HomeMy WebLinkAboutPacket - 01/10/2018 - Economic Development CommissionECONOMIC DEVELOPMENT COMMISSION MEETING NOTICE
DATE: Wednesday, January 10, 2018
TIME: 4:00 p.m.-6:00 p.m.
PLACE: McHenry Municipal Center
(City Council Chambers - South Court Entrance)
333 South Green Street, McHenry, IL 60050
AGENDA
1. Call to Order
2. Pledge of Allegiance
3. Roll Call
4. Public Input - (five minutes total)
5. Education and Economic Development ---MTI VIDEO https://vimeo.com/239891852
6. Presentation and Discussion with McHenry School Districts 156 and 15 Regarding
Education and Economic Development (Overview of Tour Previous Day at McHenry
County College) (4:30)
7. Presentation by The Bike Haven followed by Discussion and Questions by the
Commission (see attachment)
8. General Discussion on video marketing the City —NORTH CENTRAL ILLINOIS ECONOMIC
DEVELOPMENT https:llyoutu.belglTQstgQ091
9. Discussion regarding The National Apprenticeship Week and The Benefits and Costs of
Apprenticeship• A Business Perspective and Visit to IN2 at the Illinois Math and Science
Academy (see attachment)
10. Wall Street Journal Article provided by Vice Chairman Rob Jessup: "Factories Tap
Parents to Recruit Workers" (see attachment) and need to Schedule Tours of
Manufacturing Faculties
11. General Overview and Discussion about the "Retail Apocalypse" (see attachment)
12. New Business and Items for General Discussion
The City oJMcHenry is dedicated to providing the citizens, businesses and visitors oJMcHenry with the highest
quality of programs and services in acustomer-oriented, efficient and fiscally responsible mnnner.
ECONOMIC DEVELOPMENT COMMISSION MEETING NOTICE
DATE: Wednesday, January 10, 2018
TIME: 4:00 p.m.-6:00 p.m.
PLACE: McHenry Municipal Center
(City Council Chambers -South our Entrance)
333 South Green Street, McHenry, IL 60050
AGENDA
Tours of the larger businesses within the City as a way to educate our committee, but
also as a way to let those businesses know how valuable they are to the city and the EDC
and create PR opportunities
Increasing awards that are given to local businesses from the City (or EDC). Recognition
gives businesses something to strive for, achieve and engage more business owners and
will serve to again remind existing businesses of their value to the community and
encourage them to stay here because they feel a part of something.
• Setting 2018 meeting schedule and meeting more than just once every two months
13. Old Business
• Liaisons to and Establishment of Reporting Procedures:
a. Riverwalk Foundation
b. Chamber of Commerce
c. Downtown Business Association
d. Downtown SuperGroup
e. Landmark Commission
f. Planning & Zoning Commission
• OMA Update
14. Next Regularly Scheduled Meeting Date is March 28, 2018
15. Adjourn
The City of McHenry is dedicated to providing the citizens, businesses and visitors of McHenry with the highest
qunlity of programs and services in a nrstomer-oriented, efficient and fiscnlly responsible rnnnner.
The Bike Haven Direction for 2018
THE
BIKE HAVEN
Peddling Since 1959
As the last 7 years have flown by for both us and our business, we have spent
countless hours re-educating ourselves and "re -inventing the wheel" to ensure we
keep current as well as make sure our business isn't washed away due to internet
sales and marketing.
Let's keep this real, there isn't anything in our store that can't be purchased online.
Moving Forward: We would like to consider ourselves "experience creators" since day
one — consistently working to not only meet your purchase needs, but create an
experience that you remember upon leaving or an experience that urges you to come
back - ✓weekly group rides, ✓family rides, ✓mechanic classes, ✓Fall Taste Fest, ✓BMX
shows, ✓triathlons, ✓Fiesta Days, ✓Peddle to the Park, ✓wine walks, ✓beer tastings,
✓parades and more! In addition, we sponsor 42 athletes, multiple races and events in
the county on top of the endless charities that we contribute too, Cycling and the
experience that surrounds it is our passion and our life!
The Rea/ Facts: From January 1st until October of 2017 over 537 bicycle shops have
closed nationwide. That's over 11% of the country's IBDs "Independent bicycles
dealers" and over 30% of those stores are corporately owned.
Looking at Mode/s &Ideas: Over the past 12 months we have looked at creating
experiences - as most businessmove to service based models and change sale
techniques.
We carefully watch analytics, service, sales, and selling trends. We haven't changed
our advertising budget and we have been voted The Best Bike Shop in the county 2
years in a row. Unfortunately, that still doesn't change the ever changing market and
the increase to meet the consumers demands.
Current bicycle industry models we are looking at have added a cafe experience
and/or a micro pub experience which is aiding in their retaining of customers and
building of new ones based off this experience based environment that can't be
matched.
3318 Pearl St McHenry IL 60050 815.385.4642 ^' 132 Cass st Woodstock IL 60098 816.308.5840 ^' www.thebikehaven.com
Bike Haven Proposal:
Coffee
One on -tap Nitro Coffee, daily brewed 14-hour cold press, reverse osmosis system,
This coffee would be served daily and on tap for dine -in or take-out.
Bike Haven Beer
We would like to offer 4-5 beers, by bottle or on -tap. These would feature local
breweries and offer weekly specials.
Compiled these would target the passing by customer to stop in the shop or enable
the `I'm just looking customer' to stay awhile - equally creating an experience for both
that they otherwise would not have had. Our group riders, customers in for a service
on their bicycle and farmers market guests will also be able to enjoy this experience
that would give them a further sense of connection to our store.
We would offer a 2-3 beer limit for consumers, keep existing hours, have 4-5 seats
available and offer no food or video gaming. Simply put "I'm here for a tube change" -
"Well, can I offer you a Beer or Coffee while you wait?"
All our managers will be Basset Certified and would be the only ones serving.
We have looked into this extensively and shops across the country are adding cafes
and micro pubs to generate revenue and create a new experience to the `Bike Shop'
feel.
There are countless stories about these subculture stores, as well as huge rides and
events being held by Local Brewery's and Bike Shops,
1) Coffee On -Tap, 1 Local brew on tap; with a weekly or monthly highlight or
special.
2) Same hours 10-6 during the week, Saturday 10-5 Sunday 11-4
3) No Video Gaming
4) We are a Bike Shop first and foremost - selling and servicing bikes!
5) 2 or 3 Beer limit and Coffees to go or for in-house.
6) Bringing in new customers and retaining existing.
7) Creating an Experience
8) Keeping employees and driving sales, helping to grow our business.
9) Becoming the #1 destination bike shop in the county
10) Drawing weekly bike rides, weekend adventurers and craft beer enthusiast.
and
11) Oh, "I'm going to swing by the bike shop on my way home", or "I was just at the
bike shop..,."
3318 Pearl St McHenry IL 60050 815.386.4642 � 132 Cass St Woodstock IL 60098 816.308.5840 ^' www.thebikehaven.com
This is
a big idea
and
could only grow and get better. We are excited and think this
would
be a great
add
to McHenry.
Bikes, Coffee and Beer!!
We have
attached pictures
of
both of
our
stores
service bars and links to other stores
doing the
same. Please let
us
know if
you
have
any questions.
Thank you,
Josh and Jessica Arnow
Owners of The Bike Haven
Here
are a few examples
of shops
currently
using this model:
http://denverbicyclecafe.com/
https://www.thehubplspah.com/
htt p://www. bee rcitvbicvcles.ca m/
http://dirtvfineersbikes.com/
http://www. m sopu b. com/
http://www.cafevelobikes.com/
Here are some photos of our current layout at both locations:
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NOVEMBER 20I6
r®reword
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If our country is to out -compete and continue to lead the rest of the world,
we must prepare our workforce for the jobs of the 21st century. Yet, in
meeting more than 2,000 CEOs as Secretary of Commerce, the one
challenge I hear over and over again is difficulty finding skilled workers.
Neither Government nor business alone can solve today's skills shortages
or prevent new shortages tomorrow.
By building regional partnerships with education, workforce, and social
service institutions, businesses and government can create training programs
that connect workers with middle class careers. That approach is a hallmark
of President Obama's workforce policy agenda.
Since the President issued the call to expand apprenticeships in his
2014 State of the Union, the U.S. has added more than 125,000 new
apprenticeships, the largest increase in nearly a decade. Apprenticeships have gained new prominence as a
proven training model for workers; but for businesses, apprenticeships have not necessarily been an easy sell.
This report harnesses the stories of 13 businesses and intermediaries that shared their experiences with
apprenticeships. Through a careful analysis of their programs, it makes the case for apprenticeship from
the business perspective. The cost of creating the programs varied from company to company, but all
found that an investment in apprenticeship pays oli:
Many of the companies in this study had open positions in their factories, medical centers, stores, and
offices that they were persistently unable to fill. By turning to apprenticeships, they were able to broaden
their pool of candidates and fill critical vacancies. Over the long run, the companies have found that
developing talent through apprenticeships results in a more dedicated, flexible, loyal workforce that is
poised to rise into leadership positions and make the companies more competitive.
The 13 case studies also suggest that, despite the clean payoff from apprenticeships, companies tend to give
secondary attention to apprenticeships rather than embracing it as their first option for talent development.
Companies use apprenticeship as a vehicle for developing workers for a few, hard -to -fill positions; they
do not typically adopt it across their operations. This report provides evidence that should encourage
more companies to consider starting or expanding apprenticeship programs in both traditional and new
occupations.
I encourage all business leaders to read this report carefully, It makes it clear that apprenticeships are good
for business.
Penny Pritzker
U.S. Secretary of Commerce
NOVF.ABER 201G I OFFICF.OF THE CHIEF ECONOMIST I ECONOMICS ANDSTATISTICS ADMINISTRATION
Joint Vro led Team
Case Western Reserve University,
Weatherhead School of Management
Dr. Susan Helper,
Carlton Professor of Economics
ASE
f1ESTERN
SERVE
rsr. di6 TJrtnwitsin
JOINT PROJECITEANI
U.S. Department of Commerce,
Economics and Statistics Administration,
Office of the Chief Economist
Ryan Noonan,
Economist
Jessica R. Nicholson,
Economist
David Langdon,
Economist and Senior Policy Advisor
oo�®
ECONOMICS
AND STATISTICS
ADTIINISTMUM
NOVEMEER 2016 � OFFICEOFTHE CHIEF ECONOMIST � ECONOMICS AND STATISTICS ADhIINISTRATION iE
ACKNO\Pf FDGENH NTS
Acknowledgements
The ProjectTea n would like to thank the following organizations for the financial support of this study:
• JPMorgan Chase
• Joyce Foundation
• Annie E. Casey Foundation,
We also would like to extend our deepest gratitude to all of the senior managers, staff, altd especially the
apprentices at the companies and intermediaries profiled in this report. Without their time, commitment, and
patience, this report would not exist. We applaud their commitment to apprenticeship, their businesses, and
each other through their apprenticeship programs,
The Project Team also would like to thank the Following persons who contributed to the analysis in
this report:
Case Western Reserve University
• David Clingingsmith, Associate Professor of Economics at the Weatherhead School of Management
Stanford University
• Kathryn Sha\v Ernest C. Arbuckle Professor of Economics
U.S. Department of Commerce, Economics and Statistics Administration
• �Y/illiam Hawk, Economist
• David Beede, Economist
Additionally, we thank the following persons who provided comments, suggestions, and other contributions
m this report:
American University
• Robert Lerman, Professor of Economics and Institute fellow in the Center on Labor, Human
Services, and Population at the Urban Institute
Michigan State University
Dale Behnan, Professor in the School of Human Resources & Labor Relations
Universitd de Lausanne
• Suzanne de Treville, Professor of Operations Management, Faculty of Business and Economics (HEC)
NOVE.\/BRR 2016 I OFFICR OFiHE CHIEF ECONOMIST I ECONOMICS AND STAl75'fIGSADMINISCRATION
THE BENEMS AND COSIS OFAPPRENTnSSHIPS., A BUSINESS PERSPECTIVE
University of Berne
• Stefan \bolter, Professor of Economics at the University of Berne and Managing Director of the
Swiss Coordination Centre for Research in Education
University or Sonth Carolina
• Joseph Von Nessen, Research Economist at the Darla Moore School of Business
U.S. Department of Commerce, Economics and Statistics Administration
• Ellen Hughes-Cromwick, Chief Economist
• Rob Rubinovitz, Deputy Chief Economist
• Adji Fatou Diagne, Pathways Economist
• Rick Uttimer, Policy Analyst
U.S. Department of Commerce, National Institute of Standards and Technology
• Mary Ann Pacelli, Manager, Workforce Development at Manufacturing Extension Partnership
• Zara Brunner, Director of Marketing and Communications at Manufacturing Extension Partnership
• Natasha Hanacek, Graphic Designer, Public Affairs Office
U.S. Department of Commerce, Office of the Secretary
• Kate McAdams, Senior Advisor to the Secretary
• Abby Bowman, Acting Director of Digital Engagement
• Desiree McKinney, Multimedia Division
U.S. Department of Labor, Office of Apprenticeship
• John Ladd, Administrator
• Zach Boren, Director of Quality, Standards, and Policy
• Jim Foti, Senior Policy Advisor, Office of Apprenticeship
A::y errn�s in the Ieportale rnlely the aathon'respanriGility.
,{ ECONO\UCS AND STATISTICS ADAiIN15TRATION � OFFICE OF THE CHIEF ECONOMIST � NOVFA10ER 2016
TABLE OF CONTENTS
Table of Contents
Foreword..................................................................[
Joint Project Team........................................................... iii
Acknowledgements..........................................................v
Executive Summary, d I
Introduction...............................................................5
What is an Apprenticeship2.................................................... 7
Why Apprenticeship$....................................................... . 8
Methodology.............................................................10
Major Decision Points ....................................................... 11
Roadmap for Measurement...................................................19
Overview of Apprenticeship Programs and Intermediaries 29
Dartmouth-Hitchcock..................................................30
Siemens USA, I 1 0 W a 38
Blue Cross Blue Shield of South Carolina .................................... 43
CVSHealth........................................................a46
Dr. Schneider Automotive Systems. 0 1 6 F a & a 0 0 0 1 h I b s 0 a 0 a I I * 0 1 a s I 1 0 a 4 a 0 a 1 1 49
Hypertherm.........................................................52
LaunchCode........................................................55
Max Daetwyler Industries and Apprenticeship 2000 59
MTUAmerica.......................................................62
North America's Building Trades Unions .................................... 65
Oberg Industries .....................................................67
United Automobile Workers -Ford Motor Company ............................. 70
Institute for American Apprenticeships at Vermont HITEC 72
Appendix I: Quantitative Results ................................................ 75
Dartmouth -Hitchcock ............................. . .................... 75
Siemens USA. 0 & 1 4 0 a I I & 0 1 1 a s I I I I I I V h & 1 0 0 1 1 1 a * 79
Appendix II: Literature Review ................................ 1 , ............... 85
NOVEAfflFR 7A16 I OFFICEOP THECHIEF ECONOMIST I ECONOMICS AND STAif577CS ADMINIS'IItAT1pN ril
E7r�CIJ17vESUMMARY
xecutive Z)IJI'i1mary
In 2014, President Obama set out an ambitious goal to double the number of apprenticeships to 750,000 by
the end of 2018, and to diversify them as well. This year the half million mark was passed. However, despite
their increasing popularity and proven benefit to workers, apprenticeships are not fully understood in the
United States, especially from the point of view of U.S, employers. The skilled trades that support our nation's
construction industry still represent the core ofAlnerican apprenticeships, but many other industries, like
health care and information technology (IT), are adopting apprenticeships to create a skilled workforce for
jobs they cannot otherwise fill easily, if at all. Along the way, firms are not only starting apprenticeships in new
occupations and industries but also opening doors for women and minorities.
The basic components of apprenticeships are the same today as in 1937, when the National Apprenticeship
Act set the foundation for apprenticeships in the United States. Apprentices enter into a structured training
program of classroom and paid on-the-job training under the guidance of mentor. As their skills increase,
so do their wages. Upon completion of the program, apprentices earn an industry -recognized credential
and usually are hired into a job that marks the start of a career. The payoff for workers is clear: 91 percent
of apprentices find employment after completing their program, and their average starting wage is above
$60,000.' Because of these positive results, the U.S. Department of Labor (DOL) has invested $265 million
since 2015 to expand apprenticeships. Many states are increasing funding for technical assistance, tax credits
to employers, and career and technical training to prepare students for apprenticeships.'
The biggest investment in apprenticeship programs, however, is made by businesses themselves. Yet
surprisingly little is known about the payoff to businesses from these investments. Our study is one of a very
few to examine these returns to business, and it attempts to avoid methodological issues common in the
other studies. We examine 13 businesses and intermediaries from a variety of occupations, industries, and
regions and ask: What motivated them to create apprenticeships? \/hat are the costs and benefits? And if not
apprenticeships, how else would they fill their workforce needs?
Within the apprenticeship framework, companies found great flexibility to adapt the model to their needs.
As a result, apprenticeship programs vary significantly in length and cost. The longest program we studied
lasted more than four years; the shortest, one year. Not considering start-up costs, the most expensive program
in our sample of firms cost $250,000 per apprentice; the least less than $25,000. Apprentices' compensation
costs over the duration of the program were the major cost for all companies, and together with program
length mvere the major factor in the cost differences among the programs in our study. Other important costs
were program start-up, tuition and educational materials, mentors' time, and overhead. One cost that was
largely absent was the loss of apprentices from poaching by other companies; few companies noted poaching
fears or reality.
� Perez, Tom andJefFry Zienrs. ApprenriceshipUSA is UpskillingAmeriaP DepaztmentofLabor Blog. October 21, 2016.
Available at:h tp •//hl ed Ig 7201ff10/211 pp h'p p lu"u. n 1.
' Schulz, Kelly and Ken Peterson`!/ApprenticeshipWorls for Stairs.* Department of Labor Bing. October 24, 2016.
Available at: http§'Jd)lor.dol.gov/2016/10124/��ppmnrimh ipks-f - -/•
NOVETIRFR 2016 � OFFICE OFTHE CHIEF ECONOAUST � ECONOMICS AND STATISTICS ADMINIS'[RATION
THE BENEFMAND Cos s OPAPPRENTICBSHIPS: A BUSINESS PERSPECTIVE
The companies in our study were unanimous in their support of apprenticeships. They found value in
the program and identified benefits that more than justified the costs and commitments they made to the
apprentices. Our study team worked with two firms to analyze in detail how company performance was tied
to their apprenticeship program. Using internal production data, we analyzed certain productivity metrics to
put a dollar value on some of the benefits these two companies reap from their apprenticeship programs.
• Dartmouth -Hitchcock in Lebanon, New Hampshire, found that apprenticeship was essential to
a major expansion and re -organization of its provision of medical services. The apprenticeship
program cost of $59,700 per medical assistant (VIA) apprenticewas offset by a $48,000 per -
apprentice reduction in overtime costs and $7,000 per apprentice in increased revenue from medical
appointment bookings. The program nearly paid for itself within the first year and had an internal
rate of return of at least 40 percent. In addition, reducing the long-term use of overtime helped
relieve staff burnout and turnover. Our analysis also showed that the quality of care was at least as
high after the MA apprentices were introduced...
Siemens USA obtains at least a 50 percent rate of return on its apprenticeship program, compared
to hiring machinists off the street. Most of the gains stem from the way that apprenticeship allows
Siemens to more flexibly fill its capacity in Charlotte, North Carolina. The plant makes generators
for electric utilities and seeks work repairing generators when it has capacity left over from making
new products. Because apprentice graduates have a strong grasp of the principles of their work, they
are particularly well suited for tasks like repair work, which involve more judgment than standard
projects. Apprentice graduates' flexibility helps the plant make full use of its capacity. We find that
this ability to perform a variety of tasks is enormously valuable. In fact, one year of this additional
capacity is worth an amount similar to the cost of a worker's apprenticeship program. Apprentices
also were more likely to finish their work on time andwere slightly more productive than machinists
hired off the street.
All of the firms we studied believe that apprenticeships improve their overall performance and provide a
competitive advantage over other firms. Companies most often turned to apprenticeships because they could
not find labor that met their minimum standards. We can measure the benefits to the apprenticeship model,
which is often referred to as "earn and learn," using three types of metrics:
• Production: Companies gain the value of output by apprentices and later by apprentice graduates,
plus a reduction in errors.
• Workforce: Companies experience reduced turnover and improved recruitment, gain a pipeline of
skilled employees, and develop future managers.
• Soft skills: Apprenticeships lead to improved employee engagement, greater problem -solving ability,
flexibility to perform a variety of tasks, and a reduced need for supervision.
Certain employer decisions greatly affect program costs, benefits, and design, such as: program length,
apprenticeship wages, training equipment, and program management. l�/hether companies work alone or in
partnership widh other businesses, educational institutions, unions, or non -profits also affects the start-up and
ongoing costs. In the least expensive programs, employers often worked with the local public school system,
especially in states that explicitly connected their career and technical training programs to apprenticeships.
Grant funding also offset costs for some firms.
F.CONOhIICS ANO STATISi1CS ADAnNlSTRAl'lON � OFFICE OFTHF.CHIEF ECONDA115T 1 NOVFMBER1A16
E.7(EC1JIMSUMMARY
Once a decision has been made to include apprenticeships in a companys workforce strategy, the key to
sustaining an apprenticeship program over time is to balance the interests of the employer, the apprentices,
and the incumbent workforce. A successful program is one in which all three groups see benefits. It can be
tempting for employers to focus too narrowly on their own short-term interests in structuring apprenticeship
programs. However, to attract good apprentices, employers must offer a competitive package of current
pay, portable credentials, and a relatively high probability of a good job. Similarly, incumbent workers also
must benefit from having apprentices by seeing them as teammates helping the company grow and not as
competitors for their jobs or promotion opportunities.
