The 2016 election heightened the nation’s awareness of the economic woes of many American workers, especially blue-collar workers lacking a college degree. Wage stagnation, while worsened by the slow recovery from the Great Recession, is not a new trend. Men’s long-term earnings have stagnated with each passing cohort from those entering the workforce in 1967 to those entering in 1983. (Women’s earnings increased 59 percent over the period, but from a low base.) Another concern about declining opportunities in America is the erosion of middle-class jobs due to some still debated combination of outsourcing and automation.
Commentators and political factions blame these labor market problems on everything from bad trade deals, to declines in manufacturing jobs, to corporate greed, to outsourcing, to an uncompetitive tax and regulatory environment, to lax immigration policy. But there is another contributing factor that receives less attention: the weaknesses of secondary, postsecondary, and job-training systems in preparing students for well-paid jobs and rewarding careers.
U.S. researchers too often equate “skills” with years of schooling, completion of degrees, or scores on tests of math and verbal capabilities. In their well-known book, The Race Between Education and Technology, Claudia Goldin and Lawrence Katz argue that increases in educational attainment have been too slow to yield healthy economic growth and reduce wage inequality. This view of skills is one driver of the expansion of higher education spending over recent decades. In 2014, the United States spent $27,900 per full-time equivalent student in postsecondary education, 81 percent more than the OECD average of $16,400.
Despite increases in years of schooling, added government spending, and the buildup of student debt, U.S. employers report that they still face a serious skills mismatch in various occupations, especially those in technical fields. One survey of a nationally representative sample of manufacturing companies found that “84 percent of manufacturing executives agree there is a talent shortage in U.S. manufacturing, and they estimate that 6 out of 10 open skilled production positions are unfilled due to the shortage.” The skills shortfall in manufacturing is primarily in jobs that require occupational and employability skills and is not necessarily about a shortfall in the general skills that come with many college degrees. In fact, worker productivity depends heavily on occupational competencies and employability skills such as communication, teamwork, the ability to efficiently allocate resources, problem-solving, reliability, and responsibility. Strikingly, in hard-to-fill jobs, firms generally prefer relevant work experience over a bachelor’s degree.
This all raises questions about the near-exclusive focus by policymakers and researchers on schooling and academic test scores in the United States. So, too, does the recognition that many young people become disengaged from formal schooling, leading to weak high school outcomes (as reflected in high rates of enrollment in remedial coursework in two-year colleges) and low completion rates for community college students. Of students starting a two-year community college program in 2012, only 22 percent of all students and only 12 percent of black students had graduated within three years. Yet spending even more on the “academic only” approach to career preparation—through “free” college—is becoming a political staple.
Meanwhile, the country is seeing a declining share of young people gaining work experience and employability skills. The employment rate for 16- to 19-year-olds dropped from nearly 50 percent in 1979 to about 30 percent in 2018. Even in today’s low-unemployment economy, only about 67 percent of 20-24-year-old men are working, down from about 80 percent in 1979.
Making inroads on these problems requires widening our approach to preparing students and workers for careers. The most cost-effective and equitable way to do so is to build a robust apprenticeship system. Apprenticeship programs combine academic with structured, work-based learning under a mentor or supervisor. They involve joint production of skills and output, as apprentices earn wages and contribute to production, while working towards a valuable, occupation-based credential. They make career preparation more equitable by enhancing options for those who learn best by doing and who excel in a team context.
Apprenticeship in the United States has long proved successful in building skills in construction occupations for the industrial and commercial construction industries and in a few others. But the scale of U.S. apprenticeship is minimal not just compared with Austria, Germany, and Switzerland, but even Australia, Canada, and the United Kingdom. The goal of expanding U.S. apprenticeship has attracted support from Republican and Democratic politicians in Congress, at statehouses, and from Presidents Obama and Trump. In 2015, the Obama Administration funded 46 grantees with $175 million over five years to increase apprenticeships. In the first year of his Administration, President Trump endorsed a goal of 4-5 million apprenticeships. This target might sound impractical, but it would only require that the United States attain the share of apprentices in its workforce that Australia and England have already achieved. The Trump Administration increased the budget for apprenticeship and established a Task Force to chart apprenticeship expansion.
