National training systems and industrial performance: U.S.-European matched-plant comparisons

Abstract

It has been suggested that traditional mass production methods are slowly giving way to new leaner and more flexible forms of production which offer higher quality and greater efficiency. The paper seeks to learn lessons from countries whose vocational education and training (VET) systems are ostensibly better suited to the delivery of high-quality, more customized goods and services by comparing matched samples of US and European production establishments in food processing (United States, Germany, Netherlands) and precision engineering (United States, Netherlands). After comparing the productivity levels, economies of scale, machinery utilization, workforce skills (qualifications and training) and employers skill-enhancement strategies, the authors find that average output per direct person-hour in the US metalworking industry to be about 25 per cent higher than in the Netherlands. In cookie manufacturing average labour productivity levels were estimated to be 11-18 per cent higher than in the German and Dutch industries even after adjusting for inter-country difference in the mix of product-qualities. Although in both sectors American plants have a much less qualified workforce than their European counterpart, the negative impact on US productivity of lower skill levels has been more than offset by the economies of scale associated with producing for the large and homogeneous US domestic market. The comparison shows that the German model neither can nor should be replicated in the US but the European experience suggests that it is possible to create institution- and employer-led training schemes that could provide American young people with a more solid foundation of skills to enter the labour market and be an assistance to employers seeking to adopt higher skill, more flexible strategies. The study also reveals some strengths of the American VET system relative to its European counterparts in preparing firms and their workers for an environment where specific skills become obsolete ever more quickly. Not only do US firms benefit from the relatively high proportion of young people who graduate from higher education, but they also gain from the American acceptance that education is an investment rather than an entitlement as it is often perceived in the state-run European systems.