Lessons from Munich for America’s Youth Employment Crisis

In 2011, only 21 percent of American teens worked, down from 44 percent in 2000. Young adults (aged 20 to 24) also fared poorly, with their employment rate dropping from 72 percent to 61 percent during that same time, according to recent Brookings research. In the wake of the Great Recession, weak labor demand, older workers staying in the labor force longer, and insufficient skills among certain segments of young people add up to a real economic and social crisis.

That situation contrasts starkly with the situation we observed last month in Munich, where the Global Cities Initiative will convene in November. Germany has a strikingly low youth unemployment rate (under 8 percent) compared to the European Union overall (23 percent) or the United States (15 percent). And youth unemployment in Munich’s home state of Bavaria was a shockingly low 5 percent as of 2012.

A number of factors contribute to Munich’s success on this measure including some with application to the United States.

First, Bavaria, and particularly Munich, boasts one of the healthiest regional economies in Europe. A bevy of export-oriented firms in industries ranging from advanced manufacturing to life sciences to business services have produced in Greater Munich the highest per capita income in Germany and strong demand for workers.

Second, during the recession, both government policies and long-standing relationships between companies and workers encouraged work sharing arrangements that reduced hours worked for all employees and limited layoffs. That kept Germany closer to full (if not full-time) employment and prevented workers’ skills from eroding while the economy slowly recovered.

A third particularly relevant factor for U.S. regions today is Germany’s “dual educational” model. This model blends classroom education with on-the-job training through apprenticeships, equipping young people not bound for university with practical labor market skills. Regional chambers of commerce work with employers and government to classify 350 occupations nationwide, design and administer certification exams for apprentices, and monitor how businesses train and treat their workers.

We witnessed this model in action during a tour of Seidenader, a 400-person manufacturer of visual inspection machines for pharmaceutical products  just outside Munich. Each year, Seidenader leadership visits local schools, provides weeklong internships to high school students, and selects apprentice candidates based on interest and aptitude. The firm’s strong recent growth has allowed it to bring in dozens of apprentices a year, training them for two to three years in technical and commercial occupations while they also attend school. Apprentices work right alongside other employees on the production line, in machine installation and maintenance, and in sales and marketing. Management reports that the firm has hired about 90 percent of apprentices upon their completion of the program.

One of our tour guides, a 24-year-old technician and former apprentice, described how his responsibilities had grown rapidly in just a few years, noting how he had only recently been in the same position as the apprentices he now supervises. He plans to go back to school eventually—two-thirds of Seidenader’s workers end up pursuing more education with support from the company—to gain new skills with hopes of a higher income and more responsibility at the factory.

However, for all the benefits of the dual system, it would naïve to assume it could be replicated whole cloth. German companies are mandated to join the country’s network of chambers of commerce. They train workers based on a system of nationally-established and portable certifications, elements that do not exist in the United States. And American society takes a very different attitude toward the occupational tracking of young people than German society does.

A more realistic goal may be to take the successful elements of the German workforce model and help to Americanize them, region by region. In places as diverse as Southeast Michigan, South Carolina, and Charlotte, local and state workforce agencies, community colleges, and regional chambers of commerce are working with  firms to establish training that meets the demands of industry. In many cases, German firms and institutions like the German American Chambers of Commerce are spurring the introduction of those models. Rather than government, industry groups such as the Manufacturing Institute are working to standardize credentials to reduce uncertainty among employers and workers alike.

As the recent Brookings report shows, providing young people with better employment opportunities today will go a long way toward improving their future labor market success, and the all-around health of their metropolitan areas. Munich provides a compelling example of how government, business, and educational institutions can work together to engage young people in the economy. More and more U.S. cities and regions are starting to test-drive this latest German import.