Chapter
Ⅳ
Apprenticeship
in Korea 2020
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ChapterⅣ Outcomes 83
Chapter
Ⅳ Outcomes
1 Economic Outcomes
In order to analyze economic outcome of apprenticeship, Jeon et al.(2018) conducted cost benefit analysis using the data of apprenticeship survey. “Economic and Social Outcome of Apprenticeship(Jeon et al., 2015)” showed only the economic outcomes of apprenticeship at the company level as net benefit(benefit - cost), and it was difficult to examine the long-term outcomes of various stakeholder.
Hence, the research in 2016 and 2018 had compensated this limitations by examining all kinds of costs incurred and benefits gained by the government, companies and apprentices during five years
21); and also analyzed NPV(Net Present Value) and B/C(Benefit/Cost) ratio which take into account future benefits(revenues) and costs as the present value, in order to analyze long-term outcomes.
21) The cost-benefit period is set to five years to match the average 5 years tenure of new workers working in SMEs.
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Figure 4-1 Economic outcomes of apprenticeship(cost-benefit analysis) model
*Source:Jeon et al.(2018), pp.294-295.
1) Elements of Cost and Benefit
Elements of cost incurred cover all three levels including the government level(operation fund including government grant), the company level(cost for apprentices, cost of in-company trainers and HRD staffs, cost for recruitment, and cost for training), and the apprentice level(transportation fee, opportunity cost).
Similarly, elements of benefit gained also cover all the three levels, the government
level(apprentice’s income tax), the company level(apprentice’s productivity, benefit of
long-term employment), the apprentice level(apprentice’s income, reduction of cost
incurred during the period of getting a job).
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ChapterⅣ Outcomes 85
Figure 4-2 Elements of cost and benefit of apprenticeship
*Source:Jeon et al.(2018), pp.298-299.
86 Table 4-1 Cost of apprenticeship
(Unit: KRW)
Type 2018 2019
(Predicted)
2020 (Predicted)
2021 (Predicted)
2022 (Predicted) National
Level
Operation cost
(including government grants) 489,500,000,000 - - - -
Company Level
Cost for apprentices
Apprentice’s annual
income 471,990,140,285 461,392,500,283 512,600,051,665 556,944,683,186 602,801,134,008 Apprentice’s welfare cost 33,299,752,905 32,230,712,113 34,109,805,471 36,562,605,441 38,388,288,374
Cost of vacancy 199,960,485,605 - - - -
Cost for In-company
trainer &
HRD staff
Cost of vacancy
(In-company trainer) 129,855,269,475 - - - -
Cost of vacancy
(HRD staff) 10,599,722,781 - - - -
Cost of other staff
concerned 8,011,461,250 - - - -
Cost for recruitment
Recruitment advertisement and promotional cost
4,314,480,076 - - - -
Cost for interview 1,824,175,930 - - - -
Incentives for
interview applicants 895,385,299 - - - -
Cost for training
Cost of developing
training materials 2,154,206,359 - - - -
Cost of
training equipment 5,556,166,368 - - - -
Cost of other training
concerned 8,011,461,250 - - - -
Apprentice Level
Transportation fee 10,983,867,423 - - - -
Opportunity cost 507,257,546,400 - - - -
Total cost 1,884,214,121,406 493,623,212,396 546,709,857,136 593,507,288,627 641,189,422,382
*Source:Jeon et al.(2018).
ChapterIVOutcomes
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Table 4-2 Benefit of apprenticeship
(Unit: KRW)
Type 2018 2019
(Predicted)
2020 (Predicted)
2021 (Predicted)
2022 (Predicted) National
Level Income tax 5,269,932,000 5,070,093,600 6,188,544,000 7,535,841,600 8,570,488,800
Company Level
Apprentice’s productivity 526,275,057,588 673,318,407,443 804,912,926,236 926,670,562,165 1,063,489,655,145
Benefit of long-term employment
Cost reduction of recruitment advertisement
532,123,600 549,575,507 599,389,453 611,429,233 634,522,616 Reduction of cost for
interview 374,830,358 395,788,416 423,671,781 437,433,003 462,799,874 Reduction of incentives
for interview applicants 249,588,293 268,244,945 281,658,187 313,833,293 303,686,808 Reducing education
cost for new employees 1,861,319,839 1,877,848,996 1,867,346,597 1,938,111,799 1,957,152,045
Apprentice Level
Apprentice’s income
(including government grants) 600,918,140,285 590,320,500,283 641,528,051,665 685,872,683,186 731,729,134,008 Reduction
of cost incurred during the
period of getting a job
Reduction of cost for accumulating
speculation (getting a job)
4,124,293,153 - - - -
Reducing period of job
search 53,052,908,365 - - - -
Total Benefit 1,192,658,193,481 1,271,800,459,190 1,455,801,587,919 1,623,379,894,279 1,807,147,439,296
*Source:Jeon et al.(2018).
