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Regional Matters

February 24, 2017

Apprenticeships: Are They Worth It?

Man showing a girl how to solve the problem

For the past few years, businesses in the Fifth District have expressed concerns over a growing skills mismatch in the local labor force. Many of those businesses were manufacturers who reported difficulties finding employees with the required skills for an increasingly technical manufacturing world. Some manufacturing firms have decided to address the skills gap by building their own labor force through implementation of apprenticeship programs.

What is an Apprenticeship?

Apprenticeships are programs that combine on-the-job training with classroom instruction. Employers help apprentices by partially or fully funding trade certifications or degrees in a desired field in exchange for employment. In addition to receiving funded certification and education, many apprentices are paid competitive wages.

Apprenticeships in the Fifth District

According to the Department of Labor, in fiscal year 2016 Virginia had the largest number of active apprenticeship programs in the country with 2,141, compared to the national average of only 410 programs (see graph below).

Source: Employment and Training Administration, U.S. Department of Labor

Mac McGinty, vice president of the Community College Workforce Alliance (CCWA), said there was a recent “uptick” in the demand for apprenticeships on behalf of both employers and workers in Virginia. McGinty said he is unsure if the growing interest in apprenticeship programs in Virginia is a result of heightened demand in the labor market or a result of new grant money.

For Rolls-Royce Crosspointe in Prince George, Va., the lack of available skills in the labor market was the impetus behind the creation of their apprenticeship program. Lorin Sodell, manufacturing executive of Rolls-Royce Crosspointe, said the company struggled to find employees with the necessary hard and soft (behavioral) skill sets. To address the problem, they launched an apprenticeship program. 

In the three years that the apprenticeship program has been in existence, Rolls-Royce Crosspointe has successfully recruited, trained, and retained many skilled employees. Sodell said Rolls-Royce Crosspointe’s continued relationships with local community colleges, high schools, and the armed forces have created a “workforce pipeline” that has enabled their business to grow sustainably.

Benefit for Apprentices

Apprenticeships are unique in that they create career path potential that a four-year degree cannot always guarantee. Adolph Lanza, human resources director for Bosch in Charleston, S.C., said their apprenticeship program created an opportunity for workers to “grow organically” within their company. Lanza saw upward mobility as a major factor in attracting motivated employees. 

Bosch also offers workforce development opportunities in other ways, such as a learn-while-you-earn program, which gives employees an opportunity to attend the local community college in fields such as business or engineering. With potential future education funding, job security, and upward mobility, apprentices often choose to remain with the firm upon completion of the program. 

This can be a win-win situation for an apprentice entering the workforce and a business looking to retain a qualified employee. McGinty said employee loyalty is perhaps the most visible indication of an apprenticeship program’s success.

Benefits for Business

Apprenticeships provide exceptional benefits for businesses as well, as employers can tailor the apprenticeship curriculum to fit the company’s specific needs. Lanza noted that apprenticeship programs prepare apprentices for real, on-the-job scenarios that would be difficult to experience simply sitting in a classroom.

For example, Bosch incorporates common complications faced at the plant into the apprenticeship training and teaches apprentices how to handle specific problems. Bosch’s program focuses on teaching apprentices how to locate the problem and then logically apply steps to find its solution.

By tailoring the curriculum to Bosch’s needs, Lanza said they save time that would have otherwise been wasted with a less experienced employee. 

Challenges

Across our District, manufacturers cite apprentices as a beneficial source for a skilled workforce. Yet, nationally, the Department of Labor reports that participation in apprenticeship programs is still relatively low in the manufacturing sector, particularly compared to the construction industry, where electricians, plumbers, and carpenters are often required to apprentice before receiving a full license.

When asked why more businesses choose not to create apprenticeship programs, McGinty said a major obstacle is convincing CEOs that the programs will be worth the investment. Anecdotally, there are indicators of apprenticeship program successes, but without much data, businesses may remain reluctant to invest in such programs.

Lanza suggested another reason for hesitancy could be a variation in cultural norms. Typically, it is not common for U.S. businesses to invest in workforce development as it is expected that the education system will deliver the skilled labor force. In contrast, Bosch is a German company and thus identifies with a German culture that assumes firms will invest in apprenticeships to create their own workforce. Lanza claimed that as a result of Bosch’s German company culture, the decision to invest in apprenticeships is instinctual.

While there remains a significant need for data and, perhaps, a cultural shift in business models, it remains clear that some Fifth District manufacturers have successfully addressed the skills mismatch problem through implementation of apprenticeship programs.

To learn more about U.S. and German apprenticeships, click here.

 

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Views expressed are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Richmond or the Federal Reserve System.

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