Apprenticeships might sound as if they come straight out of the Middle Ages, but there is nothing medieval about the wage premiums and career opportunities that young Americans can gain from them.
Apprenticeships are a structured form of paid worker training that combine on-the-job learning and classroom instruction. They have been shown to boost workers’ earnings and raise sponsoring companies’ productivity levels, which is why many other countries rely on them as a central tool to develop a highly skilled, competitive workforce. But even though the U.S. Department of Labor administers a small system of registered apprentices, the training model is largely unfamiliar to Americans.
An apprenticeship is a job in which the worker is paid to learn a set of skills through on-the-job training. Unlike an internship – in which the intern works for little or no money and rarely receives formal training – an apprenticeship follows an earn-while-you-learn model and leads to a nationally recognized credential that recipients can take anywhere in the country. Today, there are 358,000 registered apprentices in the U.S. – just seven percent of the number of apprentices in England after adjusting for population size. If the U.S. had as many apprentices per capita as Germany does, our system would support almost seven million apprentices.
The bulk of America’s apprenticeships today are in skilled trades, but the model can be adapted to many industries and occupations. Apprenticeships are well-established in the construction industry, and there are many high-quality programs for electricians, carpenters, plumbers, and pipe fitters. The concept of a formal, paid training program can be applied to almost any occupation. For example, nearly every medical doctor participates in an apprenticeship of sorts; during their internships and residencies, doctors receive on-the-job and classroom-based training along with their salaries. England has overhauled its apprenticeship program in recent years, expanding its occupational reach so that a majority of new British apprentices now choose programs in the service sectors, such as business administration and retail.
Expanding the U.S. apprenticeship system both in number of participants and available occupations would strengthen the American economy by helping businesses meet the demand for skilled workers while offering workers higher wages and better employment outcomes. Such an initiative would especially benefit millennials, who are struggling with disproportionately high unemployment, low-wage jobs, rising college costs, and spiraling student debt. Apprenticeships can create promising new pathways for young workers to well-paying, middle-class jobs.
Below are five ways millennials would benefit from the expansion of apprenticeships.
1. Apprenticeships are jobs
Unlike most interns, apprentices are paid employees who earn a paycheck for their work. Apprentices’ wages typically start at about 50 percent to 60 percent of their eventual wages, and their pay goes up as they progress through their programs and master more skills. Moreover, because training is part of the job, apprentices do not have to forgo income from employment in order to pursue education and training. An apprenticeship provides a young worker with an immediate job, steadily rising wages, and a gateway into a successful and sustainable long-term career. This is especially important for millennials, as the unemployment rate for Americans under age 25 is still nearly 15 percent – more than double the national rate of unemployment.
2. Apprentices earn higher wages
Completing an apprenticeship dramatically raises workers’ wages. According to the U.S. Department of Labor, workers who complete an apprenticeship earn an average starting salary of $50,000. Researchers have found that workers who complete an apprenticeship make an average of $240,037 more than comparable job seekers in their lifetimes; if nonwage benefits are included, that number jumps to $301,533. The wage premium for apprentices will especially benefit young workers, who are significantly more likely than older workers to have a job that lacks sufficient pay.
3. Apprentices gain an education with little or no debt
In many apprenticeship programs, apprentices can earn college credit for their coursework and on-the-job training. This credit can lead to an associate’s degree and, depending on the industry, may also contribute to a bachelor’s or master’s degree. Ivy Tech Community College in Indiana, for example, has developed an initiative in which workers who are enrolled in one of several apprenticeship trade programs can obtain an associate’s degree or technical certificate using credits earned for time spent on the job. Nationally, about one-quarter of apprentices report that they have participated in a community college or vocational program in the last year, and an additional 30 percent report that they have taken a nondegree course in the past year, such as one offered by an employer. The prospect of debt-free education is particularly appealing to millennials, who are facing college costs that have increased 250 percent in the past three decades and an average student-loan balance of $25,000.
