the lag of productivity for the UK behind its main competitors such as Germany to improve. The German government takes on a different approach to training for young people and people in work than the UK system and this will now be analyzed to show the comparison of the two policies. For over forty years Germany has been owner of a skilled crafts and trade sector and values this sector within the German economy due to the large contribution the sector has made to the recovery from the war. The sector contain 720,000 companies, 4.6 million employees and 600,000 apprentices and has been under the skilled crafts and trade sector regulations act for 37 years, this law establishes that a company must hold a proper qualification, such as a Master Craftsman certificate or qualifications equivalent to a Master Craftsman certificate, such as a degree in order to participate in the recruitment and training of an apprentice. The aim of this law is to ensure that a standard of high quality work within the sector is withheld. Due to this law and the dependence on a high quality skilled crafts and trade sector the German government introduced a dual system of training to guarantee high standards of vocational training. This system involves school leavers taking part in training at two independent institutions, the first is the company that is willing to take on a trainee and the second institution is a vocational school, known as a “Berufsschule”. As the trainee takes part in training within two institutions it is named the dual system, therefore they are a trainee and a student. Most of the vocational training takes place within the company taking three days from the five day week, this involves the trainee learning the basic skills of the company, they work with a skilled worker and develop their skills leading to eventually fulfilling tasks independently and at the end of the training they should be able to work by themselves on individual projects for the company. The trainee will spend three days with the company, where they will receive a modest salary that is 20% to 40% of a starting salary of the company, and for the other two week days they will attend the vocational school where two thirds of the teaching time will be used to promote and supplement the training they have received throughout their time within a firm. The rest of the time at the vocational school will be spent on general education this involves filling in gaps in general knowledge and involves the studying of subjects such as, German, economics, religion and sports. The dual system has proven to be popular within German culture with 70% of school leavers participating in the system and is dependent on the joint partnership of school sector that is the responsibility of the federal state known as “Lander” and the business sector. There is a great deal of involvement from many parties required to maintain the high standards of this system, there are 2,000 vocational schools that employ 130,000 teachers and offer 500,000 work places in one of 430 officially defined jobs that have approximately 1 million qualified trainers within 900 inter-company training centers. These centers are the responsibility of 480 chambers, these are institutions that are involved in ensuring the quality of the training provided by offering advice to companies and trainees and holding exams for the system. These chambers have authority over the inter-company part of the system and have the right to determine if a company has the relevant nature and equipment to take part in training and also that the company employs suitable trainers that meet the authority’s requirement. Due to all the effort put into the efficient running of this system from various different parties it produces high levels of benefits to the individual, the companies involved and the government. The individual yields the benefits of a two to three year training period of transition from leaving school to entering work, they experience a combined system of work and learning and this time allows them to explore opportunities and their abilities, they also receive income throughout this period. The companies involved will benefit from ensuring they have a competent and skilled workforce, they will experience low costs of recruitment through the system and also low level of labour costs. Finally the government will benefit as the system guarantees the high standard of national qualification; the system also aids the maintenance of Germany’s economic competitiveness and allows the government to have low training costs. (www.gmit.ie/itac_2003/ITAC_2003) The dual system is an important part of the German economy and part of the reason the system has greater success than the UK system is the relationship between companies and trade unions, in Germany unions are organized at the industry level and are recognized with work councils at company level. Therefore it is a strong point of the German system is that a relationship between unions and management councils is highly defined when compared to the UK where there is falling power for unions. The system places an emphasis on apprenticeships for young people in Germany results in Germany having a low percentage rate of students attending university when compared with other western countries; however Germany has a much lower percentage of workers entering the workforce without recognized qualifications. This is due to the vocational training system applying to many occupations throughout the German economy and is therefore viewed in German culture as a regular academic course, not an alternative for students who are not progressing to higher education through university or college. (http://en.wikipedia.org/wiki/German_model) Having defined the differences between two countries attitudes towards vocational training, showing Germany to take a much more organized and recognized structure towards apprenticeships and work based training than the UK, where the main focus is on higher education through