A Blueprint For Expanding Apprenticeships

Confidence in higher education is falling, and with it college enrollment. Many prospective students are no longer confident that a traditional college degree will equip them with the skills required to succeed in the labor market. There is demand for alternatives: an American Compass survey found that, by a 57-43 margin, parents would prefer to have their own children participate in a three-year apprenticeship rather than attend college on a full tuition scholarship.

Politicians of both parties talk about expanding apprenticeship. But Ryan Craig has a plan to do it. Craig’s new book, “Apprentice Nation: How the Earn and Learn Alternative to Higher Education Will Create a Stronger and Fairer America” examines models of successful apprenticeship at home and abroad, and meditates on the policies that would be necessary to build on the progress already made.

Apprenticeships are growing, but not fast enough

An apprenticeship is a paid job which hires new employees based on their potential productive capacity, not their current skills or experience. Apprentices learn the tools of the trade on the job, and are paid a wage from day one. While on-the-job learning is the central pillar of apprenticeship, the model also incorporates time in the classroom, known as “related technical instruction.”

The Department of Labor (DOL) reports more than 600,000 registered apprentices in the United States (up 106% from ten years ago), with an unknown number of unregistered apprenticeships that are not tracked by the federal government. While analyses of various registered apprenticeships have documented significant wage gains for participants, the model has struggled to gain a foothold outside a few key occupations, notably electricians, plumbers, and carpenters.

As a result, apprentices are a far smaller share of America’s labor force than the labor forces of peer nations. Per capita, Britain and Australia have eight times as many apprentices as America does, and Germany has fifteen times as many.

About those German apprenticeships…

Germany’s system of apprenticeship is the international gold standard according to many. Unfortunately, Craig argues, the model is probably not replicable in the United States. The modern German system of apprenticeship stretches back over a century and assigns major roles to Germany’s powerful chambers of commerce and unions. Apprenticeships are tightly regulated and firmly embedded within the German economy’s unique institutions. But the rigid German system appears to be faltering: the number of apprentices in the country is falling, and many companies seem to be giving up on the model.

Instead, Craig advises us to look to our friends in the Anglosphere, which developed their modern apprenticeship systems much more recently. Britain, for instance, increased the number of apprentices in its workforce eightfold between 1997 and 2017—roughly the rate of growth America would need to catch up. Australia boosted apprenticeships fivefold between 1990 and today.

In both countries, companies were not expected to set up apprenticeships on their own. Instead, apprenticeships are established and operated by intermediary organizations, which the government compensates for each apprentice trained and placed with an employer. While it would be prohibitively expensive for every single company to design an apprenticeship program from scratch, intermediaries allowed the model to scale.

Intermediaries are key to successful apprenticeships in new fields

Apprenticeship intermediaries are not foreign to the United States. A 62-page chapter in the middle of “Apprentice Nation” runs through dozens of successful models in the United States. Year Up, a nonprofit organization, hires apprentices between the ages of 18 and 24 who come from underprivileged backgrounds. The apprentices start out with six months of classroom instruction, where they learn hard skills like business operation and soft skills like professional conduct. The next six months are spent working a corporate job. Year Up’s program boosts participants’ annual salaries by $8,000 per year, relative to a control group.

The white-collar, digital-economy jobs of Year Up apprentices contrast with the traditional view of apprenticeship as a training vehicle for well-paid but blue-collar jobs. Apprenticeship, Craig argues, ought to be viewed as a path that can prepare America’s youth for all kinds of careers. Researchers at Harvard Business School figure that three million job openings in America could be filled via apprenticeship in all sectors of the economy.

In Craig’s view, the clearest and most pressing need for apprentices is in cybersecurity. This field is short 600,000 workers for a career path that boasts a starting salary of $78,000. While prospective workers can pursue master’s degrees in cybersecurity, these credentials are expensive and full of outdated curriculum.

Craig instead points to cybersecurity firm Ultraviolet, which offers a twelve-week paid apprenticeship program. Apprentices spend six weeks in the classroom and six weeks learning on the job. Completers are offered full-time employment at Ultraviolet, but many land jobs at other companies to work on cybersecurity in-house.

Why the US funding model doesn’t work

While some of these providers register their apprenticeships with the Department of Labor to pursue federal funding, others don’t bother. Registration requires complying with a strict set of regulations and spending months navigating bureaucracy. Craig argues that the standards for registered apprenticeships are tailored to the particular needs of apprenticeships in construction, the sector which dominates the current landscape.

After apprenticeship providers have jumped through the hoops of registration, federal funding is not guaranteed. There’s a limited pot of money available with lots of strings attached. Incumbent apprenticeship providers often soak up all the cash, meaning newcomers can’t get a slice of the pie. The costs are not worth the rewards for many potential providers.

The Department of Labor has tried to expand apprenticeships by awarding block-grant funding to potential intermediaries, especially unions and community colleges. However, most of these grantees are, to use Craig’s terminology, “low-intervention” intermediaries: they do not run the apprenticeship programs themselves, but attempt to persuade employers to offer apprenticeships using their models. Craig questions where these supposed apprenticeships are durable after funding runs out. “The only jobs they create are administering DOL grants,” he remarks.

A more robust approach: formula funding

Apprenticeships are poised to expand, but for many employers and intermediaries, Craig thinks a significant government subsidy will be necessary. Companies must be persuaded to hire inexperienced workers and invest in training them, even as they could be poached by competitors. Many employers will decide it’s not worth the effort.

Another factor is the government subsidy for higher education, which steers many young people onto the college path and encourages employers to rely on degrees rather than apprenticeship to build up worker competency. America spends 1000 times more money on college than apprenticeship, by Craig’s reckoning. Apprenticeship cannot succeed at scale so long as the playing field is tilted against it.

Rather than the discretionary funding model that has prevailed to date, Craig suggests using formula funding to support apprenticeships. Funding would always be available so long as workers and providers meet certain conditions, much as Pell Grants are available today to any eligible college student who wants one.

Craig calls for two main funding streams. First, the government should directly pay for the classroom components of apprenticeships based on a defined schedule. Second, intermediaries should receive a set payment (Craig suggests $4,000) for each apprentice they train and place in an upwardly-mobile job paying at least $40,000.

Taking smaller steps to support apprenticeships

The idea is intriguing, but Congress would need to fund it somehow. One idea is to subject colleges to the same performance standards as apprenticeship providers. Perhaps the Department of Education should yank federal funding from schools where students don’t land upwardly-mobile jobs paying at least $40,000. The savings from this could fund the new program for apprenticeships, leveling the playing field.

Political reality may stop that from happening anytime soon. In the near term, I’d rather see Congress modify existing higher education subsidies to make them friendlier to apprenticeships. As I wrote last month, Congress could allow Pell Grants to pay for the classroom components of apprenticeships and overhaul federal work-study to subsidize apprentices’ wages.

Craig offers a few other ideas to boost apprenticeships. Government agencies should set up apprenticeship programs to fill jobs in the public sector, as Colorado has recently done. States should also remove degree requirements from occupational licenses so those jobs can be filled via apprenticeship, something my FREOPP colleague Annie Bowers and I have also proposed.

Whether or not his proposals will become law anytime soon, Craig’s book is well worth reading for anyone interested in economic mobility or the future of work. Perhaps it will find purchase on Capitol Hill. And hopefully it will persuade more than a few employers to fill their open jobs with the earn-and-learn model that has seen so much success elsewhere.