The Political Economy of Low Skills in Coordinated Market Economies

Coordinated market economies (CMEs) have been traditionally considered highly successful on economic and social terms largely thanks to their vocational education and training (VET) system. The dual apprenticeship system provides a broad skill base that allows firms to compete internationally while integrating ‘low achieving’ young people into the labour market. However, the relative increase of the service sector where apprenticeships are less common than in industrial sectors reduced the number of apprenticeships offered with adverse consequences for low achieving youth. As demand for apprenticeships outstrips supply, they experience increasing difficulties in finding pathways to well-paid and secure employment. The integration of low achieving youth into the VET system and the labour market has therefore become an increasingly important policy issue in recent years. Yet, despite similar institutional configurations of the VET and of the labour market, CMEs responded in markedly different ways to the challenge of integrating low achieving young people into the VET system.

In 1998, the Austrian SPÖ-led grand coalition with the support of the unions, and against employers, reacted to a lack of apprenticeship places by introducing state-funded supra-company apprenticeships – a primarily school based training for young people who do not find regular apprenticeships but leading to the same certification as traditional apprenticeships and forming the basis of the later introduced 'training guarantee' (Trinko, 2012). In Germany the Red-Green government reacted to a similar situation in 2004 with an extension of a range of measures intended to prepare young people for apprenticeships but which have been criticised for merely 'storing' them (Kohlrausch, 2012). In that instance, governing parties, the conservative CDU/CSU, employers and trade unions openly voiced their opposition to a publicly financed alternative akin the Austrian solution (Busemeyer, 2012). As a consequence, even young people possessing the necessary qualifications to start an apprenticeship may spend months or years in consecutive qualification measures (Dietrich, 2008).

Therefore, Austrian youth have a better chance to gain work qualifications within the regular 3 years than Germans. Further, because mostly low achieving youth enter into the delaying transition system, the German policy must be regarded as more stratifying than the Austrian solution. Given that employers opposed the introductions a fully-fledged school-based system, the divergent outcome across the two countries provides two interesting puzzles. First, why has a centre-left government opposed the introduction of an inclusive measure, such as a fully-fledged school-based VET system whilst a grand coalition introduced it? Second, why did the German unions oppose its introduction whilst their Austrian counterparts supported it?

Contrary to theoretical expectations that emphasise employers’ as the main actor in shaping skill formation systems, the paper investigates through systematic process tracing broader coalitional politics behind such reforms. It argues that employer influence should be placed into context and full consideration be given to governments’ and unions’ preferences as well as to the salience that a given policy issue bears at a given time. In addition, it is argued that short-term budgetary considerations can play an important role in the choice of institutional reforms.