1. Pre-training competencies and the productivity of apprentices
5th International INAP Conference - April, 23rd and 24th 2013
Pre-training competencies and the productivity of apprentices
Anika Jansen and Harald Pfeifer
German Federal Institute for Vocational Education and Training (BiBB)

2. Outline
Motivation „Why are we interested in that topic? Working hypothesis“
Term explanation „How do we define pre-training competencies and productivity?“
Data „Which data do we use? Selectivity issues?“
Results „Descriptive results, multivariate analyses, robustness tests“
Simulation „Effect on training costs?“
Conclusion

3. Motivation
Decision to train depends on the expected (long term) cost benefit relation
Net costs = gross costs – productive contributions of apprentices
Many aspects of costs are exogenous, but a firm may have influence on productive contributions
Productive Contribution = Working time of apprentices x potential productivity of apprentices
Time allocations of apprentices
Selection of apprentices

4. Motivation Here: Focus on selection of apprentices
Can a firm influence the cost benefit relation of training by choosing the right apprentices?
What exactly determines the productivity of apprentices at the firm?
 Human capital theory suggests that the work productivity is determined by previous education
Education = the competencies acquired at school
Our hypothesis: Productivity of apprentices depends, among others, on school developed key competencies

5. Definition Four key school competencies
oral and written expression skills
basic mathematics skills
knowledge in information technology
problem solving skills
Competencies are measured by asking those who are responsible for human resources and training to evaluate their apprentice’s competencies at the beginning of the training period
On a scale from 1 (=very good) to 5 (=very bad)

6. Definition
Productivity = Wage of a skilled worker x performance level of an apprentice
How do we operationalize the apprentice‘s performance level?
The performance level of an apprentice is measured in percentage of the average performance level of a skilled worker in the same occupation
The firm states for example that the apprentice achieves 60% of the performance level of an average skilled worker in the firm
We use the absolute productivity to ensure comparability between the firms

7. Data
We use the data from the cost benefit survey 2007, collected in the II. quarter 2008; Initial data set: approximately 3000 firms
Questions about the costs and benefits of training with respect to a certain occupation
Problem: Question about school competencies can refer to various apprentices
Therefore, we reduce the dataset to firms that only have one apprentice in the chosen occupation!
1163 firms and apprentices remain for the analyses

8. Firms with one apprentice
Selectivity?
Comparison of samples – firm characteristics
Firms with one apprentice
All firms
Observations
1163
2856
Wages
Wage of a skilled worker
2198
2235
Apprentice wage
603
590
Retention strategy
Always retain apprentice
0.45
0.47
Sometimes retain apprentice
0.28
0.30
Never retain apprentice
0.26
0.23
Firm size
Until 9 employees
0.69
0.54
10 to 49 employees
0.25
0.33
50 to 499 employees
0.06
0.12
More than 500 employees
0.00
0.01
Trainer hours
20.47
16.75
Time allocation
Unskilled work
0.35
0.36
Skilled work
0.43
Learning activities
0.20
0.21
Economic branch
Trade
0.32
Commerce
Services I
0.13
0.14
Services II
0.17
Administration/Education/Health
0.16
0.15

9. Selectivity? Comparison of samples – apprentice characteristics
Firms with one apprentice
All firms
Mean
S.D.
Oral & written expression
2.31
.98
2.19
.96
Basic mathematics
2.46
1.07
1.06
Information technology
2.51
.95
2.45
.94
Problem solving
.97
2.06
Mean of all four competencies
2.36
.80
2.24
.79
Productivity in Euro
651.36
645.62

10. Descriptive Statistics
Conditional Mean Values

11. Descriptive Statistics
Bivariate OLS regression; dependent variable: logarithm of productivity; sample: firms with one apprentice
ln(productivity)
oral & written expression
basic mathematics
information technology
problem solving
Competencies
0.12***
0.09***
0.08***
(0.03)
(0.02)
Constant
6.76***
6.81***
6.83***
6.77***
(0.07)
Observations
1,160
1,081
R-squared
0.04
0.03
0.02
Note: Standard errors in parenthesis; *** p<0.01, ** p<0.05, * p<0.1

