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Why America Needs Apprenticeships

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Why America Needs Apprenticeships

Risk Talking podcast December 15, 2022
Economy, finance, and budgets

Urban Institute fellow Robert Lerman joins Allison Schrager to discuss apprenticeship programs in the U.S., the need both to equip young people with occupational skills and to retrain workers, and lessons from other countries’ own apprenticeship policies.

Audio Transcript

Allison Schrager: Welcome to Risk Talking, a podcast about economics. I'm your host, Allison Schrager, and today I'm joined by Robert Lerman. He's a fellow in labor and social policy at the Urban Institute, and an emeritus professor in economics at American University. Mr. Leman is also the president and founder of the American Institute for Innovative Apprenticeship, an organization dedicated to supporting and encouraging apprenticeship in the U.S. Today, we're going to discuss apprenticeships and how they can address many of the problems that we face in today's economy. I think it's a solution that doesn't get nearly enough attention, so I'm delighted to have him here. Bob, thank you so much for joining.

Robert Lerman: Thank you, Allison.

Allison Schrager: All right. So, I think just to clarify, because honestly I realize this is something I didn't even really understand, what's the difference between an apprenticeship and vocational training?

Robert Lerman: Well, apprenticeship is vocational training, but its distinctive character is that it combines workplace learning alongside of classes and other academic learning. And it's a job. It's not simply being in school. So, it's a job that involves contributing to production, earning some wages, and learning by doing. And it's learning by doing to achieve occupational competence, hopefully expertise that will yield a good career.

Allison Schrager: So, did apprenticeships used to be a lot more common, certainly in the U.S.? But I mean, when I think about sort of master tradesmen in Europe pre-industrialization, it seems like that was the way most people were trained. Is that true?

Robert Lerman: Yeah. I mean, learning has been going on a lot longer than education, so people have learned in different ways and learning by doing has been a key way. A lot of the apprenticeships were informal and not necessarily recognized by some government entity. And even today, that's still the case. We have a lot of what we call registered apprenticeships that are registered with a federal or state apprenticeship office, but we also have a number of what I would call unregistered apprenticeships, genuine apprenticeships in the sense that they're highly substantive. They involve more than just a few weeks of informal training. They involve at least a year or more of high-quality occupational learning. So, we have both registered and unregistered. The problem is we have a lot fewer than many industrial countries and a lot fewer than would be a value in this country.

Allison Schrager: Why is that? Is that a recent development? Have apprenticeships ever been popular in America? And if so, when did that change?

Robert Lerman: Well, no, we've never had a broad-based system of the type that Germany, Switzerland, Austria have had. But interestingly enough, this broad-based vision of apprenticeship or of a dual system of learning has expanded in a lot of Anglo countries, including Australia, the U.K., Canada, all of whom have apprenticeships that penetrate a much larger share of the workforce and of young people than we do. And that's not necessarily a new thing. We did have more manufacturing apprenticeships in the late 1940s, early 1950s, and those declined. But most of our apprenticeships have been in, registered apprenticeships have been in the building trades, the industrial and commercial construction, not even in residential construction that much. So, we really haven't tried to develop an apprenticeship system at scale, and that's what I and some colleagues are trying to do.

Allison Schrager: So, what have all these Anglo countries done to get apprenticeships going?

Robert Lerman: Well, they've been willing to spend money, for one thing. Up until recently, the federal outlay for apprenticeships has just been enough to pay for the office of apprenticeship or around $30 million. I mean, think about the hundreds of billions we spend on higher ed for 40 percent of the population. But in the U.K., for example, they started spending money, but they also had some structural changes. For one thing, they gave a lot of incentives to what we're calling intermediaries, organizations that could be training organizations that would go out and market, sell, and organize apprenticeships with employers. Their spending would be the equivalent of us spending about $10 billion.