Companies generally recognized these multifaceted costs and benefits of apprenticeships but typically
measured only some. Surprisingly few calculated the return on their firm's investment in their apprenticeship
program. Because there is no existing toollutfor employers to measure the benefits and costs of apprenticeship
programs and few firms explicitly collect.data to do so, this report provides a madmap to help employers
get started.
NOVEAfEER 2016 I OFF[CF.OP THE CHIEF ECONOMIST l ECONOMICS ANO ST.gT1STICSADMMI5IRATFON
IN71tODOCHON
ntroduction
Throughout the his[ory of the United States, apprenticeships have been used as a way to provide workers
with specific occupational skills and a deep foundation of applied knowledge. Apprenticeships today are
characterized by the "earn and learn" model where workers are paid to work while also receiving education. In
the United States, apprenticeships are concentrated in the building trades —carpenters, plumbers, electricians,
and so on —and particularly within unions; the Building Trades Unions have more than 1,600 training centers
in the United States, with over $1.3 billion of funding per year. Nearly two-thirds of all registered apprentices
in the United States are in the construction industry.'
Employers in Europe, especially in Germany and Switzerland, widely use apprenticeships today and have
institutionalized apprenticeships into their educational system. While the model of apprenticeship has not
permeated U.S. industry or the educational system to the same degree as in Europe, U.S, employers outside of
the building trades have begun to adopt the apprenticeship model for hiring and training workers. President
Obama issued a call in 2014 for the United States to double the number of apprenticeships to 750,000 by the
end of 2018, and with the number recently surpassing 500,000, the country is on the path to meet that goal.
The 2016 fiscal year spending bill signed into law by the Obama Administration established the first -ever
annual funding for apprenticeships in the United States.' In fiscal year 2016, $90 million was dedicated for
expanding this pathway to skilled employment, on the heels of $175 million in grant funds awarded in fiscal
year 2015 for the American Apprenticeship Initiatives The apprenticeship -sponsoring companies currently
registered in DOn ApprenticeshipUSA LEADERS (Leaders of Excellence in Apprenticeship Development,
Education and Research) program represent a wide variety of industries, including construction,
manufacturing, health care, finance, and even retail.e
A handful of studies have estimated the benefits of apprenticeships to American workers or society as a whole,
but there is very little research that estimates how these programs affect American businesses. This study seeks
to understand the costs and benefits of the training programs for a diverse set ofLEADERs. From October
2015 through October 2016, our study team spoke with a variety of these firms on the phone and in person
to learn about their experience with apprendceships.7
' Data provided by the DOL Office oFApprendceship. For more information on appmndceships in the <onstrucrion trades, see the Nonh American
Building Trades Unions(NABTU)brochureonappremiceships. Available ar. htr d! bcd g/8C"I'D/ d'/F'I /BC"I'D qpp F YR
Deeree-2o15 pdF See also our rase study of NABTU sponsored apprenticeships in this report.
4 The White House. FACT SHEET,, Investing $90 Million through ApprenticeshipUSA to Expand Proven pathways into the Middle Class.
April 21, 2016. Retrieved from: h�rr s l/ vtvwh'r h g /th - ffi e/2016/04/wf h t' i 90 If h tgh p��tp
expand -proven
r For information on ApprenticeshipUSA grants see: ht •// d Ig /f d/ h'o/e -.
s See DOIs ApprenticeshipUSA w•ebpageroread more about LEADERS. Available ar.hmss/hnvwd Ig /pp h' /1 d h
' We asked all firms to review the case studies for factual errors. We also asked some to provide additional information in order to fill remaining gaps
m
in our understanding of their apprenticeship programs. AU resulu and opinions in this study are our own, a
NOVEMBER 2016 l OFFICE OF THE CHIEF FCONOS115c' I FLONOhRCS AND STATISTICS ADAfINI5IRAT1oN
THE BENEFITSAND COSTS OFAPPRFANFICESHIM,A BUSINESS PERSPECtIVE
Our study began with phone conversations with companies or other organizations drawn mostly from DOL's
LEADERS program. Some of these organizations are firms that run apprenticeship programs, including:s
+ Blue Cross Blue Shield of South Carolina
• CVS Health
• DaetwylerIndustries
• Dartmouth -Hitchcock
• Dr. Schneider Automotive Systems
• Ford Motor Company
• Hypertherm
• MTU America
• Oberg Industries
• Siemens USA
Other organizations in the LEADERS program Facilitate apprent ceships or othernise partner with firms. \Ve
also spoke with several of these organizations, including:
• American Federation of Labor and Congress of Industrial Organizations (AFL-CIO)
• Apprenticeship Carolina
• International Union of Painters and Allied Trades (IUPAT), a member of North Americas Building
Trades Unions
• IT-ology
• LaunchCode
• National Institute for Metalworking Skills (NIMS)
• North Americas BuildingTrades Unions (NABTU)
• Service Employees International Union (SEIM
• United Auto Workers (UA%V)
• Vermont HITEC
Based on interviews and site visits, this report includes 13 profiles of organizations actively involved in
administering successful apprenticeship programs. \Ve profile firms, consortia, an educational institution,
and others. We have also included two quantitative case studies that examine the relative benefits of
apprenticeships versus other staffing options. Together, the profiles and case studies have led us to identify
a series of critical decision points that bear significantly on the costs borne and benefits reaped from
apprenticeships. We also outline how companies —whether they are considering an apprenticeship program,
just starting one, or with one well underway —should measure the costs and benefits of their program.
This report presents our findings from this study and consists of four parts:
1. Overview of apprenticeships
2. Major decision points (for implementing apprenticeships)
3. Roadmap to measurement
4. Case studies'
' In addition to theseBerms, we also spoke with BuhlerAeroglide Corpotation, Denso, Huntington -Ingalls, Mohawk Industdes, and Preryse
(no v nthrive).
s Appendix I provides additional background on the statistical techniques used to analyze the benefits of apprenticeship to nvocompanies.
Appendix II reviews the literature on the return on investment to apprenticeships for employers.
ECANOARCS AND STATISTICS AD1fIN15'1'RATION I OFFICE OFTHE CliIF.P ECONOM75T � NOYEb/BER 201E
IN7T.ODUCrION
What is an Apprenticeship?
Apprent reships are available in a variety of occupations, including both traditional fields and newer ones such
as mechatronics, cost estimation, computer simulation, banking, medical coding, and pharmacy operations.
In all, the DOL Registered Apprenticeship (RA) program covers over a thousand occupations.10 Many, though
not all, of these programs are small and fairly new,with their apprentices only recently graduating into
the workforce.
DOL defines an RA program as "innovative work -based learning and post -secondary earn -and -learn models
that meet national standards set by DOL (or federally recognized State Apprenticeship Agencies)."" Programs
in DOI°s RA have five defining features:
1. Participants are paid by employers during training.
2. Programs meet national standards for registration with the U.S. Department of Labor (or federally.
recognized State Apprenticeship Agencies).
3. Programs provide on-the-job learning and job -related classroom or technical instruction.
4. On-the-job learning is conducted under the direction of one or more of the employer's personnel.
5. Training results in an industry -recognized credential that certifies occupational proficiency."
At a minimum, For an apprenticeship program to be registered with DOL, it must combine classroom
instruction with paid on-the-job training that teaches workers practical skills, and the full apprenticeship must
last at least one year. The classroom training is usually tuition -free to the apprentice. Many of the companies
with whom we spoke also pay hourlywages or a flat stipend to the employee for their classroom time. Some
firms provide all classroom training in-house and some partner with local community colleges to outsource
this training while providing hands-on training at the company. Others partner with other firms to form
consortia, like Apprenticeship 2000 or the North Carolina Triangle Apprenticeship Program (NCTAP), to
provide classroom training to apprentices across several firms all at once.
Additionally, each apprentice is paired with a mentor who takes time from his or her regular duties to guide
the apprentice's acquisition of technical skills and help integrate the apprentice into the company. Through
this, the mentor passes of practical knowledge. The mentors with whom we spoke took pride in this role and
reported that serving as a mentor helps reinforce their skills and gives them a new appreciation and purpose
for their job.1 l
\When apprentices graduate from an RA program, they earn an industry -recognized credential from DOL or
the state apprenticeship agency Depending on Svhere the program is registered and the occupation, this may
be, for example, a national or state occupational certification or a journeyperson's certificate. Many of
1° SeeDOIsApprenticeshipUSA FAQ.Available ar. hops•// dlg lF d/ ti ���,
DOI'sApprenticeshipUSAwebpage. Available at: dol-golleacuredlappienticeship.
'r DOn ApprenticeshipUSA FAQ.
'a It is important to distinguish between mentor and manager. Although the mentor may also be the apprentice's supervisor, the roles and
responsibilities of each are distinct. The supervisor provides administrative oversight and mayor may not have experience in the apprentice's
occupation. The mentor oversees the appremlce's on-the-job training as an experienced worker in drat occupation,
NOVEMRER 1Al6 I OFFICROF THECHIEP ECONOMIST � F.CONOMICSANDSrA175TICS ADMINISI'RATION
THE BEINUMAND coS1S OF APPRENTICESHMA BDSINESS PERSPECnVE
the programs in out study also provided apprentices the opportunity to earn a secondary or post -secondary
academic degree or credits, an industry certification, or a state or local license.i4
Other types of work -based learning shame many of the elements of apprenticeships. Apprenticeships and
internships both provide work experience, for example. Apprenticeships and other types of on-the-job training
both involve formal, paid hands-on training, and on-the-job experience sometimes includes formal classroom
lessons like apprenticeships. Apprenticeship is not just work experience, and it is not just on4e-job training
to do a specific task. A true apprenticeship provides a formal structure and rigor to classroom and on-the-job
training under a mentor and with pay progression that ends with an apprentice graduating with a certification
(and in some cases, multiple certifications) that he or she is fully proficient to do a job. Furthermore, the
apprentice is ready for a job and, in the vast majority of the cases, transitions directly into permanent
employment.
Why Apprenticeship?
There are many reasons why a firm might choose apprenticeship as a model. Many firms have difficulty
finding the skills they need in the open job market; for example, their employees may be required to have a
high level of company -specific knowledge that often cannot be found in the labor market. The need for skilled
workers was the most common factor cited by the companies in our study. Buhler Aeroglide, Siemens, and
Max Daetwyler Corporation (Daerwyler)—three European -based manufacturing firms with plants in North
Carolina —told us that without their apprenticeship programs it would be extremely difficult to find workers
with the skills they are looking for in the local labor market. In some cases, employers leave positions vacant,
requiring them to turn down work or deliver products late.
Apprenticeships may also reduce hiring costs by providing a streamlined channel to bring on new workers.
Apprenticeships may reduce attrition by building a bond of loyalty between company and employee or by
providing an opportunity for motivated young people to stay rooted in their communities. Dartmouth -
Hitchcock, a large hospital in New England, cited unfilled positions, increased overtime, and a desire to avoid
having to reassign doctors to administrative tasks as key reasons for instituting an apprenticeship program.
Several companies we interviewed for this study also noted that apprenticeships often lead to faster
advancement in the company, helping the firms to develop their future leaders. Siemens cited the need for a
pipeline of workers who could be cross -trained in multiple functions and graduate into leadership. Siemens
also felt that the apprenticeship program allowed it to recruit better employees than it would otherwise
because of the chance for apprentices to earn a valuable skill debt -free. Blue Cross Blue Shield of South
Carolina (BCBSSC) estimates that 22 percent of graduates from the apprenticeship program are currently
serving in leadership toles.
tr Aceordingto theAssoc;ation far Careec andT<chnical Fdumtion,'industry-recognized°credentials are: dcredem;al forrecmitment,
a. sought or accepted by employers within the industry or secror involved as a recognized, preferred, or require
screening, hiring, retention or advancement purposes; and
b. where appropriate, endorsed by a nationally recognized trade association or organization representing a significant put of the
industryorsector.
Examples include the National Institute for Metalworking Skills certificaresi machining and die -making and the Co IA Securiryrand Heahuzue:
IT Technician certificates. See h p /%w 4A ttl,+ lru2c xtid=1917.
ECONOMICS AND STATISTICS ADAi1NI5TRATlON � OFFICE OF THF.CHIFF ECANOh/1ST I NOV&110ER 2016
IN7RODUC.ITON
Registered Apprenticeship? What and why?
Most of the organizations in our study have chosen a common partner in administering their
apprenticeship programs —the government. They have partnered with DOM Office of Apprenticeship or
a state apprenticeship agency (recognized by DOL) by registering their program. As noted earlier, DOL
has identified over a thousand occupations for registered apprenticeships.
A sponsoring organization for apprenticeship can be a single business or consortium of businesses,
an industry association, joint labor-management organization, community college, community,
based organization, or other organization that assumes responsibility for the overall operation of the
apprenticeship program. To register; one of these sponsor organizations submits detailed documentation,
called `standards," on the apprenticeship program for a specific occupation to DOL or die state agency
for review and approval. The standards documents demonstrate that an apprenticeship meets the
five -part definition described earlier by fisting the occupational competencies, curriculum, wages and
hours of work, applicant qualifications, and duties and responsibilities of the apprentices, sponsor,
and mentors. The sponsors also demonstrate how the program meets regulatory requirements related
to apprenticeship training, as well as Equal Employment Opportunity in the selection of apprentices.
Registration also guarantees that apprenticeship graduates will receive an official credential from the
U.S. Department of Labor or state apprenticeship office, which helps attract potential candidates to the
program, thereby reducing recruitment costs.
Working with DOL or a state apprenticeship agency to develop and register an apprenticeship
program can provide tangible benefits to the company and reduce various costs for the business or
other sponsoring organization. DOL can reduce start-up costs by providing technical assistance in the
preparation of a company's training plan, including structuring the apprenticeship program, preparing
the on-the-job training outline, and finding educational or other partners to help design and implement
the program. By partnering with intermediaries or other companies, as well as by accessing Federal
and state funding streams to support apprenticeships, a firm may be able to reduce its apprenticeship
program's costs, such as apprentice wages and tuition. In some states, registration also opens the door to
tax credits and other state funds that may help defray the costs of each apprenticeship!
As DOL and states seek to expand registered apprenticeships, they have made the process simpler and, . .
more transparent —starting with an online registration tool at: http://doleta.gov/oa/registration/.
DOL encourages companies considering apprenticeships to contact them for assistance early in
their deliberations.
'See DOLApprcntirrshipUSAwebsite for information about sp¢s which offer tax credits m emplolnrs for hiring apprentices and notion
suppoa for registered apprenrirrs ar. hnysdhvw.xdaleta gn loalrax d'n f .
Similarly, Buhler Aeroglide told us that apprentices who move into management or engineering roles will be
more effective because they will have detailed knowledge about operations on the factory floor and
with other employees, a rapport
For workers, apprenticeships maybe an attractive way to earn an industry -recognized credential or degree as
an alternative to a four-yeaz; traditional university, node school, or cormnunity college. Apprenticeships offer
workers occupational -specific training, providing a pathway into a career and higher earnings.
NOVEAfRER7Al6 1 OFFICEOF'CE{ECnIPF F.CONOMISr l F.CONOJfiCS'AND 51'ATISrICSADhlINI57RAT10N
THE BENEFITS AND COSTS OPAPPEENm'FSRIP&ABUSINESS PERSPEcnvE
Methodology
Through our discussions with firms and organizations
acting as intermediaries for apprenticeships, we found
evidence of these benefits in action. Because we wanted
a diverse picture of how apprenticeships are being used
in the United States, Ave chose to contact organizations
across a variety of industries, occupations, regions,
and firm sizes. However, Ave acknowledge that the
study group is not representative of all firms that have
considered or started apprenticeship programs. These
are companies that, by definition, have programs where
the perceived benefits outweigh the costs. Our goal
was to understand the motivation for beginning their
apprenticeship programs and the analysis that underlies
their decisions to continue the programs. We spoke
principally with senior managers in human resources
and talent development as well as production managers.
These conversations formed the bulk of the material
presented in this study, providing an overview of the
kinds of apprenticeships offered in the United States,
their evolution over time, and how companies view
their roles as sponsors of these programs, as well as their
successes and challenges.
From these discussions, it was evident that there is a lot
of qualitative evidence that apprenticeship is good for e ` solutions I to meet
employers. However, it also became evident that most , e i Ic - - e
firms do not compile and analyze comprehensive cost _
and benefit data that allows them to carefully measure Soma: Ili. Bepartment of tabor. Available at
the return at their investment in these programs. Most
nn s ii ..., loi ec,•lacn 3^ttsSsiRq e_a I s.shtm.
firms were able easily to provide information al costs,
such as the cost of hiring in the absence of an apprenticeship program or the cost of training and educating
one apprentice. Only a few firms with whom we spoke were able to provide clear quantitative data on the
benefits they identified from their apprenticeship programs. One barrier to doing so was that key benefit data
would be derived from their production metrics, while cost data would reside in human resources or payroll,
and firms did not on their own blend those data sets to examine how their productivity measures related to
howworkers were hired and trained. The few firms that did have benefit data weighed it against program
costs, and one even went as far as calculating a measure of return on investment (ROI) for apprentices versus
other hires. Such complete analysis, however, was not the norm.
Following initial calls, we visited several firms based on the prospect of those companies having data available
for calculating ROI and their willingness to share their data. At each of these firms, we conducted on -site
interviews with staff, program officers, apprentices, mentors, program graduates, and data managers to gather
detailed information about the programs, their operation, and how they are understood by those directly
engaged with them. We also discussed in detail how apprenticeships fit into their broader hiring strategies
to understand the motivation for using apprenticeships versus trying to hire skilled workers —the goal being
to examine the ROI of using apprenticeship relative to the ROI from other methods of filling the need for
30 ECONOMICS AND STATISTICS ADAtINIS'I'RATION � OFFICE OPTHE CHIFP ECONOMIST � NOVPA10Eft I010
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workers. Two firms worked very closely with our study team and provided a large amount of data we used to
analyze firm -specific benefits from their apprenticeship programs, specifically productivity measures with and
without apprentices.
Case studies for the two firms we visited and the eleven other organizations that we interviewed comprise the
final section of this report. Although our findings cannot be generalized for all firms, the process provides a
framework for further study and lessons learned for future teams working in this field. We present the full
statistical results front our in-depth analysis of Siemens and Dartmouth -Hitchcock in the appendix.
,or Decision Points
Several common decision points emerged as the organizations to whom we talked shared their experience with
starting and administering apprenticeship programs. Their collective experience led us to seven questions for firms
to consider when designing a new apprenticeship program or analyzing the costs and benefits of an existing one,
1, Is apprenticeship integrated with your production and other strategic priorities?
Successful firms typically have talent strateg es that are closely integrated with their strategies around
production, technology, and marketing.15In some cases, technology is the driver, and workforce strategy
follows. For example, in Germany, Siemens developed a precision product and the technology needed for
production. This requires a highly -skilled workforce, which in Germany is largely supplied through the nation-
wide apprenticeship program. Siemens brought this production process to the United States and required
similariTsldlled production workers, leading to the North Carolina plane's apprenticeship program. At
Dartmouth -Hitchcock, the decision to create a medical assistant (MA) apprenticeship program was driven by
cost pressures and changes in the U.S. health cue system, such as greater emphasis on teamwork and electronic
medical records. These changes led the hospital to redesign work in a way that placed greater reliance on MAs.
Itt other cases, however, a firm's workforce strategy drives its technology or marketing strategies. For example,
CVS Health's (CVSH's) apprenticeship program is instrumental to the company's desire to have a workforce
as diverse as its customer base. Oberg sees itself as `selling skill" more than manufactured goods. Its skilled
workforce can "make the machines sing and dance," allowing the firm to operate advanced machinery and
tackle complex jobs that other firms cannot.
In short, firms should maximize the value of apprenticeships by not only looking at the program as a means of
finding workers for today's hard -to -fill jobs,
2. Where does apprenticeship fit in your overall talent development straf&W,
Firms find and develop talent through multiple channels. Apprenticeship is a proven path that pays off for
workers in terms of employment and wages, and all the companies we studied consider that it also pays off for
them. But it is by no means the only option, even for these companies.
Most companies use various other approaches to fill openings for jobs where they also use apprentices. Some
find skilled workers locally, recruit experienced workers and put them through short-term training, bring
on contractors or workers from temporary staffing firms, or distribute job tasks across other workers in the
company. The true cost and benefit question these companies face is not just whether apprenticeships pay off,
but if they are better than the other alternatives —and what this implies about the ideal share of apprentices
for each job category.
" Thomas Kahan, Thehiture oflnrk. Cambridge, MA: MIT Press, 2016,
NOVE.1fISER 2016 1 OPPICF.OF THE CHIEF ECONOAfIST I ECONOAfICS AND Sr.1T13TIC5 ADMfNISTRATION II
THE EPNEFDS AND cosiS OPAPPRENTICESHIPBA BUSINESS PERSPECnwE
Apprenticeships, however, offer unique benefits as a talent development strategy.
• Apprenticeships provide workers with both practical skills and an understanding of
fundamental principles,
Because apprentices understand the principles behind the work they are doing, they are often more
adept at problem -solving, can adapt to new technologies, and can operate with less supervision
than employees who are not apprentice graduates. For example, at Siemens, an apprentice was able
to figure how to set up a job that had stymied his own mentors. He fabricated three new metal
components to use in the setup of a machine, something he was able to do because he understood
principles of physics and was able to program the machine tool in addition to watching it run.
