Ⅳ CHAPTER
1. Economic outcomes of Apprenticeship
In order to analyze economic outcome of apprentice, the study(Jeon et al, 2015) determined the cost and benefit from the employer's perspective.
Total cost items which are calculated includes 1) personnel expenses, 2) operating expenses, 3) apprentice selection and recruitment expenses, 4) other expenses. Personnel expenses are categorized into apprentice's annual income, apprentice's welfare cost, in-company trainer allowance, HRD administration or allowance. Operating expenses consist of cost development teaching material, purchase of training equipment and rental fee of training facility. Apprentice selection and recruitment expenses refers to expenses on recruitment advertisement and promotion, cost for interview and incentive for interview applicants.
Total benefit items which are calculated comprised of 1) apprentice's productivity, 2) cost reduction of new worker's recruitment, 3) difference in productivity compared to general workers, 4) cost reduction of new worker re-education, 5) cost reduction of program development, 6) government incentives.
Chapter Ⅳ_Outcomes of Korean Apprenticeship 85 Source:Jeon et al(2015) Economic & Social Outcome Analysis of Korean Apprenticeship, KRIVET.
A large proportion of cost is attributable to the apprentice's annual income, which takes about 57% of the total cost; while purchase of training equipment and rental fee of training facility occupies 17% of the total cost.
To sum about the total cost items of apprentice, participating company spends an average of 51,380,000 KRW annually, which means the company spends an average of 33,530,000 KRW on one apprentice.
Annual cost per apprentice shows a stable trend, with a total of 33,530K in 2015, 30,520K in 2016, and 31,340K in 2017. This indicates that the cost of the apprenticeship was expensive in the beginning of its introduction, but is now kept at a stable level after the system has settled.
[Figure 4-1] Model for cost-benefit analysis of apprenticeship
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Expenditure
Cost per Company (USD) Cost per Apprentice (USD)
2015 2016
(Predicted)
2017
(Predicted) 2015 2016 (Predicted)
2017 (Predicted) Apprentice’s
annual income 77,052 82,223 90,245 17,070 17,494 18,380
Apprentice’s
welfare cost 6,477 7,621 8,412 1,435 1,622 1,713
In-company trainer allowance
8,366 8,951 9,140 1,853 1,904 1,862
HRD administrator
allowance
2,721 2,851 2,878 603 607 586
Cost of developing
teaching materials
2,689 2,896 2,857 596 616 582
Purchase of training equipment
23,145 10,550 10,354 5,127 2,245 2,110
Rental fee of
training facility 11,123 9,186 9,483 2,464 1,955 1,931
Recruitment advertisement
and promotional
cost
1,020 1,138 1,269 226 242 258
Cost for
Interviewing 1,319 1,411 1,445 292 300 294
Incentives for interview applicants
657 679 710 145 144 145
Total 134,569 127,506 136,793 29,811 27,129 27,861
<Table 4-2> Total cost items of apprenticeship
Source:Jeon et al(2015). Economic & Social Outcome Analysis of Korean Apprenticeship, KRIVET.
Chapter Ⅳ_Outcomes of Korean Apprenticeship 87 [Figure 4-2] Proportion of total cost items for apprenticeship
Source:Jeon et al(2015). Economic & Social Outcome Analysis of Korean Apprenticeship, KRIVET.
The largest proportion of the benefits can be seen in terms of the apprentice's productivity, which constitutes about 75% of the total; and this is a big difference in productivity compared to general workers, who only has about 17%. According to the analysis of the benefits of apprenticeship, participating company obtains on average about 131,490,000KRW annually, which means the company obtain an average of 29,130,000KRW per apprentice. There is a significant gradual increase in the annual benefit per apprentice, whereby the total benefit amounts to 29,130K in 2015, 36,480K in 2016, and 44,130K in 2017.
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Category
Benefits per Company (USD) Benefits per Apprentice (USD)
2015 2016
(Predicted)
2017
(Predicted) 2015 2016 (Predicted)
2017 (Predicted) Apprentice’s
productivity 87,123 116,426 150,031 19,301 24,772 30,556 Cost
reduction for advertiseme
nt and promotion
899 928 1,015 199 197 207
Cost reduction of
interview expenses
620 678 773 137 144 158
Cost reduction of incentives for applicants
390 407 414 86 87 84
Difference in productivity compared to
general workers
17,148 22,530 28,502 3,799 4,794 5,805
Cost reduction of new workers re-education
6,899 7,423 7,363 1,528 1,579 1,500
Cost reduction of
program development
3,809 4,049 4,507 844 861 918
Total 116,888 152,441 192,605 25,895 32,434 39,227
Including government
incentives (for 2015)
233,777 304,882 385,211 51,789 64,868 78,454
<Table 4-3> Total benefit items of apprenticeship
Source:Jeon et al(2015). Economic & Social Outcome Analysis of Korean Apprenticeship, KRIVET.
