Apprenticeship Could Be Our Economy’s Superpower

Apprenticeships may the best kept secret in the U.S. economy. Their value is clear to practitioners: they provide better trained workers, increase productivity and earnings, reduce college debt, and replace an aging workforce. Yet, many stakeholders – employers, parents, policy makers, taxpayers, and the potential beneficiaries of such programs – are either unaware of the concept, have only a vague notion of it, or associate it with low-paying, low-status jobs.

The concept has been part of the American economy since colonial days. The National Apprenticeship Act of 1937, along with its subsequent amendments and reauthorizations, brought standardization and established the Registered Apprenticeship programs (RAPs), but the notion has not achieved critical mass in the United States the way it has in several European countries.

Now, the National Apprenticeship Act of 2021, if enacted, would invest over $3.5 billion to expand the practice. Can apprenticeship finally take hold in the United States? Here are some reasons why it should.

A SOLUTION TO THE LABOR SHORTAGE
“The worker shortage is real – and it’s getting worse by the day,” warns Suzanne Clark, U.S. Chamber of Commerce President and CEO. We’ve been facing a shortage of workers ¬– and skills – for several years, and despite the unemployment caused by the COVID downturn, that shortage persists. “There are now approximately half as many available workers (1.4) for every open job across the country as there have been on average over the past 20 years (2.8 historical average),” according to the U.S. Chamber of Commerce. The pandemic added some new wrinkles, causing many to retire early or re-think the type of work they want to do, all while the jobs themselves have been evolving. “An increasingly digital economy has resulted both in a need for more technical competencies in fields like AI, cloud computing and machine learning, as well as so-called ‘soft skills’ that can’t be automated, like communication, creativity, leadership, adaptability and teamwork,” reported Human Resource Executive. Agriculture, construction, healthcare, hospitality, manufacturing, and information technology all want for qualified workers.

We can’t expect colleges to fill all of these positions either, according to a 2021 Brookings Institution report. “Given the immense costs of higher education in the U.S. and underproduction of science and technology graduates, relying on college degrees alone for tech-savvy talent not only excludes most Americans, but it is also not enough to prepare organizations for the future of work.”

So, could apprenticeship be the answer? Yes, but there is still some convincing to do.


GOOD FOR BUSINESS
“Despite the clear payoff from apprenticeships, companies tend to give [it] secondary attention, using it only to train workers for hard-to-fill positions. They do not typically adopt it across their operations,” wrote Penny Pritzker, former U.S. Secretary of Commerce.

It takes time and money to upgrade a workforce, and the costs are difficult to, program start-up, tuition and educational materials, mentors’ time, and overhead. Many employers are understandably reluctant to make that kind of investment. Only about 20,000 U.S. employers [out of nearly 11 million] offer apprenticeships.

By using RAPs, however, companies don’t have to go it alone. Tapping into the grants, partnerships, resources, and assistance offered by RAPs can help companies get over the initial hump of establishing apprenticeship programs so they can start reaping the benefits without all the pain.

Positive Return on Investment
While figures vary across industries and business sizes, studies in specific sectors and locations have demonstrated the positive impact of apprenticeship programs.
“Advanced manufacturers that implemented the Industrial Manufacturing Technician (IMT) Registered Apprenticeship program had a return on investment (ROI) of 48 percent during the terms of their apprenticeships,” reported a JFF study.

Respondents to a 2020 North Carolina Department of Commerce apprenticeship program survey showed an additional $1.70 of value for every $1.00 of investment in apprentices.

And in South Carolina, employers using federally recognized apprenticeship programs administered by the state’s Technical College System realized a 41% return on investment over 5 years and 135% over 7 years – about 12% a year.”

The favorable ROI is often due to a combination of increased productivity and higher worker retention. The South Carolina study found “that the average tenure among employees who had completed a registered apprenticeship was 3.2 years longer than those who had not, reducing overhead caused by frequent turnover.”

Customized Training
Another benefit of apprenticeship programs is that educational institutions can help employers develop the exact curricula required to align incoming employees with the company’s specific skill needs and competencies right from the start, to paraphrase Maria Flynn, CEO of Jobs for the Future.

Consistent Credentials
RAPs also provide companies with credentialing that is valid for locations across state lines, as pointed out by Noel Ginsberg, CEO of Intertech Plastics and Founder and CEO of CareerWise Colorado: “Nationwide businesses don’t want to do business 50 different ways. With a RAP, there is that standard that can then be used by the employer across the country. That’s a real value add to building a system rather than just a program.”

Enables Diversity
As businesses work to be more inclusive in their hiring and promotion practices, apprenticeships could be instrumental in that process. Aside from the obvious issue of equal opportunity, studies have shown that “socially diverse groups are more innovative and productive than homogeneous groups.” Apprenticeships are a good way to overcome the “opportunity gap” and provide employers with a wider talent pool who can contribute to economic growth.

 


GOOD FOR STUDENTS & JOB SEEKERS

Getting Over the College Mystique
A college degree has long been touted as the stepping-stone to upward mobility, and it has been a baseline requirement for professional occupations for many years. Newsflash: Only about 39% of Americans have one.

The good news is, some major firms, including IBM, are beginning to drop the degree requirement for many positions, as Obed Louissant, VP for People and Culture at IBM, points out. About half of IBM’s jobs no longer call for a degree. That is good news because college is simply not for everyone. Some people are more inclined to pursuits that are not strictly academic; some are better at learning in a more hands-on way. And, of course, college is expensive.

