If you are missing skills

Germany’s vocational education system could offer important lessons

Written by Anil Sasi | Published: May 2, 2013 12:21:55 am

Germany’s vocational education system could offer important lessons

Rewind to the beginning of the last decade,and things were looking less than upbeat for Germany. On the macroeconomic front,headwinds were beginning to appear in the late 1990s,primarily as the social-market economy launched after World War II — with its mismatch of market capitalism,strong labour protection and a generous welfare state — was ostensibly splitting at the seams.

Around that time,German soccer too was going through a trough,almost mirroring the performance of the economy. Even though there was a sliver of hope at the club level,with Bayern Munich defeating Valencia on penalties in 2001 to win a fourth European Cup,Germany’s continued lack of international success was seen as a worrying sign. A makeover in harnessing talent was deemed necessary and as a result,in 2002,youth academies were made a prerequisite for all first and second division German clubs. More than 700 million euros is estimated to have been pumped into the youth programme nationwide since,as the makeover efforts for German soccer were put into action.

Fast forward to the present,and the investment could be beginning to pay off. Success for the two top Bundesliga sides in the past 10 days — with Borussia Dortmund through to the Champions League final after beating Real Madrid 4-3 on aggregate and Bayern Munich demolishing Barcelona 4-0 last week — showed the nation’s international comeback could be on track.

On the economic front,too,a salvage exercise was ordered in the early 2000s. In March 2003,Chancellor Gerhard Schroder launched his “Agenda 2010”,a batch of unpopular labour and welfare reforms leading to swinging cuts to unemployment benefits in an attempt to get Europe’s largest economy back on track. Most important,the inherent strength of Germany’s dual vocational education and training programme has been at the forefront of the country’s remarkable resilience against the continuing double-dip recession.

The German model,or system as they prefer to call it,is simple. After students complete their mandatory years of schooling,usually around age 18,they can apply to a private company for a two- or three-year training contract. If accepted,the companies sign contracts with applicants under private law and train them in line with the binding provisions of the vocational training directives,which guarantee a national standard. The government supplements the trainee’s on-the-job learning with more broad-based education in her field of choice at a publicly funded vocational school. Usually,trainees spend three to four days at work and one to two in the classroom. They come out with both practical and technical skills to compete in a global market,along with a good perspective of their profession. They also receive a state certificate for passing company exams,designed and administered by industry groups — a credential that allows transfer to similarly oriented businesses should the training company not retain them beyond the initial contract.

In 2010,of the approximately 2.1 million companies across Germany with at least one employment relationship subject to social insurance,4,68,800 were engaged in vocational training. In 2012,the dual system provided broad vocational training for 344 recognised training occupations.

The vocational training system is now ingrained in the German way of life. In sharp contrast,in India,the concept of vocational schools are viewed as a fallback for those who have failed in higher education,thereby acting as a social hurdle. This is despite the fact that the paradox of severe shortage of skilled labour coexisting with a rising number of college graduates without a formal sector job threatens to knock off the hype about India’s demographic advantage.

India does have its chain of state-run industrial training institutes set up with the purpose of offering vocational training,but these largely impart basic skills on equipment that is out of sync with what is being used by industry,especially in sectors such as engineering,automation or electronics. According to the Shimla-based labour bureau in its “Employment and Unemployment Survey 2012”,Indian unemployment tends to rise steadily with education levels. Even as the unemployment among the “illiterate” category is just over 1 per cent,unemployment among graduates is over 9 per cent and among postgraduates,it is 10 per cent. In the US and the UK,where the downturn has led to poor job growth,the unemployment rate for graduates is still under 5 per cent.

The latest NSSO survey too shows there has been a drop in labour force participation rates among the youth in India. This is even more worrying in the Indian context,considering that the window of opportunity in harnessing the demographic dividend is limited. According to estimates by the Planning Commission’s Institute of Applied Manpower Research,if the skills challenge is not met within the next decade,there is a risk that India may be unable to sustain growth in non-agricultural output,and the non-availability of skilled manpower may result in machines replacing labour on a large scale. This,in turn,will result in declining employment elasticity of output,leaving large numbers among the increasingly youthful labour force unemployed.

The German vocational education system is even more important as businesses around the world are reporting a skills shortage epidemic that is weighing on growth prospects. According to the Grant Thornton International Business Report (IBR) 2013,almost four in 10 (39 per cent) businesses around the world are struggling to recruit the right people,with a lack of technical skills cited as the primary problem (64 per cent). The findings for India are even more alarming. It takes about an average of 96 days for an organisation to recruit skilled workers,with the primary challenge faced by 76 per cent Indian businesses being the shortage of technical or specific skills.

A revamp of the Indian skills development programme is desperately needed,especially as the window closes in on India’s demographic dividend.


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