Human Capital and Public Finance Final: Vocational School in the USA and Germany: Which System is Better?
Human Capital and Public Finance
Professor Burt Barnow
Carl Mackensen
Final Paper
Vocational School in the USA and Germany: Which System is Better?
Introduction
The USA and Germany have markedly different educational paradigms. These paradigms mean that students are taught in dramatically different ways. The purpose of this project is to determine if GDP, and perhaps GDP growth rate, are related to the proportion of students who are in vocational schools. This will determine if vocational schools are more economically beneficial to a country than otherwise. This is done by virtue of a fixed effects regression of percent of the population enrolled in vocational school on GDP per capita from the years 2005 to 2020.
I am interested in this subject because I am a dual US and German citizen. I have completed a high degree of higher education, but I have seen that in Germany, my cousins have completed education in a vastly different mode of schooling. What is further, I am yet to secure a vibrant full time job that challenges me, and this seems to be attainable to my cousins even while they are still pursuing their educations. In order to better understand this, before we get into the lit review, let us examine some of the initial differences between the US and Germany.
In the US, vocational school varies from state to state. Specifically, it is post secondary schools that teach the skills necessary to help students get jobs in certain fields. These schools are predominantly privately owned institutions. 30% of all credentials in teaching are given by two year community colleges. Other programs are offered through military teaching or government operated adult education centers. Historically, these schools are considered less lucrative than a bachelor’s. However, some programs lead to higher income than a bachelor’s. High schools have offered vocational courses such as home economics, wood and metal shop, typing, business courses, drafting, construction, and auto repair. These have mostly been cut due to funding issues. School-to-work is a series of federal and state pushes to link academics to work, sometimes including gaining work experience on a job site without pay.
In Germany, it also varies from state to state. Students can complete three types of school leaving qualifications, ranging from the more vocational Hauptschulabschluss and Mittlere Reife compared to the more academic Abitur. German public universities generally don’t charge fees. Germany is well known internationally for its vocational training model, the Ausbildung (Apprenticeship), with about 50 percent of all school leavers entering vocational training. Germany has high standards for the education of craftspeople. Historically, very few attended college. In the 1950s 80 percent had only primary school of 6 or 7 years. 5 percent entered college. An upper middle class life was still attainable by craftspeople. Today, more people attend college, but craftspeople are still highly valued in German society.
Literature Review
To date, there is no research available that directly compares US and German vocational schools, and their outcomes. As such, my literature review looks at each system separately, trying to distill the essence of how vocational school operates in each respective country. I begin with Germany, and then move on to the US.
The German Model
Germany maintains a high degree of standard for its craftspeople, or those who go through apprenticeship. “In the 1950s, 80 percent had only Volksschule ("primary school") education of 6 or 7 years. Only 5 percent of youths entered college at this time and still fewer graduated. In the 1960s, six percent of youths entered college. In 1961 there were still 8,000 cities in which no children received secondary education.” https://en.wikipedia.org/wiki/Education_in_Germany#Apprenticeship, viewed on 6/1/2024). Germany is not a country populated by those without education, however. Those who did not receive higher education were still highly skilled, and upper middle class. Though more people go to higher education now, skilled laborers are still highly sought after.
Before the 20th century, the relationship between an apprentice and his master was fatherly in nature. For the most part, those learning were very young. Masters had to not just imbue skill, but also the virtues of a skilled laborer, as well as spiritual guidance. Training ended with the Freisprechung, or exculpation. Following this, the trainee could call themselves a Geselle, or journeyman. As such, he could either become a master, or work for a master. In these times, laborers and crafts were known as the ‘virtuous crafts.’ More recently, those seeking apprenticeship must find a master, or Ausbilder. The Ausbilder must teach the craft, give social skills and character lessons, and sometimes give room and board. Originally, most trainees only had primary education. Today, only trainees with secondary school completion can attempt apprenticeships. Apprenticeship typically takes three years, in which the trainee both works and goes to vocational school. This entire way of doing things is known as the dual education system. (Duale Ausbildung)
In Germany, this system became formalized by the passing of the Vocational Training Act of 1969. (Pritchard, 1992). It was further reformed in 2005. In the past, “vocational training was organized by the various guilds through apprenticeships, as their members sought to ensure that they had a talented labor pool to perpetuate their respective industries.” (www.technicaledeucationmatters.org, viewed 6/1/2024). The Vocational Training Act made the system uniform across Germany, and was the basis by which government, the private sector, and trade unions could work together to facilitate the dual system.
