Investing in Human Capital through Apprenticeship

When President Obama unveiled the America’s College Promise proposal last year, he compared his free community college plan to the movement a century ago to make high school education universal in the United States.

His announcement only further solidified what many economists, policy experts, and employers already knew: that a high school education on its own no longer guarantees entry into the middle class.

Not surprisingly, more young people and adults are seeking to build their own human capital in order to make sure they can get a well-paying job. One often-overlooked training method in particular is beginning to garner national attention.

Apprenticeship – which combines on-the-job training and classroom instruction – enables workers to gain in-demand skills and a good job without incurring costly student debt. Apprentices are paid for their time spent on the job, and see their wages go up as they progress in their training. What’s more, the training apprentices receive is immediately relevant and leads to a good career and middle-class wages. Indeed, according to the Department of Labor, a worker makes an average of $50,000 after completing their apprenticeship, and 91 percent of apprentices are retained after their apprenticeship concludes.

Apprenticeship benefits employers as well. Employers who sponsor apprentices get access to a pipeline of workers whose skills are customized to meet their workforce needs. Additionally, according to one study, employers see $1.47 in increased productivity for every dollar invested in apprenticeship.

Despite the value apprenticeship offers to workers, employers, and the economy as a whole, these programs are frequently overlooked. In 2015, there were just under 450,000 active apprentices across the country, which represents less than half of one percent of the total U.S. labor force. In order to adopt apprenticeship more broadly, policymakers must overcome several barriers.

At an event hosted by the Center for American Progress last week, experts weighed in on what some of these barriers might be. Weak demand for workers in the middle-skill job market may be a factor, but where skill demands do exist, market failures may be at work. For example, employers might decide that the costs of training their workers are too high, or that the benefits of such training both to their firms and society does not justify the investment.

Unfortunately, there are few public resources available to employers concerned about costs. The nation’s public and private investments in apprenticeship are quite limited. Apprenticeships are primarily funded by sponsors, often with little to no direct state or federal financial support. Sponsors pay the wages for apprentices for the time spent on the job and in the classroom, and incur other costs including equipment and the time that skilled employees spend training apprentices. Sponsors may pay for the cost of the classroom instruction as well.

The nation’s public workforce system authorized by the Workforce Innovation and Opportunity Act, does provide federal funds for training programs, which can include apprenticeship programs. However, the funds are administered locally, are not targeted at apprenticeship, and are frequently in short supply.

By comparison, countries with more robust apprenticeship programs subsidize some portion of apprenticeship, including the classroom instruction, apprentice wages, or with tax credits that subsidize other costs to the employer.

Fortunately, these are problems with solutions. To begin, states and the federal government can make strategic public investments in apprenticeship that can serve as a multiplier for new private sector investment. In a recent brief, How States Are Expanding Apprenticeship, the Center for American Progress examined new policies that have been implemented at the state level.

States profiled in the brief employ a range of strategies, including making direct investments in apprenticeship, convening partnerships, utilizing strategies like pre-apprenticeship and youth apprenticeship, and establishing comprehensive plans to integrate apprenticeship into a broader state workforce strategy.

At the federal level, the Obama administration recently made a first-of–its-kind $175 million investment in 46 public-private partnerships that are projected to generate tens of thousands of new apprenticeship opportunities. Additionally, Congress recently appropriated $90 million in new funds to expand apprenticeship opportunities.

Another promising initiative is a recently-announced study conducted by Case Western Reserve University in partnership with the U.S. Department of Commerce that will examine the return on investment for employers using Registered Apprenticeship. Better information on how apprenticeship can impact an employer’s bottom line is a potentially powerful tool that could be used by states and the federal government to market apprenticeship to employers.

Apprenticeship holds the potential to help make the nation’s workforce more competitive and more skilled. Policymakers have made some promising first steps, though a sustainable infrastructure to that supports apprenticeship as a national human capital development strategy is still needed. Solutions-based policy changes to expand apprenticeship will help ensure U.S. workers have more options to get the skills they need to get in and stay in the middle class.


Morning Consult