This week is National Apprenticeship Week, and the Urban Institute and Franklin Apprenticeships held the third annual Transatlantic Apprenticeship Exchange Forum. The forum explored whether the United States has the capability to create 5 million apprenticeships. Apprenticeship programs have been successful around the world and in some states in America, and could expand further.
Apprenticeship programs can take different forms, but, in general, an apprenticeship offers a person a full-time job, on-the-job training in a specific occupation, and a job-related educational curriculum. Apprenticeship programs can be mutually beneficial by supplying the apprentice with specified and applicable skills to the occupation of choice, and providing a company with an employee who has met industry-specific and company-specific standards.
Apprenticeships can offer an alternative to college. The price of higher education has been rising, requiring around 30 percent of adults to borrow money for their education. According to the New York Federal Reserve, Americans owe more than $1.3 trillion in student loans. Additionally, college does not always teach students the skills that employers require. At the forum, Ned McCulloch from IBM stated that his company will often search for candidates with expertise and experience.
Apprenticeship programs are more prevalent and successful in other countries than in America. In the United Kingdom, the apprenticeship system was nearly nonexistent about two decades ago. However, since 1997 the UK has increased apprenticeship starts almost fourfold, from approximately 75,000 apprenticeship starts to a little over 290,000 starts during the 2015-2016 term.
The UK has also changed the composition of apprenticeships. Apprenticeships used to be designed around blue-collar jobs such as construction or manufacturing. More recently, the UK has been encouraging the growth of apprenticeships from intermediate- level apprenticeships to advanced- and higher-level apprenticeships in “non-traditional” industries, such as information technology or management.
Funding for the apprenticeship programs in England are now paid for through an “Apprenticeship Levy” that is raised on employers. Companies with an annual payroll over approximately $4 million must pay 0.5% of the payroll bill, but they then receive this levy in the form of an annual allowance for apprenticeships. Unused funds do not carry over to the next tax year. For companies paying less than $4 million in payroll, the costs of the programs are split with the government.
Apprenticeship programs in South Carolina have been particularly effective. Brad Neese, Associate Vice President and Director at Apprenticeship Carolina, and his company have found great success connecting youths to registered apprenticeship programs in the state.
In the past decade, the South Carolinian apprenticeship programs have grown substantially. Neese said that when he began working for Apprenticeship Carolina he only hoped to get four companies to join that year. Instead, he got four companies in one day.
Since 2007, South Carolina has increased the number of apprenticeship programs from 90 to 918 and the number of active apprentices from 777 to 14,475. The extensive growth illustrates that a demand exists from both employers and employees for apprenticeship programs.
The South Carolina experience could be an example to other states. Neese believes South Carolina’s success can extend to all of the country through state-specific programs and federal tax credits. Because all states have different economic conditions in terms of popular industries, labor force participation, etc., Neese does not believe that a uniform apprenticeship program will match the needs of individual states.
Also, Neese argues that federal tax credits would be more effective than state tax credits because everyone has a federal tax liability. The federal tax credit would encourage apprenticeship programs by reducing the cost to companies through lower taxes. In South Carolina, businesses can receive a $1,000 tax credit for each registered apprentice per year for up to four years.
Apprenticeships in the United States are often thought as a Plan B to college, but they do not have to be. High schools do not advertise apprenticeships as viable alternatives to college. This is often because states base their high school ratings on the number of graduates that go to college afterwards. If ranking systems were changed, high schools would likely be more willing to promote other paths into the workforce.
Discovering the proper formula for expanding apprenticeship programs in the United States will take time and experimentation to perfect. Fortunately, the United States benefits from being able to learn from trials in different states. The goal of reaching 5 million apprenticeships in the United States is lofty, but as the South Carolina example suggests, some employers and employees are ready to embrace the apprenticeship pathway.
Emily Top is a research associate at Economics21.
Interested in real economic insights? Want to stay ahead of the competition? Each weekday morning, E21 delivers a short email that includes E21 exclusive commentaries and the latest market news and updates from Washington. Sign up for the E21 Morning Ebrief.