12. Multivariate analysis
How can this relation be explained?
Different distribution of apprentices on firms
Mean value of school competencies
Apprentice wage per month
Firm size (average number of employees)
Retention strategy (Share of firms saying they always retain apprentice)
Frequency €
9.75
25.00 % 8 1 €
28.10
49.21 %
126 2 €
36.79
42.78 %
395 3 €
54.07
51.85 %
513 4 €
60.41
60.33 %
121

13. Distribution over occupations

14. Distribution over occupations - commercial

15. Distribution over occupations - industrial

16. Multivariate analysis
Introduction of control variables:
1. Sorting: dummies for occupation, apprentice wage, retention strategy, firm size
2. As the apprentices are not only in the first year, the firm‘s training strategy might be a possible mediator variable
Time allocation: Unskilled and skilled tasks, and other learning activities
Training hours: How many hours is an apprentice supervised by a trainer?

17. Multivariate Analysis
OLS regression; dependent variable: logarithm of productivity; sample: firms with one apprentice
ln(productivity)
oral & written expression
basic mathematics
information technology
problem solving
Bivariate Model
Coefficients
0.12***
0.09***
0.08***
1.) Controlling for sorting*
0.06***
0.05**
0.11***
(0.02)
(0.03)
R-squared
0.21
0.20
0.22
2.) Controlling for sorting and training strategy**
0.07***
0.04
0.32
0.31
0.30
Observations
1,160
1,081
* Sorting: control for occupation, firm size, retention strategy, apprentice wage
** Training strategy: control for trainer hours, time allocation
Standard errors in parenthesis; *** p<0.01, ** p<0.05, * p<0.1

18. Robustness check: sample with all firms
OLS regression; dependent variable: logarithm of productivity; sample: all firms; apprentice specific variables are averages
ln(productivity)
oral & written expression
basic mathematics
information technology
problem solving
Competencies
0.06***
0.03**
0.02
0.07***
(0.02)
(0.01)
Constant
3.91***
3.96***
3.84***
3.88***
(0.37)
(0.39)
Observations
2,847
2,623
R-squared
0.22
0.21
Control for: Occupation, firm size, retention strategy, apprentice wage, trainer hours, time allocation
Standard errors in parenthesis; *** p<0.01, ** p<0.05, * p<0.1

19. Simulation
Example: Problem solving competencies  Coefficient suggests an increase of productivity of 7%
Benefit per years and apprentice of Euro in the sample with one apprentice
That means by recruiting an apprentice with a better evaluation of one unit, firms save 815 Euro of net training costs per year and apprentice
For a three year training period this is equal to a saving of 2445 Euro
The benefit that is caused by retaining apprentices is not included in these numbers

20. Conclusion
Pre-training competencies of apprentices have an effect on the firm’s cost benefit relation of training
The analysis suggests that firms should especially pay attention to problem solving skills and oral and written expression skills in their recruitment decision
Basis mathematical skills, however, can also serve as a predictor for productivity as they can be measured more easily
For the future: Observation within one firm and/or objective measures to verify the results

21. Thanks for your attention!

22. Robustness check: occupational groups
Overview of coefficients: Differentiations for occupational groups
Competencies
oral & written expression
basic mathematics
information technology
problem solving
Commercial
(564 Observations)
Full model
0.08**
0.04
0.05
0.16***
(0.04)
(0.03)
Bivariate model
0.12***
0.09**
0.18***
Industrial – technical
(596 Observations)
0.03
0.01
0.10***
0.08***
0.06**
Control for: Occupation, Firm size, Retention strategy, apprentice wage, trainer hours, time allocation, independence, motivation
Standard errors in parenthesis; *** p<0.01, ** p<0.05, * p<0.1