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    ILR Review, 68(2), March 2015, pp. 314–
    337
    DOI: 10.1177/0019793914564963. © The Author(s) 2015
    Journal website: ilr.sagepub.com
    Reprints and permissions: sagepub.com/journalsPermissions.nav
    A Road Map To Vocatio nal Educatio n And
    Training In Industrialized Countries
    Werner Eichhorst, Núria Rodríguez-planas,
    Ricarda Schmidl, and Klaus F. Zimmermann*
    Young people have been among those most affected by the recent
    financial crisis. Vocational education and training (VET) is often
    viewed as the silver bullet for the youth joblessness problem. In this
    article, the authors provide a better understanding of VET in industrialized
    countries, proposing a typology with three types of vocational
    systems: 1) vocational and technical schools, 2) formal
    apprenticeships, and 3) dual apprenticeship systems that combine
    school training with a firm-based approach. They first describe the
    strengths and challenges of each system. They subsequently review
    the evidence of the effectiveness of VET versus general education
    and the relative effectiveness of the different VET systems. Results
    indicate that VET is a valued alternative beyond the core of general
    education and that the use of apprenticeships combined with
    institutional learning tends to be more effective than school-based
    VET.
    Unemployment rates among youth have soared since the Great Recession
    of 2008, doubling the adult unemployment rate in many developed
    countries. While many young people have responded to sluggish labor
    market prospects by continuing tertiary education and investing in their
    human capital, others have withdrawn from education, training, and
    employment. According to OECD (2013) data, youth unemployment rates
    are now above 35% in countries such as Portugal and Italy and are above
    50% in Spain and Greece, while they are still below 10% in countries such as
    Germany, Switzerland, and Austria. The share of youth (aged 15 to 24) in
    neither employment nor education (NEET) in 2012 ranged from 4 to 7% in
    the Netherlands, Denmark, and Switzerland and up to 18% or more in
    *Werner Eichhorst is affiliated with IZA. Núria Rodríguez-Planas is affiliated with Queens College
    of CUNY and the Institute for the Study of Labor (IZA). Ricarda Schmidl is affiliated with the University
    of Mannheim and IZA. Klaus F. Zimmermann is affiliated with IZA and Bonn University. We thank
    Costanza Biavaschi, Corrado Giulietti, Michael Kendzia, Alexander Muravyev, Victoria Finn, and Janneke
    Pieters for their input and support. Inquiries can be directed to [email protected] or
    [email protected].
    564963ILRXXX10.1177/0019793914564963ILR ReviewVocational Education And Training In Industrialized Countries
    Keywords: vocational education and training, apprenticeships, dual VET, vocational schooling,
    developed countries
    Vocatio nal Educatio n And Training In Industrialized Countries 315
    Greece and Italy.1 Regarding the situation of young labor market entrants,
    the 2008 crisis and its aftermath clearly highlighted the interaction of a
    cyclical development with long-standing institutional features governing the
    transition from school to work. The situation deteriorated particularly in
    those countries where young people had difficulty entering the labor market
    even before the crisis, while other countries succeeded in maintaining
    low youth unemployment rates by a variety of means.
    Against this background, we look at the role of various types of vocational
    education.2 Vocational education and training (VET) is frequently perceived
    as the solution to improve the opportunities of youth who lack the
    resources, skills, or motivation to continue with higher education. For
    example, in countries such as the United States, the recent economic crisis
    has reignited an earlier discussion of building up a larger and more effective
    apprenticeship system (Harhoff and Kane 1997; Lerman 2012).3 In particular,
    researchers, policy advisors, and other experts often argue that VET
    provides useful skills to prepare youth for a smooth entry into the labor
    force (Quintini and Martin 2006) by aligning initial education more closely
    to particular vocations and tasks demanded in the labor market.
    After classifying VET in industrialized countries into distinct systems, we
    review the evidence on their effectiveness in facilitating transitions into
    employment and in raising earnings, and highlight the relevant institutional
    features that support the effectiveness.4 With this, we aim to provide evidence
    that can be crucial in designing programs to counteract the labor
    market problems exacerbated by the Great Recession.
    A Typology of VET Provision
    This section provides a typology of VET provision, reflecting the various
    VET models found in practice among a range of countries. This topology
    focuses on two dimensions. First, differences in provision may be viewed
    along a continuum, reflecting the relative importance of institutional learning
    and workplace training. At one extreme, vocational schools can provide
    VET that is not complemented by work-based training; at the other, older
    1NEET rates are taken from the OECD employment database and are based on national labor force
    surveys.
    2In this article, we use the term “vocational education and training” (VET) to refer to qualifying education
    paths that provide individuals with occupation-specific knowledge and practical skills, independent
    of the place, content, and educational provider. Our focus is on initial VET, in contrast to
    vocation-specific education and training as part of life-long learning (see Arulampalam, Booth, and
    Bryan 2004; Bassanini et al. 2007 for workplace training in Europe). A related study (Zimmermann,
    Biavaschi, Eichhorst, Giulietti, Kendzia, Muravyev, Pieters, Rodríguez-Planas, and Schmidl 2013) connects
    vocational training with youth unemployment around the world, including developing countries.
    The novel feature of our paper is the systematic and updated review of the major types of vocational
    training systems from a policy perspective.
    3Of course, VET is complementary to the various policies boosting labor demand (typically industrial
    policies) in its goal to improve youths’ transition into employment.
    4In medium-income countries and in the developing world, an alternative classification is appropriate;
    see Zimmermann et al. 2013 and Eichhorst, Rodriguez-Planas, Schmidl, and Zimmermann 2013.
    316 ILR Review
    union-dominated apprenticeships did not include formal theoretical institutional
    learning. A second dimension is whether institutional-based learning
    is provided within formal secondary school frameworks (part of the education
    system) or at vocational training centers (which often have close ties
    to industry). Below we review these three systems.
    Vocational and Technical Secondary Schools
    Many countries maintain a large vocational schooling system as part of their
    upper secondary education. In these countries, the initial schooling system
    is characterized by the duality between general and vocational education.
    While the former aims to provide youth with general, often academically
    oriented knowledge as the basis for further (higher) education and training,
    VET provides youth with practice-oriented knowledge and skills that
    are required in specific occupations. VET typically follows a formal curriculum
    that combines general and occupation-specific knowledge. Compulsory
    schooling integrates VET as an alternative to an academically oriented
    schooling track, or as part of several post-compulsory education options.