In The German Vocational Education and Training System: Its Institutional Configuration, Strengths, and Challenges by Solga et al (2014), considerable thought is given to thte nature of vocational schools in Germany. Germany is well known for its high quality educational system, including vocational education and training (VET). There are two primary aspects to this way of doing things, firstly, a company based program done in conjunction with a school based aspect, usually numbering one to two days a week. Apprentices, as they are known, get their more generalized education for secondary school in main subjects and the theory that is relevant to their occupation. This combination of the theory and practicality of types of knowledge, gotten through both school and work, is done in concert with the public-private combination of the way of governance. The recession of 2008 caused a great deal of attention to be called towards this dual system by the international order. While youth unemployment increased greatly across Europe, this was not the case in Germany.
This dual system is to a high degree a part of the labor market structure. Job-relevant skills are rewarded by those who employ these students, as well as given weight during collective bargaining. The overall system depends greatly on how well firms are doing. It seems the case that this sytem of apprenticeship is desirous as a means of getting into skilled labor for a high degree of young people who are not able to continue on to higher education. It gives society skilled labor for both the service and occupational sectors. The primary negative, which is similar to higher education generally, it leaves out the low achievers. It is difficult for other countries to emulate the dual system. The system has evolved over a long time period, and the things needed to facilitate such a system, both normatively and institutionally, is quite high. We can still conclude that making connections between schools and firms facilitates transitioning to the workplace. Making certificates and standardization of training allows for transfer of skills between companies. This system works not only with the private sector, but also trade unions, as well.
In Vocational Education and Training in Germany: Trends and Issues, by
Cockrill & Scott, the authors attempt a deep dive into the current structure of the German Vocational Education System, and look at some of the key issues and stresses in which it operates. They begin by describing the dual system and how it is undergirded by the larger educational system. They cite some problems which may harm the continued worth of the program. Some of the most important are pressure for the differentiation of giving training, as well as more flexibility, as well as redesigning the way funding and costs are configured.
In WHAT MATTERS IN THE TRANSITION FROM SCHOOL TO VOCATIONAL TRAINING IN GERMANY, Educational credentials, cognitive abilities or personality? By Protsch, (2011), the dual system is further explored, specifically the transition from school to apprenticeship, or vocational training. He argues that the system is an institutional means by which the prevention of some people from specific backgrounds of class being able to access learning is ameliorated. Specifically, the author asks whether the change from school to vocational school and apprenticeship allows students with lower secondary degrees or intermediate degrees to show their abilities, regardless of school credentials. This is further examined by an appeal to the place of the Big Five personality traits in the process. They find that the type of school degree is vital to the process of change. Specifically, it is easier for those with intermediate degrees than lower ones. Further, they find that the specific importance of personality, credentials, and abilities on success in the labor market isn’t a universal issue. The specific things that aid this change significantly based on the nature of the school degree.
The US Model
Vocational school in the United States changes based on which state you are in. Vocational, or Tech, schools, are post-secondary schools in which students study after completing high school or getting a GED. They teach skills needed to allow students to get jobs in specific industries. Two year colleges play a significant role, allowing for transfer of credits to four year schools. Military and government operated adult education centers are also employed.
In the past, vocational school was seen as providing a lower return on investment in the long run than an undergraduate degree. However, there are a number of crafts jobs which allow for a decent income, and cost significantly less time and money. “Even ten years after graduation, there are many people with a certificate or associate degree who earn more money than those with a degree”. (Torpey, 2019).
Traditionally, high schools would give some vocational courses, such as home economics, wood and metal shop, typing, business courses, drafting, construction, and auto repair. (https://en.wikipedia.org/wiki/Vocational_education_in_the_United_States viewed 6/1/2024). These programs have largely been cut, however. This may be due to funding issues, and the push to emphasize academics due to the standards based education reform.