France recently has embarked, and by recently, I mean since 2018, they saw the light and they chose to shift away from a very poorly organized system by state to a federal system and are now going to be spending something like 12 billion euros for their system. And they've created about 1 million apprenticeships. We would have about over 5 million, adjusting for population. And we have about half a million civilian apprenticeships. We do have another 100,000 that are in the military. But there's the spending, there's the way of marketing the program, there's the development of recognized occupational skill standards. These are some of the elements that you need for vibrant and high-touch system that covers a good chunk of the workforce.

Allison Schrager: As I was reading your work in the last couple of days, I was struck that it seems like such a good system. We have what seems like a skill mismatch. We have people who are dropping out of the labor force because they just don't engage with our educational system. And it just seems like there are workers. There's demand for it. This program makes a lot of sense, because you can train people but also get work out of them. I mean, why does it need so much government, such a heavy hand from government? I mean, is there some sort of market failure that companies aren't just offering apprenticeships, and they need nudges or money from the government? Why is that?

Robert Lerman: Well, that's a good question, and believe me, I've thought about it because I'm a market-oriented guy myself. You have to step back for a moment and ask why do we spend so much money on education? Can't individuals learn? I mean, there are all kinds of tools that you have. And the answer typically is that there is a public-good aspect to education that you're going to be using it not just for one firm, but for yourself overall. And so we choose to prepare people for careers through a publicly funded system of late-secondary and post-secondary education. And companies think, well, we're paying taxes to support this career preparation system, and we should be able to get people who are capable to do the work that we want done.

And this mismatch arises because the education approach, what I call the academic-only approach, doesn't work for large numbers of people. Now in the US, where apprenticeships outside the building trades are uncommon, we do need some degree of sales and organizing effort with employers, but the amounts can be very low in comparison to the benefits. So for example, there's some data in Washington state where they've found that it's 28 to one or 20 to one social benefits to social costs.

Allison Schrager: I mean ideally, would apprenticeship happen when people are young? I mean, could it also be used for retraining?

Robert Lerman: Yes. Yes to both. Ideally when they're young, because we're already paying for courses. Apprenticeships require both work-based and you could say school-based or academic courses. So if you're an electrician, you have to learn about electricity theory. If you're doing some computer work, you have to learn some principles of how computers work. Those courses can be given in late high school or in some dual-enrollment programs that exist, so that we're already paying for those costs and there wouldn't be extra costs, number one. Number two, there are a lot of youth development benefits to apprenticeship, to learning by doing, to applying what they're learning. It's a much more engaging way of learning for many, many young people. They gain some work experience and employability skills. We've seen, in this country, a dramatic decline in the share of young people who work. I just looked at the data. In the late 1980s, we had at least half of 16 and 17-year-olds gaining some work experience during the year.

Last year, it was 25 percent. So, young people are losing valuable work experience that can provide the kind of employability skills that will help them in the future. So, I'm especially happy to see efforts to provide apprenticeships at younger ages. The other good thing is that at the younger ages, the wages don't have to be high. So from the employer's point of view, they're going to pay an apprentice wage that's a lot better than sitting in class. And it will then offer a benefit in the way that the productivity of the young apprentice will perhaps even exceed the wage during the apprenticeship itself. That's what we see in Switzerland. But it can be used for retraining. And again, it's much better for retraining than standard training programs, because again, the people are earning a wage while they're learning, and second, people who want retraining very often are not patient and sitting through classes indefinitely.

Allison Schrager: So, I mean, you bring up a good point that even the trade jobs have become a lot more technical and are almost unrecognizable to where they were say 15, 20 years ago. I mean, in practice it's a different story. The advantage of having more academic training is it's supposed to train your brain to be able to learn new things and adapt to changing technology. Do you think apprenticeship programs could also achieve that?