    Similar to academic education, the skills that vocational schools provide are
    mostly general in the sense that they are transferable between employers
    (Becker 1964); however, there might be differences in the degree of transferability
    across occupations. While some countries have a VET system that
    transmits skills that are not restricted to one particular occupation, others
    provide vocational schooling for specific types of occupations (Shavit and
    Müller 1998).
    Why Do Governments Offer School-Based Vocational Training?
    The supply of VET by governments through the educational system can be
    justified as a means to improve the opportunities of youth who lack the skills
    demanded in the labor market, the ability or motivation to continue with
    higher education, or the funding to pursue higher education. Furthermore,
    individuals might prefer this option to academic education as it implies a
    shorter human capital investment and facilitates earlier entry into the labor
    market. Many countries that provide a vocational schooling option during
    compulsory schooling perceive this as an alternative for poor academic performance
    or at-risk youths (Neuman and Ziderman 1999), as well as a safety
    net for early school dropouts and those who are less academically inclined.
    The close link to work tasks and hands-on practical experience may motivate
    practically oriented youths to continue training and to remain in school
    longer. Furthermore, researchers have argued that establishing a vocational
    education track during school is a means to reduce the influence of parental
    background on educational choices, thereby increasing intergenerational
    mobility. Given that the educational decisions of youths are often
    linked to the educational attainment level of their parents, participation in
    a vocational track might allow those from working-class backgrounds
    Vocatio nal Educatio n And Training In Industrialized Countries 317
    to pursue educational attainment beyond the compulsory level, hence
    increasing their chances of attaining skilled rather than unskilled employment
    (Shavit and Müller 1998).
    In most cases, participation in either vocational or academic courses during
    school is operationalized by tracking students in the two respective pathways.
    The benefits of such a tracking system are not clear, as leaving school
    with vocational qualifications often translates into reduced options of further
    post-compulsory education, particularly the academic type. The incentive
    effect of learning more practice-oriented skills might therefore be mitigated
    by high costs of later switching to academic education. Although the
    technical possibility of transferring to academic education might exist, earlier
    tracking will lead to strongly divergent levels of skills and competences
    (Woessmann 2008). Furthermore, through separating higher and lower
    performing students, VET might counteract the equalizing potential of
    vocational education (Shavit and Müller 2000). Given that very few youth
    manage to enter academic education after vocational schooling (Kogan
    2008), populations in many countries often have a low regard of the vocational
    schooling option since they perceive it as a dead-end track and a
    second-choice education.
    Southern European Countries
    Most of the vocational training in Spain takes place in school instead of
    within a firm: Only 4% of those in vocational upper-secondary education in
    Spain combine school- and work-based training (CEDEFOP 2010). Similarly,
    three in four young people in vocational training in France participate
    in school-based vocational training as opposed to the apprenticeship alternative.
    In Italy, firm-level vocational training is not widespread since it is
    used only in crafts, retail, and large manufacturing companies, and is based
    on fixed-term employment contracts.
    Youth in these countries face particular difficulties when trying to enter the
    labor market, especially since the recent economic crisis has aggravated these
    long-standing problems. In addition to having above-average NEET rates,
    labor market entry is difficult for both low- and high-skilled young people.
    One major factor is the deep labor market segmentation between permanent
    and fixed-term contracts, which can be attributed to strict dismissal protection
    and largely liberalized temporary employment. Another issue is wage
    compression in low-skilled occupations by collective bargaining. For instance,
    collective bargaining in Spain, which is centralized at the province and industry
    level, sets “entry minimum wage” above the legal minimum wage, inflating
    the lower part of the wage distribution and resulting in relatively high earnings
    for young workers and those least qualified. Together, employment protection
    and wage compression make it difficult in Spain for youth to become
    established in the labor market and to transition to a permanent position.
    Such effects on youth employment have been found in previous international
    work such as Bertola, Blau, and Kahn (2007) and Kahn (2007).
    318 ILR Review
    In some of these countries, the relatively marginal role of vocational
    training can be explained not only by a limited interest of employers in
    more formal vocational training (given the dual-employment structure) but
    also by strong expectations of upward social mobility on behalf of young
    people and their families, which creates strong preference in favor of academic
    training (Planas 2005). Moreover, a long tradition in these countries
    is to subsidize temporary employment and training contracts as part of
    Active Labor Market Policies (ALMP). The effectiveness of these measures
    is questionable, however, as explained by Felgueroso (2010) in Spain, Roger
    and Zamora (2011) in France, and Tattara and Valentini (2009) in Italy.
    Evidence from cross-country comparisons in Europe, which have
    attempted to implement vocational schooling systems, points to the necessity
    of several systematic elements to ensure success, as described below
    (Woessmann 2008; Gambin 2009):
    1. Ensure curricula relevance: All stakeholders (government, employers,
    social partners, educational institutions) need to be involved in curriculum
    development, with a clear assignment of responsibilities. The weight
    of the respective voices might differ across countries.
    2. Maintain close labor market contact: A system of continuous feedback
    from employers and private-sector institutions allows for adaptation of
    the training content to labor market needs. This element requires a high
    degree of employer involvement.
    3. Ensure high-quality training: Sufficient funding is required to guarantee
    the appropriate teaching material and the availability of well-trained
    teachers. A decentralized system of quality assurance and local competition
    among training centers, in combination with output-based funding
    and licensing, needs to be established.
    4. Establish qualification frameworks: Centralized accreditation of training
    curricula creates transparency and promotes acceptance among employers.
    5. Limit the risk of creating a dead-end vocational schooling track: The
    competences and qualifications acquired should be comparable and
    creditable to academic qualifications to promote transferability between
    the two and to avoid stigmatization of vocational schooling participants.
    Formal Apprenticeship
    In some countries, VET is provided through formal apprenticeships, with institutional
    instruction complementing workplace training. This arrangement
    occurs primarily in the United Kingdom, the United States, and Australia.