university and college courses. The paper will now discuss the effects the two different attitudes have on the performance of the countries economy. The UK economy has experienced impressive economic performance over the years through stable growth and low rates of unemployment, however there are certain areas within the UK economic structural performance when compared with other countries can be improved. One of these areas is productivity per hour, the UK ranked 15th out of the 27 countries involved with the OECD showing the lack of training and shortage of skills is having a noticeable effect on the UK’s productivity compared with other established economies. Germany however does not face problems within structural performance but has experienced a long period of weak economic growth, low levels of domestic demand and high levels of unemployment. Therefore this shows that both economies differ when it comes to strengths in economic performance which could be partly due to the effect of the differences in training policy. Germany’s economic performance is focused on the fact that it holds a strong level of exports that over the years has followed an improving trend that allows Germany’s global competitiveness to hold a stable position. This strong level of exports will be aided by the high standards of vocational training within the country as they produce quality goods and services. However Germany has experienced low rates of economic growth since 1993 and in order to improve this they must improve long term growth, employment creation and public finance substantiality. Germany has experienced high levels of unemployment throughout the economy especially for the low qualified workers and therefore a policy reform has been called, there are many changes that have been suggested in order for Germany to increase employment levels, such as improving the public employment service in order to encourage the unemployed to search for employment opportunities and wages to be better aligned with skills. Also it has been recommended by an OECD survey that the German educational system will need to improve in order to reduce the level of unemployment this is due to the tertiary graduation rate being one of the lowest of all the OECD countries, therefore it is suggested that access to early childhood education should be more available, regular evaluation of school performance can add to secondary education results. Also an increase in government funding towards universities in order to influence universities to offer attractive degree programmes and introduce tuition fees and a student loan scheme should encourage students to choose higher education. This shows that although Germany has a exceptional vocational training system and produces high quality results for productivity, the low levels of economic growth and employment will be aided by increasing the focus on the educational system and improving the structure of the higher education offered amongst other parts of the economy that are in need of reform. (www.oecd.org) The UK on the other hand has been accused of neglect towards the vocational training system and focusing highly on further education which may have added to the stability of the economy, however the neglect of the vocational system has presented the problem of a skills shortage and low productivity so therefore the UK should aim to continuously improve the significance and quality of vocational training programmes, join together vocational programmes that are already in place in order to make it attractive and easier for employers and potential participants to understand and expand work –based training for adults in order to improve the skills shortage. The UK government has recognized the policies required to reduce the skills gap within the UK economy and in March 2006 published the “white paper” this paper puts forward that the UK must reform programmes based on 14 to 19 year olds and also adult skills and for these programmes to be backed by large levels of investment in order for the UK skills level to reach world skills standard. The government put forward that: “They will provide new incentives for colleges to develop distinctive areas of specialist excellence. They will put the needs and interests of learners and employers at the heart of the system, so that their choices drive funding and performance.” Tony Blair, the Further Education White Paper. http://www.dfes.gov.uk/publications/furthereducation/docs/6514- FE%20White%20Paper.pdf This highlights that the government intends to improve the quality and availability of vocational training within the UK in order to reduce the skills gap and increase productivity in order to meet the standards set by countries like Germany where the vocational training system is effective and efficient. After carrying out an analysis of the vocational training systems in place within the UK and Germany and then relating the standard of vocational training to economic performance it is clear that Germany has proven that a system that is well structured and continuously monitored gives an economy high levels of productivity and leads to higher level of exports giving the country strong global competitiveness. However it is also shown that focusing on higher education through university will add to the improvement of economic growth and higher employment levels. By showing that the UK has a vocational training system that has been subject to major criticism in the past suffers through low productivity and a high skills shortage but has maintained low levels of unemployment and high levels of economic growth. Therefore it is clear that Germany must now focus on taking measures to improve economic growth and employment, whereas the UK must focus on improving the vocational training system and through the publication of the white paper it is clear that this is recognised by the government and measures in tackling this problem are already in place.
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