Why Apprenticeships Could Make a Comeback in the U.S.

At a time when many U.S.-based industrial companies are struggling to create the workforces they need in order to compete in global markets, can apprenticeship programs play a more significant role in meeting their needs? All apprenticeship programs, whether online or classroom-based, will include similar elements: workplace learning; production in the workplace; and theoretical learning, all leading to an occupational certification that the individual is competent in their new field.

Explains John Colborn, director of the Aspen Institute’s Skills for America’s Future program, “The apprenticeship model is really a way for employers to have a very structured program that prepares the talent they need in order to be successful.” The goal of the program is to strengthen and increase partnerships between employers and community colleges to provide workers with the training they need for today’s labor market.

In an encouraging trend, there has recently been “a wider effort to broaden the role of apprenticeship into occupations beyond construction and, to some extent, manufacturing — and to increase the penetration of apprenticeship in employers, more broadly, in other areas, including in manufacturing,” notes Robert Lerman, a fellow at the Center on Labor, Human Services and Population at the nonprofit Urban Institute. On the federal level, Sens. Cory Booker (D-N.J.) and Tim Scott (R-S.C.) have co-sponsored a tax credit bill for apprenticeships somewhat on the lines of South Carolina’s apprenticeship tax credit. And some states are creating small tax credits for apprenticeships.

Yet Canada, which has about one-tenth the population of the United States, still has a higher absolute number of people who undergo apprenticeships than the U.S., notes Lerman. In the U.S., there are barely more than 300,000 people in apprenticeships. “That is really a drop in the bucket compared to the U.K. or some of the E.U. countries,” says Colborn. “That is a function of our secondary-school system, which for the last 30 years has been almost entirely focused on putting people on a college trajectory.”

“Our apprentices start at a much later age” than those in other leading industrial countries, Lerman says. “The government provides virtually no support for the offsite learning and not much in even sales, marketing, oversight and assessment. In some states, there might be [only] one rep of the office of apprenticeship that is supposed to do all that.”

The concept of apprenticeship has languished in the United States in recent decades for a number of reasons. But observers suggest several moves and initiatives that could transform apprenticeship from a niche practice common only among a few employers and occupations into something more widespread.

Why Invest in Training?

Wharton management professor Peter Cappelli notes that despite a groundswell of new efforts to boost the popularity of apprenticeships, many employers don’t find them appealing because they want to hire “people who are already trained and skilled.” Unfortunately, Cappelli says, “Employers [in the U.S.] gave up on training. They thought they didn’t have to, and for a while it looked like they didn’t have to — because you could hire the people you wanted who already had experience someplace else. That works OK until everybody has that. And then it stops working.”

“Employers gave up on training. They thought they didn’t have to, and for a while it looked like they didn’t have to – because you could hire the people you wanted who already had experience someplace else”–Peter CappelliThe most recent global recession, and the slow pace of the subsequent recovery, have buttressed the notion that training is not necessary, adds Cappelli, who is also director of Wharton’s Center for Human Resources. “That makes it easier, because you are not hiring so much [nowadays], if you are hiring at all. In the last seven years, it has been pretty much of a buyers’ market for labor; you could pretty much hire anybody you want,” he notes. “You don’t have to pay much; you don’t have to train. A lot of companies got rid of training programs if they had them. They probably got rid of recruiters, if they had them.”

Does Cappelli believe that apprenticeships are about to make a comeback? “If people don’t have to train people,” he asks, “why would we think they would do an apprenticeship program, which is taking unskilled people and training them? This is the question we are struggling to answer.” There hasn’t been much activity or growth in apprenticeships since the late 1990s, Cappelli says, when the economy was strong and companies were struggling to hire. “Why would they suddenly change their minds?” he asks. “If the economy does get really hot, the first thing is that we’ll hear a lot of screaming about retention, and then we’ll see companies trying to compete with perks, which don’t really cost so much. Then they’ll try to raise wages, and then we’ll say ‘We have to look at different pools, and start hiring people who are cheaper….’ ”

Roberta Rehner Iversen, professor at Penn’s School of Social Policy and Practice, agrees that job training is deeply underfunded in the United States. “I don’t see any evidence of corporate demand…. And corporations are probably looking at highly skilled workers, [rather than] looking at recruiting those who require training in order to contribute to the corporate return on investment.”

