Employment prospects and firm-based training — Evidence from opening the Swiss-German border

We study how improved wage opportunities for skilled workers affect firm-based training, using the 2002 opening of the Swiss labor market to German commuters as a natural experiment. The reform triggered a large outflow of skilled workers from German border regions, prompting firms to expand apprenticeship training. Using a Difference-in-Differences approach, we find a significant increase in the number of apprenticeships in affected firms in Germany despite unchanged apprentice wages. This pattern is consistent with an outward shift in apprentice supply: higher wages for skilled workers across the border made apprenticeships more attractive to young people. Our findings suggest that improvements in skilled workers’ wage prospects, rather than adjusting apprentice pay, may help to address training gaps and alleviate skill shortages. • When borders open and skilled workers face higher earnings opportunities abroad, firm-based training in the home country increases. • Evidence comes from the 2002 Swiss-German border opening for cross-border work, which presents a natural experiment. • The empirical method is DiD, comparing treated border regions to matched control regions across Germany. • Apprenticeship numbers increased by approximately 7% five years after the opening in treated regions in Germany, even though apprentice wages did not. • Our main explanation among others: Skilled workers leave the German labor market to seek employment in Switzerland where wages are higher. German firms substitute apprentices for lost skilled workers (demand-side increase), and adolescents become more interested in apprenticeships (supply-side increase). • Policy implication: Rather than increasing the apprentice pay, improving labor market prospects for skilled workers seems to be a key channel - among others - to increase apprenticeship supply and thereby reduce skill shortages.