COMMISSION STAFF WORKING DOCUMENT

Analytical document

Accompanying the document

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS

Towards a Quality Framework on Traineeships Second-stage consultation of the social partners at European level under Article 154 TFEU

TABLE OF CONTENTS

1........... Introduction.................................................................................................................... 4

2........... Types of traineeships, their benefits and their costs........................................................... 6

2.1........ Definition of traineeships................................................................................................. 6

2.2........ Types of traineeships and their regulation......................................................................... 7

2.3........ Benefits and costs of traineeships.................................................................................... 9

3........... Consultations and stakeholders views............................................................................ 13

4........... Problem Definition........................................................................................................ 15

4.1........ Nature and extent of problems...................................................................................... 15

4.2........ Number and share of low quality traineeships................................................................ 21

4.3........ Problem drivers and trade-offs: The role of market failure.............................................. 23

4.4........ Quality issues and transnational traineeships................................................................... 26

5........... Legal basis and subsidiarity........................................................................................... 28

6........... Policy Objectives.......................................................................................................... 30

7........... Policy coherence – contribution to Europe 2020............................................................ 31

8........... Possible avenues for EU action..................................................................................... 31

8.1........ No initiative at EU level (baseline scenario).................................................................... 33

8.2........ Creation of an information website................................................................................ 34

8.3........ Quality label for traineeships.......................................................................................... 35

8.4........ European Quality Framework for Traineeships.............................................................. 36

8.5........ Combination of options................................................................................................. 39

8.6........ Final overview.............................................................................................................. 39

9........... References................................................................................................................... 40

ANNEXES................................................................................................................................ 43

Annex I – Apprenticeships vs. Traineeships................................................................................. 43

Annex II – Traineeship study, Executive summary........................................................................ 44

Annex III – Regulatory Framework............................................................................................. 48

Annex IV – A voluntary approach to Quality Labels for Traineeships........................................... 49

Annex V – Sectoral distribution of traineeships by country........................................................... 50

Annex VI - Market failure in traineeships..................................................................................... 51

ANNEX VII – Comparison of the quality elements considered by the Commission with the Code of Best Practice (UK), the Loi Cherpion (FR) and the European Quality Charter on Internships and Apprenticeships presented by European NGOs.......................................................................................................................... 54

1. Introduction

Social Partners consultation

According to Article 154 TFEU Social Partners have to be formally consulted, before the Commission submits proposals in the social policy field (e.g. working environment, working conditions, social security and social protection of workers, and the integration of those excluded from the labour market and the combating of social exclusion, Article 153 TFEU).

Social partners are consulted in two stages – first on the direction of Union action and later on the content of the envisaged proposal. This document presents background information to support the second stage consultation of the European social partners on a possible EU initiative on a Quality Framework for Traineeships.

The first stage consultation was closed on 23 October 2012. It followed a public consultation carried out between 19 April and 11 July 2012[1].

This second stage consultation will gather opinions of the European social partners on the content of the envisaged proposal. The possible outcomes of this procedure are the following: social partners can enter into negotiations (which may last max. 9 months), and may reach an autonomous agreement or may ask the Commission to make a legislative proposal implementing their agreement. If social partners fail to agree or decide not to negotiate, the Commission has to assess the situation and can present its own proposal.

Context

Currently over five million young people in the EU under the age of 25 cannot find a job, and in a large number of Member States transitions from education to work have become increasingly longer, more unstable and uncertain. In this context, increasing the access of young people to the labour market is a top priority for policy makers and facilitating the transition from education to work is key in this context. By providing a possible stepping stone to more productive employment careers, traineeships can help foster sustainable job creation, reduce youth unemployment and eventually contribute to raise the employment rate –one of the headline targets of the Europe 2020 Strategy.

Despite the benefits of traineeships, concerns about their effectiveness and quality have been recognized by European Institutions. In its 2010 Resolution[2] the European Parliament called specifically for better and secured internships; for a European Quality Charter setting out minimum standards for internships to ensure their educational value and avoid exploitation; and for young people to be protected from those employers who are "exploiting the willingness of young people to learn without any future prospect of becoming fully established as part of their workforce." In 2011, the European Commission foresaw in its Youth Opportunity Initiative the launch of a Quality Framework on Traineeships by the end of 2012.

In its conclusions on promoting youth employment of June 2011, the Council acknowledged that "given a lack of appropriate employment opportunities, in some Member States a significant number of young people have no other choice but to take up precarious employment offers, such as unpaid or low-paid internships (…)." In response, it asked Member States to "tackle labour market segmentation where appropriate by developing adequate contractual arrangements, strengthening activation measures as well as promoting sustainable and high quality employment, securing decent working conditions and providing adequate income protection with clear incentives for young people, while respecting national needs and starting positions and the important role of the social partners" and to "promote quality mobility for young people at both national and EU level." Similarly, in May 2011 the Council Conclusions on the structured dialogue with young people on youth employment emphasized that "(…) a quality framework for internships is desirable in order to guarantee the educational value (…)" of traineeships[3]. Furthermore, the June 2012 European Council concluded that "It is crucial to address youth unemployment, in particular through the Commission's initiatives on youth guarantees and the quality framework for traineeships (…)".

Member States, too, have been actively examining traineeships in order to improve their functioning. This has led to a series of initiatives, typically aiming at increasing safeguards against trainee exploitation and addressing quality concerns (see Box 1).

Box 1. Examples of Member States’ Efforts to Enhance Trainee Protection in the Open Market ■ Austria: in an effort to help the so-called ‘internship generation’ secure regular employment instead of successive traineeships, the 2010 Aktion + 6000 Programme provides wage subsidies to employers if, upon completion of the traineeship, they keep on the trainees. ■ France: in an attempt to address the issue of successive traineeships, the 2011 Loi Cherpion stipulates that, inter alia, companies should wait for a period corresponding to 1/3 of the length of the previous traineeship before taking on a new trainee in the same role. This law strengthens the legal framework of traineeships and reinforces the trainee’s rights, terms and conditions, including trainee compensation. ■ Greece: in order to prevent employers from replacing regular staff with trainees, the 2010 Work Experience Programme for New Labour Market Entrants stipulates that companies which have reduced their staff in the last six months are not eligible to take part. In addition, an employer cannot renew the traineeship contract with the same trainee. ■ UK: a number of voluntary charters (CIPD’s Internship Charter) and codes of best practice (Code of Best Practice for Quality Internships) are promoted in an effort to improve the quality of traineeships in the open market. Source: Traineeship study, European Commission (2012a), p. 65

The European cross-sectoral social partners (BusinessEurope, UEAPME, CEEP, ETUC) agreed to "promote more and better apprenticeship and traineeship contracts" and "ensure the right working conditions to welcome and support new entrants in the enterprise" as key actions under their 2010 Framework Agreement on Inclusive Labour Markets. In their joint work programme 2012-2014,[4] the European social partners - aware of the remits of European competences in the field of employment and social affairs – agree on the need in general to “establish the appropriate framework conditions to ensure employment opportunities for all workers and to allow for the integration, retention and development of workers in European labour markets”; and more specifically to take action to remedy the “unacceptable situation” of youth unemployment; to assess the situation of young people as a priority; and to “focus on the link between education, young people’s expectations and labour market needs, taking into account young people’s transition into the labour market, in an effort to increase employment rates in general.” While noting that they are put to a test in this exceptional situation, with success measured in their capacity to put forward solutions to EU labour markets problems, the European social partners announce that they “will make, in the context of a framework of actions, concrete recommendations also to Member States and the EU institutions [and] also contribute to the G20 agenda on youth employment.” Finally, they also agree to jointly ensure better impact and/or implementation of EU social dialogue instruments throughout Europe.

To ensure the respect of the principle of the autonomy of the social partners this document addresses issues such as types of traineeships, benefits and costs, the results of stakeholder consultations, the definition of the problem, the subsidiarity check, the policy objectives and reflections on how an EU initiative could achieve them. It does not claim to present a detailed assessment of policy options and their potential impacts – all of which would be addressed in a possible future impact assessment, taking due account of the outcomes of the 2nd stage social partner consultation. It does include, however, evidence and first indications on the costs and benefits of policy options and their potential impacts where available. It further lays out possible future steps to support a more detailed analysis in the context of a possible future full impact assessment.

2. Types of traineeships, their benefits and their costs

2.1. Definition of traineeships

Traineeships, also known as internships or stages, are understood as a limited period of work practice spent at business, public bodies or non-profit institutions by students or by young people having recently completed their education, in order to gain some valuable hands-on work experience ahead of taking up regular employment. Given their similar aims, traineeships are often confused with apprenticeships; however, even though the distinction between the two can be fuzzy in some cases, traineeships and apprenticeships differ in several respects:

· An apprenticeship in a strict sense is a systematic, long-term training alternating periods at the workplace and in an educational institution or training centre. The characteristics of the apprenticeship (e.g. occupation, duration, skills to be acquired, wage or allowance) are defined in a training contract or formal agreement between the apprentice and the employer directly or via the education institution. Apprenticeships are normally part of formal education and training at upper secondary level (ISCED 3), the duration of the training is on average 3 years, and a successful completion leads to a nationally recognised qualification in a specific occupation. However, most initial vocational training programmes include some optional or compulsory practical training either in school or in a company and the borders between apprenticeships and school-based schemes which include traineeship periods at a workplace are not clear-cut.

