The secret of the world’s most effective labour market: fewer university students
14 January 2020
Switzerland can brag about having the most effective labour market in the world. And this factor is essential in explaining how a country with a tiny domestic market and a very strong currency has earned a permanent place in the leading pack of the most competitive and innovative economies on the planet.
With a population of just 9 million and a GDP per capita three times that of Spain, the unemployment rate in the Alpine nation is around 2% per month. The indicator has averaged 3.5% since 1995 and the series reached an all-time high of 5.7% in January 1997. To see similar figures in Spain one has to go back to the late seventies when migration was the main adjustment mechanism of the Spanish labour market. The comparison is even more hurtful in terms of youth unemployment, which in Spain exceeds 30%, four times more than in Switzerland, according to OECD data from 2018.
‘The Swiss economy has a high level of flexibility and its labour market is the best performing in the world. The capacity to absorb new technologies is high, as well as a high technological update of citizens and companies,’ summarized the report of the World Economic Forum 2017-2018, when the country chained nine consecutive years leading the global competitiveness table -a title that usually fights with Singapore and the United States, which heads the ranking for two years.
But, unlike in the United States, the Swiss labor miracle has not been at the cost of resigning itself to a growing inequality between wages and social classes. Nor do they deal with the rigidity and accelerated ageing that afflicts the ‘Mecca’ of Asian capitalism. What, then, is the Swiss secret for equality and work in one of the most deregulated economies on the planet? A miraculous legislation? A demand for excessive labour? An economic exceptionality? The answer is more prosaic: almost 70% of Swiss students opt for Vocational Training (VET) instead of going to university.
To understand this efficient synchronization between the educational system and the labour market, we spoke with Antonio Loprieno, president of the European Federation of Academies of Sciences and Humanities (Allea) and of the Swiss Academies of Arts and Sciences. Who better than a 64-year-old Italian-Swiss Egyptologist who has been teaching at European and American universities for decades can explain why fewer graduates and better workers are needed?
QUESTION: What is the Swiss Vocational Education and Training model and what are its advantages?
ANSWER: Vocational Education and Training (VET) is the crystallization of a tradition of apprentices deeply rooted in Germanic cultures that has survived to the present day.
Two out of three Swiss students in the final stages of the secondary school (15-16 years) opt for Vocational Education and Training, mostly in dual programs combining theoretical studies with practical work in industry. They may spend three or four days a week working in a company – the distribution of time varies according to the curriculum – so they leave prepared with the precise skills required by the labour market immediately. The remaining 30% go to university – 20% through high school to traditional careers and 10% through VET to applied sciences. These numbers have remained stable for the past 20 years or so.
QUESTION: WHAT TYPE OF PROFILES ARE OFFERED AND WHICH IS THE MOST IN-DEMAND?
ANSWER: There are about 300 different programs; electrician, cook, draughtsman, social worker. A profile much in demand for a few years is technical sales, but there is also solid demand in health, IT, retail and logistics. There are different programs: two years [federal certificate] and three or four years [federal diploma]. After completing a VET program [Federal Vocational Baccalaureate] one can access careers in applied sciences at the university.
QUESTION: Why do young Swiss prefer VET to university?
ANSWER: There is a historical element behind it. The Swiss system, in essence, is something shared by other Germanic countries, such as Germany and to some extent Austria. The VET institutions of these countries have a long tradition of students and teachers, with a high prestige. This type of recognition is something that is not so present in countries such as Spain, France or Italy, where professions have lower value and less financial satisfaction than academic direction.
QUESTION: What about prestige? What about salaries?
ANSWER: In Switzerland, the apprentice system is more socially recognized than in Germany or Austria. In Austria, the same system of vocational training exists, but academic work still has higher prestige than VET. In Germany, the situation is somewhere in between. But in Switzerland we have the most complete version. For VET graduated students there is the possibility of getting a good salary earlier than those pursuing academic carrier, without giving up too much social prestige. In fact, the prospects of getting a well-paid job right away are greater, although in the long run there is not much difference – it will depend on your aspirations and talents in the world of work. For example, the CEO of Switzerland’s largest bank, UBS [Sergio Ermotti], comes from the VET system not from the university, and makes almost more money than anyone else in this country. Another personality coming from the VET system is Peter Voser, president of the ABB engineering group.
QUESTION: Does this mean that Switzerland has an education with no elitism?
ANSWER: There have been several studies to identify trends, but few patterns have emerged. One geographical since access to university is unevenly distributed across the country. In rural areas, it accounts for 10%, while in large cities it can be 40%. Another social study. Children from families with a migration history tend to choose VET and are less represented at university. This suggests that the social status of universities is usually higher, but Swiss society is more egalitarian in this respect. Thus, you won’t find statistics with dramatic differences.
QUESTION: How does the system update itself and avoid oversupply of professionals in an industry?