Robert Lerman: For sure. When we take a course, and then we haven't used it for years, used the learning for years, even if we've learned the material at some level, we often lose it. Use it or lose it, number one. Number two, when you're learning it, to have some real applications, real-world applications reinforces the academic learning. So, we actually asked people who were in apprenticeship program whether being in an apprenticeship program enhanced their learning of academic skills. Some said no, but most said yes. So, then there's the issue of the long-term and when you master the skills in a particular occupation, whether you'll be able to use those skills later on. Again, we have evidence that when people are asked how much of their, I'm talking about 20, 30 years later, how much of what they use on the job today was drawn from their experience in their apprenticeship, a large share, people say that it is from the apprenticeship.

And remember, most people, when they change careers, they often change to adjacent careers. So, yes, there may be some losses. Just as in academic programs, there are losses.

Allison Schrager: I mean, so we've put some money towards apprenticeships. I mean, do you feel like the programs... I guess Clinton and Bush both had them, some states have tried them. I mean, have they been successful?

Robert Lerman: Yes, you're right, we put some money. But again, we've put in up until 2015, $30 million for the country. I mean, it's minuscule compared to anything we do on the education front, and it's still quite low. We've jumped from about $30 million to about $200 million a year. And we do have a lot of evidence from the American Apprenticeship Initiative, which we've just completed an evaluation of, and a number of reports on what happened to the apprentices. It wasn't an experimental analysis, but neither are most education studies. But we did see very large earnings gains, far larger than what would've been expected just from work experience in these programs. So, that's pretty strong evidence.

There's evidence from Washington State where they do try to develop comparison groups that really are well-matched to the apprentices. And you see far, far larger gains on the order of three times larger gains from apprenticeships then from, let's say, community college. So, there is evidence. Now, as we expand into a much wider range of occupations and go to scale, we have to see how well it works, but it seems to work well in other countries. So in Switzerland, which has the highest share of a cohort going into apprenticeship on the order of 70 percent, you have a situation where 95 percent of 25-year-olds have either a BA or have completed an apprenticeship. It's an amazing number. And they have a higher GDP per capita than we do.

Allison Schrager: So to put that in perspective, what percentage of American cohorts go into apprenticeships?

Robert Lerman: A tiny, tiny percent. First of all, a lot of our apprenticeships . . . Well, let me back up. A lot of our apprenticeships are older. The people that go into them are in their late twenties, so they don't start as youth, but we have maybe 150,000 per year, maybe up to 200,000. And we have a cohort of about 4 million. It's about 7 percent, maybe.

Allison Schrager: Seven percent. And what do you think it should be?

Robert Lerman: Twenty-five or 30. We have about 40 percent of people getting BAs. Well, it's much higher for women than men. Somewhere on the order of 35 to 40 percent are getting BAs, which I have no objection to. I think college degrees are fine, but they don't work for a lot of people, and they're very expensive. They're very expensive, and the amount of public sector money going to that 40 percent is massive compared to the amount going to the other 60 percent.

Allison Schrager: So, I think about the biggest, my opinion, biggest problems facing our economy, structural problems, not just immediate problems with inflation or whatnot. It is one, I think there is a serious skill mismatch, and especially in terms of changing technology. And I'm very concerned about the fact that in every recession, we lose a lot of prime management from the labor force. It feels like apprenticeships are potentially the solution to both those problems, or all of those problems. But I feel like the solutions we keep getting from policymakers is more of the same, in fact, more money for college or really pushing community college. Why do you think that is? I mean, we get some lip service for apprenticeships. And as you point out, it's a very tiny fraction of the labor force gets them. Do you think it's a lack of vision from policymakers, or do you think there's just less demand?

Robert Lerman: Well, I think there's a big lobby for higher ed. I mean, it's massive. And in fact, I've just formed a new nonprofit with a couple of people called Apprenticeships for America where we are going to advocate for funding at scale. But there are some visions of hope. In state of Maryland, they passed a law that 45 percent of high school seniors should graduate with the equivalent of a registered youth apprenticeship, which would start in late high school and continue. Now, I'm helping with the plan to develop how they might do that, but there's a growing interest in it. I would say that years ago, I used to have to persuade people about why we should do it. And today, there are very few people who are against it. The question is how can we do it now? How can we mobilize the funds in a constructive way to generate the employer demand to link it to young people?