    The United Kingdom
    In the 1980s, traditional apprenticeships lost their appeal in the United Kingdom
    because of “the recession, the removal of supports and the introduction
    of cheaper, less-valued alternative training schemes such as the
    Vocatio nal Educatio n And Training In Industrialized Countries 319
    Youth Training Scheme (YTS) and its successors” (McIntosh 2007: 4). With
    the relative shortage of intermediate (Level 2 and Level 3) vocational skills in
    the mid-1990s, however, apprenticeships were reintroduced as Modern
    Apprenticeships at Level 3 and National Traineeships at Level 2. Despite considerable
    public interest in their expansion, the overall participation rates
    remained rather low during the early 2000s. Possible explanations for this
    modest involvement include 1) the lack of a central and rigorous assessment
    of the apprentices’ qualification obtained; 2) the high costs of apprentices to
    employers, relative to other countries such as Austria, Germany, or France,
    among others (Steedman 2010); and 3) a shift toward offering apprenticeships
    to older youths who had previously worked at the company (Wolf 2011).
    The 2009 reform—the Apprenticeship, Skills, Children and Learning
    Act—addressed some of these issues, in particular tightening the link
    between the apprenticeships and employers and offering larger incentives
    for employers to increase training activities. Subsequently, the number of
    youth below the age of 25 who participated in apprenticeships increased
    from 387,000 in 2007–2008 to about 460,000 in 2011–2012. In 2010, the UK
    government implemented the Specification of Apprenticeship Standards for
    England (SASE), harmonizing the qualifications of the various apprenticeships
    and increasing transparency in training activities. In addition, the
    United Kingdom offered employers a grant of 2,500 pounds per apprentice
    aged 16 to 17 years old. In 2012, they extended the grant to incentivize training
    of those up to 24 years old. Moreover, they started the National Apprenticeship
    week, a yearly public event to draw media attention to the benefits of
    offering and learning in apprenticeships, as well as to increase the acceptance
    of apprenticeships. Further government reforms are currently underway
    to improve training quality and transferability and to ensure continuous
    adaption of the qualifications and skills to align with economic demand
    (Department for Education, Department for Business and Skills 2013).
    The United States of America
    In the United States, formalized apprenticeships have a limited role and are
    largely confined to adult education in so-called Registered Apprenticeships
    in the construction industry (e.g., electricians, carpenters, plumbers, and
    others). Through the combination of time spent in theoretic instruction
    and work-based training, the apprenticeship system imparts both general
    and occupation-specific knowledge; however, the place of training is concentrated
    in the firm, as the apprenticeship system operates without any
    close links to formal education.5
    The Office of Apprenticeship (OA) in the U.S. Department of Labor
    (DoL) is in charge of the registration and evaluation of VET. Thereby, the
    5Alternatives to apprenticeships in the United States are specific programs targeting at-risk youth and
    training students for careers in specific sectors, combining high-school classes, training, and work experience
    (see Holzer 2012 for a thorough review).
    320 ILR Review
    Advisory Committee on Apprenticeship (ACA) supports the OA. Across 26
    states, State Apprenticeship Agencies (SAAs) are responsible for the apprenticeship
    programs, including the provision of technical assistance. Currently,
    around 21,000 apprenticeship programs are registered in the United
    States. Participation numbers from the DoL count approximately 290,000
    active apprentices in 2012. Since 2008, the number of active apprentices has
    been steadily decreasing, largely because of a steep decline in the number
    of new apprentices. This figure accounts only for apprenticeships not
    offered by the military (currently around 70,000) and for those registered
    with the labor office. Lerman (2012) suggested that the actual number of
    total apprentices is higher, given that not all apprenticeships have to be registered.
    Contrary to the European model, U.S. apprentices are in their midto
    late-20s and have most likely already gained some work experience.
    Australia
    Although the majority of VET participation is school-based (80% in 2011), a
    comprehensive Australian Apprenticeship system also exists. This system differentiates
    between two types of contracts: apprenticeship contracts and traineeship
    contracts. Apprenticeships refer to technical occupations and the traditional
    trades, whereas traineeships apply to all other occupations (Karmel,
    Blomberg, and Vnuk 2010). These traineeships are comparable to further
    qualifying training that occurs in other countries because of their short duration
    (typically less than one year). The contracts are structured in both workbased
    learning with an employer and school-based education with certified
    training providers. Contrary to apprenticeships, which have a long tradition
    in Australia, traineeships were introduced in 1985 to counteract unemployment
    of those aged 15 through 19 with low levels of schooling. The participation
    in apprenticeships and traineeships has significantly increased across all
    age groups over the past years due to supportive policies, such as financial
    hiring incentives, part-time training, minimum training wages, and waived
    age restrictions (ibid.). Specialized subsidies have encouraged the training of
    workers aged 25 and over as well as mature workers (45 and above); thus, the
    share of adults among participants increased to one-third and two-thirds,
    respectively, of all new entries into apprenticeships (traineeships).
    Dual System
    In Austria, Denmark, Germany, and Switzerland, the dual VET accommodates
    between 40% (Austria) and 80% (Switzerland) of all school leavers.
    The dual apprenticeship systems in these four countries share the following
    four key institutional elements.
    1. A high degree of formalization: They provide training in centrally accredited
    occupational qualifications, and the training content is continuously
    adapted to meet the changing labor market requirements.
    Vocatio nal Educatio n And Training In Industrialized Countries 321
    2. Strong involvement of social partners: Representative advisory boards
    assist in developing and maintaining curricula at the governmental and
    federal level. Regional trade or occupational committees, or a combination
    of the two, undertake implementation and monitoring.
    3. Vocational colleges provide the school-based part of dual apprenticeships:
    Colleges cover both general and occupation-specific education.
    The government bears the costs of training in the schools.
    4. Firms must meet certain technical standards: A training firm will not
    obtain accreditation if standards are not met. Offering apprenticeships is
    optional for companies, but those who choose to offer them follow standard
    application procedures to match the firm with trainees. The training
    companies cover the training costs within the firm.
    Why Would Firms Invest in General Training?
