Academic journal article International Journal of Training Research

Cost-Benefit Paradigm of Apprenticeship Training: Reviewing Some Existing Literature

Academic journal article International Journal of Training Research

Cost-Benefit Paradigm of Apprenticeship Training: Reviewing Some Existing Literature

Article excerpt


The purpose of this paper is to provide an assessment of the existing literature about the importance of apprenticeship training in developing human capital, and to identify constructs for analysing return on investment regarding apprenticeship training in terms of the impact of training on firm productivity, profitability and long-term competitiveness. The objectives are set out in the context of institutional and firm-sponsored apprenticeship training, which is in operation in many countries, including Pakistan. The combination of institutional training and firm-sponsored apprenticeship is called 'dual training', based upon German tradition (Beckmann, 2002). The cost of training under this system is mainly borne by the employer while the state subsidises or supports the institutional part of the training (Asghar & Siddi, 2008).

The justification for this paper comes from the reality that the literature on apprenticeship training costs and benefits is fragmented and scattered. No single composition encompasses all the necessary aspects of the costs and benefits for the employer. For example, Dockery, Norris, and Stromback (1998) in their article discussed apprenticeship costs that are incurred by the employer but did not mention the institutional part. Similarly, they did not include all the benefits that employers receive from apprenticeship training. Then there is disagreement on the cost-benefit analysis approaches. Highlighting the same dilemma, Zwick (2007, p. 3) remarks that 'cross-section approaches have the disadvantage that they include subjective estimations of costs and benefits that may be biased by measurement errors'. A company's individual costbenefit calculation is the most important factor in decisions about apprenticeship training, as argued by Wolter, Mühlemann, and Schweri (2006). This argument of Wolter et al.'s appears to be even more relevant in the context of developing countries like Pakistan.

This paper is structured as follows. In the next section, human capital and its importance is reviewed, followed by discussion on the significance of a skilled workforce in human capital and the importance of apprenticeship training in producing a skilled workforce. Subsequently, issues relating to the costs and benefits of apprenticeship training for employers are deliberated. The conclusion is given in the last section.

Significance of human resources and a skilled workforce

The human resources in organisations are being seen more in terms of 'human capital' than of mere labour (Asghar & Siddi, 2008). This concept of human capital arose from a recognition that an individual's or a firm's decision to invest in human capital (that is, to undertake or finance more education or training) is similar to decisions about other types of investments undertaken by individuals or firms (Blundell, Dearden, Meghir, & Sianesi, 1999). Human capital has three main components: (1) early ability (whether acquired or innate); (2) qualifications and knowledge acquired through formal education; and (3) skills, competencies and expertise acquired through training on the job (Blundell et al., 1999). Blundell et al. further maintain that human capital investments involve an initial cost (such as tuition and training course fees, forgone earnings while at school and reduced wages and productivity during the training period) which the individual or firm hopes to gain a return on in the future (for example, through increased earnings or higher firm productivity). Marimuthu, Arokiasamy, and Ismail (2009) had perhaps the same reasoning in mind when they remarked that human resources should be considered the most valuable assets of an organisation and, hence, the most important investment.

The development of a skilled labour force makes an important contribution to a firm's productivity and competitiveness (Hendricks, 2002). An educated, trained and more productive workforce contributes to greater economic growth, making it the most important aspect of human capital (Asghar & Siddi, 2008). …

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