4. Apprenticeships create a pathway to middle-class jobs for those without a four-year degree
Apprenticeships offer high school graduates a path to a well-paying, middle-class career that does not require them to obtain a four-year degree. Today’s high school graduates must consider record-high college costs and the possibility of taking on an overwhelming amount of student debt – often without sufficient information to confidently evaluate the quality of colleges. At the same time, few students and their parents are aware that apprentices can achieve a long-term career and a substantial wage premium without a college degree. Too many Americans mistakenly believe that earning a four-year degree is the only way to achieve economic mobility, with surveys now indicating that almost all high school graduates plan to earn a bachelor’s degree.
But fewer than half of these students actually complete a bachelor’s degree. One-third of 2012 high school graduates were not enrolled in college by October of that year. Of those who do seek a bachelor’s degree at a four-year institution, 40 percent do not complete a degree at that institution within six years. Too many of these students are left with the burden of student debt and without the economic benefits of a degree. Expanding awareness of apprenticeships can open the door to an alternative career pathway for high school graduates without precluding further post-secondary education.
Apprenticeships would benefit millennials by providing those who do not go to or finish college with a viable path to the skills development that will allow them to earn higher wages.
5. Apprenticeships grow the economy by making American businesses more competitive
Employers who sponsor apprentices gain skilled workers, reduce employee turnover, and improve productivity. Apprenticeships can also help businesses address any critical or expected shortages of skilled labor at a time when many businesses are reporting that they cannot find skilled workers to fill jobs.
For these reasons, nearly all U.S. employers who sponsor apprenticeship programs recommend them. A survey of registered apprenticeship sponsors in the U.S. found that 87 percent of sponsors would strongly recommend registered apprenticeships, and another 11 percent would recommend apprenticeships with some reservations – for a total of 98 percent of sponsors recommending them.
Businesses in countries with more expansive apprenticeship programs show very high levels of satisfaction. A recent survey by the U.K. Department of Business found that apprentices scored four percent higher on an employability scale than university graduates, indicating that employers increasingly view apprenticeships as being on level footing with university education. U.K. apprenticeship sponsors also report improved labor supply, better efficiency in hiring and retaining employees and embedding organizational culture and values into their workforce, as well as overall productivity gains.
A Swiss study found that employers spend around $3.4 billion annually training apprentices but earn $3.7 billion each year from apprentices’ work during training. They also save on recruiting and employee-relocation costs. Consequently, 80 percent of the more than 2,300 Swiss firms surveyed said that they were “satisfied” or “very satisfied” with the cost-to-benefit ratio of the apprenticeship program.
An extensive 2009 study that surveyed almost 1,000 businesses across Canada found that employers receive a benefit of $1.47 for every $1 spent on apprenticeship training. What’s more, they see the cost benefits and revenues increase each year over the course of an apprenticeship. Importantly, these returns on investment existed in every geographic region of Canada and across companies of all sizes.
Expanding U.S. apprenticeships will benefit all of us by boosting American business and improving our competitiveness in the global economy. But millennials, who have been hit especially hard by recent sluggish economic growth and high unemployment rates, have the most to gain from faster economic growth and increased hiring.
Apprenticeships are proven workforce development tools that offer substantial benefits to both workers and businesses. Expanding apprenticeships in the U.S. can help address the economic challenges that millennials face. In the new report “Training for Success,” we explore the hurdles that have thus far prevented the United States from developing a more robust apprenticeship system, including a lack of awareness among workers and businesses, the limited occupational reach of current apprenticeships, and the significant upfront costs to businesses that sponsor apprentices.
We propose a set of policies that will expand apprenticeships by improving marketing to businesses, introducing financial incentives for employers, enhancing data collection to identify new occupations for apprenticeships, and launching a national campaign to enlist commitments from businesses to engage unemployed young Americans. millennials face substantial economic challenges, and lawmakers should expand apprenticeship opportunities to better connect them to well-paying, middle-class jobs.
Sarah Ayres is a Policy Analyst in the Economic Policy department at the Center for American Progress. This article was published by the Center for American Progress.