Why Do Firms Train? Empirical Evidence on the First Labor Market Outcomes of Graduated Apprentices

The apprenticeship system is the most important source of formal post-secondary training in Germany. Our Paper contributes to the ongoing debate as to why firms are willing to invest in such training even though many apprentices will leave the training firm soon after completion of the apprenticeship. A particular advantage over previous empirical studies is that we use German register data, the IAB Employment Sample, which gives us a large sample size, and which gives us detailed information on occupations. We find that apprentices staying with their training firm after graduation have (1) higher wages and (2) longer first-job durations than apprentices leaving the training firm. These results support theories according to which firms use the apprenticeship system to select and retain the more able apprentices, thereby recouping the costs of investing in skills that are portable in principle.

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