And in terms of the mismatch, one good thing about apprenticeship is you don't have a training program unless you have an employer. So, there's a built-in sort of market mechanism by which employers are not going to employ apprentices unless they think they're going to need people in that field. They might be wrong, but I would say it's a much closer link than the pure education system. So, it's a combination of things, but I'm hopeful that over the next 10 years or so, we can move toward a scaled system. I mean, England went from something like 150,000 to 850,000 in the space of seven, eight years. And 850,000 in British terms would be fantastic for us. France has done similar numbers. Australia has done very large numbers. Canada, even though they don't have the broad occupational reach, has about the same absolute number of apprentices as we do with one ninth of the population. It's possible. I mean, I know we economists say, "Of it's so great, why hasn't it been done already?" But if you act like that, there's no reform of any kind that would work.

Allison Schrager: From listening to you, and really it seems like one reason why is it there's this market failure of firms just not offering apprenticeships is there's this major market distortion in terms of how much we subsidize higher ed. It means more people are going, and therefore they have to be paid more, which might not make it cost effective to do an apprenticeship with them, or just employers expect people to come to them fully trained. Do you think, if we sort of cut funding to higher ed, then there'd be more of a natural move towards apprenticeships?

Robert Lerman: There could be. There could be. One thing I haven't mentioned is that we have a fairly complicated system for what we call registered apprenticeships. We've never even measured the unregistered ones, which I'd like to do. So, we've had a dearth of research on this field, but the registration system is often complex and cumbersome. And to the extent that some very modest subsidies go only to the registered system, you have this barrier. And I think it would take time for employers to get to know how a quality occupation-based apprenticeship system for their companies would work well. But I think that it very well might be that if we place less emphasis on the higher ed system, we would do better. I'm not trying to say that four-year BAs are a bad thing. I just think we need to diversify our options and widen the routes to rewarding careers beyond the four-year degree.

Allison Schrager: I mean, do you think we also have this hurdle of social stigma? I mean, there's a social stigma of not going to college, of working in trades, anyway. You honestly could make a lot more money in trades than going to college. I mean, do you think in Europe, one of the reasons it's taken off a little bit easier or maybe never went away is that working in trades just doesn't have the same sort of social stigma?

Robert Lerman: That's why we're trying to broaden apprenticeships. The trades are going to get their people because the building trades in industrial and commercial constructions pay very high wages, and there's usually a waiting list for those good apprenticeship programs. There's an effort to kind of diversify who goes into them and get more people prepared to be able to go into them. Certain things have become more fashionable. I mean, becoming a chef is more fashionable today than it used to be. You have hundreds of TV programs showing these great chefs, and people aspire to that. Young people do like to do things, most people do. And I think once we get through a few cohorts where quite a few people are going into applied jobs, I think they're going to tell their brothers and sisters and friends that, "Hey, I don't have to sit in the classroom all day. I can earn some money, do some things, hang out with some adults."

And I think it's going to be less of a problem than we might imagine. And again, we're seeing a good deal of IT apprenticeships develop, a lot of them in healthcare. There too, we have some problems because of the regulatory system. Some of the licensing systems require either an AA, or in some cases even a BA, for things that could be learned through apprenticeship, and those tend to place limiting factors. The whole licensing system as could be reformed in that regard. But I've heard people argue parents want to make sure their kids go to college and so on. But I think most parents know that one of their kids likes to do something and not sit in class the whole time. He doesn't want to go to college. And right now, we have college or the Army, and we don't have a robust apprenticeship system that could appeal to a lot of these young people.

Allison Schrager: Yeah. Actually, I meant to ask you, do you think another area of reform is integrating licensing and apprenticeships?