Is the increased emphasis on apprenticeship appropriate? If so, how can the U.S. government, in partnership with private industry, expand apprenticeship sufficiently to cover a wide array of occupations and reach a high share (say one-third or more) of a cohort? How can the United States build a high-quality apprenticeship program that generates sufficient demand for apprentices to match the supply of willing applicants in the labor market?
Apprenticeship programs improve the learning process (as students directly apply what they learn), encourage student engagement, increase incentives for students to perform well in academic courses, improve the match between workers’ skills and labor market demands, encourage employers to upgrade their mix of jobs, and widen access to rewarding careers for workers who prefer learning-by-doing over traditional classroom education and the four-year college model. A large-scale apprenticeship system can also yield healthy returns to employers and can slow the seemingly inexorable drive to increase spending on higher education. An apprenticeship credential documents a worker’s competence in a profession and provides apprentices with a deep sense of pride when they complete their program. In Switzerland, where about 70 percent of each cohort goes through an apprenticeship, 95 percent of 25-year-olds have attained either a BA or gained an apprenticeship qualification.
Apprenticeships are distinctive in that they enhance both the worker (supply) side and the employer (demand) side of the labor market. On the supply side, the financial gains to apprenticeship are strikingly high. Studies on U.S. programs indicate that apprentices do not sacrifice earnings during their education and training, and that their long-term earnings benefits exceed the gains to completing a degree at a community college. Reports from the state of Washington indicate that the gains to earnings from apprenticeship programs far surpass the gains to all other alternatives. A study of apprenticeship in ten U.S. states documents large and statistically significant earnings gains from participation in apprenticeship programs.
These results are consistent with many studies of apprenticeship training in Europe showing high rates of return for workers. One study exploited variation in apprentices’ abilities to complete their programs to estimate the effects of additional years of apprenticeship. The researchers found that apprenticeship training raised wages by about 4 percent per year of training. For workers completing a three-to-four-year apprenticeship, post-apprenticeship wages were 12-16 percent higher than the wages of those who did not complete an apprenticeship because the firm went out of business. Because the workers’ costs of participation were often minimal, the Austrian study found high overall benefits and modest costs.
Non-economic outcomes are more difficult to quantify, but evidence from Europe suggests that vocational education and training in general is linked to higher confidence and self-esteem, improved health, higher citizen participation, and higher job satisfaction. These relationships hold even after controlling for income. An Australian study found that quality apprenticeships improve mental health.
On the demand side, employers can feel comfortable raising the skill requirements and the complexity of tasks that new hires are expected to accomplish, knowing that their apprenticeship programs will ensure an adequate supply of well-trained workers. Firms reap several additional advantages from their apprenticeship investments. They save significant sums of money in the form of reduced recruitment and training costs, reduced errors in placing employees, and reduced costs when the demand for skilled workers cannot be quickly filled. Other benefits of apprenticeship for firms include reliable documentation of appropriate skills, increased worker productivity, higher morale, and a reduction in safety issues.
Another benefit to firms, rarely captured in studies, is the positive impact of apprenticeship on innovation. Well-trained workers are more likely to understand the complexities of a firm’s production processes, and to identify and implement technological and technique improvements—the two are not the same—especially incremental innovations that improve existing products and processes. A study of German establishments documented this connection and found a clear relationship between the extent of in-company training and subsequent innovation.
The evidence suggests that employers achieve positive returns on their investments in apprenticeship. After reviewing several empirical studies, Muehlemann and Wolter conclude that:
in a well-functioning apprenticeship training system, a large share of training firms can recoup their training investments by the end of the training period. As training firms often succeed in retaining the most suitable apprentices, offering apprenticeships is an attractive strategy to recruit their future skilled work force.
In the United States, evidence from surveys of more than 900 employers indicates that the overwhelming majority believe their apprenticeship programs are valuable and produce net gains. Nearly all sponsors reported that their apprenticeship program helps them meet their skill demands. Some 87 percent reported they would strongly recommend registered apprenticeships; an additional 11 percent recommended apprenticeship with some reservations. A recent U.S. study found 40-50 percent returns for two expensive apprenticeship programs.