    While dual training exhibits several advantages from societal and individual
    perspectives, establishing an efficient dual apprenticeship system crucially
    depends on the willingness of firms to participate. To ensure postapprenticeship
    skill transferability across firms, the training should provide
    a sufficient amount of general schooling. As Becker (1964) noted, however,
    in a perfectly competitive labor market, in which workers are paid according
    to their marginal productivity, firms have no incentives to invest in general
    schooling because workers could leave directly after the training period
    in order to reap all the benefits of their acquired general skills.6 Hence, for
    firms to provide both specific and general training, the worker must bear
    the general training costs. Implementation would include state-funded
    school-based general education or firm-based general training, along with
    workers paying for their training costs. Alternatively, firms could be incentivized
    to participate, if they were able to recoup part of their investments by
    contractual arrangements ensuring that either 1) apprentices accept a wage
    lower than their marginal productivity during the training period, or 2)
    apprentices continue to work for the firm beyond the training period (Malcomson,
    Maw, and McCormick 2003). In fact, what we see in countries such
    as Germany, Switzerland, and Austria is a specific collective agreement
    reached between unions and employer associations, or wage recommendations
    issued by professional associations, setting a generally applied rate for
    apprentice remuneration. This wage is significantly below the earnings of a
    full-time low-paid job and thus can be seen as a part-time wage or some basic
    income support during the training period.
    In practice, this model seems to explain firms’ incentives to offer training.
    In some countries, such as Switzerland, the low level of wages and the
    strong involvement of apprentices in the productive activities during the
    6As discussed below, many firms do invest in their employees’ general training. Some reasons that
    explain this are informational asymmetries regarding workers’ productivity, search costs and market frictions,
    or monopsony power.
    322 ILR Review
    apprenticeship allow firms to incur a net benefit during the training period
    (Lerman 2014). In other countries, such as Germany, some firms are found
    to incur a net cost during the training period (Harhoff and Kane 1997;
    Dionisius et al. 2009).
    Several theories attempt to find alternative explanations of the training
    activities of firms (for an excellent overview, see Wolter and Ryan 2011). In
    particular, Acemoglu and Pischke (1998, 1999, 2000) developed and
    extended the framework of Katz and Ziderman (1990) in which informational
    asymmetries regarding the abilities of workers and the quality of
    training received can lead to sufficient incentives for firms to invest in general
    training. Given that firms are able to learn the ability of the worker during
    the training period, the additional presence of a compressed market
    wage allows firms to pay high-ability workers less than their marginal product,
    hence reaping part of the benefit of training. A compressed wage structure
    might arise because of 1) information asymmetries and complementarity
    between ability and training in the production function (Acemoglu and
    Pischke 1998); or 2) search costs combined with market frictions such as
    collective bargaining, minimum wages, and firing costs, which are higher
    for high-skilled workers (Dustmann and Schönberg 2009). Booth and Zoega
    (2004) pointed out that wage compression is not a necessary condition for
    the emergence of firm-based training, but suggested that all setups resulting
    in a situation in which training increases the worker’s productivity more
    than their wage are expected to stimulate the investment in training. In particular,
    factors reducing the apprentice’s propensity to quit after the apprenticeship
    increase the willingness to invest in training.
    Another set of models explores the deterring effect of poaching, a practice
    in which firms not investing in training might hire apprentices from the
    training firm by offering them higher wages. Hence, firms are more likely to
    engage in training if they are able to enjoy some monopsony power arising
    from industry- and occupation-specific skill requirements, dispersed regional
    location of firms, and lower product market competition (Gersbach and
    Schmutzler 2006; Smits 2007; Lazear 2009). While the incidence and relevance
    of poaching is difficult to measure, recent evidence from Germany
    suggests that 3% of training firms in Germany are poaching victims. Firms
    in bad economic situations that are unable to make counter offers are particularly
    affected (Mohrenweiser, Zwick, and Backes-Gellner 2013).
    A further potential reason to participate in training might be that firms
    prefer to ensure their own future skill supply by providing such training
    themselves. Some countries, however, such as Switzerland, maintain a large
    dual system and have a high turnover rate after training (Wolter and Schweri
    2002). It may be that firms train apprentices to use them in current production,
    and although firms might incur a net cost for the average productive
    apprentice, some high-productivity apprentices might also be paid less than
    their marginal productivity, given that the overall wage level for apprentices
    tends to be low (Mohrenweiser and Zwick 2009). In particular, if few outside
    Vocatio nal Educatio n And Training In Industrialized Countries 323
    options exist for youth, they might be willing to engage in such a payment
    scheme since they would benefit afterward from the acquired skills.
    Why Is the Dual System Not Readily Transferable?
    The dual VET depends on some essential preconditions. For instance, it relies
    on strong cooperation between government and employers to develop the
    VET institutional framework, to design and adjust curricula, to certify competences,
    and to co-fund the plant-based and school-based elements. In addition
    to these regulatory and budgetary issues, the dual system depends on sustained
    and active support from a sufficiently large number of actors, such as:
    1. Trade unions must accept that apprenticeship contracts have lower payments
    compared to regular contracts;
    2. Employers must be willing to provide training (not in an informal manner
    but according to occupational curricula), to send apprentices to
    vocational school leading to certified occupational qualification, and to
    provide them with a credible prospect of sustainable employment;
    3. Government must provide for vocational schools and teachers and also
    for preparatory training for young people who fail to enter apprenticeships;
    and
    4. Youth and parents must accept VET as a solid alternative to academic
    education.
    These elements tend to be mutually reinforcing. As they have developed
    over a long time, these conditions cannot be readily transplanted across different
    institutional and historical contexts. However, many countries have
    tried to develop dual VET programs. For example, in the United States,
    both the National Youth Apprenticeship Act under the administration of
    George H. W. Bush and the School-to-Work Opportunities Act under President
    William Clinton were attempts to implement the dual system. According
    to Lerman and Rauner (2012), however, widespread participation in the
    youth apprenticeship could not be reached because of 1) the inability of
    employer organizations to coordinate long-term training plans; 2) the federalist
    division of responsibilities that impedes a binding national framework
    for the training systems; 3) a general mistrust in the idea of imparting
    specific human capital, as it is likely perceived to lose its value more quickly
    in a continuously changing labor market (Krueger and Kumar 2004); and
    4) a lack of employer interest in participating in this exchange. Despite the
    futile efforts at the federal level, some states were able to establish and maintain
    a functioning small-scale dual apprenticeship system, particularly in the
    construction industry (Bilginsoy 2003).