· Traineeships on the other hand can be described as work practice including a training component. They allow to document practical work experience as part of the individual CV and/or as requested in educational curricula or to gain work practice for the purpose of facilitating the transition from education and training to the labour market. They are predominantly short- to middle-term (a few weeks up to 6 months, in certain cases 1 year).

· Traineeships within education can be an optional or mandatory part of the curriculum or of the graduation procedure. Traineeships can be part of labour market programmes aiming at connecting or reintegrating people with the labour market.

· In most Member States, traineeships and related rights and conditions are only regulated in a fairly general way at best and may not be regulated at all. In a majority of Member States, a traineeship contract in particular explicitly is not an employment contract.

This document deals with traineeships only. For greater details on the distinction between traineeships and apprenticeships, please see Annex I.

2.2. Types of traineeships and their regulation

One may distinguish five major – partly overlapping - types of traineeships:[5]

1. Traineeships forming an optional or compulsory part of academic and/or vocational curricula (i.e. traineeships during education);

2. Traineeships which form part of mandatory professional training (e.g. law, medicine, teaching, architecture, accounting, etc.);

3. Traineeships as part of active labour market policies;

4. Traineeships on the open market, generally after completion of studies and/or as part of job search;

5. Transnational traineeships.

Type 1 and 2 traineeships are linked to educational and training programmes and curricula and are often a precondition for diploma or licences to practice. Educational institutions are generally involved in their organisation and monitoring. Similarly, employment services are involved in the organisation of type 3 traineeships. Generally, the most tightly regulated traineeships relate to the case of specific professions whose exercise requires the completion of compulsory traineeships as part of mandatory professional training by relevant bodies and professional associations. In almost all Member States, the most regulated professions with long periods of traineeships are those related to health (medicine, nursing, pharmacy, dentistry, psychology, psychotherapy, veterinary medicine etc.) and law (lawyers, barristers, judges); compulsory traineeships are also associated with some technical occupations such as architects and engineers, but may also be required for professions in media and journalism, hospitality or accountancy. Traineeships that are part of ALMP for young unemployed persons are typically also highly regulated. In contrast, open-market traineeships (to be understood as those in which no educational institution participates in the definition of the learning content and in the organisation of the traineeship) are subject to much less regulation and their definition and organisation is generally left to the bilateral agreement of the parties involved. Type 5 traineeships, i.e. those involving trainees and host organisations from different countries, are less common at present[6].

Regulatory framework

The regulation of traineeships differs considerably not only between the different types of traineeship, but also across Member States. At one end France regulates all types of traineeships directly under a series of laws, while in countries such as the Bulgaria, or the UK there is no specific national legal framework for trainees[7]. In six Member States (CY, IE, LT, LU, LV, UK), no legal definition of traineeships exists. Moreover, while traineeship contracts tend to be offered as a common practice in most EU Member States, less than half of the Member States have provisions in place regarding duration, remuneration or social protection coverage of traineeships, and practices with regard to these elements differ widely. Among the issues addressed is whether repeated traineeships are possible with the same employer, and whether trainees should be compensated and, if so, by how much and whether minimum wage rules should be applied.

Table 1 summarises the situation in terms of these key regulatory issues in EU Member States: Clearly, differences in the regulatory framework are rather important – in particular remuneration and social protection issues are not regulated in 11-12 Member States. It is also remarkable that in 11 Member States there are still legal and administrative barriers to trainees coming from another Member State.

Table 1. Key differences in regulatory framework

Issue || Yes || No || Unclear

Legal definition of traineeships || AT, BE, BG, CZ, DE, DK, EE, EL, ES, FI, FR, HU, IT, MT, NL, PL, RO, SE, SI, SK || CY, IE, LT, LU, LV, UK || PT

Legal provisions on duration || BE, BG, DE, EE, EL, ES, FI, FR, HU, IT, LU, MT, PT, RO, SI, SK, UK || AT, CY, CZ, DK, LV, NL, SE || IE, LT, PL

Legal provisions on remuneration || EL, ES, FR, HU, IE, LT, MT, PT, RO, SE, SI, SK || AT, BG, CY, CZ, DK, FI, IT, LU, LV, NL, UK || BE, DE, EE, PL

Legal provisions on social security protection || AT, BE, BG, CY, EL, FR, LT, RO, SE || CZ, DE, DK, EE, ES, IE, IT, LU, LV, MT, NL, PT || FI, HU, PL, SI, SK, UK

Absence of legal and administrative barriers for trainees from other EU MS || DK, IT, MT, SE, SI || BE, DE, EL, ES, FR, IE, LU, LV, NL, PL, RO || AT, BG, CY, CZ, EE, FI, HU, LT, PT, SK, UK

Traineeship contract offered as a common practice || AT, BE, BG, DE, DK, EE, EL, ES, FI, FR, IE, IT, LT, LV, MT, NL, PT, SI, UK || CY, LU, PL || CZ, HU, RO, SE, SK

Source: Traineeship study, European Commission (2012a)

An example of a stricter regulatory approach: the US

In terms of regulation, it is interesting to compare the case of the EU with the US because, although the labour market is less regulated and the level of youth unemployment is different, the concerns voiced over traineeships are very similar and the trend toward a higher number of traineeships is equally prominent.

On traineeships, the U.S. clearly follows a more stringent regulatory approach than many, probably the majority, of EU Member States. The primary law governing workers’ rights to fair compensation is the Fair Labor Standards Act of 1938 (FLSA). The FLSA requires employers to provide the federal minimum wage to most workers. To determine whether an intern qualifies as an “employee” under the FLSA, the Department of Labor has developed a six-point test for employers to apply, based on a 1947 Supreme Court ruling. All six points must be met in order to determine that trainees are not fully protected “employees”; if only one of the points is not met, the trainee would be considered an employee under the FLSA, and hence entitled to receive the federal minimum wage. These six points include (Edwards, Hertel-Fernandez, 2010):

1. The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;

2. The training is for the benefit of the trainee;

3. The trainees do not displace regular employees, but work under close observation;

4. The employer that provides the training derives no immediate advantage from the activities of the trainees and on occasion the employer’s operations may actually be impeded;

5. The trainees are not necessarily entitled to a job at the completion of the training period;

6. The employer and the trainee understand that the trainees are not entitled to wages for the time spent in training.

Particularly points 1-4 are quite restrictive. In practice however these guidelines are hobbled by legal and technical issues making their application far from straightforward; partially as a result of this they have not been extensively enforced until recently (Curiale, 2010). However, this may be changing as a result of suits filed by former interns against several well-known corporations (Time Magazine, May 2 2012). This is reportedly already leading to a perceptible drop in unpaid internships (USA Today, July 3, 2012).

Lack of official statistics

Partly as a result of the wide variation in type and official recognition of traineeships, there are no official statistics on trainees. Academic research on traineeships is scarce, particularly as regards quantitative studies, and tends to be fragmentary and country- and situation-specific. This document is mainly based on the Traineeship study, which provides a first EU-wide evidence base on traineeships. A few studies and survey results have been quoted when particularly relevant; however it has to be born in mind that their methodology is different, so that caution is needed in comparing their results directly.

Although the lack of official statistics makes it impossible to measure precisely trends over time, available evidence suggests that traineeships, whether national or transnational, are becoming significantly more common in the EU and worldwide. There is wide consensus that traineeships are becoming a standard feature of young people’s transition from education and training to the labour market. The Traineeship study found a definite upward trend over time in almost all Member States. For example, a study found for Germany that the share of those who did a post-graduate traineeship was 25% amongst 18 to 24 year olds, while only 17 % of those in the 30-34 age bracket had done one after their studies. In the US, the National Association of Colleges and Employers found that 50% of graduating students had followed internships in 2008, up from the 17% reported in a 1992 study by Northwestern University (Greenhouse, 2010). In Japan, too, the so-called 'freeters' or furita are becoming more common (Hommerich, 2008).

2.3. Benefits and costs of traineeships

The spread of traineeships is due to a growing realisation of their benefits to both trainees and employers, while also responding to the overall economic and labour market situation. These benefits have implications at the macro level, too. Traineeships also have a series of costs, at individual level and for society at large.

Trainees

A positive traineeship experience can play an important role in building the foundation of a successful career. This is because traineeships, owing to their practical, hands-on nature, are increasingly being seen as an important contribution in terms of acquiring useful skills, both during studies and later, during the transition to employment and the subsequent career.

Traineeships can supply students with several benefits: 1) the ability to relate classroom concepts to practical applications, 2) an improved knowledge of industry career paths, 3) crystallization of interests and career ambitions, 4) a reduced shock upon entering the workplace, and 5) faster advancement (Coco, 2000).

Traineeships have further been found to enhance productivity by increasing students’ knowledge base and motivation (Beard, 1998); and to improve not only the transition from school to work, but even students’ grades while education is ongoing (e.g. in accounting) (Knechel, 1987; English, 1993).