Apprenticeships are also a useful tool for enhancing youth development.1 They integrate what young people learn in the classroom with their on-the-job experiences, which particularly benefits hands-on, nontraditional learners. Early apprenticeships can help engage youth and build their identities. Youth who participate in apprenticeships early in their careers also benefit from a longer period of economic returns to training and a lower probability of developing bad work habits. Ideally, teachers and counselors help prepare students to take full advantage of their work-based learning and provide opportunities for students to reflect on the links between classroom and job-based learning.
Apprentices work with adult mentors who not only teach young people occupational and employability skills but also offer encouragement and guidance, provide immediate feedback on performance, and impose discipline. Unlike community colleges or high schools, where one counselor must guide hundreds of students, each mentor deals with only a few apprentices.
Youth apprenticeships can be less costly for employers than programs focused on older workers. Wages can be low because youth have fewer medium- and high-wage alternatives, and because youth have fewer family responsibilities and are better able to sacrifice current for future income. For example, while Swiss firms invest heavily in their apprenticeship programs, they pay their young apprentices very low wages during the apprenticeship period.
Most government human capital programs offer government funding each year (per full-time equivalent trainee) and result in a social cost in the form of the foregone earnings of trainees. In apprenticeship programs, by contrast, there is an initial fixed cost for helping employers establish apprenticeships, but subsequent years require far less government funding as employers bear most of the costs of training. Moreover, the foregone earnings of apprentices are modest since they receive wages during their training and as they contribute to production. These contributions allow firms to recover a significant share of their costs during the apprenticeship itself.
Some scholars are concerned that apprenticeship training, due to its specificity to one industry or occupation, may yield weaker capabilities than general education to adapt to technological change. Yet recently released data from the 2016 National Household Education Survey found that former apprentices were very likely to apply the skills they learned during their apprenticeship to their current job. Among workers ages 40 and over, 67 percent of those completing apprenticeships of one year or more reported using the skills they learned in the program all or most of the time; another 24 percent reported doing so some of the time.2 European studies yield similar results.
The Government Role
A government role makes sense economically and socially. Like other public investments in career-focused education and training, apprenticeships lessen credit constraints for students, generate productivity gains not fully captured by students or firms, and lower the excess burdens and administrative costs of transfers. As a cost-effective method for subsidizing preparation for careers, apprenticeships lower political pressures to increase government funding for higher education and to impose market distortions (such as increasing the minimum wage). From a social perspective, apprenticeships are likely to increase mobility and reduce inequality by improving career prospects for those who learn best by doing. Why, then, has the United States failed to generate the kind of large-scale apprenticeship program seen in other developed countries?
One barrier is a failure to try. Until 2015, the Federal government had devoted less than $30 million per year to the Office of Apprenticeship (OA) to supervise, market, regulate, and publicize the system. Many states have only one employee working under their OA. Were the United States to spend what Britain spends annually on apprenticeship, adjusting for differences in the size and composition of the labor force, it would provide at least $9 billion per year for apprenticeship. In fact, the British budget for advertising its apprenticeship programs exceeds the entire U.S. budget for apprenticeship.
While government funding for apprenticeship remains very low, the annual cost of instruction and support services for each full-time equivalent student in two-year public colleges was approximately $16,000 in 2008-09; today’s annual costs are no doubt substantially higher. The Federal Pell Grant program for low- and lower-middle-income college students spends about $32 billion per year, with a substantial share going toward career-focused programs in community and career colleges. That’s well over three times what an apprentice program comparable to Britain’s would cost in the United States.
The second barrier is the complex administrative structure of the registered apprenticeship system. This includes separate state administrations in half the states and Federal governance in the other half; the requirement that each firm or set of firms have an approved set of occupational skill frameworks; the lack of national occupational frameworks; delays in the approval process; and the lack of an auditing system to assure quality.
A third barrier is the limited capabilities of OA staff and intermediary organizations to sell and organize apprenticeships. Because few employers outside commercial and industrial construction offer apprenticeships, most employers are unlikely to hear about the model from other employers or from workers in other firms. Compounding this problem are two factors: the difficulty of finding information about the content of existing programs, and the fact that developing apprenticeships is complicated for most employers and often requires technical assistance that is unavailable in most of the country.