    Complementary to the previous analysis outlining the incentives of firms
    to provide training, the quality of the training must be of a sufficiently high
    level to ensure that students are willing to participate in apprenticeship
    training. Acemoglu and Pischke (2000) highlighted the existence of external
    certification of training content that increases the value of training in
    324 ILR Review
    the overall labor market, and hence the willingness of students to invest a
    high level of effort during the apprenticeship. At the same time, Dustmann
    and Schönberg (2012) pointed out that the external certification and
    occupation-specific binding standards for the content of training are important
    commitment devices for firms to invest in high-quality training. In the
    absence of these two conditions, firms may exploit students as cheap laborers,
    which thus reduces the willingness of students to participate in training
    and lowers the reputation of apprenticeship training in general. Dustmann
    and Schönberg (2012) suggested that the abolishment of mandatory, external
    training boards in the United Kingdom in the 1980s, which centrally
    decided on the training content, was responsible for the decline of the relevance
    of the UK apprenticeship system. This trend further highlights the
    need for a specific institutional framework when aiming to establish a mainstream
    dual VET system, since it is not easy to replicate its complexity.
    Empirical Evidence
    Identification Problems
    Is school-based vocational training as effective as general-based education?
    How useful are apprenticeships in helping youth transition into the labor
    market? How does the dual system compare with general-based education
    or other types of vocational training? Which type of VET best prepares workers
    for the labor market? Researchers have attempted to answer some of
    these questions for different countries and here we summarize the findings.
    As will become apparent, no easy answers resolve these questions given variation
    across and within countries and studies. Countries’ institutional and
    cultural differences, as well as the available amount of information on workers,
    jobs, and labor market characteristics in the data sets used explain some
    differences, yet several identification problems within the literature are difficult
    to overcome.
    Most of the literature compares the employment outcomes of VET students
    with an alternative group, namely general-based education students,
    other VET tracks, school dropouts, or college graduates in the same country,
    after controlling for all observable characteristics available. However, we
    acknowledge that unobserved heterogeneity may still prevail given that youth
    deciding to study VET may have different abilities, tastes, and preferences
    about work from those who choose an alternative education system or no
    education. If unobserved quality differences occur between both types of
    youth, results from cross-sectional studies will reflect an omitted variable
    bias. For instance, given that VET is frequently intended for youth with lower
    motivation and ability than those who pursue general-based education, noncausal
    estimates of the returns to vocational education relative to generalbased
    education will be downward biased (Willis and Rosen 1979; Tuma
    1994; McCormick, Tuma, and Houser 1995). By contrast, the opposite is
    likely to be true when comparing students from vocational education to
    school dropouts. Furthermore, a related concern arises due to different
    Vocatio nal Educatio n And Training In Industrialized Countries 325
    occupations requiring diverse mixes of academic and practical skills. If youth
    self-select into various occupations based on their skills, evaluating the effectiveness
    of the differing systems becomes a difficult task given that the
    employment patterns, payment structures, and union coverage in the occupations
    themselves may not be comparable.
    Unable to exploit exogenous changes in the institutional setting, the majority
    of country studies conduct descriptive analyses controlling for students’
    characteristics; this is to capture the expected opportunity cost of the alternative
    forms of schooling, including grades and test scores achieved prior to
    accessing VET or remaining in general education, family background, and
    local economic conditions. Additional confounders include subjective statements
    of preferences for VET or academic studies (Bishop and Mane 2004),
    subjective self-assessments of ability (Hotchkiss 1993), and information concerning
    the vocational orientation of the school captured by full-time vocational
    teachers and the schooling choice of previous cohorts (Meer 2007).
    In addition to the aforementioned problems, one has to add measurement
    issues in studies comparing the effectiveness of two types of VET systems
    across countries. Indeed, the covariation of other relevant institutional
    factors, the absence of a unified framework for defining the respective training
    options, as well as the difference in data collection and quality frequently
    bias cross-country studies analyzing the relative effectiveness of school-based
    VET and the dual system (Hoeckel 2008). In an attempt to avoid this problem,
    some studies exploited the two systems’ coexistence within countries to
    evaluate their relative effectiveness. However, in most countries one system
    prevails over the other, and the reason for that is likely correlated with the
    labor market structure, thus adding yet another source of endogeneity.
    One way to address the selection problem is to exploit some exogenous
    change that lengthens or shortens one educational system compared to the
    other. For instance, several researchers have exploited institutional changes
    increasing the duration of general schooling in the vocational schooling
    tracks of those respective countries (Oosterbeek and Webbink 2007; Pischke
    and von Wachter 2008; Hall 2012; Felgueroso, Gutiérrez-Domènech, and
    Jiménez-Martín 2014), whereas others have used an instrumental variable
    approach (Fersterer, Pischke, and Winter-Ebmer 2008). Furthermore, an
    alternative way to address the endogeneity is to use propensity score matching
    that addresses the selection problem (Lee and Coelli 2010) or, even better,
    conduct randomized controlled experiments designed before the VET
    program implementation (Díaz and Jaramillo 2006; Attanasio, Kugler, and
    Meghir 2011; Card et al. 2011). The concerns with randomized controlled
    experiments are their external validity and their costs.
    Evidence of Vocational and Technical Secondary Schools
    Rigorous quantitative evidence on the returns to school-based vocational
    education is scarce primarily due to the lack of informative data. Most countries
    experience a negative selection into vocational schooling tracks,
    326 ILR Review
    leading to a systematic underestimation of vocational training effects when
    the selection issue is unaccounted. Here we review some of the existing evidence
    on the relative benefits of participating in vocational schooling relative
    to general schooling. We thereby focus on studies that aim to control
    for the selection. Clearly, however, the lack of evidence based on random
    variation is quite unfortunate and raises accountability concerns, as discussed
    earlier.
    Overall, the evidence described below indicates that youth completing
    school-based VET do as well (and sometimes better) than if they had instead
    remained in purely academic studies (Tansel 1994, 1999; Mane 1999; Tunali
    2002; Bishop and Mane 2004, 2005; Meer 2007). Some evidence found that
    school-based VET is most efficient when the area of vocational training is
    matched with the occupation of employment, whereas no significant differences
    arise for unmatched groups (Neuman and Ziderman 1991, 1999).
    Additionally, it is efficient when offered to low-ability individuals and to
    those who work in lower skilled jobs (Dearden, McIntosh, Myck, and
    Vignoles 2002).