The exposure to the workplace enables students to obtain a realistic preview of the business environment and corporate culture and helps bridge the transition from university life to professional work life, notably in the case of expatriate trainees (Feldman, 1998). Traineeships can enhance students’ chances of receiving job offers at the firms where they trained, or elsewhere due to signalling effects related to previous traineeships; work performance of professionals that have had a traineeship experience, as measured by their annual performance valuation, was better compared to those that had not, and their retention and promotion rates are also significantly higher (Höft and Hell, 2007; Siegel, 2010, 2012).

Trainees also face costs. The major component is the living cost and, in the case of transnational traineeships, costs due to the need to move to another country; in addition, particularly after the end of the studies, a traineeship involves an opportunity cost in terms of foregone earnings (as compared to regular employment); if the traineeship is during the studies, the opportunity cost might take the form of a possible delay in finishing one’s studies. Finally, trainees face search costs for finding and applying for a traineeship.

Host organisations

One of the most important benefits of traineeships to host organisations consists of a better screening of job applicants, based on direct experience with the candidate rather than 'signals' (Stolorz, 2005), as shown by higher retention rates of employees who were in traineeships in the same company[8]. Traineeships also may help attract more or better job candidates. Finally, host organisations can utilise the trainees, alongside regular employees, to conduct certain work activities at lower or no cost, while benefiting from trainees’ up-to-date academic knowledge and skills. In a 2011 survey of 218 top, senior and middle level managers in the UK, 52% said that the main reason for taking on interns was to identify new talent for the organisation, while 17% said it was to get work done more cheaply. A 95% share of them believed that interns were useful to the organisation[9].

A company’s involvement in a well-designed traineeship programme can also be seen as a mark of business quality. The provision of quality traineeships is sometimes utilised as an integral part of an organisation’s CSR (Corporate Social Responsibility) and employer brand[10].

The costs of a traineeship for a host organisation include, besides any direct remuneration, mainly the training costs, typically related to the time that trainers or other employees have to spend overseeing the trainee. In addition, costs include the provision to the trainee of office space and equipment. Unfortunately, no studies quantifying training costs could be identified. Edwards and Hertel-Fernandez (2010, p. 5) provide two examples which can be taken to represent a plausible range of training costs for the US (US$ 400 and US$ 3500). In a more dated contribution, McCaffery (1979) estimated the total direct costs of one specific traineeship programme at US$ 2000 per trainee.

While training costs and oversight costs can be fairly limited in case the tasks assigned to the trainee are easy, they can be fairly substantial in ambitious, high quality programmes. Box two provides two case studies.

Box 2. Case studies - the benefits and costs of providing high quality traineeships Swedbank's 'Young Jobs' project In 2010 Swedbank launched the project “Young Jobs”. The idea is to use Swedbank’s extensive network of branches to encourage the creation of trainee positions for people aged between 18 and 24. The objective is not only to create trainee positions at the Swedbank and related Savingsbanks' branches, but also to encourage the bank’s corporate clients (businesses and municipalities) to offer trainee positions themselves. The bank’s employees have a good understanding of the local companies’ operations as well as their needs and are therefore in a good position to identify possible job openings. The project is conducted in cooperation with local employment offices. To support the project, the website www.ungajobb.se, was created where young people can search for new trainee opportunities while companies can enroll in the project. The total number of traineeships created by the project was 3,000 – including 400 traineeships within Swedbank, 1,600 traineeships in the Savings banks' 600 branches as well as 1,000 further traineeships at partner companies. The traineeships included three months of practice also supported by the Swedish Public Employment Service Centre. Two full days of education, as well as five days of tutoring by staff members ensured the high quality learning content. Swedbank’s branch office managers evaluated the project positively: - 82 per cent said that Young Jobs has actively contributed in strengthening the bank’s brand. - 65 per cent believed that Young Jobs has increased the confidence of personnel. - 64 per cent answered that they are continuously planning to invite more trainees. - 26 per cent stated that the project has increased business among current clients. - 18 per cent point out that the project has resulted in new clients. Of the approximately 400 apprentices within the bank 70% have been offered some form of employment after their internships. The costs of the programme for the bank are estimated at around € 1,200,000 per year, i.e. about € 3,000 per trainee. Audi traineeship project in Brussels Audi Brussels has recently launched an initiative together with two Belgian VET schools with the aim of providing a high quality technical traineeship. Although the traineeship borders on an apprenticeship in terms of the organisation and ambition of the scheme, it represents a useful example of an unpaid, but high quality traineeship. Audi provides traineeship placements for 10 VET students, who spend a total of 600 hours in 75 days with the company (one day per week plus a 3 week workshop). The objective is to offer all the trainees a job at the end of the programme. The costs faced by Audi include two persons (not full-time) following the programme, organizing a course for 10 trainers, and about € 300,000 to adapt the facilities to the needs of the programme. Audi’s motivation is that it allows the company to train its future employees, thus reducing later recruitment costs. The programme is also part of the company's CSR policy; it helps to reinforce the image of Audi in Belgium. Sources: Swedbank AB, Audi AG

Socio-economic costs and benefits

At macro-economic level, besides the direct productivity benefits, traineeships can improve labour market matching, ease education-to-work transitions and promote labour mobility, notably by decreasing search costs - both for enterprises looking for new staff and for young people, who, having just begun their work experience, may be uncertain about their skills, preferences and the direction in which to develop their career. The reduction in matching costs appears particularly beneficial in those countries where the costs of hiring and dismissing an employee are highest.

Social costs can also arise if traineeships, particularly repeated ones, displace regular employment, notably entry-level positions usually offered to young employees. In light of the long-term benefits of successful traineeships, however, the bulk of costs appear to be concentrated in low-quality traineeships with little learning content, where the time spent on the traineeship does neither lead to significant productivity gains nor entails positive signalling effects. These traineeships therefore provide little or no benefit in terms of the education-to-work transition. Other social costs relate to the spread of unpaid or low-paid traineeships which may limit the career opportunities of those from disadvantaged backgrounds, particularly in certain professions. Against the background of raising student tuition fees and tightening labour markets it may indeed be increasingly difficult for students or graduates from less wealthy backgrounds to afford to work for free. Such difficulties are exacerbated in the case of transnational traineeships. This in turn would prevent firms from identifying the most talented for some of their future top jobs.

3. Consultations and stakeholders views

Public and social partner consultation

On 18 April 2012 the Commission adopted the communication ‘Towards a job-rich recovery’[11], which was accompanied by the staff working document 'Quality Framework for Traineeships'[12] that launched a public consultation. The Commission asked stakeholders whether there is a need for such an initiative, what should be the scope of the initiative, which quality elements would have to be included and what form the initiative should take. Between 11 September and 23 October 2012, social partners were consulted on their views on the possible direction of an EU initiative on a quality framework for traineeships.

The public consultation received over 250 responses of which 29 came from national and regional governments (ministries and agencies), 8 from trade unions, 40 from employers’ organisations and business representatives, 14 from youth (umbrella) organisations, 33 from education institutions, 11 from other organisations and 117 from private individuals.

Trade unions, as well as NGOs, youth organisations, educational institutions, agencies involved in transnational traineeships and most individual respondents generally supported a Commission initiative (some asking for a binding legal instrument, others preferring non-binding recommendations); employers' organisations, chambers of commerce and industry – while acknowledging the positive role of traineeships in school-to-work transitions and in acquiring skills – typically adopted a more sceptical stance, with some questioning the need for an EU initiative. Those contesting the need for an EU initiative mostly came from Member States with comparatively well-developed, structured apprenticeship systems and traineeship markets (e.g. Germany, Austria, and Denmark).

Both employer organisations and Member States often referred to the need to keep the framework sufficiently flexible so that diversity of national systems and practices can be taken into account. Opponents of EU action argued that minimum requirements for traineeships should not be set at the European level, due to a lack of EU competence particularly on the issue of remuneration. Concerns were also raised about traineeship schemes becoming overburdened with too many legal or administrative procedures that could discourage companies from taking on trainees, thus depriving young people of valuable work experience opportunities.

Opinions about the scope of a possible initiative were varied as well. Many educational institutions preferred to keep the scope limited to traineeships that are part of study curricula/programmes; while other respondents including most employers suggested limiting the framework to 'open market' traineeships. Some comments (mainly from the world of education) enquired why apprenticeships should not be covered by the initiative.

On the quality elements most respondents agreed with the Commission's analysis/definition (traineeship contract, clear objectives and content, limited duration, adequate social security/remuneration etc.), however businesses and employers' organisations in particular argued that remuneration and social protection issues may not fall under EU competence and in any case small businesses would have problems applying them.

Several respondents urged the Commission to provide financial support to increase the number of traineeships, eventually by launching large scale EU-level programmes.

In their replies to the first-stage consultation EU social partners confirmed the positions taken in the public consultation. At the Social Dialogue Committee meeting of 23 October 2012 employer's organisations expressed the readiness to start discussions on traineeships as part of the EU social partner autonomous negotiations on a Framework of Action on Youth Employment. The European Trade Union Confederation explained that while it is fully committed to participate in the EU social partner's negotiations on the Framework of Action, it considered that the discussions under the Framework are not, at this stage, the appropriate place for negotiations on traineeships under Article 154 TFEU.