A fourth issue is the asymmetric treatment of government funding for postsecondary education and training. Pell Grants, subsidized loans, and state college subsidies provide financial support to students taking for-credit courses. Yet in general, similar subsidies for academic-related instruction linked to apprenticeships receive little government aid.
A Strategy for Scaling Apprenticeships
A high-quality apprenticeship system requires several elements, including:
- effective branding and broad marketing;
- incentivizing direct marketing and organizing apprenticeships among private and public employers;
- credible, recognized occupational standards with continuing research on changing requirements;
- public funding for off-job quality instruction that includes teachers effective at helping apprentices prepare for and reflect on their work-based experiences;
- a system of credible end-point assessments of apprentices and programs;
- one or two certification bodies to audit programs and issue credentials;
- simple systems enabling employers to create and track the progress of apprentices;
- counseling and screening for prospective apprentices to insure they have the aptitude for, and interest in, the field;
- training for the trainers/mentors of apprentices; and
- research, evaluation and dissemination.
We can begin moving toward this vision by focusing on four feasible initiatives.
Develop an Apprenticeship Brand
The Federal and/or state governments should create a distinctive and quality brand. South Carolina chose to link apprenticeship with local pride by using “Apprenticeship Carolina” as its brand name. Britain has now established a copyright for the term “Apprenticeship” so that employers cannot claim to offer an apprenticeship without meeting the terms of the established program.
Once a brand name has been selected, political officials, business leaders, and the media should highlight apprenticeship as a high-quality career option in all types of occupational areas. Videos of successful employers and apprentices should be widely featured.
Establish a Public/Private Entity to Develop Occupational Frameworks
These occupational frameworks should reflect both employer needs and long-term skill requirements. Consensus frameworks are especially important if the public sector provides funding for the general skills component of apprenticeships (for example, for skills that have value outside the training firm). Employers rarely have the time to develop such frameworks, nor do all employers in the same industry always share a common vision. To ensure that American Apprenticeships remains a quality brand and to simplify the process of implementing apprenticeships, Congress should establish the American Apprenticeship Standards Institute (AASI), which would be tasked with researching, creating, and updating apprenticeship competency frameworks for a broad range of occupations.
Working with industry associations and individual public and private employers, the AASI would produce frameworks with potential job titles, occupational pathways, certification and licensure requirements, salary ranges, and employment opportunities. The frameworks should be limited to no more than 500-600 occupations to avoid frameworks that are too narrow for mobility.
Each framework should describe the following:
- cross-cutting competencies, including personal effectiveness (such as reliability, initiative, interpersonal skills, and adaptability);
- academic competencies; and
- workplace competencies (such as planning, teamwork, scheduling, problem-solving, and working with tools).
The entity can draw on examples developed by the Urban Institute and by the United Kingdom’s Institute for Apprenticeship.
Support the Direct Marketing and Organizing of Apprenticeships
Branding and broad marketing will not suffice without a well-developed system for selling and organizing apprenticeships. This key task is often overlooked, especially where most employers are unfamiliar with apprenticeships and their value. Marketing apprenticeship as a partial solution to the talent management efforts of individual employers is not easy and typically requires several face-to-face encounters. Employers whose interest is piqued by an advertisement must have a resource they can access quickly and easily for more information about developing and implementing an apprenticeship program. Working with a company to organize apprenticeships requires determining the most suitable occupations, developing a plan to combine work-based and academic instruction, and filling out the forms and other materials required for registering apprenticeships.
The U.S. government, again in partnership with industry, should establish incentives for intermediaries (private or public) to market directly to, and organize apprenticeships for, employers. The incentives should be structured to ensure apprentices receive the appropriate training and work-based learning experiences and achieve high completion rates. Funding should go only to those intermediaries that stimulate apprenticeships that follow the official occupational frameworks.
Britain managed to scale apprenticeship scale from about 150,000 to over 850,000 in about eight years, largely through the efforts of 850 employment and learning providers. Australia achieves high levels of apprenticeship partly through private, often nonprofit, Group Training Organizations (GTOS).