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2) Result of cost-benefit analysis
The net present value(NPV) is obtained by converting all costs and benefits that occur during the period of analysis(2018-2022) to its present value, and taking the difference between the present value of the benefit and the present value of the cost. The proposed alternative will have a meaningful standpoint from policy-making perspective, if the benefit converted to the present value is greater than 0(NPV>0).
NPV=∑PB-∑PC
The B/C ratio is calculated by dividing the present value of the benefit by the present value of the cost, after converting all the costs and benefits that occur over the period of analysis into its present value. The proposed alternative will have a meaningful standpoint, in case the benefit/cost ratio is greater than 1(B/C Ratio>1).
B/C ratio=∑PB/∑PC
As a result of the cost-benefit analysis, the net present value(NPV) is 2,681,062,915,017 KRW for the whole society, and 99,816,192 KRW per apprentice
22). The benefit/cost ratio(B/C) value was 1.693, which is larger than 1. The results of this analysis emphasized that the apprenticeship has incurred more costs than benefits in the first year; however, apprenticeship is still economically feasible in the long term because the society will gain more benefits than costs.
22) The number of apprentices targeted in this analysis is 26,860.
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Table 4-3 The result of cost-benefit analysis of apprenticeship(total)
(Unit: KRW)
Year Benefit Cost Present value
of Benefit(PB)
Present value
of Cost(PC) PB-PC 2018 1,192,658,193,481 1,884,214,121,406 1,192,658,193,481 1,884,214,121,406 -691,555,927,926 2019 1,271,800,459,190 493,623,212,396 1,205,498,065,583 467,889,300,849 737,608,764,733 2020 1,455,801,587,919 546,709,857,136 1,307,968,453,466 491,192,791,839 816,775,661,627 2021 1,623,379,894,278 593,507,288,627 1,382,492,500,128 505,438,916,787 877,053,583,341 2022 1,807,147,439,296 641,189,422,382 1,458,759,670,616 517,578,837,375 941,180,833,241 Total 7,350,787,574,163 4,159,243,901,947 6,547,376,883,273 3,866,313,968,257 2,681,062,915,017 Result NPV(∑PB-∑PC) = 2,681,062,915,017 KRW, B/C(∑PB/∑PC) = 1.693
*Source:Jeon et al.(2018), p.300.
Table 4-4 The result of cost-benefit analysis of apprenticeship(per apprentice)
(Unit: KRW)
Year Benefit Cost Present value
of Benefit(PB)
Present value
of Cost(PC) PB-PC
2018 44,402,762 70,149,446 44,402,762 70,149,446 -25,746,684
2019 47,349,235 18,377,633 44,880,792 17,419,557 27,461,235
2020 54,199,612 20,354,053 48,695,773 18,287,148 30,408,625
2021 60,438,566 22,096,325 51,470,309 18,817,532 32,652,777
2022 67,280,247 23,871,535 54,309,742 19,269,503 35,040,240
Total 273,670,423 154,848,991 243,759,378 143,943,186 99,816,192 Result NPV(∑PB-∑PC) = 99,816,192 KRW, B/C(∑PB/∑PC) = 1.693
*Source:Jeon et al.(2018), p.302.
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The results of cost-benefit analysis of apprenticeship in 2018-2022, as illustrated in [Figure 4-3] below, shows that the apprenticeship system had incurred a total net cost of 691,555,927,926 KRW in 2018; but is projected to gain a net benefit of 737,608,764,733 KRW in 2019, 816,775,661,627 KRW in 2020, 877,053,583,341 KRW in 2021, and 941,180,833,241 KRW in 2022.
Figure 4-3 The result of cost-benefit analysis of apprenticeship
(Unit: million KRW)
*Source:Jeon et al.(2018), p.301.