Chapter Ⅳ_Outcomes of Korean Apprenticeship 89 [Figure 4-3] Proportion of total benefit items for apprenticeship
Source:Jeon et al(2015). Economic & Social Outcome Analysis of Korean Apprenticeship, KRIVET.
The net benefit of apprenticeship is calculated by taking the difference between the total benefit and the total cost value. Results show that the participating company of apprenticeship has annual average benefit of 73,610,000KRW(225,000K of benefit-151,380K of cost). However, the company spends an average 19,880,000KRW(131,490K of benefit-151,380K of cost) annually, if it excludes government incentives.
The company receives an annual benefit of an average of 16,300,000KRW(49,840K of benefit-33,530K of cost) on an apprentice;
but, it incurs a total cost of an average 4,400,000KRW(29,130K of benefit-33,530K of cost) if government incentives are excluded. The annual total cost is kept stable at certain level, while the annual benefit shows a rapid increase. It is expected that a net benefit, excluding government incentives, would be achieved starting from the year of 2016.
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<Table 4-4> Cost-benefit analysis result of apprenticeship(2015-2017)
Category
Cost-Benefits per Company (USD) Cost-Benefit per Apprentice (USD)
2015 2016
(Predicted)
2017
(Predicted) 2015 2016 (Predicted)
2017 (Predicted)
Cost (a) 134,568 127,505 136,792 29,811 27,129 27,861
Benefits (b) 116,888 152,440 192,605 25,895 32,434 39,227 Benefits
Including Government
Incentives (c)
200,006 235,559 275,723 44,308 50,848 57,641
Net Benefits
(b-a) -17,679 24,935 55,813 -3,917 5,305 11,366
Net Benefits Including Government
Incentives (c-a)
65,438 108,053 138,931 14,497 23,719 29,780
Source:Jeon et al(2015). Economic & Social Outcome Analysis of Korean Apprenticeship, KRIVET.
[Figure 4-4] Cost-benefit analysis result of apprenticeship (2015-2017)
Source:Jeon et al(2015). Economic & Social Outcome Analysis of Korean Apprenticeship, KRIVET.
Chapter Ⅳ_Outcomes of Korean Apprenticeship 91
Korean apprenticeship is showing positive effects compared to apprenticeship structure of other countries, even though the system is still in the early stage of implementation. The result of cost-benefit analysis shows that annual cost per apprentice totals to an average of 33,530,000KRW and this number is similar to the cost which is to be invested in the second year of apprenticeship training in other countries, for example annual cost per apprentice of Swiss is 33,490,000KRW.
Annual benefit per apprentice is an average of 49,840,000KRW and this number is higher than the benefit of the second year apprenticeship training in other countries. For instance, the annual benefit per apprentice is 34,380,000KRW in Swiss. In particular, the benefit excluding government incentive is about 29,130,000KRW per apprentice and this amount is similar to the benefit value of other country.
A net benefit also shows that the company gains an average of 16,300,000KRW per apprentice in Korea. This implies that the Korean apprenticeship is a promising system, in comparison to most countries which have incurred more costs than benefits in the second year of apprenticeship training; or countries which had obtain only a small amount of benefits. Although currently, the company still has to pay an average 4,400,000KRW of the cost per apprentice without the government incentives.
However, it is expected that a net benefit of 5,960,000KRW per apprentice excluding government support would be made starting from 2016, which is the third year of implementation. Considering that most countries earn benefits between the second and the fourth year of starting apprentice training, it is anticipated that a net benefit without the government support will be made after a successful settlement and
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operation of the apprenticeship system in Korea.
<Table 4-5> Cost-benefit structure comparison with other countries Category 1st year 2nd year 3rd year 4th year 5th
year note
Korea
Cost 23,780K 33,530K 30,520K 31,340K
benefitEarn in third year of starting
*KRW Benefit
41,420K (20,700K excluding government
incentives)
49,840K (29,130K excluding government
incentives)
57,200K (36,480K excluding government
incentives)
64,840K (44,130K excluding government
incentives) Benefit-
Cost
17,630K ( 3,080K– excluding government
incentives)
16,300K ( 4,400K– excluding government
incentives)
26,680K (+5,960K excluding government
incentives)
33,500K (+12,780K excluding government
incentives)
Swiss
Cost 25,976fr
(30,250,000KRW) 28,769fr
(33,490,000KRW) Earn
benefit secondin year of starting
*Franc Benefit 25,630fr
(29,840,000KRW) 29,533fr (34,380,000KRW) Benefit-
Cost -346fr
( 410,000KRW)– 767fr
(790,000KRW) + + +
Austr -alia
Cost $30,182 (28,950,000KRW)
$38,493
(36,930,000KRW) Earn benefit in third year of starting
*Austral -ian dollar Benefit $11,375
(10,910,000KRW)
$39,519 (37,920,000KRW) Benefit-
Cost
$-18,807
(-18,040,000KRW) - - $1,026
(980,000KRW) +
Source:Jeon et al(2015). Economic & Social Outcome Analysis of Korean Apprenticeship, KRIVET.
Chapter Ⅳ_Outcomes of Korean Apprenticeship 93