Apprenticeship non-completion in Germany: a money matter?

Abstract

German establishments heavily rely on the apprenticeship system for skill supply. With one in four apprenticeship contracts ending before successful completion, it is in the interest of establishments and policy-makers to determine factors, which reduce non-completion. This paper investigates the role of apprenticeship wages and income prospects after completion for apprenticeship non-completion in Germany. For this purpose, this study identifies incidences of apprenticeship non-completion in a large sample of administrative data on employment biographies and estimates a piecewise exponential model of the non-completion hazard with shared frailties by occupations. The results suggest a robust and significant association with both apprenticeship wages and skilled worker wages. All else at means, apprenticeships which are paid 5% more than the mean apprenticeship wage, on average have a 0.8 percentage points higher estimated survival rate. In turn, an apprenticeship expected to lead to a skilled job that is paid 5% above average, has an estimated survival rate, which is 3.1 percentage points higher on average. These findings highlight the importance of income prospects for apprenticeship non-completion.