Small and medium enterprises

The Commission launched a specific consultation of small and medium enterprises (SMEs). The Commission sent out a questionnaire targeted at SMEs through UEAPME. The results highlighted that small businesses face particular difficulties when offering traineeship placements due to relatively higher levels of costs. However, traineeships offered important advantages for SMEs, in particular the possibility of screening potential future employees, recruiting and retaining high-skilled workers and enhancing the corporate image at relatively low cost. SMEs favoured excluding open market traineeships from the scope of any EU initiative. Any proposal by the Commission should be non-binding (e.g. general principles) and take into account SME specificities. SMEs called for increased EU resources to increase the availability of traineeships, both national and transnational.

Consultations within the European Commission

DG Employment has been collaborating with DG Education and Culture on the issue of traineeships. Further to the EMPL-EAC cooperation, DG EMPL set up an Impact Assessment Steering Group with the involvement of SG, SJ and DGs EAC, ECFIN, ENTR, HOME, INFSO/CNECT, MARKT and RTD.

Recommendations from the Commission Impact Assessment Board

An earlier version of this paper was submitted to the Commission Impact Assessment Board, which examined it on two occasions, , requesting improvements to clarify the policy context and the problem definition, to better demonstrate the necessity, added value and proportionality of EU action, and to better present the available policy options and the effectiveness and efficiency of the presented avenues for action. The document was therefore amended by, inter alia, including more detail on the Treaty procedure for Social Partners consultation and on the concrete problems faced by trainees, by adding some new sections and an annex on market failure, by a clearer specification of subsidiarity considerations applying to this case, and by adding substantially more detail on the ways in which policy action could take form and the foreseeable impacts of the various options considered. It was also clarified that traineeships are not employment contracts in most Member States, and details were added on which aspects justify an EU action and which do not. It was also indicated that a more detailed assessment of impacts will be carried out following the results of this consultation, in case the Commission decides to present a proposal.

Traineeship survey by the European Youth Forum

The European Youth Forum (EYF) is the most important Europe-wide umbrella organisation representing young people in the EU. It conducted an online survey in 2011 among (ex)-trainees about their experiences and concerns regarding traineeships. More than 3,000 young people responded to the survey. Results (see Box 5) confirm that there is room for improvement in the quality of traineeships.

As a follow-up to the survey, the European Youth Forum – together with other civil society organisations and 31 MEPs – presented a European Quality Charter on Internships and Apprenticeships. The Charter underlines that traineeships and apprenticeships should be primarily a learning experience and should not replace jobs; that a traineeship should be based on a written contract and should be limited in time; that a mentor/supervisor should provide guidance throughout the traineeship; that the trainee should receive reimbursement of costs or should have the right to receive food, housing, and public transportation tickets instead; that decent remuneration should be provided for work carried out additional to the requirements outlined in the contract; and that clear evaluation criteria of the traineeship period is needed.

4. Problem Definition

4.1. Nature and extent of problems

The analysis carried out in the Traineeship study shows that concerns with traineeships usually take four main forms: insufficient learning content, lack of or low compensation, unsatisfactory working conditions, and low level of intra-EU trainee mobility (see Box 3 for a summary of the qualitative findings and Table 2 for some relevant quantitative evidence).

Box 3. Main concerns identified by the Traineeship study

Insufficient learning content of the traineeship is one of the most frequent problems. Learning content is more likely to be formally defined where an educational institution is involved. Traineeships involving just the trainee and the employer more often lack content definition. This does not necessarily mean that these placements are entirely devoid of structure and content. For example, in the UK many employers voluntarily provided well-structured traineeships with pre-defined content. It is noteworthy however that even in Member States where regulation exists to define the content of traineeships (e.g. AT, LU), there are concerns that employers do not always abide by these rules.

Another worrisome point in relation to traineeships was found to be the lack of proper social protection coverage (most often only health, and in some cases occupational risk/accident insurance is being offered to the trainee). Traineeships which form part of government sponsored programmes increasingly oblige employers to pay the trainees’ social security contributions, either in full or in part through subsidies (e.g. in CY, EL, PL).

The lack of compensation or low pay and the prospect of exploitation are general concerns mainly in the case of traineeships in the open market and mandatory professional training schemes. This is one of the most common theme and starkest message emerging in the study as well as in public debates, available literature, and information provided by trainees. The risk of substituting regular employment by traineeships is greater in Member States with high unemployment and/or unfavourable labour market conditions for young people (e.g. EL, ES, IT, PT). However, using traineeships as free labour is a growing phenomenon also in other countries, where young people might have to do several traineeships before they find a proper job. Whether traineeships should be paid or not is a contentious issue in many countries. Employers’ organisations often argue that trainees gain work-related experience which will improve their employability, while taking on board a trainee can be time-consuming and resource intensive for the host organisation.

On the other hand, trainees who are not or insufficiently compensated have to rely on other sources of financial support, including own and/or family resources. This, in turn, raises concerns about equity of access, since those from less privileged backgrounds may not be able to draw on such resources in order to undertake traineeships to gain work-related experience and enhance their employability. Trainees are reported to be in many cases asked to carry out tasks usually performed by regular, fully-paid staff for which they receive no or low compensation. The issue of no or low trainee compensation (associated with poor trainee-related terms and conditions such as lack of social security coverage) is critical because a significant segment of young people may have to undertake a series of traineeships before securing stable employment. This can, in turn, seriously impede their ability to become financially self-sufficient and lead an independent and autonomous life. Further, there are indications of a gender ‘pay gap’ in traineeships with a larger proportion of women in unpaid or low paid placements.

Finally, low quality seems to be more common where there is a lack of monitoring and clear traineeship linked objectives.

Source: Traineeship study, European Commission (2012a)

Table 2. Indicators on the Quality of Traineeships

Indicator || Data || Source(s) || Country

Learning content

Mentor' s performance: good or excellent || 55% || EYF Survey, p.19 || EU-wide

Mentor' s performance: less than satisfactory or not satisfactory || 18% || EYF Survey, p.19 || EU-wide

Relevance to respondents' field of study: good or excellent || 55% || EYF Survey, p.19 || EU-wide

Relevance to respondents' field of study: not satisfactory || 6% || EYF Survey, p.19 || EU-wide

Beneficial in terms of extending experience and practical knowledge || 83% || Fuchs / Ebert (2008) || DE

Good mentoring || 81% || Fuchs / Ebert (2008) || DE

Useful in terms of learning outcomes || 70% || Briedis / Minks (2005) || DE

Duties/tasks at a good level || 67% || Briedis / Minks (2005) || DE

The traineeship content was good || 64% || Kravietz (2006) || DE

Usefulness for professional development || 57% || Kravietz (2006) || DE

Usefulness for professional orientation || 66% || Kravietz (2006) || DE

Good mentoring || 61% || Kravietz (2006) || DE

The tasks contributed to learning || 88% || OPALA survey (2010) || FI

Compensation

Traineeship was paid || 51% || EYF Survey, p. 15 || EU-wide

Compensation covered living expenses || 25% || EYF Survey, p. 15 || EU-wide

Working conditions

Feeling of being exploited || 61% || Fuchs / Ebert (2008) || DE

Traineeship plans lacking / not followed / not useful || 62% || Briedis / Minks (2005) || DE

Counselling / support during the traineeship was sufficient || 81% || OPALA survey (2010) || FI

General level of satisfaction || || ||

Trainees completely satisfied with their internship || 25% || Internocracy (2010) || UK

Traineeships felt to be poor quality || 30-40% || Traineeship study, p.831 || UK

Comparison mandatory vs. open-market traineeships

VET students satisfied/very satisfied || 88% || Traineeship study, p.151 || AT

University applied sciences graduates "at least satisfied" || 80% || Traineeship study, p.151 || AT

General University graduates "at least satisfied" || 70% || Traineeship study, p.151 || AT

Young graduates "at least satisfied" || 52% || Traineeship study, p.151 || AT

A first group of problems relates to the high share of traineeships characterised by insufficient learning content. Insufficient learning content might mean that the host organisation does not ensure a proper induction training or the trainee does not get a proper explanation/description of the work of the organisation and the underlying issues within the industry; it might mean that the host organisation does not ensure a mentor who follows the work of the trainee and supports him or her throughout the traineeship, or the appointed mentor does not fulfil his or her tasks. A traineeship with insufficient learning provides only a limited (or no) support to smooth education to work transitions since the trainee will acquire less practical skills by the end of the traineeship then he or she optimally could have acquired through a high quality traineeship.

Learning content tends to be most deficient where there is no well-structured written agreement between the trainee and the host organisation, specifying the purpose of the traineeship, the skills to be learnt, the roles and responsibilities of all parties involved, and the supervision, mentoring and monitoring arrangements (Traineeship Study, p. 137). These problems have been especially observed for open market traineeships; in the traineeships where learning institutions are involved problems exist, but are less common because the learning institution usually ensures minimum standards ahead of the traineeship, through guidelines and selection of host organisation, and ex post if negative feedback is received. A case study about a low-quality traineeship and the reaction by the learning institution is described in Box 4.