The largest discrepancy between vocational school and traditional schooling is the amount of time invested in order to finish their studies. Vocational schools offer programs of one to two years, for the most part. Traditional schools require a broader education, as well. Vocational schools focus on specifically what the student needs for their specific desired field.
The federal government is involved by virtue of the Carl D. Perkins Vocational and Technical Education Act. “The Office of Career, Technical, and Adult Education in the US Department of Education also supervises activities funded by the act, along with grants to individual states and other local programs.” ( Office of Career, Technical, and Adult Education).
By the early 20th century, the US sought to emulate the German model. “Researchers such as Holmes Beckwith described the relationship between the apprenticeship and continuation school models in Germany and suggested variants of the system that could be applied in an American context.” (Beckwith, 1913). This system of industrial education grew following World War I, and became the contemporary vocational education system. The following is a rough timeline of events:
· Vocational education was initiated with the passing of the Smith-Hughes Act in 1917, set up to reduce the reliance on foreign vocational schools, improve domestic wage earning capacity, reduce unemployment, and protect national security.
· Around 1947, the George-Barden Act expanded federal support of vocational education to support vocations beyond agriculture, trade, home economics, and industrial subjects.
· The National Defense Education Act, signed in 1958, focused on improving education in science, mathematics, foreign languages, and other critical areas, especially in national defense.
· In 1963, the Vocational Education Act added support for vocational education schools for work-study programs and research.
· The Vocational Education Amendments of 1968 modified the Act and created the National Advisory Council on Vocational Education.
· The Vocational Education Act was renamed the Carl D. Perkins Vocational and Technical Education Act in 1984.
· Amendments in 1990 created the Tech-Prep Program, designed to coordinate educational activities into a coherent sequence of courses.
· The Act was renamed the Carl D. Perkins Career and Technical Education Act of 2006.
(https://en.wikipedia.org/wiki/Vocational_education_in_the_United_States viewed 6/1/2024
In DEPTH OVER BREADTH: The Value of Vocational Education in U.S. High Schools, Kreisman et al examine how vocational school in the US is seen to contribute towards national welfare and education. In 1983, A Nation at Risk was published. Since then, those in decision making positions have attempted to prevent the diminishment of readiness by virtue of academia for US students. International standardized tests give worrying signs as to our country’s ability to meet higher education needs. They underscore that many young people are not ready for college or work. As a result, many states have made high school graduation more challenging. Today, high schools finish more courses and higher level studies than they did three decades ago. This would seem to portend beneficial change on the topic.
These developments, however, have come to be by virtue of cutting vocational, career, and technical education. Some argue that this is good, as it better prepares students for higher education, and will not lead to students finding themselves in dead end jobs. Others, however, point out that there are not enough skilled professionals out there, and that for a subset of students, vocational school could be the distinction between middle and lower class lives. Forcing everyone to focus on academic courses, while neglecting the trades, results in a dearth of tradespeople and corresponding credentials. This makes us wonder, “What is the relationship between modern-day vocational or career and technical coursework and high-school graduates' success in college or in the workforce? Is vocational education an off ramp to college foisted upon lackluster students, or a different and less costly path toward adult success?”
The authors examined 4,000 adults to determine the answers to these questions. Their study looked at a representative sample of young working professionals, and found that students will follow the vocational path if it is made available to them. It is not the case that ‘unfit’ students are left to languish in these schools. “Further, we find that not all vocational classes are equal: students earn about 2 percent more annually for each advanced or upper-level vocational class they take, but enjoy no wage premium for having completed lower-level or introductory vocational study.” (Kreisman, 2019).
There are some conclusions to be drawn from these findings. Primarily, those who benefit from vocational coursework seek out those courses. Programs which limit this, like a higher course requirement for academics, is not best for these students. Lastly, benefits come to students who focus on specific topics, and not those who take more than one course. Because of this, depth of study should be facilitated.
