Effects of Institutions on Human Capital Investment: A Comparison of Policies in Japan, Germany and the USA

In Germany, as almost everywhere in the industrialized world, the working population is ageing. It is predicted that in the year 2020 almost 40% of the working population will be over 50 years old (Economist 2006; Staudinger and Kühler 2006: 10). This demographic change in the labour force calls for action. The ageing workforce needs to be kept up to date with modern technologies and developments. Investments in human capital have become an unavoidable expense, and lifelong learning will be inevitable. This seems to present governments, firms and employees with challenges which, at least in Germany, are not yet being met. According to Eurostat statistics, the participation rate of German employees in training is one of the lowest in Europe, only 42% of 25 to 64 year olds in the German workforce participated in training of any kind, whereas the participation rate, for example, in Scandinavian countries was over 70% (Eurostat 2005: 2). Moreover, in comparison with other OECD countries, the percentage of German 25 to 64 year olds in the workforce who participate in non-formal job-related education and training is low. In the United States, for instance, over 40% of the workforce participate in such training, whereas in Germany the participation rate is under 15% (OECD 2005: 50). OECD statistics show that public and private investment in education at all levels is low in Germany, although lifelong learning seems to be one of the key factors for future competitiveness under demographic change.