A share of 18% of traineeships is reported to be unsatisfactory with respect to learning content in the EYF survey (see Box 5; other surveys find even higher shares; see Table 2). This is less than the share of unpaid traineeship, which surveys results consistently indicate at around 50%, indicating that many unpaid traineeships are satisfactory from a content viewpoint.

Box 4. Case study: A low learning content experience “A traineeship experience abroad is important, but in my case it’s been a wasted opportunity” says G.C., who did a traineeship as a fourth year law student. “I applied for a five-month traineeship organised by my university at a law firm in London, in the department for international property purchases. There were almost exclusively lawyers from my country there. My role was essentially making photocopies. My working time was the same as for the colleagues, I tried to be proactive but de facto I just did secretarial work like handling email and archiving documents. There may have been contributing factors for this, as the law firm had just moved and I did not know English perfectly. But I was not the only one in that situation; in the firm there were other two boys whose judgement was equally negative. I know that their tutor intervened doing some checks on the traineeships although I have the impression that my own complaint did not have any effect. Once back I explained to the responsible department in my university how things had gone and that there was no underlying project to make the traineeship useful. Nothing happened, but I know that in other such cases traineeships were stopped. My impression was that they were just looking for people to put to work for free; they were continuously looking for trainees, certainly not with training purposes. However the experience has not been totally negative, I noticed that my traineeship abroad is the first thing they note in interviews, but it could have had more value’. Source: abridged from Repubblica degli Stagisti, E. Della Ratta, 8 March 2010

A second group of concerns relate the lack of or the low level of compensation. The EYF survey indicates that only every fourth trainee was remunerated or compensated enough to be able to cover his or her expenses. Lack of compensation explains concerns about equity of access and merit-based career opportunities, and raises issues about employers using traineeships as a form of unpaid employment with ‘cheaper’ trainees being used for entry level jobs and/or other job vacancies instead of regular staff. In the UK, a 2011 survey found that only 62% of permanent employees thought that trainees were treated fairly (Heath, Potter 2011).

A third group of problems relate to working conditions other than compensation, such as long working hours, substandard working conditions, lack of coverage for health and safety or occupational risks, lack of clarity on the applicable legal regimes, equal treatment, and so on.

Table 3 supplies some greater detail on the concrete problems typically encountered by trainees, their practical concerns and ideas for improvement, as identified by an online poll of a UK trainee organisation, “Changing internships in the UK”. The ranking of votes also provides some insight on the relative importance of problems, as perceived by trainees, although it should be stressed that online polls are not statistically representative and have a purely indicative nature. Apart from the specific aspect about the London-centric nature of UK internships, which is due to a high concentration of professional services firms in the capital, the concerns put forward are very similar to those put forward in other Member States (see also European Youth Forum survey results in Box 5).

Table 3. Internships for change poll, UK

Ideas || Votes

Pay interns National Minimum Wage || 20.90%

Interns should be viewed as potential employees, not cheap labour || 13.70%

A youth-driven quality mark to identify the organisations with the best internships || 11.40%

Organisations should have to adhere to a minimum set of standards || 7.90%

The London-centric nature of internships should be challenged || 5.60%

Profit-making organisations should pay interns || 5%

Organisations should define the nature of the work before the internship starts || 4.40%

Set up an organisation you can turn to protect your rights if being treated unfairly. || 3.50%

Make employers aware that they are supposed to have educational value for the intern || 3.20%

Internships should be advertised to everyone || 2.80%

Send a letter to companies/MPs advertising unpaid internships reminding them of their duty of care/law || 2.60%

Distinguish between interns and volunteers || 2.30%

Interns should be offered cheaper accommodation || 2.30%

Unpaid internships should not require a commitment of more than 3 months. || 2.30%

Others || 11.80%

Total || 100.00%

Concerns by topic (excl. ‘others’) ||

Working conditions, fairness || 39.70%

Learning content || 30.50%

Wages and compensation || 29.70%

Source: Data downloaded from Internocracy website on October 13, 2012 and elaborated by Commission services. The poll is ongoing.

Finally, a fourth group of problems that is typically not highlighted by trainees’ organisations or national analysis but that is of concern from the perspective of the integration of EU labour markets is the low level of intra-EU mobility for trainees. This has important negative consequences for the integration of the EU labour markets and prevents young people living in countries with insufficient or unsatisfactory traineeship offer to profit from better opportunities in the EU single market. The problem will be discussed further in section 4.4.

Box 5. A closer look at data on traineeships – the European Youth Forum survey Given the lack of official statistics, the only quantitative evidence available is represented by survey results. Although compiled from different populations and using different methodologies, they generally seem to supply encouragingly similar estimates on parameters such as rate of job retention after completion of a traineeship (which has been estimated at 12%, 14% and 16% in three different surveys in different EU countries). One of the most important sources on EU traineeships is the European Youth Forum Survey conducted among (ex)trainees in the EU from April to July 2011. The 3028 responses provide a large enough sample for drawing some conclusions concerning quality concerns related to traineeships, as well as the dimension of the problem. Most trainees are in their twenties and traineeships typically last between 4 and 6 months. The majority of respondents (63%) have done one or two traineeships (but 37 % has already done 3 or more) and the most common ways of finding a traineeship is by applying directly to organisations, searching on the internet, and making use of personal connections. With regards to the motivation for doing a traineeship, improving their CV and improving future job opportunities were the two most significant factors. Some also wanted to learn more about a particular organisation or field of work, or get first-hand experience of working life. A high number of trainees also cited a lack of available jobs as a motivation. The quality of the traineeship is a core concern of the trainee, and takes precedence over other factors such as remuneration. Although three out of four respondents were not (51%) or insufficiently (24%) compensated and had to rely on parental support, savings, or other forms of external financial means, they seem more interested in the potential gains from the traineeship than its costs. An example is the traineeship satisfaction rates of the post-studies (open market) trainees, which did not differ from the average despite the fact that they more often received no or low pay. A 16% share of trainees managed to turn their traineeship into a job with their host organisation afterwards. A 25% share of trainees report not having had a written traineeship agreement (which the Traineeship study identified as an important quality indicator). 54% of (ex)trainees were completely satisfied with the mentor’s performance (excellent or good), and further 19% evaluated the mentor as satisfactory – meaning that every fourth trainee lacked a good mentor. The learning content of the traineeship was relevant to the studies/career interests for 56% of the trainees (excellent or good), and satisfactory for further 24%; however this was not the case for every fifth respondent.

4.2. Number and share of low quality traineeships

Estimating the number of low quality traineeships is not straightforward and subject to wide error margins. The traineeship study estimates that in France and Germany there are at least 1.5 million trainees each year. Estimates indicate that in Italy the number of trainees is of the order of half a million every year, while for the UK estimates indicate up to 280,000 open market traineeships plus up to 118,000 students in undergraduate courses mixing work experience with training. Assuming no substantial differences in the share of trainees in the population across the EU (admittedly a strong assumption), this leads to an estimate of between 4 and 5 million trainees in the 27 Member States in a given year.[13]

Another way to formulate an estimate is by looking at the number of tertiary education students in the EU and use this as a basis for a projection on the basis of assumed activity rates. According to Eurostat, in 2010 there were 19.8 million students enrolled in tertiary education courses (ISCED levels 5 and 6) in the 27 Member States. Assuming that during the average studies of 4 years 80 % of the students will eventually participate in one or more traineeships of altogether 6 months on average, one arrives at 4 million trainees per year. One should add to this those upper secondary level (ISCED 3 and 4) students who may also do a traineeship, even if in smaller numbers. This confirms the estimate of 4 to 5 million trainees per year.

To estimate the number of low-quality traineeships, survey results from the European Youth Forum were used (“Interns Revealed: A Survey on internship quality in Europe, Brussels 2011”), which offers the advantages of a relatively large pool of respondents and of a Europe-wide coverage. An 18.0 % share of respondents indicated that the “mentor performance” was unsatisfactory or less than satisfactory, and a very similar share (18.2%) classed as unsatisfactory or less than satisfactory the relevance of work performance to the content of the studies; either share may be taken to represent a traineeship of insufficient quality. The share indicating a more negative response (i.e. not satisfactory) was respectively 8.2% and 6.5%. Applying the lower of the two shares to the estimated total number of traineeships (4 million) results in about 300 thousand low quality (i.e. non-satisfactory) traineeships per year, and about 500 thousand insufficient quality (less than satisfactory) traineeships. This value should be seen as an indicative estimate only, taking into account exclusively the learning content, not the issue of compensation. Under certain assumptions, the share of traineeships without satisfactory learning content can further be estimated at some 20% of all traineeships, and at about 50% of unpaid traineeships.

Table 4. Estimates of the number of traineeships and their characteristics

Total number of traineeships || 4,500,000 ||

Insufficient quality || 520,000 ||

Low quality || 290,000 ||

Average duration (months) || 4 ||

Assessing the costs of low quality traineeships is complicated, in the present crisis juncture, by the fact that trainees may not have a meaningful alternative in the short run, as job opportunities are scarce and there is stiff competition even for traineeship positions (the EYF survey indicates that 40% of post-study traineeships were accepted because no jobs were available). In such cases, the opportunity cost of a bad quality traineeship is reduced.

