Real Education for the Real Economy
 

In mid-June, President Trump signed an executive order to double the $200 million the U.S. currently spends on apprenticeship programs.  This is an important step toward closing the skills gap in the American economy.1

The latest data show that 6.9 million Americans are unemployed.  Yet, at the same time, employers have 6 million jobs they can’t fill.2

The reason for this apparent contradiction is the ongoing crisis in the U.S. education system, which churns out college graduates with liberal arts degrees that aren’t suited to the demands of modern employers.  For those who forgo college and the crippling burden of student loan debt, the job outlook is even worse, because high schools fail to provide students with the skills they need to find jobs even in factories, which increasingly require specialized knowledge to work with automation and robotics.  The Manufacturing Institute estimates that manufacturers will need to fill 3.4 million jobs over the next ten years, but they won’t be able to find suitable candidates for 2 million of those jobs.
 
Apprenticeship programs provide both the opportunity to gain marketable skills and the chance to earn a solid income.  According to a commentary in Fortune magazine by Nicholas Wyman, author of Job U:  How to Find Wealth and Success by Developing the Skills Companies Actually Need, “This typically three- or four-year endeavor allows the apprentice to acquire new skills under the watchful eyes of a trained mentor.  One or two days each week are dedicated to classwork at a local community college or technical school, but no college debt is accrued.  Better still, apprentices earn while they learn, and most are gainfully employed by the conclusion of their apprenticeship.  How many four-year college students can say the same?”3

According to FoxBusiness, for example, an eighteen- year-old student in Chicago is earning $38,500 a year as an apprentice at the professional services firm Aon while he works toward his degree in business management.4  But today, such opportunities are rare.  Only 505,000 of the jobs in the U.S. are filled by apprentices, or about one-third of one percent of the 146 million American jobs.

It’s easy to see why expanding the apprenticeship program is a win-win for Millennials seeking jobs and for employers.  Apprentices, unlike most interns, earn money while they learn how to perform a specific job for which they will be ready to be hired.  The U.S. Labor Department reports that 87 percent of apprentices are offered a job as soon as they finish their training, and their average starting salary is $50,000, which is the higher than the median U.S. annual wage of $44,720.  Over the course of their careers, apprentices earn as much as $300,000 more than colleagues, according to a study by Mathematica Policy Research.

Meanwhile, a study by the Canadian Apprenticeship Forum gathered data from 1,000 employers about the return on investment in skilled apprentices in sixteen trades and calculated that, “For every $1 spent on apprenticeship training, an employer receives a benefit, on average, of $1.47 or a net return of 47 percent.  And employers estimate that employees they’ve trained as apprentices are 29 percent more productive than employees hired from outside the company.5

Smart employers are already aware of the benefits and started creating their own programs even before Trump’s announcement.  At Aon, the company is bringing the apprenticeship program that it has long used in the United Kingdom to the U.S.  The company has found that former apprentices are more engaged at work and stay at the company longer than other employees.  Wells Fargo is launching a program this summer that will offer fifty apprenticeships to military veterans interested in training for jobs such as branch manager, collections manager, and financial crimes specialist; the apprentices’ GI Bill benefits help to pay for the training costs and stipends.6

Based on this trend, we offer the following forecasts:

First, the United States will add 5 million vocationally relevant apprentices over the next five years.

Resources will be ramped up and reallocated as momentum builds.  That’s about 25 percent of the young Americans entering the workforce over that period.  In Germany, where the apprenticeship program is well-established; about half of high-school graduates skip college and become apprentices.  In Switzerland, nearly 70 percent of students forgo university education and pursue vocational training.  According to Wyman, “On a per capita basis, 5 million apprenticeships would bring the U.S. in line with the low unemployment levels and strong manufacturing sectors in countries like Germany and Switzerland.  Despite paying their workers high wages, these countries achieve their economic strength by prioritizing apprenticeships and other education models that integrate classroom learning with on-the-job training.”

Second, the federal apprenticeship program won’t eliminate the role of community colleges and universities.

According to Labor Secretary Alexander Acosta, “Higher education, too, should assume responsibility for promoting apprenticeships.  Community colleges and four-year colleges have an obligation to work with students to educate them in skills they need to succeed.  Incorporating apprenticeships into two- and four-year degree programs would offer students both traditional learning and skills-based learning.”7  Apprenticeships and online bachelor’s degree programs will create pricing pressure on universities, requiring them to become leaner and more focused on providing real-world skills.

Third, the focus on preparing young people for the jobs that are in demand by employers will benefit the economy.

Millions of jobs that would otherwise go unfilled with be filled with skilled workers, which will lead to higher productivity and GDP.  Millions of Americans will avoid the burden of student loan debt and unemployment, which will lead to increased consumer spending.  According to research cited by Wyman, every $1 in government spending on apprenticeships creates $27 in economic growth.  The federal government can’t get that kind of return on any other kind of investment!

References

1. Fortune, June 18, 2017, “This New Trump Plan Could Be the Answer to Millennial Job Woes,” by Nicholas Wyman. ⓒ 2017 Time Inc.  All rights reserved.

http://fortune.com/2017/06/18/donald-trump-apprenticeships-programs-executive-order-millennials-news/

2. Job U: How to Find Wealth and Success by Developing the Skills Companies Actually Need by Nicholas Wyman is published by Crown Business, an imprint of Crown Publishing Group, a division of Random House LLC, a Penguin Random House Company. ⓒ 2015 Nicholas Wyman.  All rights reserved.

3. FOX Business, June 14, 2017, “Apprenticeships Aren’t Just for Welders Anymore,” by Douglas Belkin and Eric Morath, with Laura Meckler. ⓒ 2017 FOX Network News LLC.  All rights reserved.

http://www.foxbusiness.com/features/2017/06/14/apprenticeships-arent-just-for-welders-anymore.html

4. To access the Canadian Apprenticeship Forum’s study on the impact apprenticeships have on the economy and employment, visit their website at:

http://caf-fca.org/topics-in-apprenticeship/hiring-an-apprentice/

5. FOX Business, June 14, 2017, “Apprenticeships Aren’t Just for Welders Anymore,” by Douglas Belkin and Eric Morath, with Laura Meckler. ⓒ 2017 FOX Network News LLC.  All rights reserved.

http://www.foxbusiness.com/features/2017/06/14/apprenticeships-arent-just-for-welders-anymore.html

6. To access the Press Secretary Sean Spicer/Labor Secretary Alexander Acosta press briefing on the federal apprenticeship program, visit the White House website at:

https://www.whitehouse.gov/the-press-office/2017/06/12/press-briefing-press-secretary-sean-spicer-and-secretary-labor-alex