Evidence suggests that effective marketing and organizing of apprenticeships could be achieved at a cost of about $2,000 for each apprentice who completes the first 60 days of a program, along with an additional $2,000 for each apprentice who completes the program in full. The payments could vary with the long-term returns to occupations. One reason for expecting modest per-apprentice costs is that once employers establish an apprenticeship program, most are likely to continue the program over time, with less effort by intermediaries. Assuming intermediaries stimulate half a million new apprenticeships per year, the initial costs of the incentives would total about $1 billion. In equilibrium, if the intermediaries successfully generated 900,000 new participants and 675,000 completers per year, the costs of the incentives would reach about $3.15 billion per year. Along with intermediary incentives, the Federal government should establish an independent auditing system to assure program quality and to avoid fraud, thus increasing the credibility of the apprenticeship system.
A significant share of the long-term costs of apprenticeship programs will be borne by the employer in the form of apprentice wages and the costs of work-based training. The foregone earnings of apprentices will be modest since they will receive wages during their training. Firms, meanwhile, will recover a significant share of their costs during the apprenticeship itself. The costs to the government will come largely in the form of setup costs and contributions to off-job training.
At scale, the stock of apprentices in any given year would reach well over two million. Since about three-fourths or more of the occupational and employability training for these apprentices would take place at worksites (at no public cost), full public support for the off-job training could be about $8 billion, raising the overall costs to $11.15 billion. For the sake of comparison, were these apprentices to attend community college full-time instead, the costs for instruction and services would amount to at least $32 billion per year. Again, that’s about triple the cost of going the apprenticeship route. Moreover, some of the costs of off-job training would offset spending on community colleges and other training schemes. Over time, the costs of incentives to intermediaries could fall as employers adopted apprenticeships without intermediaries and intermediaries lowered their costs by gaining repeat business.
Federal, state, and local governments could show leadership and credibility by also creating apprenticeship positions in the public sector. Many state and local employees work in occupations that could be filled through apprenticeships, in positions in information technology, accounting, health care, administration of parks and courts, and security (including police and fire). Kentucky recently launched a program for social care apprenticeships. Such a step would be feasible and cost-effective. Britain now requires government agencies to fill 2.3 percent of their jobs with apprentices.
Use Existing Funding for Off-Job Training and Incentives
Theoretically, skills learned in the off-job courses related to apprenticeships can be applied not only to a current employer, but to many other employers as well. For this reason, the employer who provides the training will not necessarily recoup the benefits. But the worker will, and the government shares in these gains in the form of higher taxes and reduced transfers.
Federal, state, and local governments already spend tens of billions of dollars on an array of education and training programs. The effectiveness of government dollars would be far higher if at least some of these funds were made available for off-job apprenticeship training. Encouraging this shift in priorities, however, will require detailed analysis of each funding source.
In some cases, government funds could be substituted directly for employer funding, while in other cases existing government training funds could be made accessible for apprenticeship. Currently, for example, the Trade Adjustment Assistance (TAA) program provides about $740 million in funding to those who lose their jobs due to trade impacts. Participants receive support for training, often in a community college program, and cash income support while undergoing training in the form of extended unemployment insurance. The operations of TAA could be changed in ways that increase funding for the off-job training in apprenticeships and for organizations to sell and organize apprentice programs with employers. The U.S. Department of Labor’s Workforce Innovation and Opportunity Act (WIOA) programs are already required to work with apprenticeship programs, but WIOA staff are ill-equipped to help scale up apprenticeships. Some of WIOA’s over $3 billion dollars could be directed toward the intermediary incentive program. Training WIOA business services staff to sell and organize apprenticeships could also defray some of the costs of the incentive program.
Some of the $1.8 billion now allocated to Job Corps and YouthBuild could also be redirected to apprenticeship initiatives, or made available to local program operators to market and organize apprenticeships. These two programs are expensive, cover only about 56,000 participants per year, and yield modest or no gains in earnings. Although apprenticeships have demonstrated far higher earnings gains than existing programs, including Job Corps and YouthBuild, any diversion of funds should be accompanied by a renewed effort to target disadvantaged youth for participation in apprenticeships.
Funding for the Carl D. Perkins Career and Technical Education Act of 2006 has supported career and technical education in high schools and colleges. Some of the $1.7 billion annual outlays on the program could also subsidize the cost of off-job training for apprentices.