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ChapterⅣ Outcomes 91
2 Social Outcomes
Apprenticeship survey 2020 was conducted in November 2020 as an effort to monitor the outcomes of the policy, which includes questions on the current status and the outcomes of apprenticeship.
23)The target group of the survey includes employers, HRD staff, in-company trainers, apprentices, and training center staff as shown in <Table 4-5>.
Table 4-5 Data collection
Target group Target population Sample size
Employers 6,627 916
HRD staff 11,790 920
In-company trainers 48,819 900
Apprentices 20,009 2,420
Training center Staff 181 170
Total 87,426 5,326
*Source:Hong et al.(2020), p.11.
Survey respondents evaluated the social outcomes of apprenticeship on various indicators which could be categorized into three levels: national level, company level, and individual level.
1) National level
Training center staff was asked to evaluate the social outcomes of apprenticeship at national level on several indicators, such as reducing youth unemployment, reducing the age of entry into first job, reducing the period for seeking employment, and alleviating mismatch between labor supply and demand. Most of the respondents provided a rating of
23) Since 2016 KRIVET has conducted apprenticeship survey annually.
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3.6 points or higher out of 5, indicating that the apprenticeship has contributed to improving labor maket conditions.
Table 4-6 Recognition on social outcomes of apprenticeship at the national level
National level outcomes Mean
Reduce youth unemployment 3.93
Reduce the age of entry into first job 3.72
Reduce the period for seeking employment 3.85
Alleviate mismatch between labor supply and demand 3.66 1) Rating Scale: ① Strongly Disagree, ② Disagree, ③ Neutral, ④ Agree, ⑤ Strongly Agree
*Source:Hong et al.(2020), p.11.
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ChapterⅣ Outcomes 93
2) Company level
Social outcomes of apprenticeship at the company level were evaluated on 12 indicators, including improvement of quality of product, reducing production cost, contribution to long-term employment, training manpower needed by the company, and reducing re-education cost and probationary period of new workers. Most indicators scored high ratings, with mean values just below 4 or higher out of 5, reflecting positive reception of respondents on social outcomes of apprenticeship at the company level.
Table 4-7 Recognition on social outcomes of apprenticeship at company level
Company level outcomes
Mean Employer Training
center Staff HRD staff In-company trainer
Improve apprentice’s skills 4.05 4.12 - -
Improve adaptability of apprentice in the
workplace 4.10 4.22 - -
Improve organizational satisfaction of
apprentice 3.88 3.88 - -
Contribute to apprentice’s long-term
employment 3.84 3.88 - -
Train manpower needed by the company 4.01 4.09 - -
Reduce re-education cost and probationary
period of new workers 3.90 4.19 - -
Raise the quality of internal corporate
training 3.89 3.86 - -
Improve learning-centered corporate culture 3.80 3.61 - -
Improve company’s image 3.82 3.70 - -
Improve quality of company’s product 3.58 3.49 3.37 3.57
Reduce company’s production cost 3.45 - 3.33 3.45
improve workers’ job proficiency 3.85 - 3.62 3.88
1) Rating Scale: ① Strongly Disagree, ② Disagree, ③ Neutral, ④ Agree, ⑤ Strongly Agree
*Source:Hong et al.(2020), p.11.
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3) Individual level
Training center staff evaluated social outcomes of apprenticeship at the individual level through 7 indicators, such as enhancing job performance, improving the adaptability in the workplace, increasing interest towards work. Overall, the respondents gave high ratings to most indicators. ‘Improve the adaptability in the workplace’ scored the highest ratings(4.23), followed by ‘enhance apprentice’s skills(4.12)’, ‘obtain confidence in the ability to grow as professionals(3.97)’, and ‘increase interest towards work(3.96)’.
Table 4-8 Recognition on social outcomes of apprenticeship at individual level
Individual level outcomes Mean
Enhance apprentice’s skills 4.12
Improve the adaptability in the workplace 4.23
Increase interest towards work 3.96
Obtain confidence in the ability to grow as professionals 3.97 Feel psychological secure due to the job security and welfare provided 3.78
Ease economic burden 3.85
Increase motivation for long-term employment 3.74
1) Rating Scale: ① Strongly Disagree, ② Disagree, ③ Neutral, ④ Agree, ⑤ Strongly Agree
*Source:Hong et al.(2020), p.11.