Robert Lerman: Yes, for sure. Because a lot of the licensing is captured by occupational groups. Now, you could say apprenticeship is in some ways as well because the building trade unions play a key role in apprenticeship, sometimes too large a role, because they sit on committees in different states that are very restrictive about which occupations can be registered as apprenticeships. So, we do have to watch for those barriers. And I believe very strongly that licensing reform can be a compliment to broadening apprenticeship.

Allison Schrager: Yeah, because it seems inefficient. So, my hairdresser had to go to hairdressing school. That wasn't cheap. She got a license. And then she spent two years as an apprentice at a high-end salon. It seems that she could have just skipped the hairdressing school. She actually really learned how to be a hairdresser during the apprenticeship.

Robert Lerman: Yes. A woman I met at a conference who ran a number of high-end restaurants in New York complained about the fact that people that go to these culinary schools and spend lots of money, they come to the kitchen, they come, and they're not really ready for primetime work, that it would be much better if they learned through an apprenticeship. They could take some courses, but they would start right away, seeing what work in a really functioning restaurant is involves. So, I agree entirely with what you say. And again, sometimes people say, "Well, you could teach it in a classroom," but there are a lot of things you just can't teach in a classroom. You can't teach exactly how to work with customers. You can't teach the pace. You can't get tips from people who have been in the field for a long time and can give you some special workarounds. There's just a lot of skills that you can only learn on the job.

Allison Schrager: I wonder how we got so off track. I don't know if you heard my conversation, with John Meer, where we talked about the fact that even summer jobs or high school jobs have become less common, which I guess are another form of apprenticeship where you just is said, learn how to show up and listen, take direction. And it seems like we've gotten just so focused on education independent from work at all skill levels. I mean, how do you think that happened?

Robert Lerman: I don't know, but I would put part of the blame on us. I was once at a conference where a Harvard graduate student showed a graph of educational attainment and said, "This is the trend of skills in the United States." And what this person did was use as an identity, educational attainment equals skills. Whenever we say, "Well, we have a mismatch, we don't have a big enough skilled workforce," the solution always is increased years of education. I mean, we've seen it with free college. We need to have free college. And I think, again, it's been a dead end for a lot of people, and in some ways even worse, because if they've borrowed a lot of the money, they have to pay it back.

Allison Schrager: Yeah. And as I said, I think one of the big issues we're starting to identify with men dropping of the labor force is they just didn't really connect with formal education and now feel shut out from jobs, which is a real tragedy for them and their families.

Robert Lerman: Absolutely. And one of the big things about apprenticeship is that when you complete an apprenticeship in an occupational field, you gain a sense of pride, a sense of occupational identity. I mean, we're used to it by economists and doctors and lawyers and people that have professional degrees, but certainly electricians have it. They know that they're in a community of practice in that field. And in lots of apprenticeships, you gain this sense of pride and mastery in what you've been able to accomplish and what you can continue to do. And it shouldn't be the case that the only way you gain that sense is by sitting in class for 16, 17 years, when especially a lot of boys and men don't like to do it.

Allison Schrager: Yeah. Unfortunately that's all the time we have time for today, but I've really enjoyed this. I think we've been hearing so much about problems in the labor force, and I haven't really even realized until we started talking, how just our response does tend to just be more education, when really I don't think we're thinking about it in the right way. This is such an obviously good answer to so many of the problems we're facing today, and I hope it just gets a lot more discussion and a lot more resources.

Robert Lerman: A podcast will certainly help.

Allison Schrager: I hope so.

Robert Lerman: Thanks a lot.

Allison Schrager: Thank you. So, you can find City Journal on Twitter @CityJournal and on Instagram @CityJournal_MI. And always, if you like what you hear, please give us a five-star rating on iTunes. Bob, thank you. Thank you again so much for joining us.

Robert Lerman: My pleasure.

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