Apprenticeships provide a viable alternative. “It really isn’t about limiting kids’ choices. It’s about giving you an option. If you decide college isn’t for you, what other options do we give kids?” remarked John Ladd, Administrator, Office of Apprenticeships, U.S. Department of Labor.

Overcoming the Blue-collar Stigma
Still, apprenticeships and vocational schools have long been sidelined as a distant second choice for those who can’t get into college or who have to “settle” for a blue-collar job. However, anyone who tries their hand at home repair or has the need to hire a plumber or electrician should get the idea that these occupations require specialized skills – and they seem to provide a pretty good living. So, a traditional building trades apprenticeship for those who are so inclined is not at all a bad thing.

Advancing “New-collar” Professions
Beyond that, while apprenticeships are an excellent route into the skilled trades, they now offer a breadth of other career paths as well. Since 2017 more than 700 programs have been created in white-collar or ‘new collar’ fields such as cybersecurity, financial services, information technology and health care – the very sectors that are crying for capable job candidates. There are now “more than 1,200 apprenticeable occupations” in a variety of sectors.

A few examples:

The Chicago Apprentice Network, launched in 2017 by global insurance provider Zurich North America, “now includes more than 50 employers across 18 sectors, including finance, technology, consulting, retail, and manufacturing.” Zurich “worked with Harper College to develop a training model that coupled workplace experience with relevant coursework” in “an ‘earn and learn’ model in which apprentices are hired by Zurich, earn a salary and simultaneously earn their degree.”

The New York Times reported that in Kentucky young people can shadow experienced social workers and can join the state’s Civil Service. California is even allowing apprenticeship to replace law school.

The same article describes how, nationally, “Amazon has helped veterans and military spouses train as software development engineers and technical support engineers, and CVS Health has trained around 8,000 apprentices as pharmacy technicians, logistics technicians and store managers.

Raising Earnings Potential
The average salary for college graduates is about $50,000 a year. Associate degree holders earn on average a little more than $46,000. Meanwhile, the DOL puts the average annual salary of apprenticeship completers at around $70,000.

Participants who finished Kentucky’s Federation for Advanced Manufacturing Education (FAME) apprenticeship program, which pairs employers with community colleges, showed first-year median earnings of $59,000, with $89,000 in the third year, and almost $100,000 after five years. A participant who started the program at age 40, having dropped out of high school, increased his salary by 40% and now earns $72,000 a year repairing factory machinery.

Providing a Different Kind of Post-Secondary Ed
Finally, the choice isn’t necessarily college or apprenticeship. These days, it could be college and apprenticeship, as made clear by several of the program examples mentioned. “This new generation of apprentices often earn college credit while training for a profession, so paid apprenticeships actually make it easier to earn degrees, faster and without student-loan debt.”
“In apprenticeship, you can start with an apprenticeship and end with a PhD,” says Intertech Plastics CEO Noel Ginsberg. “It’s not a limiter. It actually expands opportunity.”

The FAME program referenced above, which has chapters in 14 states around the country, enables participants to earn an associate degree and certification as an Advanced Manufacturing Technician (AMT) while being paid a competitive wage. And the occupational credentials achieved through such programs are portable, affording workers the flexibility to continue their career path with other companies.

In addition, a number of employers cover their apprentices’ college costs. Federal student aid, including G.I. Bill benefits, and state funding can also be used for tuition assistance in apprenticeship. Plus, students are earning a salary throughout the process.

 

GOOD FOR TAXPAYERS

With the success of apprenticeships within particular companies, states, and regions, and with the need for skilled workers so pressing, a national push would seem logical.
European models suggest how an apprenticeship system can be superior to a patchwork of individual company programs. Such national initiatives benefit everyone: businesses, workers, and the public at large.

Studies show that countries “with strong apprenticeship systems (Switzerland, Germany, Austria) have robust economies due to a skilled workforce, and less than half the rate of youth unemployment found in the U.S. These economies [also] have comparatively lower government debt, and higher labour productivity.” The Swiss dual vocational education and training system (VET) prepares “70 percent of Swiss young people for careers in a range of occupations – white-collar and blue-collar – allowing them to graduate with little to no debt.”

Studies of stateside programs show that U.S. taxpayers stand to gain from apprenticeships as well. “Analyses conducted for Washington State’s Workforce Board show that taxpayers net almost three times their spending on apprenticeships within two and a half years of the program’s completion, and the combined benefits accruing to participants and taxpayers are about five times the costs. By the time former apprentices reach age 65, benefits to taxpayers reach $23 for each dollar spent.”

The funding required to support these programs, which is often the issue raised by opponents, is “minuscule in comparison to college subsidies. Even tripling the federal and state funding for apprenticeships would amount to only about 2% of the increase in funding for college loans, as calculated in 2013.

The National Apprenticeship Act of 2021 is an attempt to push apprenticeship to the forefront. If enacted, it is predicted to “yield $10.6 billion in net benefits to U.S. taxpayers in the form of increased worker productivity and decreased spending on public-assistance programs and unemployment insurance.”

What remains is for the rest of the country – legislators, students, parents, adult job seekers, and many more businesses – to understand how much they stand to gain by getting on board.