• Apprenticeships expand the pool of skilled workers in locations where firms cannot find the
workers they need.
Dartmouth-Hitchcock's relatively remote location, along with a small labor market with few local
graduates from related associate's degree programs, made it difficult to find local workers who were
willing and able to take on the required duties of an MA. Fully trained MAs were not typically
willing to commute or relocate for the same pay they were already earning elsewhere. To the extent
that apprentices earn good wages and graduate without debt, the program may allow a company
to recruit a higher quality worker, one who is willing and able to combine classroom training with
hands-on learning.
• Apprenticeships help firms target specific groups of job candidates, such as youugex or older
workers, women, minorities, and veterans.
Siemens has both a youth apprenticeship program as well as one For veterans. LaunchCode has
[rained and placed 1T apprentices from age 16 to age 65, For CVSH, apprenticeships offer a strategy
to reach and prepare workers who face educational and other barriers that leave them on the margins
of the labor market.
• Apprentices can be trained into a company's wort[ and culture.
Firms often have a specific way of doing things. The long and intense training period of an
apprenticeship helps workers absorb these methods intuitively. Hypertherm found its computer
numeric controlled (CNQ machinist apprentices were so productive that it decided to put all of its
incumbent machinists through the same program to refine the skills that the firm values.
Apprenticeships are an attractive option for a particular occupation when the features above are particularly
valuable Ica company. DOL publishes a list of occupations with existing registered apprenticeship
programs; that list should be seen as a starting point, since the variety of jobs with apprenticeships continues
to increase.1G
1° For mors information, see: h� dl d I -.g / / 4P ' r<fm.
12 ECONOMICS AND STATISTICS ADMINISTRATION J OFFICE OFTHF.CHIEF ECONOMIST I NOVEAIEER 2016
INTRODIC11ON
3. What value can partnerships provide?
Nearly all of the apprenticeship programs in our study involve some form of partnership between die
company and another organization. Most frequently the partner organization is a union or an educational
institution. Companies have formed consortia with other businesses and contracted with non-profit
intermediaries. DOL or the state apprenticeship office often helps build these partnerships.17 Partnerships
create economies of scale and facilitate sharing of expertise. They reduce the sometimes substantial start-up
costs related to curriculum development, staff raining, purchasing equipment and training materials, and
acquiring classroom space. Partnerships with secondary schools and public community colleges effectively
reduce tuition costs by leveraging the public educational system.
Industry consortia
Curriculum development, recruiting, program admire stration, and apprentice classroom instruction can
seem prohibitively expensive for a small firm with fete and infrequent openings. Furthermore, setting up and
administering an apprenticeship program is time consuming for any firm. Firms needing workers with similar
skill sets have joined together to form regional industry consortia like Apprenticeship 2000 and the North
Carolina Triangle Apprenticeship Program (NCTAP) where each firm is responsible for contributing to the
administration of the program. Representatives from each firm in the consortia work together to start up
the program and then jointly conduct marketing and recruiting activities as the program continues. Once a
consortium is established, new firms make an initial payment to join and pay a flat annual fee thereafter. For
example, firms pay $3,000 to join NCTAP and then pay a total of $500 to $1,000, regardless of the number
of apprentices they hire, each subsequent year to maintain their membership. In addition to the fees, firms pay
the wages and tuition expenses for each apprentice they hire.
The firms with which we spoke felt that dues paid to consortia was moneywell spent. The cost of recruiting
apprentices is substantial, especially when apprenticeship programs are first introduced in a region or for an
occupation for which no program existed before, when this is the case, the basic concept of apprenticeship
must be explained to potential young workers and often their'parents. Finns and paid consortium staff can
divide up the tvork of developing and disseminating marketing materials and attending career fairs at
area schools.
c' For moce infocmadon, see the box note on'Regiswred Apprenticeship WhatandWhy7"
NOVF.A{BF1t2pIG � OFFICE OFTHE CHIEF ECONOMIST � F.CONOMICSAND SrpTISTICS ADA9NI5IRATION t3
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Illinois Consortium for Advanced Technical Training (ICAl 1)
Although not part of this study, the Illinois Consortium for Advanced TechnicalTraining (ICATT)
illustrates the variety of forms consortia and partnerships can take. The ICATT dual vocational training
program was established by the German American Chamber of Commerce of the Midwest, the Illinois
Manufacturers Association Education Foundation, and William Rainey Harper College in 2014.' In
2015 ICATT launched its pilot cohort at Harper College. Currently it has established apprenticeship
programs with 12 manufacturing firms and 4 community colleges as partners across the state (two
in the Chicago area and two downstate in more rural locations). Current programs are for industrial
maintenance technicians and CNC machinists. Apprentices take part in an accredited three -yet
program, in which they will receive an associate's degree in advanced manufacturing along with German
industry certification and other accreditation."
All companies offer essentially the same terms, including full community college tuition for classroom
training, paid on-the-job training (with increasing wages) at the company, and a job guarantee for
two years upon successful completion of program "' Each participating company pays a management
and administration fee; currently, this is an initial contribution of $2,500 plus a recurring annual
participation fee of $2,500 for each apprentice. The annual fee is capped after the third apprentice so
that the total annual fee for employers does not exceed $7,500 in any given year.
[ Headquar[aed in Chicago, with a branch offim in Devon, GACC Midwais mission is w prommm dte expaadon of bi6[eral trade and
investment between Germany and the United Stara, apeciaUV the Midwest, via the official representation of German companies, membership
and consulting services. The ICATT program is detailed a[ www ddnkica rcmu.
°The German certification is from the Association of German Chambers of Commerce and Indusuy (DIHK(AHK) and is identical to that
earned by apprentices in Germany. Gradual" also earn aDOL Registered Apprenticeship Certification and have the option to esm multiple
rertificata from the National Institute for Metalworking Skills.
'a Apprentices that have the program early or at terminated by the company for just cause most reimburse the company for all funds paid
toward tuition and stipend.
Another feature of consortia can be a shared classroom. Apprentices from several different firms attend
part-time classes together at the community college or other• educational institution associated with the
consortium. Apprentices then spend the rest of the week in on-the-job training with the firm that recruited
them. This arrangement makes it possible for firms with very few apprentices to offer formal classroom
training with a specific occupational curriculum, a scenario that may be prohibitively expensive for just one or
two students.
An additional benefit of consortia is that they reduce both the danger and cost of poaching, a practice
in which a firm hires a sldlled worker awayfiom another firm that has invested in the workers' training.
Successful consortia create a pool of skilled workers in the local labor force with widely -recognized credentials.
This situation is good for workers, who can advance in their careers by changing to a new firm if a promotion
opportunity is not available at their original firm. It is also good for employers, who may find it beneficial to
hire mid -career workers. Employers may not be able to retain a worker they have trained for his or her entire
career, but all firms in the local market can benefit from access to workers that others have trained.
l4 ECONO\1lC5 AND STATISTICS AD�UNISTR{'OON � OFFICE OF THE CHIF,F ECONOAti$T � NOVEMBER 20IG
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Unions
Labor unions like the United Auto Workers (UAW) and North Americas BuildingTrades Unions (NABTU)
house registered apprenticeship programs for their members. These programs have substantial benefits for
employers as well, particularly for small firms or firms that need workers with certain skills only for short
periods of time. As our case study of NABTU points out, construction is "the original gig economy," where
workers work on any given project for only a short period. The Construction Industry Craft Training
Research Team estimates that NABTU employers earn a return of between $1.30 and $3.00 for every $1.00
invested in craft training due to improved safety, increased worker productivity, and reduction of rework,
absenteeism, and turnover."
A union, in cooperation with employer associations, can provide a structure for training workers and
matching them with employers. It is difficult for individual small employers to keep up with new
developments in technology; joint training centers have staff that ensure that new skills (e.g., installing fiber
optic cable or solar panels) are incorporated into apprentice training and continuing education. The structure
also avoids the poaching problem discussed above; employers do not get access to trained workers unless they
pay their share of training costs. Meanwhile, employers do not have to pay for a worker whose shills are not
currently needed; the union maintains a hiring hall that matches employers with needs and jobseekers with
specific skills.
In addition, union involvement can ensure that the training remains relevant to the day-to-day tasks worlters
actually perform, rather than an abstract curriculum that may not reflect their real -world activities. Finally,
collective bargaining can provide a structure in which disputes are resolved and a balance of benefits is
maintained. For example, key to the 100-year history of the building trades apprenticeship is the maintenance
of an intergenerational bargain, in which mentors, apprentices, and employers each receive enough benefits to
want to continue with the arrangement.
Intermediaries
Non-profit irrtermediazies like Vermont HITEC and LaunchCode provide a fee -based option for firms to
access or develop an apprenticeship program. While firms must still hire and provide on-tlre-job training to
the apprentices, they can pay the intermediary to provide other services such as recruitment and screening,
curriculum development, and classroom training associated with the apprenticeship program.
For example, LaunchCode is a nonprofit organization that helps workers develop the proper skills needed
to enter into IT coding positions as apprentices, LaunchCode handles curriculum development, recruiting,
screening, and training for the firms with whom they work. Only after candidates are deemed proficient in
the IT skills needed by employers does LaunchCode work with firms to place qualified candidates into open
positions. LaunchCode bills firms $5,000 after apprentices are fully converted to permanent employees; this is
the only explicit non -wage cost that firms have under this arrangement.
Community colleges can also serve as intermediaries for firms by convening firms and by sponsoring
apprenticeship programs. One role drat is more common for community colleges is to help firms develop and
deliver classroom curriculum for apprentices, as we discuss below.
" "Conscrucsion Indussry CrahTrain;ssg in the Unfired Ssaces and Gsuda,"Consrmcsion lndussry lnssimse, Unfrersiry ofT as,
Research Summary 231-1, Auguss 2000.
NOVEAfOF:R 20tG I OFFICF.OP THB CnIFF F.CONOT9IST � ECONOilfICSAND SPATfST[CSADhfM157Ri770N IS
THE BENEFITS AND COSTS Or, APPRENTICESHIPS:A BUSI PERSPECM
4. How should you develop and deliver the classroom curriculum?
A rigorous, well defined curriculum is essential to apprenticeships. Apprentices need formal training in or
technical, occupation -specific skills and in soft skills, such as teamwork, communication, and professionalism.
If a firm is not joining a consortium that already has a defined curriculum, developing the curriculum and
determining how best to deliver it can be the most daunting parts of starting an apprenticeship program.
The companies we studied vary greatly in how they build their curriculum and conduct the training, and their
approaches have evolved over time. Some conduct their classroom training on -site with contracted instructors;
for example, CVSH provides classroom training to its 1,500 apprentices in its own classrooms with nationally
certified trainers who are CVSH employees. It follows a unique five -section curriculum with 20 to 30
competencies in each section. Other firms blend in online classes while manywork with a community college,
often aligning their curriculum with existing degree programs so apprentices can receive college credit, if not a
degree, upon finishing the apprenticeship. Rather than work widr community colleges to meet its curriculum
needs, Dr. Schneider Automotive Systems takes advantage of a statewide pre -apprenticeship program through
Kentucky's high school and secondary vocational. schools.19
When companies choose to use a curriculum linked to an academic program or an industry -recognized
certificate, such as BCBSSC's use of CompTI s Healthcare IT Technician certificate program, graduates
can earn an additional portable credential beyond the certificate issued by DOL. These credentials signal to
the firm providing the apprenticeship, and other potential employers that the graduated apprentices have
acquired a specific skill set. Credentials can also make these programs more attractive to potential recruits who
want to continue academic or professional training after the apprenticeship. Dr. Schneider cited a state -based
certification as particularly important because there is no existing associate's degree program for the mold -
setter occupation. CVSH apprentices earn both national, industry -specific and company -specific credentials.
5. What are the best ways to implement owthe-job training and incorporate apprentices
into the workplace?
Well -developed on-the-job training (OJT) is as important as the foundational classroom work. It is through
this part of the program that apprentices gain the firm -specific skills that make them valuable members of
the workforce. The single most important element of OJT is the apprentice -mentor relationship (the fourth
point in DOn definition of apprenticeship). Mentors should be trusted, relatively senior members of a
firm's workforce who are able to help apprentices apply their technical skills to their assigned tasks and also
introduce apprentices to the company's culture.
Mentors also help apprentices learn how to conduct themselves in the workplace and how to work with
others to get the job done. Many apprentices are young adults or even teenagers who have never been in a
professional work environment; mentors are key for helping them understand the etiquette and expectations
of that world. Because these soft skulls are so essential, some firms offer pre -apprenticeship training in them.
CVSH partners with community organizations -to offer initial soft -skills training to candidates before they
start the apprenticeship to help prepare diem for the transition into the corporate world.
The exact way in which mentors and apprentices are paired varies from company to company, but each
apprentice should have one mentor responsible for his or her training at a time. Some firms rotate apprentices
through multiple mentors over the course of the program. How a firm assigns mentors to apprentices might
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l6 ECQ.�'O�t[CS AND STA7lSTICS ADhUNLSTRATION � OFPICE OFTHF.CHIEE ECONOAfIS'r � NOVPAtBER 20tG
INTRODUGUON
depend on a firm's work processes or on employees' work schedules. Some firms know in advance how they
will use the apprentice within their firm and for what work processes the apprentice will be responsible. Others
use the apprenticeship period to test their new employee's skills in order to later assign him or her tasks.
IFthe apprentice -mentor pairing proves to be a poor fit —whether because of different skill sets, training
needs that a particular mentor may not be best suited to provide, or even personality conflicts —then the
company should act quickly to find a new mentor. Getting the mentor-mentee relationship right is critical
to the success of the program. As described above, companies take many steps to ensure that apprentices they
bring on are qualified and have an excellent work ethic. Malting sure the OJT component of the program
works well is hey to ensure that companies are holding up their side of their bargain to prepare apprentices for
careers. While this study examines the investment and commitment of companies doing apprenticeships, it
is important to remember the considerable commitment and investment of die apprentices in the companies
they choose, too.
Mentors with whom we spoke were honored to be chosen to [rain others. They also spoke of a renewed
interest and focus in developing their own skulls. Additionally, mentors and apprentices to whom we
talked shared that they gained a sense of belonging to the workplace family by participating in this type of
relationship. Nonetheless, the time spent on the clock teaching others is time away from regular production
work, so mentors deserve recognition for this contribution to the company's long-term success and should
perceive a benefit from participating in the program.
Finally, companies need to consider thoughtfully how apprentices will be incorporated into their existin
workforce. Doing this well requires balancing the interests of the employer, the apprentices, and the g
incumbent workforce. Apprenticeships must prepare workers for good, stable jobs with the company, with
compensation on par with the existing workforce. The incumbent workforce—notjust the mentors —should
see the value of having apprentices and consider them teammates, not competitors for their good jobs or
promotion opportunities. Likewise, apprentices should not be seen as a cheap or temporary substitute for
skilled labor, but rather as workers early on the career ladder who soon will be equal colleagues.
6. How do you decide between acompetency-based and atime-based
apprenticeship program?
As discussed, apprentices gain general technical knowledge and firm -specific knowledge about an occupation
through a combination of classroom and OJT. In some programs, firms validate die acquired skills and
competencies of apprentices either through competency -based testing or completion of program milestones.
Wage increases are often based on the competency level that the apprentice has reached. The time to to
competency -based programs can vary; for example, at CVSH, apprenticeships last front one to two years
depending on how long it takes for an apprentice to learn the skills required.
On the other hand, in time -based programs, the length of the program is fixed. The time -based programs we
examined ranged in length from one year to more than four years, reflecting the differing levels of time needed
to impart classroom training and to train apprentices fully in job -specific skills.
Most of the programs we studied were competency -based. Siemens, however, favors a time -based program,
with apprentices alternating classroom and OJT throughout the four-year program. For Siemens, die relative
youth of its apprentices led the company to prefer a time -based approach. The company realized that maturity
and professionalism were just as important as technical skills and that these attributes could not be effectively
measured with a pre -entry test. Consequently, Siemens decided to use a time -based program, which provides
ample opportunity to mature in a professional environment.
NOVF1i6Ea 2016 I OFEICF.OFTHECHIEF ECONOMIST I ECONObfICS AND STATISTICSADMINISIRATION 17
THE BENEFITS AND COSTS OF APPRFNrICE511B'S: ABUSINESS PERSPEC1vE
7. How many apprentices do you need?
Once a firm has paid the upfront costs of establishing a program, it should hire apprentices as long as the
benefits of having one more apprentice are greater -than the additional cost of that apprentice. Calculating
these benefits and costs is not easy, especially when a firm is just starting its program. Below, we discuss some
factors firms should consider in initially determining how many apprentices to bring on: future labor needs,
probability that apprentices will complete the program, cohort effects, and company time horizon.
Future labor needs. Firms such as BCBSSC use a sophisticated, annual planning process to determine how
many apprentices to hire each year, Future labor needs matter most in this process, but companies also need to
consider the share of jobs they want to fill with apprentices and how long apprentices are likely to stay in a job
before being promoted or leaving the company.
Probability of completion. Like any employee, apprentices (night leave a program for a variety of reasons: for
SOrne, the program or firm might be a bad fit; some leave for personal reasons; and others leave to take another
jA or go back to school full-time. Whatever the reason, non -completion creates a sunk cost that firms must
take into account when determining how many apprentice hires to make. BCBSSC estimates that one out of
ten of its apprentices leaves the company before completing the apprenticeship.
Firms can increase the probability of completion by trying to get a good fit between apprentices and the firm
at the time of Hire. At Daettvyler, the non -completion rate has fallen from 35 percent to zero since 2013, as
the company has gained a better understanding of the type of candidate that will succeed in their program
after having run the program for a few years. Siemens instituted additional screening, including a six -week
paid internship, to ensure that potential apprentices understood the commitment theywere making; turnover
has fallen as a result.
As we discussed earlier, another potential source of attrition is that apprentices may be "poached" by
employers who have not made such an investment. In practice, this was not a major problem for our
interviewees. They avoided the problem in several ways. First, they paid attention to a balance of benefits (e.g.,
making sure wages of apprentices are commensurate with their value to the firm). Second, they participated
in consortia. As discussed above, consortia reduce both the probability of poaching and the cost to firms if it
does occur (since firms have a bigger pool of trained workers from which to draw, and thus may sometimes
be the beneficiary of workers that another firm has trained). Firms that are more concerned about losing their
apprentices require apprentices to agree to pay back their training costs to the firm if they separate before
completing the apprenticeship. Furthermore, apprentices at Siemens and BCBSSC sign an agreement that
theywill pay back training costs if they leave the firm less than two years after completing the program.
Cohort Effects. MTU America sees value in creating a cohort of about six apprentices each year, regardless
of its plans to transition the apprentices to permanent employment, and it does not guarantee a job to
graduates. It can do so because it finds that the apprentices provide a positive return to the company during
the apprenticeship program, and it believes in adding new skilled workers to the local labor force whether
they are working for MTU or another company. Like MTU, all study participants stressed the value of the
strong bonds that apprentices developed with others in the same class. The apprentices with whom we spoke
mentioned the value of having more senior apprentices to whom they could ask questions they were less
comfortable asking management.
Programs with just a couple of apprentices or that do not recruit new apprentices each year are likely to
lose these cohort benefits. That said, smaller programs can succeed. Dr. Schneider has just a handful of
apprentices, which it is able to do because the students are well integrated in an existing pre -apprenticeship
LB ECONOMICS AND STATISTICS ADABNl57RAT10N I OFFICE OF THECUIEF ECONOMIST I NOVEF7BER 2016
INTRonucnoN
program in the local schools. Consortia have a similar effect in that apprentices from several firms attend
classes together, creating inter -firm cohorts.
Time horizon. Some firms focus on recouping their investment during the term of the apprenticeship.
However, such a focus may create an incentive for firms to treat the apprenticeship program as a short-term,
low -wage labor program, causing these firms to sacrifice training time for production. These tactics diminish
the long term returns to apprenticeship programs by reducing the quality of people wanting to enter the
program or reducing the skills they gain while in the program. While most companies in the study guaranteed
graduates a permanent job, BCBSSC and Siemens went a step further by requiring graduates to stay with the
company two additional years, as noted above.
In some cases, back -of -the envelope calculations make a compelling case for the in-depth training an
apprenticeship provides. At Siemens, the cost of scrapping defective product is very high, so if defect
reduction would occur as a result of apprentice training, Siemens could recoup its costs very quickly. At
CVSH, apprentice programs meant that the firm could hire people from neighborhoods near its stores,
diversifying its workforce in many ways. This had an additional benefit for CVSH as this workforce program
led to an increase in customer loyalty."
For these reasons, most of the firms in our study bring on apprentices with the intent to move them into
permanent positions after they complete the program. Siemens, BCBSSC, and CVSH all base their decisions
about how many apprentices to hire on long-term labor force needs. It is critical for companies to lure
apprentices with an eye toward the long-term in order to avoid die perception that apprentices are low -wage,
temporary workers in the company.
However, the point at which the net cost of the apprenticeship program turns into a net benefit is not
something that the study films tend to measure, in part because the data needed to do so is stored in
different parts of the same company. We discuss these measurement challenges further in the Roadmap for
Measurement section below.
Rogclmap f4.r:.Measurement
The discussion so far has focused on decisions and best practices for firms considering apprenticeship. In
practice, firms should not make these decisions without a clear assessment of costs and benefits. In this
section, we discuss how firms can quantify the costs and benefits of the major decisions we discussed in the
previous section. Each decision affects the ROI in an apprenticeship program. The companies in the study
weighed these questions regularly but did not always have complete information.