    A number of studies provided evidence on labor market returns to vocational
    curricula in the United States, showing a positive effect in the short to
    medium run. They also found that for later cohorts, returns to attending
    technical schooling have increased over time. While Hotchkiss (1993) found
    no return to vocational schooling on employment and wages of high school
    graduates in 1980, even after controlling for training-related occupation
    choice, Mane (1999) identified differences in the returns to vocational
    training of high school graduates who do not attend college during the
    1970s, 1980s, and 1990s, finding a positive trend over time. Whether this
    trend was due to increasing quality in education or to increasing demand
    for these skills remains unclear. The positive wage and employment effects
    of participating in the vocational track were confirmed by Bishop and Mane
    (2004) using data from the National Education Longitudinal Survey of
    1988, and by Bishop and Mane (2005) using high-school transcripts. They
    noted that a growing need for these types of skills during the 1980s and
    1990s most likely explained the increasing returns to vocational training in
    the United States. They used a multinomial logit selection model to account
    for self-selection in track choice, and found that those on the technical or
    academic track are best off following the path they chose, suggesting that
    VET provides a valuable alternative for youth aiming to work in technical
    occupations.
    Using data on high-school qualifications in Israel, Neuman and Ziderman
    (1991, 1999) found that school-based VET yielded higher returns than
    general schooling, but only when the occupation of the VET and the occupation
    of employment are matched. For cases in which the occupation of
    training and employment are matched, the authors estimated that vocational
    high school graduates earned between 8 and 10% more than those
    with solely academic qualifications. No significant earnings differences
    arose between vocational high school graduates with unmatched jobs and
    Vocatio nal Educatio n And Training In Industrialized Countries 327
    academic high school graduates. The probability of finding a matching
    occupation varied substantially across occupations. Taking the average of
    37.5% indicated that the overall wage gain of the vocational occupation was
    still at 3%.
    Some studies provided evidence of the differential rates of return to vocational
    education. After using a variety of data sets, accounting for the time
    taken to acquire various qualifications and controlling (when possible) for
    ability bias and measurement error, Dearden et al. (2002) found that the
    returns to UK school-based vocational education varied with the type of
    qualification obtained. These authors found that the returns to academic
    qualifications were higher if individuals subsequently acquired a skilled
    rather than an unskilled job. Heterogeneity also occurred among individuals’
    ability. The returns to vocational qualifications were significantly higher
    for low-ability individuals. In a different setting, Tansel (1994, 1999) and
    Tunali (2002) found differential returns to vocational training (relative to
    general schooling) by gender in Turkey. Controlling for the differential
    selectivity into the choice of tracks, they found that women who participated
    in vocational education benefited from a higher employment probability,
    while men experienced higher wages. Furthermore, women seemed to benefit
    predominantly in urban areas, while males benefited in both rural and
    urban settings, suggesting that females faced participation constraints in
    addition to educational ones.
    It is interesting to note that recent studies that exploited a reform to
    identify the effectiveness of school-based vocational training relative to general
    education did not find any effects of increasing the general education
    for students in the vocational training track by one year. Oosterbeek and
    Webbink (2007) investigated the increase in duration of the vocational
    schooling track in the Netherlands in 1975 by one year, with the additional
    year designated only to general schooling. Adopting a difference-in-difference
    strategy, they analyzed the effect of the change on wages 20 years later and
    did not find any effect. Most recently, Malamud and Pop-Eleches (2011)
    evaluated a Romanian reform that postponed the tracking of students into
    vocational and academic schools. Using a regression discontinuity design,
    they found no effects of this reform on university completion, labor market
    participation, or earnings. Pischke and von Wachter (2008) exploited the
    gradual adoption of a one-year increase in compulsory schooling in the lowest
    schooling track in Germany between the 1950s and 1970s to study its
    effects on long-term wages, and likewise found no effects of the policy.
    Hall (2012) assessed a policy change in Sweden in 1991 that increased
    the duration of general education content of the vocational schooling at the
    upper secondary level by one year, after which students were eligible to
    enroll in tertiary education. Exploiting random differences in time and the
    regional implementation of a policy pilot, Hall did not find any effects on
    subsequent study take up, nor any increase in the wages earned up to 16
    years after the beginning of upper secondary school. She found, however,
    328 ILR Review
    that low-achieving students were significantly more likely to drop out of
    upper secondary education.
    Using an instrumental variable approach, Cappellari (2004) assessed differences
    in early labor market outcomes for participants in vocational or
    general secondary schooling in Italy. Observing that the selection into the
    respective tracks was strongly related to parental background and ability, he
    used grandparents’ school participation as an instrument, arguing that this
    is exogenous to the pupil’s labor market outcomes (after controlling for
    parental characteristics) but relates to the decision on whether to select into
    general or vocational schooling. He found that participating in the vocational
    track increased the early career employment and labor market participation
    rates, while general schooling increased the probability of attending
    university. Unfortunately, the study analyzed only short-term effects. An
    interesting French study estimated both short- and long-run effects of vocational
    versus general schooling tracks (Margolis and Simonnet 2003). Controlling
    for non-random selection using a Heckman selection correction
    model, these authors found that technical education had a similar effect as
    general education on the speed of entry into the first job. However, they
    found that five years after entering the labor market, youth with lower levels
    of vocational schooling earn less than those who graduated from the academic
    schooling track. They further found that one channel through which
    participants of the lower- or medium-level vocational schooling track experienced
    a fast entry into employment was the increased probability of finding
    the first job via social networks—although, this network effect faded
    over time.
    Evaluating Apprenticeships
    Apprenticeships seem to improve both social and occupational skills of
    apprentices (Rose 2004; Halpern 2009), yet rigorous quantitative evidence
    on their effectiveness is meager, even in countries where apprenticeships
    are widespread (Lerman 2013). Overall, studies indicate apprenticeship
    effectiveness varies with the counterfactual to which they are compared.
    When compared to other types of VET or post-school study, it seems that
    apprenticeships work better than the alternative (Bonnal, Mendes, and
    Sofer 2002; McIntosh 2004, 2007; Lee and Coelli 2010; Alet and Bonnal
    2011).
