Make or buy: train in-company or recruit from the labour market?

Lutz Bellmann,Günter Walden,Philipp Grunau,Klaus Troltsch

doi:10.1186/s40461-014-0009-x

Abstract

Using a sample about company hiring behaviour from the BIBB Establishment Panel on Training and Competence Development 2011, this paper analyses the hiring decisions of German establishments. Companies essentially have two choices to meet their labour demands: to provide their own apprenticeship training or to recruit unskilled or already-qualified staff through the external labour market. Therefore, we employ a multinomial quasi-maximum likelihood fractional regression model that simultaneously investigates the determinants of five hiring alternatives (new trainees, external unskilled staff, external skilled staff with initial vocational education, technicians and master craftsmen, and external staff with higher education). Our analysis reveals that a firm’s characteristics play a crucial role in explaining its recruitment behaviour. In this respect, the mobility and development of its workforce as well as the reproduction of the existing qualification structure prove especially important. The empirical results further show some evidence that apprenticeship training and the recruitment of workers with IVET qualifications from the external labour market depict alternative strategies. I-21; J-23; J-63

Highlights

To meet their demands for qualified workers, companies essentially choose between providing their own initial vocational education and training (IVET) or recruiting differently qualified staff from the external labour market
We propose a positive relationship between in-company vocational training and the company’s evaluation of apprenticeship training’s costbenefit ratio
The greater the perceived cost associated with in-house IVET, the less a company relies on the recruitment of highly qualified staff with university degrees; surprisingly, these companies hire significantly more new apprentices

Summary

Introduction

To meet their demands for qualified workers, companies essentially choose between providing their own initial vocational education and training (IVET) or recruiting differently qualified staff from the external labour market. In Germany, the overriding importance ascribed to in-company apprenticeship training has traditionally affected this decision Over their lifetimes, more than 50 per cent of a given school leavers cohort will have received basic occupational training through the dual IVET system (Gericke, 2014), which includes firms and part-time vocational schools as learning venues. The following paper focuses on the question of which different key company-related factors the recruitment of new apprentices and (unskilled and skilled) workers from the external labour market fundamentally depends on. Companies essentially have two choices to meet their labour demands: to provide their own apprenticeship training or to recruit unskilled or already-qualified staff through the external labour market. In-company training of skilled workers would cease to be a worthwhile recruitment strategy

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