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Gütersloh, 12/10/2008

Poor integration of young people in the job market gives rise to considerable follow-on costs

A study by the Bertelsmann Stiftung foresees savings and value creation potential of some €50 billion between 2007 and 2015

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For society, the poor integration of young people in the job market gives rise to considerable follow-on costs. As a recent study carried out by the Institut der deutschen Wirtschaft Köln (Institute for German Economics Cologne) on behalf of the Bertelsmann Stiftung shows, by adopting the right measures in the area of education policy and integrating Germany’s young people in vocational training and other career-related programs, it would be possible to save a total of €13.4 billion in direct and €15.9 billion in indirect costs between 2007 and 2015. In addition, a value-creation potential of some €21.5 billion exists and could be realized by helping less-qualified workers acquire professional certification.

"With this study we want to draw attention to the problems young people have making the transition from school to work," said Dr. Gunter Thielen, chairman and CEO of the Bertelsmann Stiftung, presenting the findings a few days before Germany’s "education summit" was scheduled to begin in Dresden. "From our perspective, the topic of professional training is still not being addressed in a sufficiently consistent manner."

The study identifies three key education policy goals that would make it possible to achieve the massive potential in savings and value-added by 2015, including reducing the number of school graduates with insufficient vocational qualification as well as reducing by a third the time spent transitioning to the workforce. In addition, 5 percent of today’s less-qualified workers would have to be enrolled in post-school programs to give them adequate professional certification. In addition to these potential sources of savings, the declining number of school graduates would give rise to a "demographic windfall" of some €7.5 billion by 2015.

The calculations of the direct costs of integrating young people in the job market are based on data from 2006, when national, state and local governments and the Federal Employment Agency spent €5.6 billion on measures designed to promote integration. In 2006, a total of 437,584 young people participated in the career-preparation programs identified in the study. The data also show that every student graduating from a Hauptschule (a school that focuses almost exclusively on vocational training) or holding a lesser qualification spent some 1.4 years in transitional programs. In the area of indirect costs, better integration of young people in training programs and the job market would result in savings in the area of unemployment compensation and social assistance programs. In addition, value creation potential could be tapped by providing post-school training to less- or unskilled workers, resulting in easier job placement and increased income. 

"If we achieve the policy goals proposed in the study, not only can we reduce the follow-on costs of insufficient integration that society must bear, we will also improve the entire professional education system and prevent the dramatic shortage of specialized workers that is currently foreseen," Thielen said.


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Clemens Wieland Clemens Wieland
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