    McIntosh (2004) analyzed the returns to apprenticeships in the United
    Kingdom prior to the 2004 reform. Using the 1996–2002 Labour Force Survey
    (LFS), he found that while completing an apprenticeship increased
    males’ wages by around 5 to 7% (controlling for other qualifications held
    and personal characteristics), it had no effect for women. He also found
    sectoral differences, with higher returns among men working in manufacturing
    industries rather than in the service sector. Most recently, McIntosh
    (2007) evaluated the government-funded apprenticeships established in
    the United Kingdom in 2004. Using Labor Force Survey and OLS estimates,
    Vocatio nal Educatio n And Training In Industrialized Countries 329
    he compared the effectiveness of these apprenticeships to other types of
    vocational qualifications in the United Kingdom. He found that in 2004–
    2005, individuals who completed apprenticeships earned around 18% more
    at Level 3 and 16% more at Level 2 than individuals whose highest qualification
    is at Level 2, or at Level 1, respectively. As McIntosh acknowledged,
    however, these estimates may be biased because employers may select the
    best applicants, as there is excess demand for apprenticeships.
    According to Lerman (2013: 12), “few rigorous studies have examined
    how entering and completing apprenticeships in the United States affects
    the education, job skills, non-academic skills, and job market outcomes of
    young people.” Orr (1995) analyzed the effects of participating in a Wisconsin
    youth apprenticeship in printing and found that apprentices earned
    substantially higher earnings than those of a similar age. Ethnographic evidence
    from 24 programs involving nearly 500 apprentices—with more than
    300 hours of observation and more than 90 interviews with adult mentors,
    staff, program directors, and students—suggested that apprentices learn
    both noncognitive and occupational skills (Halpern 2009). Noncognitive
    skills included problem solving, self-confidence, teamwork, discipline, and
    the ability to take direction and take initiative, among others. Similarly, Rose
    (2004) found that apprentices learn from their mentors and aim at mastering
    an occupation and becoming part of a community practice.
    Lee and Coelli (2010) analyzed the labor market returns to vocational
    education in Australia using propensity score matching methods and found
    substantial differences for individuals who completed 12 years of schooling
    and those who did not. While the effect of participating in VET on wages
    and employment probability was zero or even negative for the first group, it
    was significantly positive for the latter group. This finding is in line with previous
    literature, suggesting that vocational education options seem to provide
    a safety against low labor market attachment.
    Bonnal et al. (2002) studied the relative performance of apprenticeship
    training versus school-based training in France. Correcting for the negative
    selection of youths into apprenticeships, they found that apprenticeships
    perform significantly better in integrating youths into their first employment
    relationship. This advantage faded over time and was not associated
    with higher wages. In addition, a recent study by Alet and Bonnal (2011)
    showed that young people integrated into the apprenticeship system rather
    than vocational schooling in France were more likely to successfully complete
    their final exam and undertake further education.
    One of the first studies to use an instrumental variables (IV) approach to
    measure the returns of apprenticeships was that of Fersterer et al. (2008)
    using Austrian data from 1975 to 1998. These authors exploited the different
    lengths of apprenticeship periods completed for a group of apprentices in
    failed firms. Perhaps surprisingly, they found that the estimated returns for
    apprentices affected by the firm failure were low, at around 2.6%. These
    returns were not very different from the OLS returns in the same sample, suggesting
    that the selection problem was not particularly important in this case.
    330 ILR Review
    Evaluating the Dual System
    As with apprenticeships, the dual system seems to outperform other types of
    vocational schooling; but in this case, the benefits focus on employment
    opportunities, as opposed to earnings, and are concentrated at the beginning
    of individuals’ professional lives (Winkelmann 1996; Plug and Groot
    1998; Parey 2009). In addition, recent causal estimates of the returns to dual
    training find no differences in wage returns relative to the academic track
    (Krueger and Pischke 1995; Winkelmann 1996; Fersterer and Winter-Ebmer
    2003; Pischke and von Wachter 2008).
    An extensive area of research exploits the coexistence of the dual VET
    system and other types of vocational schooling within countries to infer
    their relative effectiveness, and more specifically, the relevance of firmspecific
    skills. For the case of Germany, studies by Winkelmann (1996) and
    more recently Parey (2009) showed that participation in the dual VET had
    a particular advantage compared with other options of the vocational
    schooling system since it improved early labor market attachment and
    showed a faster and more structured integration into the labor market. This
    advantage faded over time though as other education participants found a
    foothold in the labor market. Furthermore, these studies showed that the
    fast initial transition did not hinge on finding employment in the training
    firm, suggesting that firm-specific skills did not play a major role in the German
    apprenticeship system. Investigating wage differentials, Parey (2009)
    did not find any significant differences in return to the training options in
    the early working life. Studies regarding the performance of apprenticeship
    training versus school-based training by Plug and Groot (1998) showed similar
    results for the Netherlands.
    When comparing the dual system with purely academic studies, several
    papers have found that wage returns to apprenticeship training on wages in
    Germany and Austria range between 15 and 20%, based on ordinary least
    squares (OLS) estimates (see Krueger and Pischke 1995; Winkelmann 1996;
    Fersterer and Winter-Ebmer 2003). Given that dual vocational training lasts
    around three years on average, this implies a return of approximately 5% a
    year, which is not far from other forms of school-based education. Selection
    into the dual system, however, once again raises concerns that OLS wage
    estimates will be biased (Soskice 1994). In particular, Soskice found that much
    heterogeneity was due to firm size, given that the wages for apprenticeshiptrained
    workers strongly increase along with the training firm size.
    Recently, Adda, Dustmann, Meghir, and Robin (2006) used a structural
    approach to compare the career path of apprentices relative to unskilled
    workers (pure on-the-job training). They modeled the entire career path,
    starting with the original apprenticeship choice and following period-byperiod
    employment transitions, job mobility, and wages. Using 15 years of
    German data, they found that apprenticeships led to more wage growth
    upfront, while wages in the pure on-the-job (unskilled) training grew at a
    lower rate but for a longer time. Overall, they found that wages were higher
    Vocatio nal Educatio n And Training In Industrialized Countries 331
    following an apprenticeship qualification, with the job arrival rates very
    high and destruction rates very low after some years of experience. These
    findings contrast with Heckman’s (1993) suggestions that qualified apprentices
    were harder to reallocate following a job loss.
    Hanushek, Woessmann, and Zhang (2011) also analyzed the life-cycle
    employment patterns of people with varying educational backgrounds using
    data on the labor market experiences of individuals at various ages in 18
    OECD countries, collected in the mid-1990s as part of an OECD-sponsored
    venture. They found a higher initial employment rate for vocational education
    participants at labor market entry, which reversed by the age of 50. These
    results suggest that occupation-specific knowledge quickly becomes outdated
    and thus leads to lower employment opportunities later in life. Nonetheless,
    we need more reliable evidence concerning the perceived trade-off since
    both occupation-specific labor market segregation as well as limited longterm
    panel data impede the causal interpretation of these findings.