Pell Grant funding is another potential source of funding for apprenticeships. Currently, over half of Pell recipients are in public two-year or for-profit colleges, often in career-focused education programs. Loan programs that are very costly to the Federal government also support students in these programs. Helping students use Pell Grants for apprenticeship would save significant sums and generate higher earnings gains. Although Pell Grants are currently not well-suited for apprenticeship, Pell eligibility criteria could easily be modified to allow apprentices to use pro-rated Pell Grants for the off-job component of their training.
State governments could encourage more apprenticeships with the use of their existing subsidies to community colleges. States commonly reimburse community colleges for some percentage of the cost of a full-time equivalent (FTE) student. Suppose the reimbursement rate were 60 percent of the costs of a FTE but that much of the actual and accredited learning (say, 70 percent) for an occupation program took place at the work site in an apprenticeship. If the costs of the community college instruction fell to only 40 percent of the normal costs of a FTE, but the state continued the 60 percent subsidy, then colleges could provide the classroom component of apprenticeship at no cost to employers. They could use the remaining 20 percent to sell employers on, and help them organize, apprenticeships.
The GI Bill already provides housing benefits and wage subsidies for veterans in apprenticeships, but funding levels for college and university expenses are far higher than for apprenticeship. Offering up to half of the GI Bill’s per-recipient college benefit to reimburse employers for the off-job education and training when hiring a veteran into an apprenticeship program could be accomplished by amending the law. However, unless the liberalized uses of Pell Grants and GI Bill benefits are linked with the intermediary incentive campaign to sell and organize apprenticeships, the take-up by employers is likely to be limited.
Still another way of financing the off-job education of apprentices is to link the intermediary incentive program with youth apprenticeships in high schools. Since high school CTE courses, and some college courses within high schools, are already an entitlement, the funds to complement work-based learning in apprenticeships would be readily available.
Policymakers should consider starting such a policy at “career academies”—schools within high schools that have an industry or occupational focus—and at regional career and technical education (CTE) centers. Over 7,000 career academies operate in the United States in fields ranging from health and finance to travel and construction. Career academies and CTE schools already include classroom-related instruction and sometimes work with employers to develop internships. Because a serious apprenticeship involves learning skills at the workplace, at the employer’s expense, these school-based apprenticeship programs could reduce the costs of teachers relative to a full-time student. If, for example, a student spent 2.5 days per week (or 50 percent of their time) in a paid apprenticeship, the school should be able to save at least 15-30 percent of the costs of educating a traditional, full-time student. Those are big numbers, as anyone familiar with this professional niche knows. Applying these funds to selling and organizing apprenticeships should allow the career academy or CTE program to stimulate employers to provide apprenticeship slots.
Today, funding for the “academic only” approach to skill development in the United States dwarfs the very limited amounts available for market and support apprenticeship. Yet apprenticeship programs yield far higher and more immediate gains in earnings than do community or career college programs, and cost students and the government far less. Postsecondary education carries costs for students in the form of both tuition and foregone earnings and sometimes fails to provide students with a useful degree or credential. By contrast, apprentices rarely lose earnings while they learn skills, nor are they forced to take out burdensome student loans. Apprentices, through their connection with the employers, work on up-to-date equipment, learn modern business practices, and gain valuable work experience and employability skills.
Expanding access to apprenticeship programs could improve the lives of millions of Americans and help prevent further erosion of the middle class. Apprenticeships widen the pathways to rewarding careers by upgrading occupational skills, employability skills, and traditional academic skills. For hands-on and nontraditional learners, academic coursework completed in the context of an apprenticeship program can increase worker motivation and improve the efficacy of the delivery process. Furthermore, given the effects of these programs on worker productivity and innovation, firms will have an increased incentive to adopt “high road” strategies with respect to their apprenticeship programs. Especially in today’s tight labor market, apprenticeships represent one of the best ways firms can attract and retain skilled workers.
While structural barriers to apprenticeship exist in the United States, Federal investments in marketing and standards development, along with ongoing financial support for the off-job costs of apprenticeship, can overcome these barriers. And as more employers adopt apprenticeship strategies successfully, network effects could well take over, with employers learning from each other about the value of apprenticeship.
1 See Robert Halpern, The Means to Grow Up. Reinventing Apprenticeship as a Developmental Support in Adolescence (Routledge, 2009).
2 Tabulations by the author from the 2016 National Household Education Survey.