State-by-state Progress

And yet, some avid proponents of apprenticeships are starting to see signs of progress. “We have seen that in a couple of states, South Carolina most notably, they have adopted different kinds of tax credit regimes to help support employers who are sponsoring apprenticeships,” says Colborn. “There are also some federal legislative proposals intended to advance that idea at the federal level. The Obama Administration has put forward budget proposals that have gone nowhere about dramatically increasing federal support for apprenticeship through the Department of Labor and through the Apprenticeship Training Fund [of the U.S. Commerce Department], which would provide money to the states to increase their participation.

“All of this is emblematic of a renaissance in looking at apprenticeships,” he says. “That follows a sense that our traditional educational system is not doing a very good job of training people for these middle-skills jobs — and we need to have a different way of pedagogy for training people.” The advantage of apprenticeships is two-fold, Colborn notes. First, the training is grounded in an occupation, and it enables the student to earn a paycheck while they are in school. “It addresses the twin problems of the unaffordability of post-secondary education — and the disconnectedness” of students after they have finished their secondary education, he adds. “By and large, employers take on the cost of both training and wages. It’s a good deal for those who couldn’t get such training in other post-high-school programs.

“Our traditional educational system is not doing a very good job of training people for these middle-skills jobs — and we need to have a different way of pedagogy for training people.”–John Colborn

“There is a lot to be said for [college education],” says Colborn. “[But] we have done a disservice for those folks for whom either the academic route is not suited for their aptitude and interests, or it doesn’t fit with their economic or life circumstances at the time when they are graduating from high school. The apprenticeship [model] is a lot more responsive to the needs of those people who, for whatever reason, are not ready to go to a four-year college degree.”

As social policy, stronger governmental support for apprenticeships sends a significant message, adds Colborn: “These other tracks of post-secondary education are every bit as valuable” for society, and for some employers, and “are really another way to pursue post-secondary education, instead of a bachelor’s degree. If you look at those countries where apprenticeship has a much firmer foothold, apprenticeships are viewed widely not as a second prize, but as one alternative pathway.”

For his part, Lerman argues that the United States hasn’t tried to leverage the full potential of apprenticeships. “If we just take what we spend on Pell Grants — $35 billion [annually] — that’s just one part of government support for higher education, much of which is going to community colleges and career colleges,” Lerman says. “Similarly with some of the loans, they are going to occupation-based programs, but in an entirely school-based setting. If we spent one-third of that to stimulate apprenticeships, I’m convinced we’d do a lot better. In every other country that has a robust apprenticeship program, there is far more support for apprenticeship [measured in] dollar funding.”

Why Apprenticeships Are Gaining Ground

Among the minority of U.S. companies that depend on apprenticeships, there tends to be a few commonalities. According to Colborn, these are firms that, on the one hand, “don’t have an adequate pipeline of talent, and are looking for avenues into which they can interject new kinds of skills and talent. And they are looking for ways to build a more deeply engaged and committed workforce.” The best-designed apprenticeship programs, says Colborn, allow employers to find new employees that meet their varied needs, and allow them to inject new initiatives into their management practices that can re-energize their entire workforces.

One such company is Hypertherm, a Hanover, New Hampshire-based manufacturer of high-temperature metal cutting technologies. A decade ago, says Matthew Burge, the leader of Hypertherm’s technical training institute, the company was experiencing unusually rapid growth, and was anticipating the need for more than 60 new operators of computer numerical control (CNC) equipment. At the time, Hypertherm had about 120 machines; and in another two years, anticipated that the size of its CNC shop was going to double. But the company had a staffing problem. “It was taking us between nine and 18 months to train someone,” he said, “and in our area, high schools and tech schools were just not producing the number of CNC operators that our area demanded.” Even worse, Burge says, the few vocational and tech school grads didn’t have all of the skills they’d need to start work right away. The local training programs were educating students in a wide area of skills, but not at sufficient depth. “The exponential growth of the new CNC equipment we were bringing in requires constant training and workforce skills,” explains Burge. “Unfortunately, a lot of tech schools have equipment that was run in the 1950s,1960s and 1970s — and then handed on or donated to a tech school or purchased with a grant — which are so far away from what is actually being used in production today.”