Low-quality traineeships are likely to affect more often trainees from a less privileged background

One particularly unwelcome aspect of low-quality traineeships is that they are likely to affect more often those from a less privileged background and may prevent their future access to high-productivity quality jobs in line with their skills and study results.

It is of course more difficult for the less well-off to support themselves during a low-paid or non-paid traineeship and the spread of jobs for which a traineeships constitute a de facto requirement reinforces this concern. However, the structural differences of the traineeship market from the regular employment market create a further barrier.

In search of a regular employment relationship, a candidate with a weaker training background will of course be at a disadvantage against stronger candidates, but has nevertheless still a chance to compete by reducing his or her wage requirements; the lower reservation wage would also increase the pool of possible alternative job offers. This is not possible in a traineeship market where often there is no compensation at all. Available positions will tend to be awarded simply to those having the best educational background, possibly also including earlier work experiences, or other characteristics of value to the recruiting organisation. Those with a weaker educational background thus risk having no way of overcoming initial disadvantages, whenever the number of positions is fewer than the number of candidates as is the case currently. In summary, those from a less wealthy background as well as those with weaker educational credentials will more often be victims of low-quality traineeships because they have less scope for selecting the host.

4.3. Problem drivers and trade-offs: The role of market failure

The analysis above shows that while the majority of traineeship positions on offer do provide adequate quality, a substantial share does not. An important question is what are the key drivers of this problem and whether it is due just to factors such as the current economic crisis or to special characteristics of the traineeship market that make it advisable to adopt specific measures.

Market failure plays a more important role in traineeships than in regular employment contracts because a much greater share of the benefits that the trainee obtains from the arrangement is not easily definable and quantifiable, and hence asymmetric information likely to be more important. One of the main benefits, the possibility to be hired, materialises even after the end of the traineeship (see Annex VI). Therefore, the trainee cannot effectively compare the quality of the various options with their respective costs, as is the case in any normal market transaction.

As for host organisations, at present there are few incentives for them to improve the quality of traineeship positions. First, owing to high demand for traineeships the host organisation is under little pressure to adopt any quality standard to attract candidates, and at any rate is normally under no legal obligation to do so. Second, the lack of generally accepted quality standards does not provide hosts with any guidance as to how to improve the quality if they wanted to.

Overall, the main incentives for a company or other host organisation to provide good quality are currently either their intention to hire trainees in the near future or their wish to maintain a good reputation as employers or, more generally, out of respect for Corporate Social Responsibility. Indeed, according to the EYF survey, those trainees that were later recruited by their host organisation were much more frequently sufficiently paid (67%) than the average rate of 25%; the same result is apparent from an analysis of the hiring behaviour of participants in a Quality Label initiative in Italy (see Box 6).

However, an organisation that does not intend to hire and does not assign a particular value to its reputation faces few other disincentives to limit the training content to the minimum and may just use traineeships as a source of cheap labour (‘free-riding behaviour’). This set of incentives and disincentives explain why open market traineeships are significantly more affected by low quality than the other types of traineeships, where actors with a specific role in ensuring quality are present.

Box 6. Comparing high quality with average traineeships using data from a quality label experience The Italian trainees’ organisation Repubblica degli Stagisti has launched a voluntary scheme, “OK Stage” whereby host organisations commit to respect a quality charter formulated by the organisation. The traineeship conditions, published on the site of Repubblica degli Stagisti include commitments on fair treatment. Currently, 36 host organisations have adopted the charter. It is interesting to compare the traineeships conditions offered by these quality traineeships with the average for Italy. • All these traineeships offer remuneration – a minimum of 200 euros per month for student traineeships and 500 euros for traineeships after university graduation. The average net compensation for university graduates amounts to 643 euros per month. In Italy, according to the Repubblica degli Stagisti traineeship organisation (RdS), only 47.6 % of traineeships were paid; note however that while the quality charter calls for compensation it did not specify its level. • The average rate of hiring after completion of the traineeship was 55%, compared to an estimate of 12.3% for traineeships as a whole in Italy (RdS, 2010). The much higher rate of hiring among participants confirms the link between quality and intention to hire on the part of the organisation.

Trainees also face a cost in changing companies and the duration of the traineeship is not very long anyway. As a result, they are often ‘trapped’ into completing a bad quality traineeship, in the hope that this will at any rate give them some kind of positive return (i.e. a mention on their CV) compared to nothing - or even a negative signal to potential future employers - if they quit the traineeship.

All these factors – asymmetric information; lack of general quality standards; lack of disincentives to firms to offer low quality traineeships; incentives to trainees to stay on such traineeships – are key problem drivers underlying current market failures as they create results in a long-term equilibrium in which the market is unable to screen out lower quality traineeships, which may remain on offer indefinitely and which may coexist with a majority of good quality offers (this mechanism is explained in more detail in Annex VI; see also Curiale (2010), Edwards, Hertel-Fernandez (2011).

Quality and compensation

One element which should be reasonably clear and which could, in theory, help the market to screen out bad quality traineeship offers is compensation. Indeed quality and compensation are found to be positively correlated, and in addition low or unpaid traineeships are more likely to be of bad quality. Unfortunately however this does not solve the market failure on quality, as there can be good reasons for a high quality traineeship to be unpaid. In particular, a traineeship with high training cost (see Box 2 for some relevant examples) may be economically sustainable for the host organisation only at reduced or zero pay levels, given relatively low trainee productivity.

Compensation and labour market conditions

Low compensation is not only linked to the characteristics of the traineeships itself, but also to the structural characteristics of the labour market, in particular to the general level of labour demand, labour market regulation, the existence of labour market segmentation, and so forth.

High youth unemployment will tend to increase the number of candidates for each available traineeship position, while negative growth prospects will induce businesses to curtail hirings, one of the main motives for taking on trainees, but possibly also to increase traineeship offers as replacement for more costly regular employment. Abundance of candidates is likely to induce host organisations to offer unpaid instead of paid traineeships or to reduce compensation for new positions.

Compensation and legal status

If demand and supply for traineeship positions were in greater balance than is currently the case, some form of compensation would probably be generally be paid to trainees even in the absence of specific regulation. However, given the oversupply of trainee candidates, rules on minimum compensation come to play an important role.

In most countries, trainees are not considered employees, and, as such, their rights, terms and conditions, including remuneration are not tightly defined and regulated, at least as regards certain types of traineeships. In general, legal provisions for the trainee’s terms and conditions in most countries are very fragmented and do not cover all types of traineeships in a consistent and coherent way. As shown in Table 1, most countries do not foresee, or may not enforce, minimum compensation.

There is no consensus on the issue of the appropriateness and level of trainee compensation. The main reason for not paying wages to trainees is probably linked to the idea that traineeships should be distinguished by employment contracts and be mainly about training. This line of reasoning has a long tradition and is embodied e.g. in the US regulatory approach. In addition, binding rules on minimum compensation are generally believed to have positive effects on equality but negative ones on employment levels.

Trade-offs

There is clearly a trade-off between ensuring availability of traineeship positions and imposing a minimum level of compensation. It is less clear, however, what would be the effects of increasing trainee compensation on the labour market as a whole. In a recent contribution, Dolton and Rosazza Bondibene (2012) found that the negative employment effects of minimum wages are particularly strong for young people. Widening the scope of minimum compensations to traineeships could have similar effects, at least in countries where traineeships are not subject to minimum compensation. On the other hand, it could have positive effects on equity of access and income inequality. Businesses could face higher labour costs with some negative effect on profitability and competitiveness, while at the same time possibly benefitting from better skills matching and higher retention rates.

As for the other employees, theory suggests that the net effect will generally depend on the degree of substitutability between trainees and regular workers. If trainees and regular workers can easily substitute one for another, higher compensation for trainees would result in less traineeship positions and employment gains for regular workers. Conversely, if trainees and workers are, instead, complementary, demand for regular employees too should drop. Which of the two effects will dominate is an empirical question that it is difficult to answer at present. The impact is also going to depend on the degree of labour market segmentation.

4.4. Quality issues and transnational traineeships

Low quality is likely to affect the development of transnational traineeships even more seriously than domestic traineeships. This is because the problem of the lack of information about the quality of traineeships becomes more acute in an international setting:

· The differences in standards and the wide range of diversity in labour market and traineeship regulation across Member States make the situation in terms of quality standards even fuzzier than at home, and informal learning through contacts and networks about the quality of traineeships gets more difficult;

· Ignorance of local conditions by foreign trainees makes the awareness of rights more limited and complaining more difficult;

· Foreign trainees can screen companies with greater difficulty only;

· Foreign trainees may face higher costs in changing companies if not satisfied. Their investment in going abroad is bigger and the greater sunk costs incurred create a stronger incentive to complete a traineeship even if it is low quality.

Although a traineeship placement in a different country can contribute to the increase of the employability of a young person (similarly to the completion of studies abroad), still relatively few young people complete a transnational traineeship. The 2011 Eurobarometer shows that 53% of young people in Europe are willing or keen to work in another EU Member State. Young people are much more mobile than the labour force as a whole, as less than 3% of European workers are currently living outside their home country. Demand for international placements funded under the Lifelong Learning Programme (Erasmus and Leonardo da Vinci) systematically exceeds supply. Similarly, traineeship placements offered by the European Commission attract a large number of applicants partly due to the high level quality.

