This post looks at a research study that explains what type of companies offering learnerships in South Africa, benefit the most.
How Big Companies Offering Learnerships Benefit More Than Smaller Firms
The Dynamics of Companies Offering Learnerships in South Africa
In this post we continue unpacking the study “The Success of Learnerships? Lessons from South Africa’s Training and Education Programme” by Neil Rankin, Gareth Roberts, and Volker Schöer. This time we’re looking at what researchers found when studying the differences between companies offering learnerships.
Why Does Big Business Profit Most From Learnerships?
If you missed our last three articles summarising different aspects of learnership success, click the links below:
- Start at Part One: Do Learnerships Succeed Anywhere? The Proof Now for Sections 1 and 2
- Go to Part Two: How Do Learnerships Help Unemployed Youth Now? for Section 3 of the research paper
- Read Part Three: How to Measure Learnership Impact on Youth in SA for Section 4.
Now let’s move on to section 5!
Section 5: Learnerships and Firms
A Little Rant From Leonie
Before we go there, many learners struggle when placed on learnerships at businesses. Not only that, but they also experience difficulty when trying to resign. For example, PSG Wealth unlawfully claimed R105k from a learner when they resigned. But it turned out their “Learnership Contract” was a total fake and we sent them on their way. PSG Wealth is notorious for labor-related incidents, its death didn’t come soon enough. Like Franklin Covey, they push an agenda for indentured labor. I had to pretty much fight for my life when FranklinCovey hired me to do work and then refused to pay me for that work until I provided additional services for free. Crazy right?
Prove Me Wrong
Researchers should do much more to investigate contractual arrangements at companies. They should also be younger than the current crowd who prop and submit to corporate power. Original research to specifically investigate patterns entrenching inequality are conveniently ignored by universities. In addition, the academic poverty and inequality crowd is nothing but funded spin. They exist to exploit funding, not to bring solutions and insights disrupting poverty and inequality. Why is inequality growing like crazy? It’s because the people we should count on in society are nothing but hired guns for greed.
Ranting Over: Research Ready
This part of the research is not about how learners benefit from learnerships, but specifically how businesses benefit. If you’re someone looking for a learnership, you could use some of the details of this study if you get called into a learnership interview. It’s useful if you can identify if the learnership employer is a large or small firm and then show an understanding of their concerns.
How do Companies Offering Learnerships Benefit?
Learnerships play an important role in skills development and training. However, learnerships are often driven by funding and implementation at the business level. So this section of the research focuses on the distribution of costs and benefits to businesses as a result of learnerships. In 2014, these researchers used insights drawn from data collected by the World Bank in 2007/8. This data was part of their Investment Climate Assessment Survey. I want to mention that the data they used was limited. This is an example of how the same research gets shuffled around and rehashed as opposed to research being continuously and innovatively expanded upon.
1. Companies Offering Learnerships
It’s important to understand how firms contribute to and benefit from learnership programs. Companies are not benevolent youth employers offering learnerships, they are profit-driven enterprises.
The research analyzes company characteristics. For example, they look at output, labor costs, employment, and training. Note that this study concentrates mostly on manufacturing firms in major metropolitan areas of South Africa.
2. The Distribution of Costs and Benefits for Learnerships at Businesses
The research goal was to see how learnership costs and benefits are distributed across businesses that have different characteristics. By going through business-level data, the study aims to find which firms contribute more through payroll taxes. It also suggests which types could gain the most from SETA-accredited training initiatives.
3. Labor Costs: Slimline Stipend
3.1 Firm Size vs. Labor Costs for Learnerships at Businesses
The research investigates the potential difference (variance) in labor costs based on firm characteristics. Through regression analysis, the study explores variables such as:
- capital-labor ratio,
- non-production worker proportions (indicative of high-skilled workers),
- and sector and location controls.