Above we suggested that firms will most likely start their apprenticeship based on educated guesses given
available data, but it makes sense to evaluate the program more carefully once several classes of apprentices
have graduated. At that point, and going forward, firms can adjust parameters such as the number of
apprentices, the nature of both classroom and OJT, and so on. This evaluation is much easier if firms collect
data from the beginning and have in mind clear alternative scenarios, or "counterfactuals," that they evaluate
in their analysis.
30 Forafullerdisaruion ofrhe 6enefirs ofmanaging,vor�rce diversity,
ue hnns//hbrore/1996/09/ ki g-d'ff - -- .pa d' -f a�rd'_ry.
NOVET1aER201G � OFFICF.OFTHE CHIEF ECONOMIST I ECONOMICS ANDSrATISnCSADMINiSLRATION 19
THE BENEFITS AND Costs OFAPPRF.NHCESHIPS:A
The following steps will help any firm measure the return to investing in apprenticeship and then make use of
Aar they learn along the way.
• Determine the total costs of apprenticeship and the costs of alternative luring methods.
• Determine the measureable benefits of apprenticeship.
• Look across the company for data to measure benefits.
• Keep in mind other changes at the company and its environment that affect performance.
• Analyze and share the data across the company.
• Make improvements based on the analysis.
These points may seem obvious, but they are not necessuily easy to implement. Most of the companies in the
study intuitively understood the value of many of the steps, but had only an incomplete understanding Of the
whole picture. Our study team began to work through this process of collecting data across the organization
with two firms, Siemens and Dartmouth -Hitchcock, in order to learn more fully about their apprenticeship
programs and their work processes. In the next section, we provide overviews of these companies, their
approaches to Apprenticeship, a discussion of the costs and benefits of their programs, and a summary of the
results of our detailed economic analysis using firm data.
The level of detail in our quantitative analysis of Siemens and Dartmouth Hitchcock is intended to illustrate
the power of operational data in understanding the benefits of apprenticeships; individual companies may find
different levels of value in such detailed studies. This section lays out a more general approach to completing
the steps identified above, using examples to illustrate how a firers executives might think about this.
1. _Determine the total costs of apprenticeship and the costs of alternative hiring methods.
For most firms, identifying costs is relatively straightforward. There axe ttvo major types of costs associated
with any project: fixed and variable costs. Table 1 provides some examples of these kinds of costs, and the
following sections provide more detail about how they are defined and measured.
Table 1. Costs of Apprenticeships
Fixed
Costs
• Curriculum development
• Equipment purchases
• Staff time spent on setup
• Overhead and management
• Classroom space
• Recruitment
Variable Costs
• Wages and benefits of apprentices
• Mentor tune
• Supplies and uniforms
• Tuition, books, and classroom materials
1A ECONOMICS AND 5rATISTICS ADAUNISTRATION � OFHCF.OF THE CHIEF ECONOMIST' I NOVFAtSER 7AIL
INTRODUCTION
Fixed Costs
Some costs remain more or less constant regardless of the number of apprentices in a program. To a large
extent, these "fixed costs" represent the cost of setting up the program in the first place. Firms can develop a
curriculum in-house or they can outsource this job to a local community college or workforce development
organization. Modifying a pre-existing curriculum, such as an associate's degree program, may be relatively
inexpensive. Developing a new approach from scratch can be fairly costly, whether done by staff on the
company payroll or by a private agent for a fee.
Purchases of equipment that can be used by all apprentices and by future classes also count as fixed costs.
Hypertherm teaches students in the classroom using the same kinds of machines they will later operate on
the factory floor. Dartmouth -Hitchcock provides each apprentice with a loaner laptop to use for the duration
of the program and uses a projector and models of various organs in the classroom to teach students about
human anatomy.
Most of the firms in the study dedicated at least one staff member to manage their programs, though
some maintained larger groups of staff. CVSH employs a task force to oversee the company's workforce
development programs across the nation. These staff members manage relationships with consortia,
educational institutions, community groups, government agencies, and even other groups within the
company. They usually monitor overall performance of the program and manage records as well. At many
firms, those staff who manage their apprenticeship programs spend the rest of their time working on other
workforce management tasks or other operational tasks:
It is also important to count what economists would call "opportunity costs" —that is, the cost of using a
resource for apprenticeship rather than something else it could be used to do. A major fixed cost that is also
an Opportunity cost is often facility space used for apprenticeship functions. Many companies repurpose
conference rooms or other spaces within the existing facility to train their students. Others, like Hypertherm,
realize facility costs directly when they build or retrofit spaces —in the case of the Hypertherm Technical
Training Institute, at a significant cost of $2 million.
The cost of recruiting apprentices must also be included. Recruiting costs are twofold; identifying the target
population and reaching it. Job postings, participation in career fairs, presentations at local high schools or
colleges, or some combination of those all entail costs. These can take the form of staff time to attend events,
presentation design, materials for handouts, and so on. Many of these costs do not vary substantially with the
quantity of apprentices.
Variable Costs
Some costs vary based on the nwnber of apprentices in the program. These "variable costs" include many of
the largest costs associated with apprenticeship; in particular, wages and benefits usually make up the bulk
of a program's per -apprentice costs. Most, though not all, of the firms in the study pay their apprentices for
every hour they are in the program, including classroom time, as well as pay for books, supplies, and in many
cases, tuition.
Because mentors take time to teach apprentices, they often work more slowly or take periods of time offfrom
their regular work. As described in the cost section above, this represents an opportunity cost for acompany—
instead of mentors, who are usually experienced, senior members of the workforce, working to increase sales
NOVEMBER 201G � OFF[CF.OF THE CHIEF ECONOMIST I ECONOMICS AND 5LA77STICS ADMINISTRATION 21
THE BENEFITS AND COSTS OFAPPRENTICESHIP&A BUSINESS PERSPECTIVE
or revenues, they are engaged in teaching others for some portion of their time at work. One way to measure
this cost is to estimate the output of mentors, pro -rated to reflect the percentage of their work time they spend
as mentors.
Adding up the Costs
Based on interviews with companies that were able to provide a fairly complete accounting of program
costs, the per -apprentice costs of die firms in the study ranged from under $25,000 to around $25030004
While these figures are not comprehensive, they portray the large variation in per -apprentice costs faced
by companies. It is essential to keep in mind, however, that all of the companies studied, whether their
investments were in the tens or hundreds of thousands of dollars, believe that the payoff justified the
investment.
Dartmouth Hitchcock provided the study team with a detailed breakdown of costs for running apprentice
classroom training, tuition, wages of apprentices, a workforce development consultant, and two apprentice
supervisors. In addition, Dartmouth -Hitchcock used long-term lease agreements on its facility to estimate the
cost of classroom space. Divided across all apprentices, these costs came out to approximately $60,000 per
apprentice for the course of the one-year program.
The ultimate goal is for companies to fill skilled jobs, and apprenticeships are one way to do so. Many of the
costs listed above are also incurred when the job is filled through a direct hire of an already -trained worker,
the contracting of a temp worker, increasing the hours of existing staff, or some other method; this is part of
the "counterfactual," or what a firm would do instead. Firms need to compare the costs of an apprenticeship
program to the costs of these alternative hiring methods when analyzing whether it makes sense_ to develop an
apprenticeship program.
MTU America shared its recruiting costs with our study team, which we consider illustrative of the costs other
small firms might bear. White advertising on the company website or on the South Carolina state employment
website is free, other job sites charge approximately $400 per ad. A ten -line newspaper ad running for two
weekends costs the firm more than $600. Hiring through a staffing agency means MTU will pay a markup of
over 25 percent on the hourly rate of the employee. On average, MTU estimates thatit spends $3,000 to hire
a mechanic outside of its apprenticeship program.
Hiring workers, the next step of the process, can be expensive. Almost all new workers will need some training
or an adjustment period. If sufficiently skilled workers are hard to find at a reasonable wage, firms may leave
positions vacant. However the decision to leave positions vacant is not without cost —turning down work,
paying overtime, or delivering product late all cost firms money.
2. Determine the measureable benefits of apprenticeship.
While the calculation of costs is fairly straightforward, determining the benefits of an apprenticeship program
is often much more challenging. While many of the costs associated with running an apprenticeship program
show up on the company's balance sheet or accounts payable, the benefits of apprenticeship rarely do.
Alt of the organizations in the study believe that there are sizeable benefits to apprenticeship (see Table 2 for
some benefits to consider), and most are helping promote apprenticeship through their participation in the
DOL LEADERS program. Some benefits are realized during the apprenticeship period, while others take
longer to appear. Many of the firms in the study believe that their apprentices become as productive as, or even
22 ECONOh11CS AND ShATISTTC5 ADA11NISTRATTON I OFFICE OFTHE CHIEF ECONOAfIST � NOVFAIRER201G
INTRODUCTION
more productive than, employees hired off the -street before the apprenticeship is over. As a result, these firms
believe that the productive work of the apprentices more than offsets the apprentices' wages and tuition costs.
Table 2. Common Benefits of Apprenticeship
Production
• Output during the
apprenticeship at a reduced wage
• Higherpost-apprenticeshi
productivity relative to similarly
tenured employees
• Reduction in mistakes or errors
Production Metrics
Workforce
• Reduced over
• Pipeline ofskilled employees
• Better snatching of employee
skills and character with
employer needs and firm culture
• Lower recruiting costs
• Development of future managers
Soft Skills
• Employee engagement and
loyalty
• Greater problem -solving ability
and adaptability
• Reduced need for supervision
During the apprenticeship, one benefit to a firm is dsat apprentices' labor is usually provided at a reduced
wage relative to an off -the -street hire. To measure this benefit, a firm should emphasize the real metrics used
to judge the success of its particular business, such as parts per minute, number of prescriptions filled, or
computer coding projects successfully completed. Although performance reviews are common for measuring
how an apprentice is doing, they are necessarily subjective and provide a measure of employee contribution
that is often difficult to quantify.
After they graduate, apprentices may continue to have higher productivity than worlrers that did not receive
such training. In addition, many firms cite a reduction in errors as a key benefit of apprenticeship. The likely
driver of these improvements is better training in the principles behind their work. Most of the firms in the
study cited classroom training in the theory of their work processes as a driver of multiple benefits. One of
those is that employees who understand not just what tasks need to be performed, but also why those tasks
need to be performed, are often able to diagnose potential problems before they occur, or they can quickly
troubleshoot problems after they occur. A decrease in errors can reduce scrapped product due to poor quality
and maintenance costs, and it can improve on -time delivery, all of which represent a benefit to, the company.
Workforce
Metrics
Many benefits of apprenticeship are not directly related to production outcmnes, though they may improve
those outcomes tangentially. Some of these benefits will be easier to measure than others, though all are
important and should be considered.
Among the most -cited benefits of apprenticeship for the study firms was reduced turnover —in many cases,
firms considered it even more important than increased productivity. During our site visits, apprentices
described a feeling of loyalty to their hiring firm for the opportunity the apprenticeship provided them and
for the relationships they developed along the way with other apprentices and their mentors. CVSH officials
say that apprenticeship makes employees twice as likely to stay. BCBSSC cites an attrition rare of 4 percent for
employees wlio graduate from their apprenticeship program, compared to an industry average of 13 percent.
Dartmouth -Hitchcock went further, noting that MAs also drove a reduction in turnover for other employees;
reducing physician stress and allowing them to perform work for which they were trained led to a reduction in
their turnover as well,
NOVF.MBER 201E � OFPICF.OF i'HE CHIEF FCONOMlST 1 F.CONOMICSAFID SI'ATIST{CSAOAfINISTRATION 23
THE BENEFrFS AND cosIS oFAPPRENMCESHIPS:ABUSI\TM PERSPECTIVE
Related to reduced turnover are the recruitment costs saved by having a pipeline of skilled employees
to replace retirees or others who leave the company. For 100 years, the building trades have used an
apprenticeship model to move workers from apprentice to journey worker to supervisor, providing guidance
and mentorship to new apprentices at every step. BCBSSC has adopted the same model, with each level of
employee responsible for teaching those at the next level below. Dr. Schneider, an auto parts manufacturer in
Kentucky, believes that apprenticeship saves the firm 20 percent on recruitment costs alone, aside from the
other benefits the program provides.
Marry of the firms in the study used apprenticeship to find workers from a diverse pool of cant dates
including women, minorities, veterans, and the long-term unemployed. For many of these workers,
apprenticeship represents an opportunity to gain entry to a field or industry that is otherwise difficult to enter.
CVSH, in partnership with community organizations, is a strong proponent of this approach, citing both
high-minded goals like corporate social responsibility and the everyday need to expand the labor force and fill
positions. Apprentices can also make a firm more attractive to other skilled workers. Dartmouth -Hitchcock
believes that MAs, by allowing physicians to perform more of the work for which they were trained; have
improved recruitment of very highly -skilled medical professionals.
Finally, a long-term measure that firms can use, though likely only after many years of having an
apprenticeship program, is the development of leaders. Many firms believed that the intensive training,
immersion in company culture, and strong theoretical • underpinning provided by apprenticeship were
ideal for preparing future managers. While few of the programs in the study were mature enottgh to have
strong measures of this kind of development, BCBSSC estimates that 22 percent of graduates from the
apprenticeship program are currently serving in leadership roles.
Soft S1d1ls Metrics
Other benefits that apprenticeship is likely to provide are even harder to measure. Apprentices are often
grateful for the opportunity to participate in the program. As discussed above, this may show up in reduced
turnover, or advancement into senior positions in the company, but it may also show up in recruitment of
friends to new positions, better relationships with supervisors and colleagues, or improved customer service.
Both theoretical classroom training and hands-on cross training can give apprentices a powerful toolbox
for problem -solving and adapting to unforeseen challenges. Sometimes these benefits show up in reduced
errors or shorter maintenance times, but they may also result in gaining new work for a company or process
improvements across the entire workforce. Apprentices are often self-starters as well, reducing workload for
supervisors. Otter soft skills that many programs emphasize, such as attendance, writing, and public speaking,
are also key for developing future leaders.
Because they understand the principles behind their work, apprentices may be more "flexible' in several
senses: they can do a greater variety. of routine tasks at a point in time (leading to increased capacity
utilization), they can do higher -value tasks (such as those requiring judgment or initiative), and they can
facilitate innovation because they learn quickly and have problem -solving skills. The Siemens case in the next
section gives an example of how to measure such benefits, which can be very large.
24 EC.ONOMLCS AND57ATIST[CS ADMINISTRATION � OFPICE OF THE CHIEF ECONOMIST I NOVEAIBER 20lG
INTRODUCTION
Adding up the Benefits
The value of apprentice output should be compared to a baseline "counterfactual" level of output for an
employee that would have been hired had an apprentice not been available. Many companies in the study,
including LaunchCode, Siemens, and Hypertherm, claimed that apprentices were significantly more
productive than off the sweet employees, for the production, workforce, and soft -skill reasons listed above.
Firms may not be able to find workers that meet their minimum standards. In this case, the counterfactual
is turning down work or delaying completion ofprojects. In such cases, the margin on all of an apprentice's
output should be counted as a benefit.
For Dartmouth -Hitchcock, MAs were difficult to find in the local workforce and other staff —doctors,
registered nurses, and other medical professionals —were asked to perform administrative tasks. Having these
highly -paid professionals work below the highest level that they are trained and certified to perform was very
expensive for Dartmouth -Hitchcock and resulted in inefficiencies or turning patients away because of the time
constraints that employees faced when asked to perform additional tasks. In addition, this led to staff burnout,
turnover, and additional cost. At $250,000 just to replace a lost physician, this turnover was extremely
costly —enough to pay for the hiring of several MA apprentices?,
Each of the metrics we discussed in this section was cited by several study firms as specifically important to
them. In nearly all cases, companies measured at most one or tvo of the items in this list, relying on reports
from management and other employees for a sense of the value of other things.
However, not
every metric will matter to every firm, which is another reason why it is important to think
ahead about what benefits to measure. For some companies, long term loyalty may not be a particularly
important goal. If an apprentice is relatively productive during his or her training, and then chooses to leave
after completing the program, a firm may have already recouped the costs of its investment. For a consortium,
like Apprenticeship 2000 or the NCTAP, one of the key outcomes may be the creation of robust local
labor force with manufacturing skills that are readily transferable between member firms. Such an ecosystem
benefits all partners, even if any given apprentice may not remain in a single firm for a long time.
3. Look across the company for data to measure benefits.
Once a firm has an idea of the kinds of benefits it expects to see From an apprenticeship program, it is time to
collect the data that will be used to measure those benefits. It is important to begin gathering data early, even
if a full evaluation of the program is difficult before several classes of apprentices have graduated. Early data
collection may allow a firm to adjust parameters such as the number of apprentices and the nature of both
classroom and on-the-job training if the program is not providing the desired benefits.
To measure all of these benefits, firms can collect new data or use data they already have. Firms should be
creative —many already have data that they are not using, and dmeteor departments, units, or systems within
a firm's organization might be collecting data. Organizational banners are common. For example, in larger
organizations, the human resources department has personnel data about wages, benefits, and turnover; the
finance department has cost and revenue data that may help measure productivity; and operations has data on
the real Output of employees. All of these data sources can be used to take advantage of any information that
the company is already collecting.
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NOVF.MBER 2016 I OFPICF.OF THE CHIEF F.CONOAfIST I ECONOMICS AND STATISTICS ADAfINISTRATION y5
THE BFNEM- SAND CWFS OFAPPRENTICESHIPS:A BUSINESS PERSPECI7vR
However, in many firms, particularly large ones, one department may be unaware of the existence of data
in other departments that is relevant to the cost -benefit analysis of apprenticeships. Existing data was likely
collected for a variety of reasons, none of which may have involved measurement of the benefits of an
apprenticeship program. Adapting systems to measure the contributions for these new employees may
be necessary.
In practice, one challenge of data collection is the need to compare the company both before and after the
implementation of an apprenticeship program. Measuring the contribution of apprentices requires knowing
the baseline level of productivity, turnover, errors, or other measures in order to understand how those things
changed when apprentices came onboard. To do so, firms need to have a time -series of consistent data that
spans several years. For example, measuring the ROI of a four-year apprenticeship program could require data
spanning a decade or more to get a clear picture of productivity before the implementation of the program,
the period when apprentices are in the program, and the period after the program.
It is generally easier for firms to precisely measure performance metrics for an entire plant or other work unit
rather than for individuals. For this reason, firms should first focus on these metrics and the contribution of
apprentices and other workers to overall performance when trying to value apprentices' work. Once those
measures are fully understood, data should be collected on individual employees to the extent possible. It is,
however, very important to separate the analysis of the apprentice program from evaluation of individuals. In
particular, many things early in the life of a program can go wrong (or right) that are not necessarily the fault
of individual apprentices or managers.
4. Keep in mind other changes at the company and its environment that
affect performance.
The importance of establishing a baseline level for each metric being treasured cannot be overstated. In
any company, it is rare for one program to be adopted independently of all other changes. At any given
time, multiple factors will change the companys performance simultaneously: new work processes, new
technologies, changes in training, and so on. Without detailed data from before and after any such change, it
is difficult to understated how any given program affects. overall performance.
For Dartmouth -Hitchcock and other health care providers, the last several years have been a time of great
change. While Dartmouth-Hitchcock's MA apprenticeship is one factor in the company's increased service
metrics over that time, the hospital also cited electronic medical records, the Affordable Care Act, and the
overall aging of the population as factors changing the kinds of work Dartmouth -Hitchcock does and how
it does that work. Given the firm's location in New Hampshire, even snowfall can play a factor in how many
patients are willing or able to meet their doctors for a previously -scheduled appointment.
Other factors may also account for observed changes in performance. Remember that "correlation is not
causation." For example, the introduction of apprentices could coincide with a general economic upturn; it is
important to test whether any improved productivity is due to the apprentices or to the upturn. All of these
different factors combine to affect Dartmouth-Hitchcock's performance metrics, and detailed data gathered
with high frequency can make it possible to disentangle the individual effects of each factor.
5. Analyze and share the data across the company.
Performing ROI calculations in order to understand the value of an investment is nothing new for any
company. Remaining profitable and successfid in a competitive economy requires spending money wisely.
The goal of this roadmap is to help companies think comprehensively about the costs and creatively about the
2( ECONOMICS AND STAT15nC5 ADMINISTRATION � OFFICE OFTHECHIEF EC.ONOA95F � NOVEh18L•R20I6
'1N1'RODUC110N
benefits of apprenticeship. Failing to do so will lead companies to underestimate both the costs and benefits,
making it unlikely they can calculate the true ROI of apprenticeship programs.
The companies in the study all believed that the benefits of apprenticeship outweighed the costs, but many of
them expressed a strong desire to get better numbers about their ROI for a variety of reasons: better decision
making, marketing to prospective employees, convincing the board to approve funding for more apprentices,
and so on. Using the roadtnap here to understand the full array of costs and benefits can lead companies to
the numbers they need to make a sound decision based on real data.
Once the value of apprenticeship is fully understood, firms should use that information to make better
decisions. Any workforce development or talent acquisition strategy should continue to take the results
into account. In addition, decisions in areas such as technology and marketing will probably be affected as
well. Firms with deeply trained workers can invest in more complex equipment and may be able to target
more demanding market segments, such as those requiring better customer service or faster innovation
and de -bugging.
6. Make improvements based on the analysis.
As with any new business process, firms often learn as they go. In interviews, firms shared some of the
lessons they learned as they have worked through implementation and administration of their apprenticeship
programs. Below are some examples. of tweaks firms made as a result of experience.
Mentor assignment. As noted earlier, the apprentice -mentor pairing is not always a good match, in terms
of an apprentice's training needs or personality. Assessing the relationships between the apprentices and their
mentors is important and firms should not be afraid to make changes to improve matches.