ANSWER: Here lies the secret of Switzerland’s innovative miracle. Because VET is so much in direct contact with the job market and businesses, it is also very close to the innovation process and is constantly being updated. There is no ministry that decides on the programs or courses, which can be modified if the need is urgent by the professional organizations themselves. If there are changes in the structure of the labour market, they are transferred to the VET offer so that it is not trapped in the past models. Thanks to this practical closeness, innovation can be implemented much more quickly and widely than in countries with a more academic tradition.
It could be said that the system has always been liberal, the supply and demand are freely fixed by the market. Young people, institutions and companies are closely following these employment trends. There is no risk of oversupply of professionals, because right now the complaint of employers is that we do not have enough VET graduates. Our economy runs at a higher rate than our demographics.
QUESTION: How is vocational education and training funded?
ANSWER: The system is funded in three ways. There are three major contributors who contribute, more or less, a third each. The first is the Confederation [state level], then there are the cantons [federal level] and, finally, companies and professional organizations. This is unusual in other countries, as business itself is the key to maintaining the system.
Students pay a tuition fee of 10,000-20,000 Swiss francs [9,000-18,000 euros] for two to three years of training. It’s a lot more than college costs, but if the students pass the federal exam, they get 50% of their tuition back. Then, the companies start paying their apprentices [salaries starting at around 800 euros] and many end up as their workers.
QUESTION: How did you get the private sector so involved in the system?
ANSWER: Companies that put money into the system do so not out of charity, but out of economic interest. It is in the best interest of the company and the industry to train the best workers to achieve better results. These well-trained workers at all levels give them a significant competitive advantage. For the same reason that the big Swiss companies, from food to pharmaceuticals to banking, are investing so much in research. It costs a lot, but the competitive advantage pays off. The private sector has an influence on the workforce being trained. This is key: the system is far from politicians and close to the labour market. We’re shielded from political interference. Politicians have nothing to say on the educational issue or the programs.
QUESTION: How have you ensured that political agendas do not interfere with the education system?
ANSWER: This is because of how the state is organized in Switzerland. The State comes in two forms: The Confederation [national level] and the 26 cantons [regional level]. The cantons, unlike the Spanish autonomies or the German ‘regions’, are sovereign autonomous entities that collect taxes. Dialectics, or to some extent the complement that exists between the cantonal and federal levels, both with power and weight, is crucial to protecting the system from mutual intervention. The Confederation is subsidiary, the structure is so decentralized that it would take an agreement between many parties to make a change. The simple reason why we are shielded from political interference is that politicians have nothing to say about education or the programs.
QUESTION: What are the weaknesses of the system?
ANSWER: The disadvantages of decentralization parallel its advantages. In Swiss education we have ‘de facto’ 26 different systems, one for each canton. The way schools are organized is completely different from place to place. In times of globalization, that’s a big disadvantage, because we put too much emphasis on local needs. We are, to put it self-critically, a little provincialist. This is accompanied by another problem, which is the lack of recognition of [VET] degrees abroad. It’s the price to pay to be free of political interference.
The CEOE (Spanish Confederation of Employers’ Organizations) prepares an arsenal of proposals to change an inefficient system that ‘has degenerated in recent years’ and is on standby in the face of political blockade.
Another argument that we rectors use to convince politicians and the society of how important it is to maintain a good level of university students is that the faculties prepare young people more generally, and this is useful because we do not know what the labour market will be like in 10 years. In a more global and knowledge-based society, I believe that more university experts are also needed. On the other hand, we also don’t want to risk high youth unemployment by having a lot of people prepared for things the market doesn’t need.
QUESTION: And don’t you risk running out of doctors, chemists or linguists?
ANSWER: We face a social challenge: both our academic and economic systems work faster than demographics. We depend on importing outside talent. If you ask the industry representatives, they will say there is a need to increase the number of VET students because we don’t have enough. And in college they’ll tell you the same thing: we don’t have enough students. Fortunately, the Swiss economy tends to attract qualified professionals. And the proof is that we import college students, graduates and professors.
QUESTION: Can the Swiss vocational education system be applied to other countries?
ANSWER: The Swiss system is now attracting a great deal of international attention, especially from countries whose labour markets are unable to absorb the high number of academics they produce. From a technical point of view, I think it can be exported to other countries, but it is more difficult from a cultural and social point of view. In Swiss society, both VET system and academic training are considered to be of equal value, only of a different nature. As in other countries, there is no stigma associated with VET as opposed to academia. In Switzerland, you don’t wonder if you need to go to university to have an economic independence or to climb the social ladder. It’s never been like this.
I believe that the origin of this phenomenon lies in the creation of the Swiss Federal Institute of Technology in Zurich [Eidgenössische Technische Hochschule Zürich or ETH] in the mid-19th century . Today it is one of the top 10 universities in the world, but from the beginning it has been an engineering school that had in mind the labor market and practical jobs. While in the Romance countries the academic focus was on culture or prestige, in the Germanic countries the orientation of the educational system was always the labour market.
And this is a vital difference from Spain, France or Italy. In a country with a tradition of using school and university as a means of social mobility, it is going to take a long time to adopt our system. Even expatriates living in Switzerland send their children to traditional academic education, because they have not internalized the vocational education and training system. It’s very Swiss!