Modern apprenticechips aid German economy.

Germany's apprenticeship program is one answer to a growing problem. Even as the world financial system stabilizes, unemployment among young people is soaring. In Spain, some 39% of under-25-year-olds are jobless, up from 26% a year ago. Ten other European Union countries including France, Belgium, and Hungary have youth unemployment rates above 20%. In the U.S., the unemployment rate for 16- to 24-year-olds has climbed to over 18%, up from 13% a year ago.

The danger is that a generation of young people may be economically scarred for years. Studies suggest that an extended period of youthful joblessness can significantly depress lifetime income as people get stuck in low-end jobs, or come to be seen by employers as damaged goods. "The longer they are out of work, the harder it becomes.

In Germany, by contrast, under-25 joblessness was 8.2% in September, just a tick above the overall German rate of 8%. Austria, Denmark, and Switzerland also have well-established apprenticeship programs and below-average youth unemployment. Rather than being left to flounder after high school, young workers are plugged right into the labor market.

German companies are happy with the system, too. Apprenticeships give employers several years to train workers in company-specific skills and assess the abilities of an Azubi—short for Auszubildener ("trainee"). Says Günther Hohlweg, who oversees the 10,000 young people learning trades at Munich-based electronics and engineering giant Siemens: "When they're done, they can start on a higher level."

The system is even good for the national budget, because companies bear much of the cost of secondary-school education. German authorities accredit some 350 kinds of apprenticeship, ranging from baker to hair stylist and bank clerk to video editor. Even university students may be apprentices, splitting their time between studying and practical experience in fields such as biotech or aerospace.

Lately, though, the system has come under stress through factors related to both the current downturn and long-term changes in the global labor market. The number of apprenticeships slumped more than 10% between 2000 and 2005, recovering only after the government threatened to compel companies to take more trainees. German officials expect the number to dip again this year because of the financial crisis. Although apprentices in lower-skilled trades can serve as cheap labor, they are often an expense to their employers in the short term. Siemens (SI) spends about $220 million a year training Azubis, some of whom earn as much as $1,500 a month. The company estimates that the productive work done by the trainees equals only about one-third their cost. Siemens, which offers almost all its apprentices full-time jobs, recoups the investment only later.

The biggest problem is a shortage of work for teens who complete only basic schooling, which may end after the ninth grade. Germany's highly automated factories offer far fewer low-skilled jobs than they used to. As a result, more than half the graduates of basic schooling wind up in government-supported training programs.

At the same time, some industries take on too many apprentices. Hair salons, for example, can profit from the cheap labor that trainees provide. So they tend to train more hairdressers than the market can absorb. Once young people have invested years learning a trade, it's tough to start over. Germany is much less successful retraining older workers than training young ones.