To satisfy its customers — which include Caterpillar, John Deere and Daimler-Benz — Hypertherm’s products must meet precise, high-tech specifications. More than 60% of its sales are overseas, but 98% of its manufacturing takes place in the U.S. Hypertherm’s apprenticeship program has been a rousing success, notes Burge, in part because it focuses on attracting the right kinds of students; not necessarily those who have a high aptitude for math or science, but those who excel at teamwork and have the strength of character to show up on time and work hard.

For its part, Oberg Industries, based in Freeport, Pennsylvania, has been operating a registered apprenticeship program in advanced manufacturing for more than 40 years. “We hire people with no experience, sometimes right out of high school, and train them how to use off-the-shelf equipment to hold tolerances down to 20 millionths of an inch,” says Greg Chambers, Oberg’s director of corporate compliance. “We work with a variety of materials such as metals, plastics, ceramics, powdered metals and superalloys. Our customers are some of your Fortune 500 companies. When we say that our people are our competitive advantage, that is more than just a slogan for us. We sell the skill of our workforce.” Oberg has found that the ROI for new hires is a negative number, sometimes a triple-digit negative number, at the start, Chambers notes. “However, when they complete the apprenticeship program, it is not unusual for the ROI to be a triple-digit positive number.”

Other Hurdles

In spite of all their positive attributes, apprenticeship programs face significant challenges, not only when it comes to attracting employers but when it comes to attracting potential students. At Hypertherm, Burges notes, “In our [geographical] area, the trade itself is not very sexy these days.… It used to be a case of family honor [for some] to go into your father or grandfather’s trade; and have this passed on. Culturally speaking, most parents [now] recommend that their kids go to college as the path to success.”

“For a lot of organizations, this is ideological; not empirical”–Peter Cappelli

Colborn adds that another challenge is “the cultural norms and expectations of employers, who have been trained for a long time to treat education as a private good. If you want to get education, you’re on your own — in spite of the fact that we know that there are returns to the employers and to society.” At the Skills for America’s Future program, Colborn says he and his colleagues at Aspen have been talking with employers to see “what would it take to move apprenticeship from a niche practice with few employers and few occupations — to something that is more widespread.”

Regarding the utility of tax credits that incentivize employers to create apprenticeship programs, Cappelli said, “If they operate like they do in the U.K., for example, where the government pays for a lot of the costs, then that would certainly encourage employers to train, since they are not paying for it. That could happen. And it is possible that some government support could make it easier to train. But there are a number of hurdles that have been intractable in the past, such as let’s just get employers together and have them agree on what to train. We have to ask: ‘What’s different now?’ If the government pays for it, that would be different. If the labor market really gets tight again, that would be different.

“Apprenticeship has to be cheaper,” adds Cappelli. “Maybe if the government covers the cost, they would do it. And there has to be a need for it. The labor gets tight and it really gets tricky to get the people they want, as at some point it will — and everybody is chasing the same trained people — then employers will turn to training. The problem is that they will scream like crazy along the way that there are alternatives. And one of the alternatives is to pressure the legislature to increase immigration of skilled people — and then we’ll pressure the government to get the schools to cover the cost of the training. So it’s not obvious to me that employers will say, ‘We’ve got to train.’ You need a fair number to make a dent in what is happening now.”

Concluded Cappelli, “The other issue is, ‘This seems to work great, it ought to happen, but it’s not.’ It never made any sense for employers to discriminate against women or minorities — because it was costing them money to do that, but they still did it. Lots of other things — like flex time, which all the studies show works remarkably well — why don’t all employers do it? They don’t want to; they don’t believe it. For a lot of organizations, this is ideological, not empirical. They have to believe, to not have an ideological objection to it.”