In Economic Returns to Vocational Courses in U.S. High Schools by Bishop et al, the economic gains of high school level vocational classes is examined further. What they call High school career-technical education (CTE) in the US is big business. Students spent “1.5 billion hours in vocational courses of one kind or another. Of the twenty-six courses taken by the typical high school graduate, 4.2 (16%) are career-tech courses (NCES, 2003a). Courses in general labor market preparation (principles of technology, industrial arts, typing, keyboarding, etc.) and family and consumer sciences are offered in almost every lower and upper secondary school.” Further, “High school graduates in the year 2000 took 1.2 full-year introductory CTE courses during upper secondary school and probably almost as many during middle school (NCES, 2003a).” Occupation-specific education is also available to most high school students.
95% of high school students attend comprehensive high schools. 60% of these offer preparation for specific labor markets. For those without access to such programs, they are able to use a portion of their school days at a local vocational-technical center. These account for roughly 6.2% of high schools. In a great deal of bigger, urban school districts, students can attend a full day CTE school. “About 4.6% of the nation’s high schools are of this type offering concentrated occupational studies and related academic coursework all in one building (Silverberg et al., 2003).” Those which are specifically for CTE have a larger degree of technical programs, and usually are better quality. Many take part in CTE. “Nearly every graduate takes at least one CTE course and 90.7% take at least one occupation specific course.”
“Forty-four percent take three or more occupation specific courses and 25% take a sequence of three or more courses in a specific occupational field (referred to as an occupational concentration) (Levesque, 2003). Occupational concentrators allocate about one-third of their time in high school to vocational courses. The total number of occupational vocational credits earned has been remarkably stable: 3.00 for 1982 graduates and 3.03 for year 2000 graduates (Digest of Education Statistics, 2003: 163). Averaging across all graduates, introductory vocational courses accounted for 4.5% of courses taken during the four years of high school by graduates in the year 2000. Occupation-specific vocational courses account for 11.6% of courses taken. The twenty-five per cent of graduates who are occupational concentrators allocate about one-third of their time in high school to vocational courses.”
Bailey et al in their piece, The Vocational Education and Training System in the United States detail the system further. They argue that the relationship drawn between work and education is clear and obvious. People who don’t graduate high school usually cannot find a well paying job, experience higher levels of poverty and unemployment.
Finishing high school is seen as the minimum that a person can do, with regards to education and job preparedness. Those without it usually work in low or unskilled jobs. Those with an associates, or certificate, usually work in technical jobs or skilled jobs. These students are less likely to get to professional or managerial work, with that going to those with bachelor’s degrees, as those positions need postgraduate school.
Data and Methods
In order to complete my analysis, I needed data on GDP by year for Germany and the US respectively, as well as population per year for the desired years. I was able to find this, through the websites listed in my References section, for the years 2005 to 2020. I also included the percentage of students in vocational schools for each country for these years. It proved very difficult to find any other demographic or economic variables that were present for both Germany and the US for these years, which results in some confusing outcomes of my analysis, which I will get into later.
I begin my analysis by running a fixed effects regression of Germany versus US GDP per capita, with the concept being that GDP per capita represents a decent indicator of the economic vibrancy of the country in question. I found GDP per capita for the years 2005 to 2020 by first finding the GDP per year for each country, and then finding the population for each year. I then divided GDP by population, giving per capita GDP.
After comparing GDP per capita between the US and Germany, to get a baseline of how these countries are doing relative to one another, I ran fixed effects regressions of the percent of students in vocational schools, a dummy for whether the country was Germany or the US, and the year. After doing this, I ran the same regressions for Germany and the US individually, to look at the relationships for those countries to be able to better compare them.
Results
For my first regression, as stated above, I compared the GDP per capita for the US and Germany. The output is below.
This shows that Germany has a GDP per capita of 10,221.63 dollars less than the US. This is unsurprising, as the US leads the world in GDP per capita, and is a significantly larger and more robust economy.
I then ran a fixed effects regression of percentage of vocational school students on GDP per capita. Results are below.
Here, we can see that for a one percent increase in vocational school participation, per capita income went up by 3,274,199 dollars. Year was used as a control variable to tease out any time trends. This makes little to no sense, and I will elaborate in my Discussion section.
I then ran individual regressions of the same variables for the US and Germany separately. Below are the findings.
Germany:
US:
These results show a massive increase for Germany, as well as a massive decrease for the US, in per capita GDP based on a one unit increase in vocational school students. Again, this makes little to no sense.