What is Regression Analysis: Aggression to Our Brain! 😉
Ready, steady, economics go! Regression analysis is like a tool that helps us understand how one thing (let’s call it “X”) can be connected or related to another thing (let’s call it “Y”). For example, imagine you’re trying to figure out if the number of hours you study (X) affects your exam scores (Y).
Regression analysis looks at a bunch of data points, for example, different students who studied different amounts. Then one tries to find a pattern or line that best fits these points. This line helps predict how much your exam score (Y) might change when you study more or less (X). So, it helps us see if there’s a connection and how strong it is.
To sum up, regression analysis helps us understand the relationship between two things by looking at a bunch of data. Then we figure out how changes in one thing might be linked to changes in another.
3.2 What the Findings Tell Us About Companies Offering Learnerships
The findings are interesting because they show us about:
- Firm Size and Labor Costs Relationship:
- There’s a strong connection between how big a company is (its size) and how much money it spends on labor (paying employees).
- Smaller Firms and Labor Costs:
- Small companies end up spending a bigger portion of their total expenses on paying employees, even when compared to their overall production or output.
- Considering Other Factors:
- The researchers checked other things that could affect this, like how much equipment the company has (capital intensity) and the types of jobs its employees do (workforce composition).
- Even after looking at these factors, the pattern still holds.
- Trend for Larger Firms:
- They noticed a clear pattern: bigger companies spend a smaller percentage of their total expenses on paying employees compared to what they produce or make.
In simple terms, the research shows that smaller companies tend to put a relatively larger chunk of their money into employee salaries. This is even after considering other things like the equipment they use and the types of jobs their employees do. On the other hand, bigger companies seem to spend a smaller proportion of their overall expenses on paying employees.
4. Impact of Payroll Taxes on Firms
- The focus of the Study:
- The research looks at how taxes on employee salaries (payroll taxes) affect the overall cost of having employees.
- Target on Smaller Firms:
- The study pays special attention to how these taxes affect smaller companies.
- Expected Result:
- It’s not a surprise that the research finds that payroll taxes increase labor costs by 1 percent.
- Impact on Smaller Firms:
- Smaller companies are hit harder by this increase because the extra 1 percent has a bigger impact on their overall labor costs, which are already relatively higher.
- Term Alert – Retrogressive Tax:
- They call this type of tax “retrogressive,” meaning it affects smaller, more labor-focused businesses more severely.
- Consequences for Smaller Firms:
- This tax change can make it tougher for smaller companies, especially those that rely heavily on labor, by making the cost of employees higher compared to using machines or technology (capital).
- Challenges and Incentives:
- The study suggests that this tax situation could make it harder for smaller companies to compete with bigger ones.
- It might encourage smaller companies to use more machines or technology instead of hiring as many people because it becomes relatively more expensive to have human workers.
The study therefore shows that taxes on employee salaries can make it harder for smaller businesses. Because the extra cost has a bigger impact on them. This might push smaller companies to use more machines instead of hiring as many people.
5. Companies Offering Learnerships: How Do Companies Benefit From Learnerships?
The research shows the relationships between firm characteristics, labor costs, and the impact of payroll taxes on learnership programs. The findings emphasize the potential challenges faced by smaller firms in effectively participating in learnership initiatives. Policymakers and stakeholders will have to consider these firm-specific factors in the formulation of effective policies to ensure equitable opportunities for all.
Bear in mind that this post only looks at one aspect of the research paper. So read our other summaries and take a look at the paper too!
Reference: Read the Paper
“The Success of Learnerships? Lessons from South Africa’s Training and Education Programme” by Neil Rankin, Gareth Roberts, and Volker Schöer. Do share your take too! Drop a comment below or on our social media pages.
The paper is organized like a story. It talks about:
- learnership programs in other countries,
- the challenges of youth unemployment in South Africa,
- how learnerships affect individuals, and
- what happens at the company level. (Summarised in this post)
- Finally, it offers conclusions and suggestions for other African countries.
We’ve summarised each section at the links listed above.