Apprenticeship training: what for?: investment in human capital or substitute for cheap labour?

Apprenticeship training in Germany is generally considered to be an investment of companies into the human capital of their apprentices. This view is mainly based on the German cost benefit studies which testify training firms high net costs for their apprenticeships, but these results have not been reconfirmed by other types of data or methods. We show that motivations for apprenticeship training are not homogeneous: some firms follow an investment strategy and others follow a substitution strategy. We derive an empirical method to identify different training strategies which can be used with publicly available company data. According to our classification, we find that in Germany 18.5 per cent of all companies follow a substitution strategy and 43.75 per cent to follow an investment strategy; the rest is mixed or undetermined. In a second step we estimate the determinants for a substitution strategy. We find sizeable differences between sectors with different skill requirements and between firms' coverage of industrial relations.

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