Apprentice uniforms. It may be useful to differentiate apprentices from other employees for safety or other
reasons. Siemens started out by having apprentices wear different uniforms from experienced employees, in
order to mark their different status. What Siemens did not foresee was that this "special" status would make
it difficult for apprentices to fit in with existing employees, hindering the development of camaraderie and
teamwork. Since then, Siemens has put apprentices in the same uniforms as other employees, using a badge
sewn onto the uniform to identify that they are apprentices. Similarly, Dartmouth -Hitchcock uses colored
stars on name badges to call out the competency level of their apprentices. These small differences in how
apprentices look signify that apprentices are still in training mode but also allow them to blend in with other
workers, making them feel like part of the team.
Scheduling. Dartmouth -Hitchcock experienced difficulty in the early stages of a pharmacy technician
apprenticeship program because ofshift schedules that were incompatible with apprentice work -life balance.
Many apprentices were scheduled to work late into the night before returning early the next morning. It
is difficult for any employee to perform productively on little sleep, but it may be even harder when that
employee is also engaged in an intense learning process. Dartmouth -Hitchcock took this into account and
fixed the scheduling process before relaunching its pharmacy technician apprenticeship program.
These are just a few examples of stories shared by companies in the study. No company got it exactly right on
the first try —and what counts as "right" is a moving target. Firms' needs change over time and apprenticeship
programs should change to remain useful. The companies profiled in this report provide a wealth of
experience from which other firms can draw. Similarly, federal and state government partners —the Office of
Apprenticeship in the DOL, in particular —can play a key role in providing advice, support, and connections.
NOVF.\1BER 2616 l OPPICF.OP THE CHIFF FCONOAfIST I F.CONOM[CS AND ST�TISTICSADMINISTRATION 27
THE BENEFITS AND COSTS OFAPPREYfICESHIPS; A BUSINESS PERSPECHVE
Conclusion: Measuring the hard -to -measure.
Leaving out a hard -to -measure cost or benefit is equivalent to assuming its value is zero. For example, if one
valued only the increased productivity of apprentices at Siemens, and ignored their flexibility the case for
apprenticeship would be much weaker. Where apprentices often shine, with their deep understanding of
fundamental principles and hands-on knowledge, is in the unexpected or unusual. Firms may want to guess at
reasonable numbers, drawing on reports such as this one to generate a range of estimates, or adopt techniques
that account for variance in capacity utilization, such as the portfolio analysis described in the Siemens case
in Appendix I. -
ilhl I nli I.hil i11f UCc3olk ��> (l IM 1'1nI
I.iC�hc�la�t 13 f37 Il�ii•:x€ lfl =tnnX tii
At��
U le,wiii to Ui TOTAL COSTS Oetennina the measureZoBENEFITS of appI r� Look across th ix r rpany for
DATA to weaqafi De:rellls.
h pmurnlO.THERCHANGES nn .lu, (1 ``� ( �,1/
r ndn rm u1 nllial i� Ilnlo,n nc� t!�I / l\\ �� �/I
ANALYZE and SHARE the
dAta across the company,
Ntalre IMPROVEMENTS based
on (ha nnafysis.
28 ECONO\TICS ANq STATISi1C5 ADhrIN15TRATION I OFFICE OP THE CHIEF ECONOMIST i NOYF1,10F1i 2016
-' OYERVIEW OF APPRENTICESHIP PROGRAMS ANDINTERMEDIANES
Overview ®F Apprenticeship Programs
and Intermediaries
The Decision Points and Roadmap for Measurement sections reflect the lessons learned as we studied the
well -established apprenticeship programs at I I companies and 2 intermediaries. This section provides case
studies for each of the apprenticeship programs. The first two, Dartmouth -Hitchcock in Lebanon, New
Hampshire, and the Siemens USA plant in Charlotte; North Carolina, are more comprehensive. We visited
those two facilities to interview the senior executives overseeing the apprenticeship programs as well as several
apprentices and mentors. For these two funs and the other organizations in our study, we tried to gain a
thorough understanding of the
• background
motivation
• recruitment process
• program design
• costs and benefits associated with each of those programs
Subsequent to our visits, we reached agreemen[s with Dartmouth -Hitchcock and Siemens USA to gain access
to more detailed production and cost data, which has allowed us to statistically assess some of die costs and
benefits for their apprenticeship programs. The remaining 11 case studies do not contain similarly detailed
data but do list enough to underscore the surprising range of costs and benefits for each apprenticeship
program —with all companies viewing the value to their companies of their apprenticeship programs as being
unequivocally positive.
The follmving organizations are profiled here:
• Dartmouth -Hitchcock
Siemens USA
• Blue Cross Blue Shield of South Carolina
• CVS Health
• Dr. Schneider Automotive Systems
• Hyperthem
• LamtchCode
• Max Daetwyler Industries and Apprenticeship 2000
MTU America
• North America's Building Trades Unions
• Oberg Industries
• United Auto Workers -Ford Motor Company
• Vermont HITEC
NOVEMBER2016 I OFFICE OFTHB CHIEF ECONOAitSi � ECONOMICS AND SLATISTICS ADMINISTRATION 29
THE BWEFHS AND COSTS OF APPRENTICESHIPS A BUSINESS VERSPECnVE
Dartmouth -Hitchcock
Location: Lebanon, New Hampshire
Occupations of apprentices:
• Medical assistant
• Pharmacy technician
• Patient registration representative
• Medical coder
• Phlebotomist
CompauyWeb Address: htto•/hvsvtvdartmouth-hirehcock.org/
Bacltgroundzz
Dartmouth -Hitchcock is a nonprofit academic health system that serves a population of 1.9 million in New.
England. Dartmouth -Hitchcock provides access to more than 1,000 primary care doctors and specialists
in almost every area of medicine, delivering care in Lebanon, NH at its flagship, Dartmouth -Hitchcock
Medical Center; the Norris Cotton Cancer Center, one of only 45 Comprehensive Cancer Centers in the
nation; the Children's Hospital at Dartmouth -Hitchcock; affiliate hospitals in Lebanon, Keene, and New
London, New Hampshire, and Windsor, Vermont; through the Visiting Nurse and Hospice for Vermont
and New Hampshire; and at 24 ambulatory care clinics across New Hampshire and Vermont. In early 2014,
Dartmouth -Hitchcock began an apprenticeship program to train medical assistants (MAs) for its new primary
care clinic located on Heater Road in Lebanon.
AtDartmouth-Hitchcock primary care clinics, MAs help doctors, physician assistants, registered lmrses, and
other medical providers. They are responsible for numerous tasks including:
• Walking patients from the waiting room to the exam room and checking height, weight, and blood
pressure.
• Reviewing medical history fortns and identifying the reason for the visit.
• Performing basic medical procedures such as drawing blood and administering vaccines and
immunizations.
• Handling basic incoming patient inquiries that do not involve an assessment of symptoms.
• Calling patients to remind them of upcoming visits or to schedule visits for check-ups or regular
preventive care.
• Preparing prescription refills for physician review and doing other paperwork.
In 2012, the new primary care clinic on Heater Road combined internists and pediatricians formerly housed in
the main Darunouth-Hitchcock Medical Center building with Family physicians from another clinic location
due to the lack of space for expansion in the former facilities. During the transition to the new facility, staffwere
also transitioning to a new electronic medical records system and to a team -based care model, described in more
detail below. In addition to these institutional changes, Dartmouth -Hitchcock was having trouble recruiting
qualified MAs to work at the Heater Road clinic. Existing MA training programs in the local area produced
" For more informadon on Darunoudr-Hirchcocksapprenrirrsship programs,
see: he /! d h-h' h k e/ es/workforce-derelopmenr hrml.
30 ECONO\B(SAND STATISTICS ADMINISTRATION � OFFICE OF THE(711F.F EODNO\QIST 1 NOYEAtBER 2016
OYERV"E'VOFAPPRFNUCESWPROGRAMSAND [WE MEDIARIES
only a small number of new graduates each year and experienced applicants were rare. Dartmouth -Hitchcock
believed that a pipeline of qualified, trained MAs would be essential to its success in navigating all the changes
at the new clinic. Dartmouth -Hitchcock created the apprenticeship program to address this talent gap and to
fill the clinics' emerging workforce needs. Without this program, Dartmouth -Hitchcock believes it would have
been unable to hire sufficient MAs to complete the transitions,
Motivation
Since 2013, and coincident with the I
use of electronic medical records,
Dartmouth -Hitchcock has transitioned
to a team -based care model that
includes MAs as an integral part of
patient care. Under this model, the
Clinic uses balanced teams of are
workers. Teams are split into three
smaller "teamlecs," each of which
has two providers —for example, one
medical doctor and one physician
assistant —who are assigned two MAs.
The entire team shares registered
nurses. The team -based care model
allows each staff member to specialize
in the level of care that he or she is trained to provtae. r�artmouth-Hitchcock's goal is to have each team member "working to the top of their license." This means that doctors, who are trained and licensed to
Provide specialized medical care do not spend their time walking patients to an exam room or responding to
patient inquiries for basic, non -urgent questions —tasks that can be handled by an MA —but can instead focus
on delivering the care only a physician is qualified to provide. Additionally, when patients schedule visits and
go to the clinic for appointments, they typically interact with a designated teamlet of providers, MAs, and
registered nurses, which allows for more personalized care.
To effectively deliver this team -based care model, Dartmoudr-Hitchcock required more MAs, \Y/hile Dartmouth -Hitchcock has a state-wide footprint, the Heater road facility serves a primarily rural community
where there was a significant a shortage of skilled MAs in the local commuting area. There are few local
colleges with MA programs, and many graduates choose to move away to larger cities after graduation.
Experienced licensed MA candidates from more populated areas face expensive relocation or an hour -plus
commute for a position paying $13 to $20 per hour, and similar positions exist closer to home for them.
Dartmouth -Hitchcock reassessed its pay practices for this role, but even at a slightly higher wage, candidates
to fill empty MA positions were hard to find.
Prior to starting ire apprentice program, Dartmouth -Hitchcock was operating with a four -to -one provider -
to -MA ratio at the Heater Road facility. At this ratio, patients were being turned away because providers were
frequently required to cover basic support tasks such as walling patients to exam rooms and checking their
vital signs. Having providers or nurses spend time on these and other support tasks detracted from the time
they had available to see patients and resulted in Dartmouth -Hitchcock having to pay these providers top
dollar for time not spent examining patients, evaluating symptoms, and diagnosing illnesses,
In addition to patient support, MAs assist providers in other ways. Before MA apprentices came to Heater
Road, nurses were providing prescription support, which took an average of two hours a day from time they
NOVF.AfBER 201G � OFF/CEOFTHE CHIEF ECONO\nSC I F.CONOMfCSAND 5rATf5TICS ADAtINf571L1770N 31
THE BENEFITS AND COSTS OFAPPRFNnCESHIPS:A BUSINESS PERSPECTIVE
could have spent with patients. Additionally, many providers and nurses were frustrated to be covering these
tasks at the expense of doing "top of license" work, resulting in higher turnover in these positions. MAs free
up the nurses' time by preliminarily reviewing requests for as many as 300 prescription renewals a week and
then preparing the requests for physicianreview and approval. MAs also assist with scheduling, helping the
clinic to use capacity more efficiently. This shift in focus means that patients are able to see providers within a
few days, as opposed to the longer wait times experienced under the old system.
To summarize, the MA apprenticeship program had the following impacts for the Heater Road primary care
clinic: Reduced costs, due to reduced overtime of all providers and lower wages of MAs.
• Enabled the team -based care model to succeed by providing the a pool of qualified MA candidates.
• Increased provider satisfaction due to increased time spent delivering care they were trained to do.
• Increased patient satisfaction, because of reduced wait time to obtain an appoinnnent.
Recruitment
The apprenticeship program was attractive to Dartmouth -Hitchcock because it allowed for identifying
candidates who demonstrated the right characteristics for patient care and to provide them with the specific
technical skills needed to perform the role of an MA. The ideal candidate is eager and ready for change,
can follow directions, and has good communication skills and an attention to detail, cares about people
and customer service, and wants to make a difference. No prior health rare experience is needed; most MA
apprentices have come from non -medical fields.
To find candidates, Dartmouth -Hitchcock launched an advertising campaign that targeted local residents —
specifically, underemployed and recently unemployed workers, recent high school graduates, veterans, and
individuals looking to return to work after a gap in employment. The organization believed that there were
people in the areaa who would be eager for the opportunity. A demographic analysis of participants shows that
the majority of people accepted into the program were in the labor market prior to starting the program but
were either unemployed (39 percent) or underemployed (54 percent). About half, 54 percent, enter the program
already holding an academic degree beyond a high school diploma, and 27 percent were over the age of 40.
Dartmouth -Hitchcock advertises the program using print and radio advertisements, social media, and some
more creative grass roots approaches including coupon mailers, ads on the backs of unemployment checks,
and posters in local supermarkets and laundronrats. Over time, word-of-ntoutlt has also become an important
outreach tool as many apprentices in subsequent programs are the friends and family of prior apprentices and
other Dartmouth -Hitchcock employees.
The applicants are put through a rigorous two -week selection process. This includes an orientation where
candidates are expected to show up on time, bring multiple copies of their resume, and submit a detailed
application online. Dartmouth -Hitchcock staff note applicants' ability to follow these directions. Candidates
then go through two rounds of interviews and are tested for basic math, customer service, and reading
comprehension skills. Dartmouth -Hitchcock clinicians, human resources staff, and classroom instructors
interview candidates noting how they interact with others and how they conduct themselves during the
process. Dartmouth -Hitchcock offers apprenticeships only to candidates that demonstrate they can make
it through the demanding classroom training portion of the prograiu and who are committed to the care of
others. A typical selection process starts with an applicant pool of over 150 candidates and concludes with an
MA apprenticeship class of 15 to 20. The pool of candidates is sometimes limited by the fact that participants
are not paid during the 11-week training course,,as described below; in some cases, grant funding was found
to cover students' living costs.
32 ECONOMICS AND STATISTICS ADAi1N[SI'RATION � OFPICE OPTHF.CHIEF ECONOAtt5r l NOVEMBER20IG
OVERVI ENVOF APPRENTICESHIP PROGRAMS AND INTERMEDIARIES
Program Details
Dartmouth -Hitchcock partners with Vermont HITEC (now known as The Institute for American
Apprenticeship) for the selection and classroom portion of the apprenticeship training. As part of a four-year
contract, Vermont HITEC staff worked side -by -side with the Dartmouth- Hitchcock team to understand
both the core skills needed to be an MA and how to best teach those skills to apprentices in the Dartmouth -
Hitchcock environment. Vermont HITEC accomplished this by going into the clinic and reverse engineering
the MA role. The end result was a comprehensive training course and competency -based apprenticeship
curriculum. Vermont HITEC provides Dartmouth -Hitchcock with classroom instructors and the training
materials. In 20153 Dartmouth -Hitchcock and Vermont HITEC formed a partnership with Burlington
College to award up to 68 hours of academic credit (45 hours of which is applicable toward an associate's
degree, representing 75 percent of the required credit hours) to apprentices upon completion of the program.
All apprentices attend an 11-week
Pre -employment classroom training
program�3 During this training, the
apprentices are considered students of
Vermont HITEC, not employees of
Dartmouth -Hitchcock, and they are
not paid. A combination of federal
and state grants, charitable donations,
and sometimes Dartmouth -Hitchcock
sponsorship, covers the tuition cost
of$10,000 for each apprentice. Each
apprentice receives two uniforms and
textbooks at no cost, which are theirs to
keep. Loaner laptops are also provided.
The classroom training is intense —
it takes place for eight hours a day,
five days a week, and apprentices are
expected to complete three to four hours of homework per night The classromn instruction is intended to .
reinforce the material and instructors expect the apprentices to come to the lesson ready to demonstrate what
they've learned on their own. The training is a combination of verbal exercises, quizzes, lectures, and practical
hands-on training. The hands-on training takes the form of injecting oranges to practice administering
vaccines, modeling hearts out of clay, or practicing taking blood pressures on other apprentices, for example.
After completing three weeks of classroom training, the apprentices begin clinical shadowing of other MAs
at Dartmouth -Hitchcock and observe the taslrs they are learning in the classroom. During the shadowing,
apprentices do not assist with any tasks on patients. At the end of the 11 weeks in the classroom, the
apprentices take the Certified Clinical Medical Assistant (CCMA) written exam. If successful, they begin
the OJT portion of their apprenticeship program and become full-time Dartmouth -Hitchcock employees.
Currently, Dartmouth -Hitchcock MA apprentices have a 100 percent CCMA exam pass rate. Dartmouth -
Hitchcock pays apprentices a starting wage of $14.50 per hour and provides full benefits. Pay raises are
awarded at six months and then again about six months later contingent upon demonstration of clearly
articulated competencies and completion of the program,
r' Originally the classroom vatting was oEfersd aver l0 weeks, burDurmoudr-Idimhcock imtimreda`readingweek"in the middle ofrhe vatting char allows the appremicu m carer up and meer wirh insrmaors ro reinforce any mncepzs They aresvuggling wirh.
NOVFAIBER7A16 I OFFICE OF THE Ck11EF ECONOWST 1 ECONOMICSAND STATISTICS ADMINI5IRATION 33
THE BENEFITS AND COSTS OFAPPREVITCESHIP&A BUSINESS PERSPECTIVE
As apprentices, the Iv1As typically spend one year in this on-the-job training before taking the Registered
Medical Apprentice (RMA) exam and graduating. As noted earlier, the typical MA certification program lasts
two years, so apprenticeship is a way to fast -track employees into the occupation.
As noted, the MA program was initially motivated by a shortage of MA candidates in the Lebanon area. Until
recently, all MA apprentices have been placed in primary care facilities around this area. However, starting
with the fourth and fifth cohorts, who are currently in training, some apprentices will be placed in specialty
practices and in facilities in other parts of the state. When MAs transfer to a specialty group, they can build
on the skills they have already attained in primary care. Creating career ladders like these can help keep MAs
in the Dartmouth-Hitchhcock system, as many of the apprentices see the MA program as just a step in their
career. It is the hope of Dartmouth -Hitchcock leadership that MAs will continue to grow and develop with
their organization through their careers. Employees are offered tuition reimbursement for further education
and there are institutional scholarships and partnerships with local colleges should an MA want to pursue a
higher degree, such as a nursing degree. Dartmouth -Hitchcock sees registered apprenticeship as a way to grow
local residents in health care careers and to build a locally sustainable worldbrce.
Costs and Benefits
Dartmouth -Hitchcock shared meticulous cost data associated with the first three cohorts of its apprenticeship
program. For these cohorts, die average cost per apprentice was about $59,700, with 70 percent representing
apprentice wages and benefits that would also be paid to an experienced, non -apprentice hire in salary and
benefits. Tuition for the classroom training
was the second largest cost, at15percent. Figure 1: Distribution offlrstyear
The contract to Vermont HITEC represented apprenticeship o costs
12 percent of tie program costs; the contact
covers numerous expenses including curriculum
development, one instructor and one project
leader per program, recruitment, classroom
supplies and uniforms, and some overhead and management. Dartmouth-Hitchcock's own
overhead took 2 percent of the apprenticeship
budget, while direct mentor costs were 1 percent
(see Figure 1).
The $59,700 is about $22,200 more expensive
than hiring fully trained MAs.24This difference
represents the training, overhead, and
mentorship costs of the apprenticeship, offset
to some degree by the fact that apprentices earn
less than fully trained workers. It is important
to note, though, that these workers were not
actually available in the local market to be hired
at Heater Road.
Salnde: �
52%
Snura: &S'Arnl ulntioru rising rlrttafranrDrtlrrnaut/rHiukmrkMediral Center
a The salary foranexperienced AfA is slightly higher Than the salary ofan apprentice;however, These positions frequently go unfilled even ar $18 per
hour as the local labor market lacks a cadre of qualified MA candidate m fill the vacancies.
34 ECONO\BCS AND STATISTICS MMINISTRATION I OFFICE OP THE CHIEF ECONOhUSC � NOVEAfBF.R 20IG
OVERVIEW OF APPRENTICESHIP PROGRAh4S AND 1NnMIEI)M6S
Dartmouth -Hitchcock was able to save about $12,800 per apprentice because of grant funding and also paid
a lower hourly wage rate for apprentices than for experienced workers. These grants reimbursed approximately
13 percent of wages and 96 percent of tuition to eligible apprentices. Adjusting for the grants, the per -
apprentice cost of the apprenticeship program was $47,000, approximately $10,000 more than hiring
fully -trained MAs.
With data provided by Dartmouth -Hitchcock, we are able to estimate the following benefits from
apprenticeship:
I. Reduced overtime costs. Because the local labor market was unable to supply MAs before the
apprenticeship program started, Dartmouth -Hitchcock had to resort to a more expensive alternative:
Paying providers overtime to carry out some MA tasks. Before the apprenticeship program began,
Dartmouth -Hitchcock estimates it was paying about $36 an hour in overtime or more expensive
labor costs. Once it began its apprenticeship program, the company was able to fill MA vacancies,
and even during the first cohort of apprentices, Dartmouth -Hitchcock was able to reduce its overtime
charges significantly. We assumed that one MA hour saved $24 per hour in overtime charges. (We
could think of this as one MA hour at straight time offsetting one overtime hour of a licensed nursing
assistant or other narrowly trained person, or a portion of an hour of an MD or RN, who are paid
far more.)
2. Reduced physician turnover. The apprenticeship program allowed Dartmouth -Hitchcock to
implement its team -based care model. According to Dartmouthi-Hitchcock, the new care model
improved Dartmouth-Hitchcock's ability to schedule needed procedures and drugs. Achieving
balanced MA -provider ratios helped with recruitment and retention of providers; with nine new
providers were hired and none have left for work -related reasons since the MA program started.