Study mobility is overwhelmingly more popular than company placements; within the Erasmus programme, it is undertaken on average by about 5 out of 6 beneficiaries. The duration of study mobility too is almost double that of placement mobility. This seems to be corroborated by results of a survey by Deloitte (Deloitte, 2012) on students and graduates in five Central European Member States (CZ, LT, LV, PL, SK) indicating that domestic job/traineeship experiences outnumber international ones by ten to one, even though young people from these Member States seem to be more mobile than in some other Member States.

Table 5. Share of transnational traineeships

Indicators || Quantification || Source(s) || Year || Country

Erasmus Programme || || || ||

Total number of Erasmus students || 231 408 || Erasmus Fact & Figures || 2010/2011 || EU wide

Total number of Erasmus work placements (traineeships) || 40 913 || Erasmus Fact & Figures || 2010/2011 || EU wide

Share of work placements in pool of participants to Erasmus programme || ≈ 17% || Erasmus Fact & Figures || 2010/2011 || EU wide

(1/6)

Leonardo Programme || || || ||

Leonardo mobility visits || ≈ 78 000 || Leonardo Fact & Figures || 2010/2011 || EU wide

Total number of transnational traineeships (Erasmus + Leonardo) || ≈ 119 000 || Leonardo Fact & Figures || 2010/2011 || EU wide

Total number of traineeships || 4 500 000 || || 2010/2011 || EU wide

Share of transnational traineeships || 2.60% || || 2010/2011 || EU wide

The number of transnational traineeships may be estimated only very roughly given the lack of statistics on transnational open market traineeships. Assuming these to be 20-25% of Erasmus and Leonardo traineeships (see Table 5), the total number is probably in the range of 150,000, compared to 4.5 million, i.e. around 3%.

The contrast between the high interest for studying abroad, and the low share of transnational traineeships, suggests that institutional factors, such as lack of information, are holding back development of the market. If a young person does not know what he or she can expect in terms of conditions, learning content, social protection, remuneration etc. in a foreign placement, his/her willingness to participate will be limited. Organisations active on the international traineeship market (e.g. Europlacement) confirm that there is high student demand for international traineeships once a certain level of quality is guaranteed. It seems therefore likely that there is significant potential for growth (at least on the demand side) if the quality problem can be convincingly addressed.

Need to improve access to information on transnational traineeships documented by study

A study commissioned by DG EAC on conditions to promote transnational traineeships in Leonardo and Erasmus (European Commission, 2011b) indeed gives a strong recommendation to improve access to information on the legal and regulatory differences relevant to traineeships between Member States and to introduce more concrete requirements for the overall organisation of traineeships.

Besides direct EU support, other public and private transnational mobility schemes offer services to students as well as to young people not in education and training. A recent study on mobility developments in school education, vocational education and training, adult education and youth exchanges commissioned by the European Commission (European Commission, 2011a) identifies 1000 learning mobility schemes in Europe, in addition to the EU-funded Lifelong Learning sub-programmes for Comenius, Grundtvig and Leonardo da Vinci and the Youth in Action Programme. Furthermore the study shows that work placements are becoming an increasingly popular type of mobility activity, indicating that “employability” is seen as an important learning outcome. However, recognition and documentation of knowledge, skills and competences acquired by participating in transnational mobility is still undeveloped in many schemes. Common quality guidelines on traineeships would be strongly relevant to these programmes

Given persistent and sizeable skill mismatches in EU Member States, the lack of development of international traineeships seems to represent a lost opportunity to reduce structural unemployment. A traineeship could constitute a way for trainees to try international mobility without a large initial commitment, while businesses could use traineeships as a first step to develop international recruitment, useful especially in case of domestic skill shortages.

Finally, given the strong boost to language learning during a period of several months spent working in a foreign country, disincentives to intra-EU trainees’ mobility may have a persistent cost in terms of lost productivity. Research by Williams (2005) indicates that the use of a second language in the workplace raises earnings by about 5 to 10 per cent.

5. Legal basis and subsidiarity

Legal basis

According to Article 153 TFEU, the Union shall support and complement Member States activities in the field of, inter alia, working conditions, social security and social protection of workers, and also the integration of persons excluded from the labour market and the combating of social exclusion.

Pursuant to Article 153 para. 2. b) TFEU, the European Parliament and the Council may adopt Directives in the field of employment and social policy.

Alternatively, according to Article 292 TFEU, the Council can adopt recommendations on the basis of a Commission proposal. Occupational Safety and Health legislation considers trainees and apprentices as covered by the scope of the Directives based on framework Directive of 1989, whose basis is Art 153 TFEU.

However, it should be noted that the provisions of Article 153 TFEU do not apply to pay (Article 153 para. 5 TFEU). Hence, the problems relating to the low level of trainee compensation will have to be dealt with at another level, notably by Member States and social partners.

Mobility in education and training not only forms a central objective in the EU's educational policy but is also an integral part in of the freedom of movement of persons under Article 45 TFEU – a fundamental freedom protected by the Treaty. Given the transnational dimension of traineeships, actions of individual Member States alone will not achieve the objectives of the proposed initiative - to comprehensively improve the quality of traineeships undertaken in the EU.

The Charter of Fundamental Rights of the European Union also contains a number of rights and freedoms which may be relevant to measures that may be decided concerning traineeships, in particular its Article 21 (Non-discrimination), Article 29 (Right of access to placement services), Article 31 (Fair and just working conditions) and Article 32 (Prohibition of child labour and protection of young people at work).

Subsidiarity

Generally, great diversity of situations among Member States, or very different societal preferences are arguments in favour of decentralised solutions, as they can be tailored to national or even local needs and preferences.

However, in the case of traineeships, the difference of labour market institutions does not seem to play a major role, as the nature of the complaints and concerns put forward is very similar everywhere, and quality problems in traineeships are frequent even in the Member States where the labour market situation of young people is more favourable. The Traineeship study found that only in five Member States there was no presence of questionable employer practices with regard to traineeships[14].

Another criterion commonly used to assess whether an EU-wide solution is preferable is whether a standardised solution offers operational advantages or cost savings. In this regard, it does appear that an EU-wide solution presents several advantages.

· First, the quality guidelines adopted or proposed so far generally look very similar (see box 7 and Annex IV), irrespective of the organisation drafting them. Differences reflect mainly remuneration - which is sometimes covered and other times not, depending also on the national regulation on this point – and the presence of individual binding elements, such as limitations of successive traineeships which are usually absent from voluntary charters. This suggests that there is no great need of adaptation of quality standards to local conditions.

· Second, an EU wide-solution would have clear benefits in terms of intra-EU mobility of trainees. Young people would find it easier to accept a traineeship in another country if standard or harmonised rules gave them a clear knowledge of what they can expect in another country. Greater trainee mobility would contribute to achieving a more integrated EU labour market through better matching and sustainable job creation.

· Third, experience shows that, owing to coordination problems, the definition of internationally accepted quality standards can be faster if supranational institutions adopt a coordinating and supporting role. The EU is best placed for this, as there seems to be little or no movement towards spontaneous development of international quality standards.

Through an initiative in this sense, the EU could concretely support Member States in implementing the EU 2020 employment guideline nr 8, in particular ‘enacting schemes to help recent graduates find initial employment or further education and training opportunities, including apprenticeships, and intervene rapidly when young people become unemployed.’ Providing guidance to the Member States that is operational and can be readily implemented at national level appears all the more useful given the acuteness of the crisis and a track record of delays in addressing the problems of traineeships. It is also fully in line with the spirit of the European Semester.

The Commission invited already in 2007 "Member States to promote internships with a strong link to training or study curriculum and to define adequate frames for doing so"[15]. More broadly, the Commission has frequently called for better work-to-school transitions, which implicitly includes action on traineeships, as this has long been recognised as a priority area. Also the resolution and conclusions of the 101st ILO Session on the International Labour Conference have called for “regulating and monitoring apprenticeship, internship and other work-experience schemes, including through certification, to ensure they allow for a real learning experience and not replace regular workers” (ILO 2012). Despite these calls however action from Member States has been patchy and the regulatory framework generally remains fragmented and unsatisfactory (see Table 1).

The traditional European employment strategy approach could be used to induce Member States to reform traineeship regimes, but would lead to greater differentiation in the resulting framework than instruments such as recommendations or legislation determining the content of traineeship regimes. This would be suboptimal particularly in terms of the need to address existing barriers to trainee mobility.

Finally, a standardised EU solution seems to be a logical pre-condition for extending EURES to apprenticeships and traineeships, as requested by the European Council conclusions of 28/29 June 2012[16]. This is due to the need to prevent the risk that without ensuring standard quality requirements for traineeships advertised within EURES, support through EURES is provided to low quality traineeships that will not help smooth education to work transitions.

6. Policy Objectives

The general objectives of an initiative in this domain are:

(1) To facilitate education-to-work transitions

High quality traineeships contribute to increasing the employability of young people. Traineeships as a form of labour market entry for graduates should be stepping stones in the progression to a regular employment, ensure a rapid increase in workers’ productivity and help reduce precarious employment. The objective should therefore be increasing the number of good quality traineeships and reducing the extent of low-quality instances and abuse.