    Conclusion and Policy Perspectives
    In this article, we have classified vocational education and training (VET) in
    industrialized countries into three distinct systems: 1) vocational and technical
    schools, 2) formal apprenticeships, and 3) dual apprenticeship systems
    combining school training with a firm-based approach. After reviewing the
    particular strengths and weaknesses of these distinct types, we evaluated the
    empirical evidence on their effectiveness. Beyond the general education
    core, youth completing school-based VET do as well (and sometimes better)
    than if they had instead remained in purely academic studies, especially
    when a match can be made between the vocational training and the future
    occupation of employment. Rigorous studies evaluating the effectiveness of
    vocational training show that vocational training makes the transition to
    gainful employment easier and may improve wage and employment outcomes,
    in particular for low-ability youths and those working in low-skill
    jobs. In several settings, an extension or prolongation of the academic
    schooling for these youth does not result in additional gains in terms of
    labor market entry, but instead may entail an increased risk of dropout.
    Comparing across types of VET, the dual system, which is most prominent in
    a number of continental European countries, is more effective than alternative
    academic or training education at helping youth transition into employment,
    though no wage differences are observed. Hence, it seems fair to say
    that vocational training elements generate some added value both to training
    employers and to the trainees, and facilitate the timely entry into more
    stable and better-paid jobs at the beginning of the working life.
    Yet, given that economic and institutional conditions are highly diverse
    across industrialized countries, when it comes to furthering vocational education
    and training, policymakers need to take into account the resources
    available and to build on them. The ideal type of a dual VET model relies
    on three preconditions:
    332 ILR Review
    1. Support from employers (and their associations). Employers and their
    associations would benefit from considering training to be an investment
    in favor of competitiveness, productivity, and sustainable employment
    prospects, and thus could offer vocational training in a systematic and
    certifiable fashion.
    2. Support from young people, their families, and trade unions. Young people,
    their families, and trade unions would benefit from accepting
    apprenticeships as a phase of lower earnings in exchange for skill acquisition.
    This perspective would ensure that apprenticeships are not seen as
    a second-best alternative to tertiary education.
    3. Support from the government. The government would benefit, even if
    indirectly, from providing vocational schooling, including funding, a
    binding regulatory training framework (agreed with employers), and
    external monitoring. Such an approach would ensure the timely adaptation
    and labor market relevance of the curricula, and that the quality
    standards of training provided within firms are met.
    Governance and the involvement of core actors—in particular government
    at different levels, employers’ associations, and unions—play a crucial role in
    implementing dual VET. The organizational capacities of governments and
    social partners are essential, given that a critical mass of supply and demand
    of dual VET cannot be created artificially and needs time to develop.
    This level of buy-in and involvement explains why a complex system such as
    the dual vocational training has not been transplanted at a significant scale
    outside continental Europe. But given that most countries have some forms
    of vocational training—school-based, firm-based, or mixed—governments
    and social partners can in principle start with those elements and reform their
    systems to bring VET closer to employer and labor market needs. Experiences
    with pilot projects, regional or sectoral clusters of employers, or traditional
    apprenticeships can be instructive. The main challenge is to make on-the-job
    learning more systematic and to bring school-based vocational training or
    general education closer to labor market needs. In this respect, employer participation
    and an increase in systematic vocational training are crucial. Hence,
    elements of dual VET closer to employers’ demand and real-work experience
    can be developed within other types of VET.
    For example, if a number of employers in a given region or sector are
    able to identify a joint interest in dual VET as a way to promote the productivity
    of their workforce, it could be realistic to start with a dual VET cluster.
    This would probably entail support from the government, which would
    need to take a supporting role regarding vocational schooling parts and
    initial employer investment in training capacities. The government would
    partake in such an exchange for the expectation of lower youth unemployment.
    A basic agreement regarding funding, management, and curricula
    could be a good starting point in such a case.
    Vocational education and training, however, should not be seen as a panacea
    to combat high youth unemployment. Keep in mind that VET systems
    Vocatio nal Educatio n And Training In Industrialized Countries 333
    are appropriate to prepare young workers for only certain types of jobs.
    VET may be less appropriate for specific high-tech sectors and to access the
    highest managerial level positions in both the public and private sectors.
    Here, general academic training is certainly relevant. To address the problem
    of rising youth unemployment rates since 2008, VET is complementary
    to structural reform policies that help revive the economy and reduce entry
    barriers to employment such as dismissal protection or minimum wages.
    Improving VET systems remains relevant even if structural and institutional
    changes need to interact with attempts to increase certain types of job
    opportunities (Cahuc, Carcillo, Rinne, and Zimmermann 2013).
    But other elements may be equally important to creating labor market
    conditions that are more conducive to a smooth transition from school to
    work. In this context, along with the strengthening of vocational training,
    the highly dualized structure of labor markets observed in countries such as
    Italy, Spain, and France needs to be addressed. Where a strong divide occurs
    between employment protection for permanent contracts on the one hand,
    and the regulation of temporary contracts or self-employment on the other,
    young people typically remain stuck in fixed-term employment spells or in
    other forms of flexible employment. Employers are very reluctant to hire
    youth on a permanent basis, particularly in the absence of vocational training.
    In this respect, reducing the rigidity of dismissal protection while
    increasing employment security for labor market entrants according to tenure
    could be a solution. Practical work experience and training could then
    further ease the successful integration of young people into stable jobs.
    Finally, a recent line of research has focused on studying the life-cycle
    impact of vocational education, motivated by the returns to vocational training
    potentially varying at labor market entry compared to returns after
    spending several years in the labor market. The differences lie in the fact
    that skills have to adapt to technological change and to be mobile across
    time, firms, occupations, and space. While some studies so far support the
    conjecture that general education still provides a more solid base for such
    adjustments (Hanushek et al. 2011), others suggest that vocational training
    is better than pure on-the-job (unskilled) training (Adda et al. 2006). However,
    the long-term counterfactuals of low-skilled individuals with general or
    vocational education considering the risk of early unemployment have not
    yet been well investigated. Future evaluations need to study the long-run
    consequences, a challenge that also has to do with the (non-)availability of
    long-term panel data.
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