The cost of replacing a physician is $250,000, or roughly the cost of training four apprentices, so
even a small reduction in turnover brought notable cost savings to Dartmouth -Hitchcock (about
$2000 per MA per year)."
3. Increased primary care appointments booked. Following the implementation of the third
apprentice cohort, booked hours at Heater Road and general internal medicine were 760 hours per
month higher than before the team -based care program began (see Figure 2) "Many factors besides
increased use of MAs could account for these results, however. To try to isolate the impact of the
new MA program, the compared these changes to those at DHMCs Manchester, NH facility. No
major changes in work organization occurred in this facility; before, during and after the period
when Lebanon was implementing its apprenticeship program, Manchester continued to hire skilled
MAs directly from the local labor market. The Manchester facility was able to do this because of its
location in an urban center, with access to community colleges offering this training.
Using a statistical technique called "difference in differences estimation", we found that compared to the
Manchester facility booked hours increased 318 hours per on after the third cohort of MA apprentices
was in place. Assuming reimbursement of $100 per hour, the growth in revenue was $31,800 per mondl?7328
" Mism-Hebert, Anita, Robert Kay, and James K.Stoller.(March/April 2004),'A Review of Physician Turnover: Rates, Causes, and Consequences,"
American Journal of Medical Quality vol, 19 no.22, pp. 5666. Available at: ht�tr//a' h / t II b
strict
16 Booked hours at the Manchester facilitywere 443 hours per month higher comparing the same time periods.
" 55 of the 58 trained MAs were placed in primary care, or general internal medicine locations.
}1 $100 is about equal to$99. IS median Medicare reimbursement for an office consultation in 2015. See the Centers for Medicare and Medicaid
Studies Physician Pee Schedule athtms•//sysysvc / d' / ed' f f ply dphy f hd/.
NOVEMBER2016 I OFPICF.OFTHE CHIFP ECONO,\iIST I ECONOAdifS.4�7D STATISTICS ADAfINISTRATION 35
Put another way, Dartmouth -Hitchcock was able to achieve a 87,000 per apprentice increase in annual
revenue from booked hours because it brought on 55 MAs. (To the extent that hours in Lebanon would have
continued to increase relative to Manchester, we are overestimating the increase in booked hours that are
due to the apprenticeship program. To the extent that the use of overtime in Lebanon was unsustainable and
would not have allowed any further increase in booked hours, we are underestimating the increase in booked
horns that ate due to the apprenticeship program. See Appendix I for more details.)
Figure 2. Booked hours per month
5,000
tt�
Cohort I Colwrt 2 Cohort 3
2012 2013 2014 2015 2016
Souxe: FSd mlmtnriam ruingdntn fiourDmm�arclrHit l wekMed �nf Center
Overall, we find the benefits per MA apprentice graduate are $48,000 in reduced overtime and $7>000 in
increased revenue from additional booked hours as of the third cohort for a total of $55,000. Given that
training apprentices costs only $22,200 each (and only $9,400 when including grant funding), the program
pays for itself, even after accounting for wage and benefit costs. This calculation does not include other (but
more difficult to quantify) benefits, such as improved provider satisfaction, improved patient satisfaction (as
the result of swifter appointment scheduling and high levels of engaged care), and other financial and quality
benefits that are generated by moving to team based care,
Ifwe look at the internal return on investment of using apprentice MAs versus provider overtime and assume
that turnover of providers decreased by just one.quit over afour-year period, the ROI of hiring apprentices
relative to using overtime is at least 40 percent. This figure assumes no grant funding. In short, die case for
Dartmouth-Hitchcock>s apprenticeship program is compelling.
3d ECONO\TICS AND SlATISrICS ADASINISI"RATIO,1 � OFFfCE OFTHF.CHfFP ECONO.InST 1 NOVfI>46ER 2016
OV,EItv1E\V OF 4PPRFXncESHIP PROGRAMS AND INTMIED1AR1ES
Given the high degree of institutional change and the number of newly trained MAs, maintaining quality of
care could become difficult. Although there is limited data to date, there is evidence that quality of care was
not adversely affected and may be improving.
One example of quality maintenance is preventive care completions, such as for colonoscopies and flu
vaccinations. MA apprentices are tasked with reaching out directly to patients to schedule these appointments,
and completion of these preventive screenings are higher in Lebanon than Manchester, NH, where there was
not an apprenticeship program in the time frame of this study. In short the use of apprentices did not worsen
the outcomes in Lebanon relative to Manchester. The newly trained MA apprentices were as productive as the
experienced ones that were hired in Manchester.
These results reflect the dinical environment in the first 24 months of the apprenticeship program. As
Dartmouth -Hitchcock MA apprentices gain experience and can step into mentor roles for new apprentices,
the clinic anticipates efficiencyand satisfaction will continue to increase. Dartmouth -Hitchcock is looking for
ways to grow and expand the MA apprentice program into its other clinics and its affiliate hospitals as a part
oIT a longer term strategy to build and sustain a local New Hampshire workforce.
NOVEA4EER 2GIG i OFFICEOP THE CHIEP ECOt�OMl.ST I ECONOMICSAND STAT(STICSADMINLSTRATION 37
THE BENEFITS AND COSTS OFAPPRENTICESHIPS; A BUSINESS PERSPECrIVE
Siemens USA
Bacltgroun
Siemens USA is a U.S. subsidiary of Siemens AG, a major multinational corporation founded in 1847 and
headquartered in Germany. Focused on the areas of electrification, automation and digitalization, Siemens'
portfolio includes fuel -efficient gas turbines, high-speed electric locomotives, digital grids, wind turbines,
optimized drive technologies for manufacturers, resource -saving building automation and, energy -efficient
health care equipment. Siemens USA employs approximately 50,000 workers across all 50 states and Puerto
Rico and had revenue of $22.4 billion in fiscal year 2015.
On over a million square feet of advanced manufacturing space, Siemens' Charlotte employees produce
highly -customized turbines and generators that require precision down to the micron. These massive turbines
and generators are used for power generation across the United States and around the world.
Motivation
Apprenticeship programs have long been important to the company's workforce in Germany and have
been revived as part of Siemens' U.S. training operations.�9 Unable to find enough qualified machinists in
the Charlotte region when the company expanded its energy hub there, Siemens began its apprenticeship
initiative in 2011 as a member of North Carolina's Apprenticeship 2000 consortium 3 fn 2014, Siemens
began a standalone apprenticeship program, which now covers three trades: CNC machinist, mechatronics
electrician, and mechatronics technician.
The new program allows the company to recruit high -potential high school students and "grow" them into
skilled employees in-house, instilling company values from the start. Apprenticeship graduates understand the
principles behind what they are doing.
Since establishing its program in Charlotte, Siemens has created similar programs elsewhere in the United
States. For example, it has a machinist program at is electric component manufacturing plant in Fort Payne,
Alabama, and a testing technology program at its drives manufacturing plant near Atlanta.
Recruiting
Siemens treats recruiting as a collaborative process with multiple local educational institutions. Beginning
each fall, Siemens in Charlotte recruits youth apprentices primarily from local high schools in Mecklenburg
County, counties in South Carolina, and Central Piedmont Community College (CPCC is a fellow inaugural
member of Apprenticeship 2000). The company emphasizes building relationships with career development
counselors, who are able to select a pool of students from their schools as candidates for the program. Siemens
employees who graduated from the apprenticeship program are also deployed as ambassadors for the program
in local schools. Basic requirements include a minimum 2.5 GPA; passing a CPCC placement test (if home
school student or veteran); completion of Algebra 1, Algebra 2, and Geometry; and no more than 5 absences
from school per year.
� Siemens now has apprenticeship programsin l9 wuntda. For morn information,
see: hn �// (j h/ fi 1- E- pe "e cehchool leavers htm
sa While no longer afull member of the group, Siemens remains an associate member, attending meetings and sharing hest practices with other
North Carolina firms.
38 ECONOS9ICS AND STATISTICS ADAfINISTRATION � OFFICE OFTHE CHIEF ECONO.WST I NOVEAIBER 20tG
OVERYIEIV OFAPPREKnCESHIP PROGRAMS AND INTERMEDIARIEs
Once a pool is gathered, officials from Siemens give a presentation to the candidates describing the
program and the application and selection process. The company then invites candidates to an open
house at the Charlotte plant in January, during which they have an opportunity to tour the plant with a
parent or guardian.
Siemens uses a variety or pre-screening methods, such as placement exam scores from CPCC, Accuplacer
test scores, transcripts, and letters of recommendation, to select participants for an orientation that lasts
four nights in March. During the orientation, candidates learn about workplace safety, measurement and
conversion, light machining, and the basics of reading engineering drawings. At the same time, Siemens
administers a custom -designed test
in addition to a standard .mechanical
aptitude test to assess the participants'
abilities and work ethic.
After the orientation, Siemens invites
strong candidates to a paid 6-week
summer internship, in which Siemens
can make a final evaluation. The
interns take two courses at CPCC—
indusuial safety and introduction to
enghteering—as well as spend time .
on the shop floor. They are assessed
for performance, attitude, skillset,
and engagement, and are given a
final project to present to senior
management as a capstone. At the end of the internship, Siemens makes offers to successful interns to enter
into the apprenticeship program based on business needs. New apprentices begin in August, coinciding with
the academic calendar at CPCC.
In recent years, the company has invited about 80 students to the January Open House, selects 8 to 10 fox
the summer internship, and ultimately offers an apprenticeship to up to 7 students. Because of the high wages
($23 per hour and benefits in the third and fourth years) and excellent training that Siemens provides, it is
able to recruit students with high potential and greater inclination for classroom study than is typical for
off -the -street hires.
Program Details
The apprentices must cmnplete higlily technical n'aining in the classroom and on the job to work on
the Siemens factory floor. Journeypersons and apprentices with whom we spoke at the plant explained
that their goal tvas to be more than a "machine operator," someone wlio essentially pushes a button and
lets the machine do the work. Rather, they wanted to become a "machinist," someone who can program
the computer to machine a part, identify and correct coding errors, and know exactly how the code will
translate into production on the manufactured part. Because of the massive size and cost of the parts they
are manufacturing, a mistake could cost tens of thousands of dollars. In this precision manufacturing
environment, there is no room for error.
Over a span of four years, Siemens' apprentices spend 1,600 hours in the classroom and alrother 6,400 hours
in OJT in the plant. While Siemens is still an associate member of the Apprenticeship 2000 consortium,
it has launched its own program, and continues to partner with CPCC for the classroom portion of the
NOVEAIRF.R 201G 1 OFFICf.OFTt[E CHEF ECONOMIST � ECONOMICS AND STAT1STiCS ADAIINI$TRATION 39
THE BENEFITS AND COSTS OF APPRENTICESHIPS: A BUSINESS PERSPECTIVE
apprenticeship training. As in the Apprenticeship 2000 program, apprentices earn their journeypetson's
certificate from the North Carolina Department of Commerce, as well as an associate's degree in computer
integrated machining or mechatronics from CPCC. The graduates of the Apprenticeship program are placed
into positions at Siemens as they become available to.
tet.�" The first class of Siemens' apprentices graduated in August
hI 2015) with the second finishing in December of the same
year. (Because Siemens puts youth and veteran apprentices
in different cohorts, there may be multiple graduations in
the same year.) There are currently 15 apprentices at Siemens
in Charlotte and 11 graduates including 3 military veterans;
i several apprentice graduates are pursuing engineering degrees
It
`.a. (at Siemens' expense) while working full-time.
/ A
s All Siemens apprentices are enrolled in a five-semester
program at CPCCs main campus located in downtown
Charlotte in either computer integrated machining or
mechatronics, resulting in an associate's degree. The academic
curriculum is stretched out over three and a half years to allow
for OJT at the Siemens plant. In order to minimize travel and
maximize floor time, apprentices typically attend all classes
one or two days per week and spend the remaining time in
their working week at die plant.
Siemens uses atime-based model rather than a competency-
_ based model, which it prefers for a few reasons. Because the
program is tied to an academic degree program, using a time -based model allows apprentices to move through
the academic program on CPCC's calendar. In addition, because many of Siemens' apprentices are young and
may still even be in high school, a time -based model allows them to mature personally and professionally.
Finally, Siemens sees benefits from using a cohort model in which each class of apprentices learns and works
together, building a support structure for each other and serving as quasi -mentors to younger cohorts.
One unique topic that Siemens highlighted was employee dress. Apprentices wear the same uniforms as all
other employees, but with a patch to indicate their training status. In the past, apprentices dressed differently,
but Siemens found that it hindered integration with regular employees.
Costs and Benefits
Siemens' estimates its typical per-appren[ice cost at $187,000, with apprentice and mentor wages and costs
representing about 96 percent of program costs. Tuition at CPCC costs just $76 per credit hour for North -
Carolina residents; as a result, tuition costs per apprentice are about $5,500; books cost an additional $4,800.
However, in the absence of apprentices, Siemens would still need to fill the position for which apprentices are
trained. A low -experience worker hired directly from the labor market is the best point of comparison for a
graduate of the apprenticeship program; and our analysis assumes that the starting salary and benefits for that
kind of worker would be $56,000. The net cost of onboarding an apprentice graduate is then $131,000.
40 ECONONICSAND STATISTICS ADA7INISTRATION I OPFICEOFTHE CHIEF ECONOMIST � NOYFh(RE2201G
OVERVIEW OFAPPRENTIGESHIPPROGRAAISAND INTEMtEDIARIES
Based on our analysis of data and discussions with company officials, we identified four potential measureable
benefits from its apprenticeship program.
1. Better adherence to planned production times.
2. Higher capacity, because apprentice graduates are even more productive than pre -trained
off -the -street hires.
3. Filling a job that would otherwise go unfilled, in which case the entire margin on the apprentice's
product counts as a benefit, because that product would not otherwise have
been produced.
4. Increased capacity to do a variety ofjobs, such as machining new generators and repairing old ones.
As detailed in Appendix I, we find that, compared to hiring a machinist off the street, apprentices are less
lately to be late and more productive than a pre -trained hire. The costs and benefits of apprenticeship are
measured using the "internal rate of return," or the rate of return generated by investing in the apprentice's
training upfront. These direct benefits yield an internal rate of return of about 8 percent over hiring a low -
experience labor.
\vle also explored the benefits of apprentice Rexibility and found a much larger return. In fact, ive found that
the program would easily pay for itself by the end of a journeyperson's first year. Compared to off -the -street
hires or even other Siemens employees with much greater experience, apprentice graduates are all cross -trained
on a variety of tasks and can be assigned to almost any operation. In particular, two kinds of flexibility are
important at Siemens:
a, the ability to work on almost any machine if demand for operations requiring that machine is higher
than usual or if the person who usually runs that machine is on leave, and
b. the ability to repair existing generators and turbines (in addition to building new ones).
Both of these types of value are potentially quite large. The data collec[ed by Siemens, however, maltes
estimation of the first type of benefit difficult, so the study team focused on the value of the second type
of flexibility. Because apprentice graduates have a strong grasp of the principles of their work ---as well as
the ability to read blueprints and program machines —they are particularly well suited for tasks involving
judgment, such as repair work. The plant seeks work servicing pre-existing generators and turbines when it
has excess capacity.
The plant would like to ensure that it has enough capacity to complete all orders for new generators in a
reasonable (and contractually specified) time. However; demand fluctuates. Data we received from Siemens
suggests that given the value of generators and fluctuations in demand, the plant on average should maintain
about 20 percent flexible capacity.31 If the plant has apprentice graduates, and if demand for repair work is
sufficient to fill the 20 percent flexible capacity, it can use this downtime to perform repair work. NY/e matte
the strong assumption that workers hired off the street cannot perform this work, which may allow us to
capture the value of the first type of apprentice flexibility as well. In this scenario, the internal rate of return
easily reaches 50 percent and can be higher. Although these assumptions are a bit crude, they capture a robust
finding: since apprentice graduates have the necessary skills and judgment to take on complex work and fill
slack time in the plant by doing this type of repair work, Siemens can rapidly recoup the costs of training —
likely within the first year of apprentice graduates working full-time.
" Pormethodologywde�ermine optimal operation whenaplant has theabiliryro make both acme -sensitive product with fluctuating demand ands timeinsensitive product,see'Options-Based Costing and the Yolariliry Potrfolio; Suranne de Trevil7e,K}•le Caaanib, Lauri Saarinenan, Universityof Lausanne Working Papeg 2GIG.
NOYE.IIEER201(. � OFFICE OP THE CHIEF ECONOA715T I ECONOMICSAND SrAT15TICS ADMINISTRATION 41
OFAPPREN ICFSHI S;A BUSINESS PERSPECTIVE
To the extent that the local labor market is unable to supply off -the -street hires, the alternative to
apprenticeship is likely to be leaving a position unfilled and turning down work —either by declining contracts
or extending deadlines on all work to create schedule slack, which have the same financial impact in the long
run. In this case, the benefit of having an apprentice graduate is the entire margin of that employee's work.
Given the margins on Siemens' products —large, complicated, advanced energy -producing machinery —the
program would easily pay for itself by the end of an apprentice graduate's first year of full-time work..
Finally, these estimates ace necessarily conservative because they exclude a variety of potential benefits, such
as improved quality control, lower turnover, and the creation of a durable pipeline of skilled labor and
management.
42 ECONOTIICS AND 57ATISTICS AD\fIN[$TRATION � OFFICE OFTHE CHIF,F ECONOMISP � NOVEAfBER 2016
OVFRVIEW OFAPPRENTICFSHIP PROGRAMS AND INTERMEDIARIES
Blue Cross Blue Shield of South Carolina
Location: Columbia, South Carolina
Occupations o£apprentices:
Information security administrator
• Information security risk analyst
• Database programmer
Computer programmer
• System support technician
Server technician
• Network technician
Company Web Address: httpsahvw ¢southcarolinablues.com/web/public/se/
3aclrground3z
Blue Cross Blue Shield of South Carolina (BCBSSC), founded in 1946, is the only South Carolina -based
health insurance carrier and one of the state's largest employers. BCBSSC offers health insurance to nearly a
million South Carolinians in all market segments, including to individuals, families, businesses, and people
with Medicare or Medicaid. BCBSSC began running its Entry Level Training Program (ELTP) in 1997.
While the ELTP has long followed a basic earn -and -learn model that effectively makes it an apprenticeship,
BCBSSC did not register the program with"DOL until 2009. Registration allowed the company to take
advantage of South Carolina's $1,000 per -apprentice tax credit.
Motivation
ELTP is a program designed to bring in new talent For BCBSSC's 2,000-person IT division. Not only
is BCBSSC the largest health insurance provider in South Carolina, it also is responsible for processing
a significant portion of the nation's overall health care spending. As a result, BCBSSC employs more IT
professionals than any other firm in Columbia. These IT Nvorkers are responsible for server management,
application development, net%vork management, telecommunications, and systems support.
In total, 528 people have participated in the ELTP since 1997, with 300 still active employees of BCBSSC.
While ELTP is the primary method used for filling positions with employees who have no prior work
experience in the IT field, BCBSSC relies on traditional hiring practices to bring on experienced candidates in
more senior roles. Between 2011 and 2015, around 12 percent of all new hires at BCBSSC were brought on
through the ELTP, accounting for over 90 percent of all entry-level lures in the period. ELTP hires jumped to
21 percent in 2016 as the company became more aggressive in recruiting to replace their retiring workforce
over the next 5 to 10 years.
Formore information on BC&SSC apprenriceship programs,
e: han//vn se h'oaral'na / 'aLs/bl bl h' Id" PP �c h I.
NOVEA4BER 20/6 � OPFICE OF THE CHIEF ECONOMIST � ECONOMICS AND SI'Ai1STICSADMIN15TRAT10N 43
THE BENEFITS AND COSTS OFAPPRENHCESHIPS:A BUSINESS PERSPECTIVE
Recrulung
Unlike the other apprenticeships profiled in this study, 80 percent of BCBSSC's apprentices are new college
graduates, mainly with computer -science degrees. Recruiting for the ELTP differs slightly from most other
firms in this study because it recruits heavily at college career fairs and also uses social media, student
information sessions, and networking events. As a result, ELTP participants tend to be relatively highly
educated and slightly older than apprentices at other companies in this study.
ELTP's sophisticated process for setting its recruitment goals provides a model for any firm thinking about
how many apprentices it will need. Assistant Vice Presidents (AVPs) use internal modeling to identify current
and future gaps in their groups. Retirement is the main driver of those needs, with demands for services and
active contracts also playing a role. AVPs submit their staffing requests to senior management for approval,
after which they are added to next year's budget. Before any recruiting takes place, BCBSSC has already built
each individual apprentice into its planned expenditures,
Program Details
The four -track ELTP curriculum is primarily technical training. Tivo tracks —infrastructure and systems
support —are provided offsite at Midlands Technical College; the remaining two —application development
in either the mainframe or non -mainframe environment —are provided onsite.at BCBSSC. The classroom
training portion of these tracks lasts 16 to 20 weeks, depending on the track. Two of the four tracks —
infrastructure and systems support —result in three certifications from the Computing Technology Industry
Association (CompTIA), a major non-profit IT industry association. Across all four tracks, the ELTP provides
169 distinct courses or training events, encompassing technical skills, certification preparation, presentation,
soft skill development, and teambuilding.
During the training period, apprentices work on the floor for at least two weeks under the guidance of
mentors, who typically are ELTP graduates. This introductory OJT allows apprentices to become acclimated
to the work environment and interact with managers and their peers. BCBSSC estimates that it spends an
average of $39,000 per apprentice on training, salary, and benefits during this period.