Discussion
While the first regression seems accurate in terms of its ability to tease out the differences in per capita income between the US and Germany for the time period 2005 to 2020, the remaining regressions all do not make intuitive sense. First and foremost, it is highly unlikely that a one unit increase in vocational school attendance, for either country, could lead to a change in per capita GDP that values in the millions, either positively, as it was for Germany, or negatively, as it was for the US. The only explanation I have for this, is that the explanatory work of the variables included was too weak, and more control and fixed effects variables were needed to make this study more accurate. Had I had the information for such things as race, gender, or other demographics, this could have been a much more nuanced study. Further variables such as percentage of workers with degrees, and which degrees, would also have allowed for a more detailed study. Working with what I was able to access, however, has lead to results which seem to defy common sense.
What is more likely is that there has been an error in my computation that results in a factor of 1,000 being applied to one of the numbers, meaning that the difference is much more likely to be in the thousands, rather than millions. This makes intuitive sense, and after reviewing my Excel file, this seems to be the case.
What, then, can we say about the comparison between the US and Germany, as regards percentage of vocational school attendees and per capita GDP? Each country works differently. For the US, an increase in this population results in a lower GPD per capita. For Germany, a higher one. It is important to remember the material covered in the Literature Review, that these countries have vastly different paradigms and social structures. When considering this, it makes sense that these differences are in place
Conclusion
German and US vocational school image and performance are markedly different. Germany has a lower Per Capita Income. Further, Per Capita Income increased with time passing. For every percent increase in German vocational school, Per Capita Income went up by $3,274. For every percent increase in US vocational school, Per Capita Income went down by $1,191. I surmise that more vocational school attendance will lead to higher economic activity. Based on anecdotal evidence and interviews, German vocational school can lead to a happy, upper middle class life for most. Vocational school in the US is looked down upon, in our obsession with everyone completing a four year degree as being seen as the only means to economic empowerment. Hopefully my study sheds light on alternatives.
Discussion Questions for Further Work
• Why would vocational attendance help Germany but hurt the USA?
• What other covariates should I include in my analysis?
• What do these results mean in the context of Human Capital?
• Should the US try to emulate Germany? Or vice versa?
References
Torpey, Elka (January 2019). "High-wage occupations by typical entry-level education, 2017". Bureau of Labor Statistics. Department of Labor. Retrieved February 9, 2019.
Beckwith, Holmes (1913). German Industrial Education and its Lessons for the United States. Washington, D.C.: United States Bureau of Education.
(https://en.wikipedia.org/wiki/Vocational_education_in_the_United_States, viewed 6/1/2024).
https://en.wikipedia.org/wiki/Education_in_Germany#Apprenticeship, viewed on 6/1/2024
www.technicaledeucationmatters.org, viewed 6/1/2024
Solga, H., Protsch, P., Ebner, C., & Brzinsky-Fay, C. (2014). The German vocational education and training system: Its institutional configuration, strengths, and challenges (No. SP I 2014-502). WZB Discussion Paper.
Cockrill, A., & Scott, P. (1997). Vocational education and training in Germany: Trends and issues. Journal of vocational education and training, 49(3), 337-350.
Protsch, P., & Dieckhoff, M. (2011). What matters in the transition from school to vocational training in Germany: Educational credentials, cognitive abilities or personality?. European Societies, 13(1), 69-91.
Office of Career, Technical, and Adult Education
Kreisman, D., & Stange, K. (2019). Depth over breadth: The value of vocational education in US high schools. Education Next, 19(4), 76-84.
Bishop, J. H., & Mañe, F. (2005). Economic returns to vocational courses in US high schools. In Vocationalisation of secondary education revisited (pp. 329-362). Dordrecht: Springer Netherlands.
Digest of Education Statistics, 2003: 163
Bailey, T., & Berg, P. (2009). The vocational education and training system in the United States. In Vocational Training (pp. 271-294). Routledge.
For German vocational school numbers and German population:
https://www.statista.com/statistics/1182007/number-vocational-trainees-germany/
For USA population:
For USA vocational school:
https://nces.ed.gov/pubs/web/95024-2.asp
For GDP measures for both countries:
https://www.macrotrends.net/global-metrics/countries/DEU/germany/gdp-gross-domestic-product