Last month, Hillary Clinton revealed her new plan for tackling youth unemployment: offering a $1,500 federal tax credit to businesses for every apprentice they hire, with a bonus for apprentices under age 25.
Clinton’s tax credit proposal builds upon an already successful South Carolina state apprenticeship program known as Apprenticeship Carolina, a partnership with South Carolina’s Technical College System which offers a $1,000 tax credit to employers per apprentice per year. Since 2007, the number of Registered Apprentices in South Carolina has increased from 777 to 8,000 and employer participation has shot up an enormous 570 percent, offering programs in fields as varied as advanced manufacturing, healthcare, hospitality, and culinary arts.
The apprenticeship system is widely and successfully used today in other countries, such as the United Kingdom and Germany, where apprentices make up 2.7 and 3.7 percent of the workforce, respectively. These percentages are high in comparison to the United States, where only 0.2 percent of the workforce is in a registered apprenticeship.
More importantly, when evaluating youth employment and training programs in the U.S., the apprenticeship model has some of the strongest data showing increases in lifetime earnings.
According to Measure of America, today, 5.5 million young Americans aged 16 to 24 are neither working, nor in school. Youth unemployment is at around 12 percent, which is more than double the national average. A comprehensive apprenticeship plan could help put a serious dent in these numbers.
What Does An Apprenticeship Mean Today?
The biggest official system of apprenticeships in our country is the federal Registered Apprenticeship (RA) program, run by the Department of Labor. In 2014, there were 410,000 people participating in the program across all fifty states. These apprenticeships combine on-the-job training with educational instruction. Participants spend, on average, 2,000 hours in job training and a recommended minimum of 144 hours of related classroom instruction every year (programs can range from 1 to 6 years depending on the occupation). The “earn as you learn” model is an especially important component as it makes apprenticeships a more accessible option for low-income populations. The average starting wage is $15 per hour.
Currently, the apprenticeship cohort is not a young one: only 20 percent of program participants are under 25 years old and the average age of participants is 30. This may be due in part to the fact that, unlike countries with successful youth apprenticeship programs, the U.S. has a narrow concentration of apprenticeships in trades such as construction and manufacturing. However, we are starting to see a push for expanding into fields such as energy, health, and engineering.
Employers and businesses are crucial partners in apprenticeships. In return for funding the apprentice’s salary, any additional training costs, and, often a portion of educational instruction (which all minimize the amount of government investment), employers get a skilled and loyal employee, who will benefit the company for years.
What Are The Benefits of Apprenticeships?
While there is a lack of longitudinal data from federal or state apprenticeship administrators, other studies have shown the positive impacts of Registered Apprenticeships. In 2012, the Department of Labor and Mathematica Policy Research conducted an analysis of RA in ten states. It found that, compared to nonparticipants, the average earnings gain associated with apprenticeship completion was $14,404 in the sixth year and $240,037 over a participant’s entire career.
The social gains of apprenticeships are hefty as well. The same report calculates that over the assumed thirty-six year career of an RA participant, the net social benefits are, under the most conservative estimates, on average, equal to $49,427. This includes benefits to the apprentices, employers, and government, such as increased productivity and reduced government administrative costs of welfare programs (taxes and transfers come out even in this calculation, as they are merely shifted from benefiting apprentices to benefiting the government). However, when the numbers are broken down and evaluated by net government benefits, the report found an average return of $13 in taxes for every $1 invested.
Washington state’s Workforce Board found similar results—evergreen state taxpayers get a return of $23 for every $1 invested in apprenticeships, due to increased taxes paid by participants. The Board also conducted an evaluation of different workforce training programs and found that the net individual and public benefits of apprentices ($332,432 and $84,829, respectively) was much greater than those of community and technical colleges ($143,899 and $31,378, respectively). However, we currently invest much more in community colleges than we do apprenticeships.
Benefits to Business
Unfortunately, the costs of apprenticeships for employers in the U.S. have not been sufficiently evaluated and, when looking at international comparisons, costs can vary significantly across countries and occupations.
However, nearly all employers received a net gain from apprenticeship investments over time. Simply put, skilled workers are more productive, employee turnover is reduced, and there is an increase in innovation since well-trained workers are better positioned to discover areas of improvement.
In the United States, a survey of 37 apprenticeship programs showed that none of the sponsors identified costs as a problem. A larger survey of 947 employers revealed that 97 percent of them would recommend registered apprenticeships to others and 86 percent would strongly recommend them. Less than 3 percent of employers said they would not recommend apprenticeships.
Proposed Apprenticeship Plans
In addition to Hillary Clinton, a wide range of legislators have already supported the expansion of apprenticeships, including Senator Cory Booker and Senator Tim Scott who proposed the Leveraging and Energizing America’s Apprenticeship Programs (LEAP) Act, which offers a $1,000 federal tax credit for apprentices over age 25 and a $1,500 credit for those under 25.
Likewise, Senators Maria Cantwell, Susan Collins, and Kirsten Gillibrand have introduced a similar bill, the Apprenticeships and Jobs Training Act, which focuses on high-demand fields like healthcare, manufacturing, and technology. Qualified businesses that offer an apprenticeship program would receive a $5,000 credit.
President Obama has also pushed for apprenticeships in his FY 2016 budget request where he allots $2 billion for an Apprenticeship Training Fund whose goal is to double the number of Registered Apprentices over the next five years. More recently, Senator Bernie Sanders has co-sponsored the Employ Young Americans Now Act, which would provide $5.5 billion in immediate funding to employ one million youth, and includes registered apprenticeships. The funds can also be used to provide supportive services, such as child care and transportation, that would help youth participate in work activities. Senator Marco Rubio also mentioned in a July 2015 speech that, if elected, he would expand apprenticeships, but thus far has not given any further details as to any details of his plan.
What Apprenticeship Plans Should Include
If we are to increase the number of currently unemployed youth in apprenticeships, plans must accommodate unique problems that this population face. One such obstacle is limited access to information about opportunities. Successful apprenticeship programs have invested in marketing efforts to get businesses, schools, and youth themselves on board. For example, the U.K and South Carolina have successfully used such tactics to rebrand apprenticeships as a practical and viable alternative to traditional four-year education.
A second obstacle that should be addressed is the fact that women are highly underrepresented in apprenticeships—in 2012 only 6 percent of active apprentices were women. One in three female disconnected youth are mothers and child care responsibilities are cited as one of the biggest obstacles for women trying to enter apprenticeships. Policies that would help apprentices to balance working life with being a parent could include subsidized child care, paternity and maternity leave, home visiting programs such as Nurse Family Partnership, and a cash allowance for parents and caregivers. Additionally, programs should, like Sanders’s, include transportation subsidies to help young adults get to and from work.
A third obstacle that unemployed youth often face is high rates of incarceration, which in turn make it difficult to secure employment later in life. One in ten male high school dropouts—and one in four black dropouts—between ages 16 to 24 is incarcerated. Campaigns such as Ban The Box, which would remove criminal history questions from job applications, are a good start. Apprenticeship plans could also include pre-apprenticeship programs for incarcerated youth to help transition them into registered apprenticeships when they are released.
While the recent attention in favor of apprenticeships is promising, for the model to truly make an impact on youth unemployment in the U.S., plans must be comprehensive when taking into account the characteristics of their intended beneficiaries. A federal tax incentive is a start, but should also be accompanied with funding for marketing and an investment in supportive services in order to increase the reach of programs.