After the 16 to 20 weeks of classroom training, apprentices spend the next 42 to 48 months in an mi-the-
job apprenticeship, where theywork full-time and continue to learn through OJT. At the conclusion of the
apprenticeship, graduates will have completed an industry recognized certificate issued by DOL. In addition,
all apprentices sign a two-year promissory note, guaranteeing that they will remain with BCBSSC for two
years after the completion of the program.
Costs and Benefits
The most direct costs to BCBSSC come from the 16 to 20-week training program and apprentice wages
throughout the entire ELTE Each year, BCBSSC evaluates the market wages for similarly experienced
employees in the region and sets wages to make positions attractive to potential entrants. In addition,
BCBSSC monitors ELTP graduates for five years following completion of the program to ensure that their
compensation is keeping up with their peers.
Additional direct costs over and above apprentice training and wages include curriculum development and a
dedicated recruiter. Mentors playa key role in assigning apprentices to projects and tasks appropriate to their
skill level to minimize the risk of costly errors and missed deadlines while allowing apprentices to build the
44 F.CONOM[CS AND STATISTICS ADSfINISTRAT[ON 1 OFFICE OA THE CHIEF ECONOARST k NOVFA4BER 2016
OVERVIEW OF APPRENT1CFSHIP PROGRAMS AND INTERMEDIARIES
sldlls they will need for more challenging work. There are cost savings in this matching of sk ll level to work,
having lower skilled and less costly resources doing lower level work is more cost effective for BCBSSC than
using senior level employees and costlier resources,
BCBSSC cites a number of perceived benefits that are largely in line with those cited by other firms. Attrition
rates are lower for ELTP participants than for employees hired from other channels, averaging around
4 percent, compared to an industry average of 13 percent. The average tenure of current ELTP-trained
employees is nearly 10 years. As with several other apprenticeship programs, the ELTP provides a training
ground for future leadership, with 22 percent of current ELTP-trained staff at BCBSSC in leadership roles.
Executives see the ELTP as part of a pipeline that brings on new employees, trains them, and uses their
knowledge and skills to train new employees coming in behind them,
The major benefit they cited, however, was the ability to inculcate a "Blue Cross culture" in younger, fairly
inexperienced candidates, While many firms describe the building of loyalty and camaraderie as a core benefit
of their apprenticeship programs, BCBSSC raised a more specific point: namely, that a great deal of their core
system applications run in traditional mainframe environments, which are not addressed in many current
computer science programs. ELTP provides a method of getting new employees up to speed within the
existing work environment.
NOVEMigF.R 2016 ( OFFICE DFTHE CHIEF ECONOMIST � ECONOMIC.iAND STAT15nC5 ADM11N1SIRATION 45
THEBENEFITSANDCOM OFAPPRENTICCSHIM A BUSINESS PERSPECTIVE
CVS Health
Location: Nation de, with its largest programs in Michigan, on Carolina, and Georgia
Occupations of apprentices:
• Pharmacy technician
Store manager
Company Web Address: https:/Ixvww.cvshealth.com/
Background"
CVS Health (CVSH) is a health are companywith 9,600 retail pharmacies and over 1,100 walk-in medical
clinics, as well as a pharmacy benefits management company with more than 75 million members. The
company has more than 243,000 employees across the United States, and CVS pharmacies serve 5 million
customers every day.
CVSH has a well -established and growing apprenticeship program primarily for pharmacy technicians. In
2005, CVSH became the first employer to start a DOL Registered Apprenticeship program for pharmacy
technicians, adding store managers in 2008. The program began in Detroit, Michigan, where CVSH
partnered with Wayne County Community College (WCCC), Goodwill Industries, churches, and other
community organizations. The city of Detroit, through the Detroit Employment Solutions agency;
contributed grant support to help launch the program. According to CVSH officials, the program exceeded
all performance goals, including retention, preparedness, and finding quality candidates to fill positions.
In 2012, CVSH expanded its apprenticeship program to South Carolina following the 2007 launch of
Apprenticeship Carolina. Apprenticeship Carolina is a statewide effort to expand apprenticeships in South
Carolina through technical assistance from the South Carolina Technical College system and with an added
enticement of a $1,000 per apprentice employer tax credit. The South Carolina program is now CVSH's
larges't, with almost 200 apprentices graduating over the few months preceding our conversations with them.
Currently, pharmacy technicians make up 90 percent of CVSH's apprentices. In 2015, CVSH joined the
LEADERS program, committing to double the number of apprentices from 1,500 to 3,000 by 2020 through
program expansions to five or six more states 39 The company also -committed to share best practices at DOL
or state -sponsored outreach events for employers. To date, CVSH has begun meeting its commitments by
registering more than 2,000 apprentices, primarily in Michigan, South Carolina, and Georgia. The company
is developing new programs for technicians_in specialty pharmacy services and benefits management, as well as
considering programs in logistics, nursing, and information technology.
Motivation
Workforce Initiatives, a department housed in Human Resources at CVSH, develops and manages
partnerships with government and non-profit entities related to workforce development programs, including
apprenticeship. Because apprenticeship regulations vary by state, an internal Apprenticeship Task Force \yas
"
For more information on CVSH's appsnriceship programs,see: hnps.//wsheahh com/ahol Jdiers'ro!�-nawr'pcion-far-career-
� him://evsheahh.com/social-responsihiliry/camoraresotial-responsihiliry/leader-in-growrh/safe-rewarding-inclusive-workplace
46 ECONOMICS AND SrATISTlCS ADTfINISTRATION � OFFICE OFTHE CHIEF ECOi\.OhfIST � NOVE.\1RER 7Ald
OVERVIEW OFAPPRENTICESHIP PROGRAMS AND IN17ERAUDLUUES
assembled to assist in navigating multiple state program standards, which only sometimes match federal
standards. The apprenticeship task force also develops partnerships with local organizations; typically, these
groups are non -profits with an education focus. Current partners include National Park College in Arkansas,
Houston Community College and Dallas County Community College District, Detroit Employment
Solutions, St. Louis Works, the Milwaukee Area Workforce Investment Board, the Rhode Island Department
of Labor and Training, Florida State Colleges, and Philadelphia Works.
When we asked about alternative hiring options to apprenticeship, CVSH officials stated that there are many
paths to a career as a pharmacy technician. Many employees are hired into other, entry-level toles in the
company, such as cashiers, and later selected for promotion into the pharmacy based on their interests and
skills. CVSH also hires from local community colleges that have certificate or associate degree programs in
the field. For CVSH, apprenticeship represents a "both/and" proposition rather than an "either/or." In some
markets, the skills they desire are more readily available than others, and localized skills shortages can drive
their decision to use apprenticeship. Apprenticeship at CVSH also provides access and opportunities for more
diverse job candidates, including women, people of color; people with disabilities, and veterans.
Recruiting .
CVSH recruits apprentices beginning at either age 16 or 18, depending on state law, using a variety of sources:
career centers, internal referrals, program orientations, or through community -based partners. Participants
need to meet the requirements of the standard CVSH employee selection process and demonstrate a customer
service orientation along with basic math and reading skills. All pharmacy techs in South Carolina go through
the program, though some complete it much faster than others because of previous experience and skills,
while Detroies program is opt -in, with approximately 35 percent of techs working through the program.
Program Details
GVSH's pharmacy technician apprenticeship program is competency -based and 12 to 18 months in length.
Apprentices move through a career path from pharmacy technician trainee to pharmacy technician to lead
technician. After completion, apprentices receive a nationally recognized and portable credential from DOL.
Technical instruction and OJT cover prescription pickups, intake, and entry; medication pulling, counting,
and packaging; and inventory management. Apprentices are supervised by the on -site pharmacist and are
not permitted to counsel patients or take calls from physicians. In addition to the skills necessary to perform
these functions, the apprentice curriculum also includes soft skill development, including customer service,
leadership, managing, and scheduling.
Apprentices begin with a pre -apprenticeship, which CVSH cites as vital to the success of their program
and particularly their outreach to non-traditional candidates. CVSH's local partners conduct the bulk of
recruiting in these non-traditional or sometimes less -skilled groups, and they also help to offset CVSH's costs
by teaching fundamental skills —particularly "soft" professional skills like punctuality and attendance —that
prepare candidates for their apprenticeship and eventual career.
Once they finish their pre -apprenticeship training, apprentices move on to classroom training provided by
certified trainers, most of whom are CVSH employees and all of whom are subject matter experts. Apprentices
are taught a set of skills used in the pharmacy environment for two to four weeks and given web -based
assessments to test their retention. Apprentices proceed to a training store to work in a live environment under
the supervision of a pharmacy employee before being sent to their home stores with an evaluation of their
skill needs.
NOVEMBER2016 � OFFICF.OPTHE CHIEF ECONOTAIST � ECONOMICSAND STATISTICSADMINISTRATION 47
THE BENEFM AND COSTS OFAPPRENTTCESHIPS:A BUSINESS PERSPF.CI7VE
In their home stores, apprentices work with a senior technician or the pharmacist to close any skills gaps. If
needed, apprentices return to the classroom for additional instruction. Overall, this process takes 16 weeks,
after which apprentices are hilly engaged in day-to-day work operations for the remainder of their two-year
apprenticeship.
Costs and Benefits
Apprentices eun stackable interim credent als from DOL as they master competencies, and CVSH is
confident that its industry standards lend legitimacy to these credentials. As part of the progression from
pharmacy technician to lead technician, the program requires apprentices to pass the national certification
exam for pharmacy technicians. Some states also require apprentices to earn a state certification, and some
community colleges give apprentices college credit for their training,
As with all the other apprenticeship programs we have studied, wages of trainers and apprentices are the
principal cost of the program. CVSH pays apprentices a market wage commensurate with their skills and
experience. Wages increase during the program as apprentices master additional skills and competencies. Soft
skills, such as punctuality, are also included in performance reviews and factor into wage increases.
To judge success of the program, CVSH relies on feedback from their operators teams and an assessment of
the apprenticeship completion rate. Overall, CVSH officials say that their community partnership programs
(of which apprenticeship is one example) help reduce the turnover rate. Apprentices and others recruited
through NVinkforce Initiative programs are twice as likely to be retained by the company over time.
I8 ECONO.LtICS AND STATISTICS ADMINISTRATIO:7 � OFFICE OF iHF. CHIEF ECONO1,USi � NOVEAfBER 201fi
OVERVIE"FAPPRENTICESHIP PROGRARISAND INTERMEDIARIES
Dr. Schneider Automotive Systems
Location: Russel Springs, Kentucky
Occupations of apprentices:
Mechatronics technician
• Tool maintenance technician
• Injection mold setter
Company Web Address: http:/hvww.dr-Schneider com/en
Background35
In 1927, Dr. Schneider Unternehmensgruppe started manufacturing cigars in Neuses, Germany. Nine years
later, the company added plastics manufacturing as a second line of business. The company dropped its
cigar production in 1955 to focus on plastics and today Dr. Schneider Automotive Systems, as the firm is
now known, is regarded as a higlrquality automobile -related plastic products manufacturer. Dr. Schneider's
products include ventilation systems, interior covers, instrument panels, and center consoles. The company
today has 3,600 employees spread across seven locations worldwide, including Russell Springs, Kentucky. The
130,000-square-foot Russell Springs plant opened in 2014 and houses 39 injection molding machines. The
company's 240 employees must be highly skilled to maximize the value of this equipment and serve its clients,
which include German brands Mercedes Benz, BMNY/ and Audi, as well as Ford Motor Company.
Motivation
Dr. Schneidel's decision to establish apprenticeship programs in its Russell Springs plant reflects its dual roots
as a German company and a Kentucky employer. Its German-born plant manager found that the Russell
County labor market was not supplying sufficient skilled labor for the plant and that the companywould have
to recruit workers from outside the area. Wanting to recruit locally, the firm drew from its German experience
with apprenticeships to develop the talent it needed while also strengthening the local labor force. The Tech
Ready Apprentices for Careers in Kentucky (TRACK) initiative, an existing pre -apprenticeship program,
provided the local support needed to get Dr. Schneider's U.S.-based apprenticeship program off the ground.
Recruiting
TRACK provides a pathway From career and technical education into a registered apprenticeship beginning
in students' junior year of high school. Dr. Schneider works with the Lake Cumberland Area Technology
Center and Russell County High School to recruit sophomores, who apply and interview with the company.
The interview process is essentially identical to that used with regular employees. Applicants highlight
why they want to take part in the apprenticeship program and demonstrate their readiness through their
freshman and sophomore classwork. Typically, two or three students are ultimately selected and offered an
apprenticeship at Dr. Schneider.
ee For more information an Dr. Schneider's apprenticeship programs,
sea hrm%n cam/G4748/2016/OG/y h- p II' g r d h 'd /,
NOVEAIBER2016 I OFFICE OF THE CHIEF ECONOMIST I F.CONOhiICS AND STATISTICS ADMINISTRATION 49
THE BENEMS AND COSTS OFAPPRENTICESHIPS;A BUSINESS PERSPECCIVE
Program Details
Students enter the three- to four-year apprenticeship program in their junior year. They attend school in the
morning, taking courses that Dr. Schneider selects in multiple subject areas encompassing maintenance of
facilities, molds, and robotics, while also working a maximum of 30 hours a week while school is in session.
After they graduate from high school or the technology center, students take additional classes at Somerset
Community College in their selected field of study. Students also conduct training with Paulson, a computer
based adaptable leaning aid purchased by the company.
Over the fast two years, apprentices will log 1,000 hours of paid OJT immold setting, tool making, and
mechatronics. In the first year, some apprentices are already programming robots. The company finds that
after six to seven months many apprentices are at die same level as other workers. The tasks they perform may
be less related to the apprentices' skill than to their age. For example, health and safety regulations prohibit a
minor from operating an overhead crane. By the third year, apprentices are working without constant mentor
supervision and begin handling the planning and implementation of projects.
Upon completion of the apprenticeship, students will have earned aTRACK certification in their selected
field for their pre -apprenticeship training in the Lake Cumberland Area Technology Center. They also receive
a journeyperson certificate from DOL and some students choose to earn industry -specific certifications in
skills, such as welding. They also earn an associate's degree from Somerset Community College as a result of
the dual credit system that allows for the transfer of their technical center credits to their college transcripts.
Based upon available positions, apprentices are hired at the conclusion of their apprenticeship. During the
personnel planning for the following year, graduating apprentices will be included in these calculations.
Costs and Benefits
The major cost For Dr•. Schneider, like all the companies in this study, is apprentices' wages. Apprentices begin
earning $8.00 per our the r junior year and by their third year are earning $11.50 per hour. Apprenticeship
graduates earn around $20.00 per hour if they are hired at the end of their program. Overall the company
estimates that the yearly cost per apprentice is $20,000 to $30,000, with an additional $6,000 to $10,000
during the third year for community college tuition. Partly offsetting those costs are the lower recruitment
costs afforded by the TRACK program, which provides a well-defined local pool of candidates at Lake
Cumberland Area Technology Center and the local high school. Dr. Schneider estimates that it costs them 20
percent more to recruit employees off the street.
Because TRACK was already established, Dr. Schneider faced only very small start-up costs when they
established their apprenticeship program. The curriculum that the apprentices use was already established
in the TRACK program. Additionally, at the plant, apprentices use the same equipment as the current
employees, so Dr. Schneider did not need to purchase any new equipment.
50 ECANOAnCS AND STATISTICS ADAfINISTRATION 1 OFFICE OFTHE CHIEF ECONOA/IST � NOVFAIRER 2016
OVERVIEW OF APPRFNDCESHIP PROGRAMSAND INTERMED7ANES
The company does not have internal metrics yet on the relative productivity of apprentices versus other
workers, but it already values other benefits from its program that don't easily translate into dollars.
Apprenticeship imparts company -specific knowledge related not just to the machines but also the company
family —the people —with whom the apprentices are working. By becoming part of the family, apprentices are
more likely to remain with Dr. Schneider. The program also honors the company's history as apprenticeship is
a way of life in Germany and a way to strengthen the company's ties in its new Russell Springs Community.16
33 Although notdiacdy rslated to its apprenticeship program,Dr. Schneider has atso received performance -based incen8vesfom the Commomveahh of Kentucky mtaling $7 million of corporate income tax credits and wage assessments bymeedngjob and investment tazgets. It also can mceive up
to $195,000 sales and use tax incentives tied to construction costs, building fixtures, equipment used in research and development and electronic
processing. That said, these incentives would not figure directly into the company's decision to use apprenticeships as one of its job expansion tools,
nor directly reduce the cost of that investment to train local staff.
NOVEA16ER 2016 I OFFICF.OFTHE CHIEF ECONOMIST � ECONOMICSANDSTAT15rICS ADMINISTRATION 51
THE BENEFITS AND COSTS OFAPPRENnCRSHIPS:A BUSINESS PERSPECTIVE
Hypertherm
Location: Hanover, New Hampshire
Occupation of apprentice: CNC machine operator
Company Web Address: https•/hvww.hypertlierm.corn/en-US/
Backgrortud37
Hypertherm is a Hanover; New Hampshire, based manufacturer ofplasma, laser, and waterjet cutting systems.
In partnership with Vermont HITEC, a non-profit workforce development organization, Hypertherm first
began training CNC machinist apprentices in 2005 under a two-year program."' In 2007, the company
established the Hypertherm Technical Training Institute (HTTI) as a first step in adopting the apprenticeship
program created by Vermont HITEC. Vermont HITEC's training model emphasizes a short, intensive period
of classroom training to get new (and sometimes incumbent) employees more skilled and productive quickly,
followed by OJT at an employer.
Motivation
Hanover, along with the surrounding cities in New Hampshire and Vermont, was part of the region known
as "Precision Valley" in the 1970s because of its booming machine tool manufacturing industry. In the 1980s,
the industry began a decades -long decline and many precision manufacturing jobs left the area. Over time,
and paralleling much of the rest of the country, many people in the area began to see manufacturing jobs as
unattractive and as a dead end.
In 2005, management at Hypertherm estimated that the companytvould need to hire approximately 60
machine operators each year through 2009. At the time, the company only employed around 120 machine
operators; increasing its workforce by 50 percent per year represented a sizeable expansion, and the local labor
market was unable to supply enough recent graduates or experienced workers. The local community colleges
and technical school graduated one or two qualified CNC machinists each year. The relatively remote location
of the firm coupled with lack of skilled new entrants to the labor market led Hypertherm to apprenticeship.
In order to hire a substantial number of new machine operators, Hypertherm tinned to Vermont HITEC for
help. For several years, Vermont HITEC had been running amulti-employer progrun to provide techn cal
training for CNC machinists in an intensive nine -week classroom session, at which point apprentices would
join sponsoring firms for OJT. In 2005, rather than share sponsorship with other employers, Hypertherm
decided to sponsor an entire class of 16 students, followed by a second class of 14 students.
Two years later, with the development of the $2-million HTTI, Hypertherm brought the Vermont HITEC
program onsite. HTTI's in-house lab is structured as a "room within a room," with employees receiving
training in a classroom embedded within the shop floor. The lab is equipped with CNC machines to train
employees in a non -production environment. Many of the machines are identical to ones that apprentices
will use in production after their training; others are. different but still allow for learning the processes on
" For more information about Hypenherms apprenticeship program,
't See Vermont HITEC cau study for more information.
52 ECONOSILCS AND STATISTICS ADAfINISTRATION I OFPICE OF THE CHIEF ECONOAfIS'C � NOVEA16ER 2016
OVERVIEW OFAPPRENFICESHIP PROGRAMS AND INTERAfEDIARIES
which Hypertherm relies. Additionally, the firm relies on a system called 5S lean manufacturing.39 From the
beginning, Hypertherm tries to instill the 5S principles in their workforce to keep them focused on efficient
production with minimal waste. For example, at Hypertherm, every object has a designated storage space to
which it must be returned after use, even including the salt and pepper shakers in the break room. The 5S
principles are embedded in HyperthernA corporate culture.
Recruiting
Initially, Vermont HITEG handled recruiting for the program. Radio and newspaper ads, press releases, the
Vermont and New Hampshire Departments of Labor, ads on stubs for unemployment insurance checks,
community organizations, and even flyers in the supermarket were used as a full -court press to find candidates
for the Hypertherm apprenticeship. All of the ads emphasized that previous experience was not required,
with a high school diploma or GED the only prerequisite. Hypertherm has since partnered with River Valley
Community College to take over these duties.
Hypertherm screens candidates using a three -stage process, In the first stage, applicants learn about work in
a machine shop, take tours of the floor, participate in a short interview, and take basic math and behavioral
screenings. Hypertherm uses the second phase to assess cultural fit; production leadership interviews
candidates and assesses their interest level, past technical experience, and motivation to take on new work.
Finally, candidates participate in a classroom simulation with short lectures and quizzes. This phase is used
less to judge candidates' performance than as a measure of how well candidates can represent themselves in
a classroom environment where motivation and self -learning are key to success. In all, Hypertherm receives
about 150 applicants for each class of apprentices, ultimately selecting up to 16 for each class.
After realizing that apprentices were performing better than veteran workers, Hypertherm began using its
apprenticeship program to re-train the existing workforce. This contrasts significantly with other companies
in this study, which rely on apprentices to fill some, but not usually all, positions for which they have
apprenticeships. Currently, all but 10 Hypertherm machinists have been through the apprenticeship program.
Program Details
Hypertherm's two-year appremiceship begins with nine weeks ofintensive technical classroom and hands-
on nails ng. During this training, apprentices learn about lean manufacturing (which reduces waste in a
manufacturing system) and the machining process. They learn how to read drawings and ]row to inspect and
retool machines. The training puts all the concepts that apprentices need to ]snow together from day one,
rather than teaching one concept at a time.
