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5 Financing of the VPET system

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Switzerland invested around 17 per cent of its public expenditure in education in 2012 (BFS 2015). This amount represented slightly more than 5 per cent of the then GDP, or around 35 billion Swiss francs. Of this expenditure, 3.5 billion Swiss francs were laid out on the VPET system (SBFI 2014). The federation and the cantons provide the public finances, with the federation contributing 25 per cent and the cantons 75 per cent to it. Public funding, however, only covers around 40 per cent of the total VPET expenditure. The remaining 60 per cent of the costs are borne by the private sector – in VET, especially by the companies providing the training – as the apprentices themselves pay no tuition fees. In PET, the students and their employers finance the major part of the training costs. The three main partners are accordingly not only responsible for VPET but also for its financing. Figure 8 illustrates the breakdown of the financing.

The public sector’s financial contribution is mostly used for vocational schools (SBFI 2014). By contrast, the training companies’ contribution is mostly used for the apprentices’ wages and the instructors’ salaries. The companies providing training are free to negotiate apprenticeship wages with the unions. However, most companies pay wages in line with the recommendations of the professional associations. The apprenticeship wage is also adapted to the level of training. At the beginning of the training, the monthly wage is about 600 Swiss francs, increasing to 1,000 Swiss francs in the last year.[15] These wages are rather low and correspond to about one-fifth of the monthly salary of a regular worker. Here, however, lies the main reason for the successful functioning of the system, since both the apprentices and the training companies derive benefit. The apprentices are on average 18 years old, live at home with their parents and have no training costs to cover (classes at vocational schools are free of charge), so their expenses are low and the pay is therefore sufficient. Despite the training costs of apprentices, the average training company already generates a net benefit from their training (Mühlemann et al. 2007) during the training period (Dionisius et al. 2009). The company providing the training therefore has an incentive to continue offering apprenticeships. However, a net gain can only be achieved through the interaction of low wages with the growth in productivity of apprentices during the training period (see Wolter, Mühlemann & Schweri 2006). These results are partly due to the well-developed framework curricula and the related in-company training programmes. In the first year, the productivity of an apprentice is rather low, but in the second and third years of the apprenticeship, productivity increases considerably to the extent that it covers the costs.

Figure 8 shows the resulting net benefits of training companies for the reference year 2000. At that time, the new Vocational and Professional Education and Training Act was up for debate. Various studies were undertaken to provide information about the relationship between public and private financing of the VPET system. These fundamentals served to justify the increase of the federal contributions, as was required by law (Bundesrat 2007, p. 1,256; p. 1,259; p. 1,265). In 2015, public expenditure for VPET was 3.647 billion Swiss francs (Bundesrat 2012, p. 3,357). The most recent representative survey on the cost-benefit ratio of apprenticeships in companies dates back to 2009. According to this study, the gross costs of training amount to 5.3 billion Swiss francs, while the productive achievements of apprentices contribute 5.8 billion Swiss francs (Strupler & Wolter 2012). Figure 7: The Youth Labour Market Index over time for Switzerland (yellow), Germany (dark blue), India (red), and the OECD average (light blue). The lines in the upper part of the figure represent the index values for the respective years, while the bars at the bottom indicate the number of available indicators for the calculation of the index. Compiled by the authors


Figure 8: Cost distribution between the three main actors and cost-benefit of apprentices. The costs of the professional associations are not included in this diagram. Further research is needed to determine the amount funded by the 600 professional organisations. Source: Bundesrat (2007, p. 1,256; p. 1,259; p. 1,265). Compiled by the authors

Although most companies that offer training generate a net benefit, there are branches in which training companies have net costs. To help these companies cover their training costs, the option of a mandatory VET fund was introduced (see Art. 60 VPETA). The idea behind this is that free-riders, i.e. companies that do not take apprentices themselves in order to save training costs but poach trained graduates from training companies, also contribute to the training costs. Upon the request of the relevant professional or trade association, The Federal Council can declare paying into a VET fund mandatory. The fund reduces the free-rider problem because all beneficiaries share the costs. This type of financing of the VET system has the advantage that the state budget is not burdened excessively.

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