(2) To promote mobility in order to reduce mismatches in the European labour market

To reduce structural unemployment, the promotion of learners' and of workers' geographic mobility within the EU should be stepped up, given the existence of marked skill and demand/supply mismatches in the labour market. A development of transnational traineeships is a key tool in this respect. Prospective trainees who consider undertaking their training in another EU Member State should have a clear reference to check quality criteria and not be discouraged by uncertainty about administrative formalities; legal concerns, or contractual obligations.

In order to meet these general objectives, the following specific objective has been identified:

· To improve the quality of traineeships in the EU.

The operational objectives would be

(1) To encourage host organisations to offer traineeships providing good quality learning content, decent working conditions and which are a good stepping stone for entering the labour market.

(2) To increase the transparency and quality of information on traineeship positions.

7. Policy coherence – contribution to Europe 2020

An initiative on a quality framework for traineeships is closely related to, and usefully complements, several other European initiatives. Facilitating education to work transitions, as well as promoting mobility, is high on the Europe 2020 agenda. In 2010 the Europe 2020 flagship initiative 'Youth on the Move' announced that the Commission would propose a quality framework for traineeships including the transnational dimension, the role of the social partners and corporate social responsibility aspects.

In light of the further deterioration of youth access to the labour market, the Commission launched the ’Youth Opportunities Initiative’ in December 2011. One of the main actions of the initiative consists in the Commission’s support for Member States to use the European Social Fund more efficiently, among others for supporting traineeship places, as is already the case in some countries. In addition, Commission support to high quality traineeships under the Erasmus and Leonardo da Vinci programmes will be increased in the remaining programme period, and a further budget increase will be proposed in the "Erasmus for All" programme starting in 2014. The Youth Opportunities Initiative also confirms earlier commitments to present a quality framework for traineeships in 2012.

Skills are a core asset for economic growth, as is good quality education and training systems that facilitate young people's transition from school to work. In this context, 16 Member States have this year received a Country Specific Recommendation on "enhancing access to lifelong learning, upgrading the skills and competences of the workforce and increasing the labour market relevance of education and training systems, VET". A very frequent recommendation is to increase the availability of work-based learning, whether apprenticeships or work placements in companies. Guiding criteria for quality traineeships appear particularly useful for countries where the education and training authorities have little experience or tradition of working in partnership with businesses.

Action on improving traineeship quality is also related to the debate around the recognition of qualifications, and in particular the recognition in the home Member State of a traineeship accomplished abroad. This is of particular importance for the regulated professions but might concern other professions as well. For traineeships in the regulated professions, the legislative proposal amending Directive 2005/36/EC foresees the introduction of a compulsory recognition mechanism.

Political attention to traineeships is maintained in the 2012 Employment Package and is also on the agenda of international organisations, notably the ILO.

Developing a quality framework for traineeships also contributes to the Commission's endeavour to lift obstacles to the full enjoyment by citizens of their EU rights, and notably their right to free movement.

8. Possible avenues for EU action

Situations in which markets fail at ensuring minimum quality levels are not uncommon. They are usually addressed either by a regulation imposing minimum standards (regulatory approach, sometimes replaced by self-regulation), or by measures to increase the transparency of the market.

The analysis in section 4 provides a few pointers for actions that could improve the situation by tackling the causes of the problems. Not all possible actions are suitable for action at EU level, in light of legal or operational considerations. Table 6 illustrates some possibilities.

Table 6. Problems, problem drivers and possible levels of action

Problem || Problem driver || Different levels of EU action

High share of low-quality traineeships || Lack of information for trainees on existing rights and quality standards || Set up information website(s)

Lack of general quality standards hinders adoption of good practices by host organisations || Encourage voluntary adoption of engagements on quality (‘quality label’)

Lack of transparency on the quality of the individual traineeship offered and lack of effective disincentives to free-riding || Introduce a set of quality guidelines

Introduce binding legislation (e.g. on quality standards, banning unpaid or repeated traineeships etc.

Possible policy response at EU level

Given the link between low quality, market failure and lack of transparency, one policy response should aim at increasing transparency at all stages. This could mean in practice:

· Clarifying the existing legal framework on traineeships: the Traineeship study has shown that the legal framework on traineeships is fragmented and complicated, leading to a lack of certainty on the legal rights and obligations of trainees and host organisations. This could be done through an effort at providing better quality information through appropriate tools;

· Simplifying the legal framework through appropriate regulatory reforms. A good starting point could be the provision of guidelines from best practice;

· Introducing mechanisms for feedback on the experience from individual traineeships, e.g. through appropriate websites;

· Providing minimum requirements on the learning content and/or on traineeship conditions, either through regulation or via soft law.

Actions could be taken, depending on the types of traineeships, at different levels, involving different actors and different tools. The EU could:

· improve the transparency of traineeship regulation through more accessible information;

· encourage voluntary action by stakeholders (host organisations, social partners etc.) to enhance the quality of traineeships, for instance through the establishment of quality labels;

· launch actions under the European employment strategy to encourage Member States to improve the quality of traineeships;

· introduce non-binding instruments (recommendations or guidelines); or

· introduce binding legislation.

Possible scope of application

Regulatory theory suggests that market failure in delivering quality can generally be tackled in two ways, either by enhancing the quality and availability of information on the market, or by imposing quality standards. Either approach could enhance the effectiveness of traineeships in ensuring good transitions from education to work. In the following, a number of measures based on the first or the second approach are explored.

Open-market traineeships seem to represent an obvious candidate for initiatives given that they represent the most problematic segment, but alternatives exist: the scope of the measures could be either widened or restricted to apply to cross-border traineeships only, or to traineeships with a duration above three months (on the grounds that these are those for which the expectations by trainees of a significant learning content are highest, as would be the costs for low quality). Another issue is whether sectoral specificities would warrant tailoring or limiting measures to certain industries (see Annex V for an overview of the sectoral spread of traineeships).

The social partners may wish to consider one or more of the below measures, requiring different levels of engagement of EU institutions. The contents of these areas may be adapted in various ways. A first rough assessment of the impact / effectiveness of each option is also provided (a more detailed assessment of impacts will be carried out following the results of this consultation, in case the Commission decides to present a proposal).

8.1. No initiative at EU level (baseline scenario)

Description: There is no sign that the quality concerns discussed above would decrease in the future. As mentioned in Section 4 and in Annex VI, economic incentives are such that an equilibrium around the current share of low quality traineeships is likely to be sustained in the absence of policy action.

Furthermore, the prolonged economic crisis may lead to a further deterioration in traineeship quality. As outlined in Annex VI, one of the main reasons for offering a high-quality traineeship consists of search for new talent in view of hirings. Job creation however is being affected by the crisis. As fewer firms are interested in hiring, it seems likely that the share of good quality traineeships will decline in the immediate future. Furthermore, it may be speculated that increasing cost-cutting pressure could also tend to boost the number of low-quality traineeships, in some cases also at the expense of regular employment.

Certain Member States might introduce regulation, possibly on the lines of the French Cherpion law, and social partners might adopt quality charters at national or sectoral level; these however would not be coordinated and therefore would retain the fragmented nature of the current landscape, with its negative effects on trainee mobility. The Commission will continue to pursue the objective of improving mobility and labour market transitions of young people in particular from education to employment, in the wider framework of the Europe 2020 strategy and as a follow-up of the 2012 Employment Package, but without any specific instrument/tool focusing on traineeships. The Traineeship study provides a first overview of the traineeship arrangements in the Member States and lays a basis for more transparency of arrangements.

Finally, another possibility is that given increasing public concern about trainee exploitation, there might be a greater trend towards adoption of voluntary quality charters by host organisations. This is however unlikely to change the situation perceptibly, for two reasons. First, adoption rates for existing voluntary charters are very low, amounting to a few dozen only for initiatives launched in Italy and in the UK. Second, and more cogently, those firms that are likely to adopt the charters are likely to be those that are already now offering a high quality traineeship; the providers of low-quality traineeships are unlikely to be swayed significantly.

Looking at developments on the ground, there seems to be limited movement towards spontaneous development of global or EU-wide quality standards. While it is possible that there are further national or international initiatives in order to enhance the quality of traineeships, the overall share of low quality traineeships could be expected to remain roughly constant or even increase: the crisis may lead businesses to scale back new hirings, which are one of the main reasons for offering high-quality traineeships, and labour market entrants may have revised downwards their expectations.

8.2. Creation of an information website

Description: Setting up a website with a traineeship panorama (based on the Traineeship study - e.g. within the EURES portal, or by the social partners), containing regularly updated information on traineeship conditions and the legal framework in each Member State, would constitute a non-regulatory approach to increase the availability of general information about traineeships. As a bolder option, the website could also allow trainees to give feedback on their individual traineeship experience with a host organisation, transforming the nature of the information from purely general to specific. However the cost and legal implications of this possible facility should be carefully considered.

Pros: A properly designed, user-friendly website would allow a better spread of – and in particular easier access to – general information on national