Upon completion of the nine -week classroom and bands -on program at HTTI, apprentices receive an
academic CNC machinist certificate from River Valley Community College and a pay increase. Apprentices
then move to the shop floor to work under a mentor. This OJT portion of the apprenticeship lasts
approximately two years, though Hypertherm uses a competency -based model that allows some apprentices
to finish earlier if they are able to demonstrate that they have acquired the required skills. At the end of
the program, apprentices receive a CNC machinist certificate from DOL. HTTI also offers two additional
training programs for current Hypertherm employees beyond the basic CNC machinist program —a more
senior machinist as well as production support technician —that employees are encouraged to complete if they
are interested.
s3 SSsaworkplace organization method that originated in Japanese manufacturing.In Japanese, the five steps ofthe praess areae;r;, seiton,
seik<rsu, and shirsuke. One English vanslacion of these steps is: sort, straighten, shine, standard;ze, sustain. For more information,
see hecrss•//us ka'zen o /kn I dg - I h S h I.
NOVF118F.R i016 I OFFICEOFTHE CHIEF ECONOMIST � ECONOMICS AND STATISTICS ADAfIN1,STRATION 5;
THE BENEFITS AND COSTS OF APPRENTICESHIPS:A BUSINESS PERSPEC'M
Costs and Benefits
Hypertherm estimates that costs for the nine -week training program are about $93000 per apprentice.
Additionally, mentors work with apprentices, but because mentors are still producing, Hypertherm does not
explicitly quantify the costs of their labor hours for the apprenticeship program. Prior to the establishment
of HTTI, apprentices were not paid until joining their home firm after the nine -week Vermont HITEC
program. With the creation of HTTI, Hypertherm now pays all of its apprentices starting from the first day
of their apprenticeship. Hypertherm believes that paying apprentices during the nine -week training builds
employees loyalty. Additionally, it is an incentive to keep the training short and rigorous, which allows
Hypertherm to get apprentices onto the production floor as quickly as possible. At the conclusion of the
classroom training, apprentices receive a raise of $I per hour to $14.50 per hour; they receive another raise
when promoted to a second -level machine operator four months to a year later, based on the speed at which
they master competencies.
Hypethertns.$2 million investment in capital equipment to establish HTTI was a relatively large upfront
cost compared to some of the other firms in the study. However, the company calculates that the program
has more than paid for itself in productivity gains through reduced downtime and maintenance costs. Prior
to training apprentices in the lab, new employees required approximately one year of training to get to the
performance level that they now reach in nine weeks. During that first year, the new hires shadowed other
employees, producing very little of their own work and potentially reducing the productivity of shadowed
employees. Hypertherm estimates that reducing training time from one year to nine weeks has saved the
company $680,000 per year (based on an average of three classes, or 45 apprentices, per year).
Beyond the reduction in training time is the savings'that Hypertherm has seen from reduced downtime
and reduced maintenance costs. Hypertherm runs three operational shifts. As with many factories, the first
shift ---or the day shift, typically lasting from around 8:00 a.m, until 5:00 p.m. —is the largest shift and is
when the vast majority of technical support personnel were available prior to the program. If problems or
errors occurred during the "ghost" second or third shifts, workers would often have to wait until the next
day's first shift for the problem to be resolved. During the downtime, Hypertherm was paying employees to
wait idly. In 2006, Hypertherm had an average of sic to eight machine crashes per week, with repairs ranging
from $10 to $40,000. The time to get the machines up and running again ranged from 15 minutes to two
weeks. By reducing the number of machine crashes, Hypertherm estimates that it has recovered $300,000 per
year in production time. Additionally, the company estimates it has avoided approximately $50,000 annually
in repair costs. Lastly, technicians are Sesponsible for trying to self -diagnose machine errors for 30 minutes
prior to submitting a request for assistance. By decreasing the number of these requests and the associated
downtime, Hypertherm estimates that it has saved $560,000 per year.
Together, Hypertherm estimates that reduced training time and increased work quality save nearly
$1.6 million dollars per year relative to its prior training methods. Such savings quickly offset the
$2 million investment to create the HTTI.
Sh ECONOMICS AND STATISTICS ADASINISTRAT[ON � OFFICE OFTHF.CHIEF ECONOMIST l NOVFd{BEa 2076
OVERVIEW OrAPPREI'MCESHIP PROGRAMS AND INIERMEDIARiES
LaunchCode
Location: St. Louis, Missouri; South Florida; Kansas City, Missouri; Rhode Island; Seattle, Washington;
Portland, Oregon
Occupation of apprentices: Computer programmer
Company Web Address: https://wwtelaunchcode org/
Background
LaunchCode is a nonprofit organization that acts as an intermediary, bridging the gap between potential
employees and employers in the technology field through apprenticeship. LaunchCode either validates
or trains potential IT candidates before placing them in hiring firms. To date, they have placed over
500 apprentices in firms in 10 different states ranging from small start-ups to large Fortune 500
companies. The success of LaunchCode's approach is evident: firms have converted 90 percent of the
apprentices to full-time employees.
Motivation
LaunchCode breaks down the process of apprenticeship for firms that believe that apprenticeship will be
time consuming, costly, and labor intensive. LaunchCode allows firms to engage in apprenticeship without
incorporating nety processes or.infrastructure to their operations. Additionally, it opens up a new pool of
employable candidates to the firm by working with diverse applicants whose lack of traditional or recent
computer science training would lead companies to overlook them.
Recruiting
LaunchCode's approach is to provide IT professionals to firms that are comparable with a "normal hire," or
someone that already has die skills and other qualifications needed to get the job done. Often, LaunchCode
will tap into a pool of possible candidates that the firms might not consider on their own. For example, at
MasterCard, one firm that takes on apprentices through LaunchCode, a typical hire has a four-year degree
in computer science and three to five years of related work experience. However, only 15 percent of the
candidates that cane to LaunchCode have a degree in computer science. Some of those with degrees earned
them decades earlier and have been out of the workforce for some time. Candidates with no computer science
degree or with one earned in a time with very different IT systems would not be attractive hires to most firms.
Furthermore, 30 percent of the candidates have no college degree.
Program Details
LaunchCode screens candidates wilt a desire to enter (or re-enter) the IT field, trains them in [he skills
needed, and places them in fans requesting talent The program incompetency -based and it generally takes
candidates a year to fully develop the competencies needed for their position as a computer programmer;
including pre -apprenticeship learning, applying to the program, LaunchCode's 20-week training program,
skill validation, and OJT. The apprentices do not earn wages during the classroom period, but the training
and job placement is provided to them free -of -charge. Additionally, candidates do not earn a degree or
credential, but LaunchCode is currently working on an agreement with St. Louis Community College
that will allow apprentices to earn 13 credits toward a degree when they successfully complete the 20-week
NOVF.MBER 2016 � OFFICF,OF THP.CHI[:F F.CONOMl5r 1 ECONOMICS AND STATISTICS ADAfIN15TRATION 55
THE BENEFFISAND COSTS OFAPPRENTICESHIP&A
classroom training program. LaunchCode hopes to replicate this agreement in other markets. Only after
LaunchCode validates their sk lls are candidates are placed in a firm to complete OJT.
Costs and Benefits
LaunchCod(A model is very transparent and straightforward with respect to the employer costs of
apprenticeship hires and hires of already -trained workers, which the company also facilitates. The company
has worked with us to lay out the standard costs as well as some hypothetical figures to compare the costs
and benefits of hiring through an apprenticeship versus an off -the -sweet hire. Because employers are working
with an established intermediary, they face no start-up costs for building an apprenticeship program, but they
do face apprentice costs for recruitment, wages, and training, as well as mentor costs. We outline those and
compare them to the costs from the alternative of the employer hiring a fully -trained worker.
Recruiting and training apprentices
Employers first register online with LaunchCode to communicate their IT needs. LaunchCode recommends
classroom -trained and validated candidates to the firms, who select candidates to interview. Firms have the
option of bringing on the candidate as a direct hire or as an apprentice. All candidates are, in effect, already
in an apprenticeship program, as they have completed the classroom portion of their training at LaunchCode
and await placement or hiring by an employer to complete OJT. The employer decides whether to bring a
candidate in for OJT and complete the apprenticeship program or to hire the candidate for a permanent
position. For candidates that enter OJT, LaunchCode requests that firms ensure that there will be an open
position for the apprentice to move into after the training is complete. For each apprentice graduate that is
converted to a full-time permanent employee, LaunchCode bills the firm $5,000 for their services. This fee
covers the recruiting and classroom training. Companies also pay this fee if they make a direct hire instead
of using OJT.
Apprentice and mentor wages
Apprentices begin working 40 hours a week and earning an apprenticeship wage, which is typically $15 per
hour, compared to $25 per hour fora fully trained new hire. Given a 13-wee k training period offull-time
work, the apprentice wage costs total $7,800, LaunchCode estimates that new apprentices are about
80 percent as productive as the average normal hire.
Each apprentice is paired with a mentor, which LaunchCode describes as a "developer that employer wants
to clone." This is usually ahigher-level employee (to value mentor dme we assume they earn $45 pet hour).
For this exercise, we estimate that mentors spend five hours a week away from their usual work training the
apprentice. These five hours are hours that would otherwise he spent on their usual assignments and reflect
lost productivity. Over the 13-week training period, mentor wage costs total $2,925,
The true cost from lost output of mentors may be lower. LaunchCode [old us that mentors often increase
their productivity while working with apprentices because they are more focused on the [ask at hand and
do not engage in bad habits that they otherwise might when working alone. LaunchCode and the firm work
together to measure skill development during the OJT portion of the apprenticeship. The apprentice
might need additional mentoring along the way, but LaunchCode promises the firm that they will receive
quality candidates.
Sfi ECONOMICS AND STA7IS[ICS ADMINISTRATION � OFFICE OFTHF,CHIF.F ECONOJ9IST I NOVEMBE22g16
OVERVIEW OFAPPRENTICESHIP PROGRAMS AND INTERMEDIARIES
Total cost of apprentices
In sum, each apprenticeship directly costs employers $15,725 if he or she is converted to a full-time employee.
For multiple reasons, about 10 percent of apprentices are not hired in the'end. If we take into account a
pro -rated portion of their apprentice and mentor wage costs (assuming that they left the program halfivay
through), program costs increase by $271, making the total cost of each apprentice hired as a full-time
employee $15,996,
Recruiting arrd training off the -sheet hires
According to the Society for Hurnan Resource Management, the national overall average cost -per -hire is
$4,500.90 Recruiting also has indirect costs associated with the length of the time the position remains
unfilled, but the do not attempt to quantify those costs. If firms were to hire workers through traditional
channels, they may need to pay a signing bonus to secure talent, as trained IT professionals are in high
demand. For this exercise, we have assumed a signing bonus equal to the gross bi-weekly earnings of an
entry-level IT professional, or $2,000. Training costs we assume to be $0 because the hires are already trained,
although it is likely that new hires do receive some firm -specific training after they are hired In short, the out
of pocket costs for hiring a fully trained worker are $6,500,
Wages far off the -street hires
During the 13 weeps that the OJT portion of an apprenticeship would last, anoff--the-street hire would earn
$13,000, or $25 per hour times 520 hours, but they also are 20 percent more productive than an apprentice
according to LauncltCode. If wages reflected productivity, fully trained workers performing at an apprentice's
level, therefore, should earn $10,400. We assume off -the -street hires do not have mentorship costs. Like
all workers, off -the -street hires require supervision, but we do not take such costs into account because
apprentices have the same needs.
$0 These cosy include third-partyagmryfees, advertisingagenry fea,job Fairs, onlinejob board fees,employee referrals, navel coscofapplicanrs and
staff, relocation costs, recruicer pay and benefit,, and talent acquisition rysrem msn, divided by the number of hires.
NOVF.MRER 2016 � OFFICE, OF TtIE CHIEF ECONOMIST I ECONOMICSAND STAT15lIGt ADAUNISTRATION 57
OF APPRENTICESHIPS:A BUSINESS PERSPECTIVE
Total cost of off the -street hers
Adjusted for productivity, we estimate that each traditional hire cost firms $16,900 (see Table 3),
Table J. Comparison of Hiring an Apprentice versus an
Employee Off -the -Street
Costs Apprentice Off -the -street hire
Recruiting and training $500 $6,500
Worker wages PAO $10,400*
Mentor time $2,925 $0
Adjust f ii• apprentice attrition $271 $0
Total $153996 $16,900
`fl djosted far prodsectioit��,
Putting it all together and reiterating that our numbers require various assumptions, the out of pocket costs
for employers using LaunchCode are about $900 less than when making off -the -street hires. These costs do
not take into account any of the potential, long-term benefits that companies may see from reduced turnover
or long-term differences in productivity of off the -street hires and apprentices.
Outside of the money billed to firms, which accounts for about one-third of their funding, LaunchCode
relies on government grants and private donations to operate. The grants support the LaunchCode approach
of targeting workers with barriers to the IT industry. LaunchCode's experience has been that the candidates
are thankful for the opportunity and generally develop a tremendous sense of loyalty to the firm that brought
them in. Often the firms are skeptical at first, but then become excited about the opportunity to bring in
non-traditional candidates who are vetted and validated. Firms also like that the cost to them is simple
and reasonable.
The alternative for firms is to seek candidates through the traditional hiring process, which can be time
consuming and expensive for IT jobs, especially if a recruiter is involved. Firms can also increase the hours and
pay overtime to existing staff or hire contractors. LaunchCode's approach is attractive to employers and job .
seekers alike, offering new opportunities and growing the IT workforce.
58 ECONOMICS ANO STATISTICS AOA{INISTRATION I OFFICE OF THE CHIEF ECONOMIST � NOVEMBER 2016
OVERVIE\V OPAPPRENTICESHIP PROGRAMSAND RQnRMEDIARIES
Max Daetwyler Industries and Apprenticeship 2000
Location: Huntersville, North Carolina
Occupations of apprentices:
• Tool and die maker
Welder fabricator
Manual machinist
Organization WeU Address: http:/hvw{ydaehvyler-usa com/
3ackground41
In 1995, four manufacturing firms with production facilities near Charlotte, North Carolina, founded the
Apprenticeship 2000 consortium to offer apprenticeships in three occupations —tool and die tool maker,
welder fabricator, and manual machinist —to graduating high school students. Blum, Sarstedt, Ameritech, and
Daetwyler each only looked to train a few apprentices each year, but together would bring on a total of 10
to 15 apprentices. These four firms joined together to form a consortium, In the consortium approach, firms
pool resources and work together to administer an apprenticeship program.
Motivation
Daenvyler Industries illustrates well the situation facing all four Founding firms of Apprenticeship 2000
and other firms that participate in apprenticeship consortia. Like other manufacturers around Charlotte,
Daetwyler had a difficult time finding skilled workers to operate specialty precision equipment at the pay rates
it was offering. The company feared that it might go out of business if it did not fill those skilled positions.
Daetwyler's Huntersville, North Carolina plant is home to approximately 75 employees. Like many small
companies, its hiring needs are low —approximately one to three new apprentices each year at this location.
Without the tradition or infrastructure to support apprenticeships that it had in its native Switzerland,
Daetwyler and its partners, including Central Piedmont Community College (CPCC), saw value in trying to
build a local infrastructure to create a pipeline of skilled workers for their jobs.
Together they established Apprenticeship 2000 and afoot -year apprenticeship program. In this program, dre
first year coincided with students' senior year oFhigh school, Tod ayApprenticeship 2000 has evolved to offer
apprenticeships in several technical career trades including CNC machinist, tool and die maker, machine
technician, mold/plastics technician, mechatronics electrician, and mechatronics technician. To date, the
program has graduated 152 apprentices, and there are 47 in the program now.
Recruiting
Apprenticeship 2000 recruits high school juniors bymaking presentations at local schools, working with the
schools' career wmrselors, and inviting students to attend an open house to learn more about the program.
Candidates are invited to participate in a six -week internship over the summer between their junior and senior
{' For more information abous Daenvyler's apprenriceship programsand Apprenticeship 2000,
see: hao://wwwdaenvyler-usac / f m' g/' d h sR�494,.
NOVEAlRER1AIG l OFPICE OFTHE CHIEE FCONOA{IST � ECONOMICS AND SCATI5nCS ADMINISTRATION 59
THEBENEFnSAND COSTS OF APPRENTICESHM, A
year of high school. The internship is an opportunity to screen the candidates further and determine which
candidates are a good fit for the program and for each firm. For most firms in the consortium, it would be too
costly and difficult to find the right candidates without this group approach.
Program Details
The apprentices, who begin the program in their senior year of high school, attend high school for half of
each day and spend the other half of the day at their worksite. Upon graduating from high school, apprentices
spend one day each week for the remaining three years taking classes at CPCC and work 32 hours a week as
employees of Daetwyler or one of the other companies. At CPCC, the apprentices from various firms come
together to take classes under the mechatronics Curriculum4r At each firm, they participate in specialized,
firm -specific learning while working on the factory floor. Each company evaluates apprentices' performance
and progress once a quarter, with favorable appraisals leading to pay increases. Upon graduation, students earn
an associate of applied science degree in mechatronics and a nationally recognized journeyperson's certificate
awarded by the state of North Carolina. They also are guaranteed a job that pays at least $36,400 a year
plus benefits.
Firms are responsible for providing an apprenticeship coordinator that works with other firms' coordinators to
administer the Apprenticeship 2000 program. This includes administrative functions and recruiting.
Costs and Benefits
To join the consortium, firms pay $5,000. There is no set annual fee for firms to retain their membership, but
each company pays for their individual costs to run the program —this includes tuition, apprentices' wages,
recruiting time, and the time of the apprenticeship coordinator. Starting this fall, however, the State of North
Carolina will waive community college tuition for apprentices who start their apprenticeship while they are
still in high school. Firms' costs are reduced by participating in the apprenticeship consortium because the
consortium eliminates the need for firms to take on the full cost of developing and delivering a curriculum
and the full cost of recruiting. When Apprenticeship 2000 program funds are running low, the partnership
decides how much each member firm should contribute to replenish the coffer; all firms contribute the same
amount regardless of the number of apprentices they have.
Additionally, Apprenticeship 2000 earns income when the group supports the development of a new
partnership. A sister program, the North Carolina Triangle Apprenticeship Program (NCTAP), sprouted
in Raleigh -Durham in 2013 with nine companies and three community college partners using the
Apprenticeship 2000 program as a model. Apprenticeship 2000 typically charges other partnerships $10,000
for the knowledge and documents they share to get the new programs up and running.
Daetwyler and the other Apprenticeship 2000 partners believe that they earn back the investment they make
during the four years of the apprenticeship or shortly thereafter. Even if an apprentice were to leave the firm
after graduating from the program, taking their experience and skills with them, the companies believe that
they've already earned back a positive return on their investment. Fifty-three percent of graduates stay with
Daetwyler for five years or more. Daetwyler has a very difficult time finding employees through traditional
hiring methods that have similar skills to its apprenticeship graduates, so the benefits are large.
" For general information, including curricula, on the CPCC mechanonia program,
e: hi •// p d / / d ' -R—S / h - g' gh 1 Sl-1.
GO ECONOhfICS AND STATISTICS ADAfINISPRATION I OFFICE OATHS CHIEF ECONOMIST � NOVEMBER2016
OVERVIE\V OFAPPRWnCESHIP PROGRAMS AND IN1ERMeDIARIES
This is important because the difficulty of finding employees with the right skills was the major motivator for
Daetwyler to enter into the Apprenticeship 2000 partnership in the first place.
Over the long run, Daetwyler believes that training employees as apprentices gives the employees the specific
skills and also embeds the firnA culture. This creates more loyal and hardworking employees who feel invested
in the firm. All the firms with which we spoke for this study expressed similar sentiment about loyalty.
NOVEMBERTA16 � OFPICEOPTHE CHIEF ECONOMIST I ECONOMICS AND SCAT157lCSADMIN157RATION 61
THE BENEFM AND COSTS OF APPRENTICESHIP&A BUSINESSPERSPECIIVE
M I U America
Location: Grantteville, on Carolina
Occupations of apprentices:
• CNC machine operators
• Engine assemblers
• Part assemblers
• Quality technicians
Company Web Address: http•//%v%vty mtu-online com/mtu-northamerica/comoanv!
Background43
MTU America, a wholly owned subsidiary of Germany's Rolls-Royce Power Systems AG, manufactures
off.highway power and propulsion systems. Their main products, diesel engines and distributed energy
systems, are used in mine haul trucks, military vehicles, and marine vessels, as well as hospitals, data centers,
and universities.
Motivation
Building on its history of apprenticeship in Germany, [he firm instituted an apprenticeship program for
industrial mechanics in the United States in 2012 as a way of bringing talent into the company and increasing
the technical skills of workers in their Aiken, South Carolina plant and community. To date, 13 apprentices
have graduated from the program.
Recruitment
The MTU apprenticeship program; based on the German model of youth apprenticeships, targets high school
students attending the Aiken County Career and Technology Center, which offers a large pool of possible
candidates for the six slots that MTU makes available to juniors each year. MTU begins recruiting candidates
by asking teachers to identify potentially suitable students as early as ninth and tenth grade. Students who
have an interest in a career in manufacturing; have passing grades, good attendance and conduct; and are self -
motivated are good candidates.
Program details
Once selected, apprentices work four hours a week during their junior year while attending high school classes
Full time. Dm'ing their senior year, they work seven hours a week, on average, while also attend ng high school
full time. Over the summers after their junior and senior years, the apprentices work at MTU full time.
During their junior year, apprentices are primarily learning during the OJT portion of the program,
but by their senior year they are functional members of the production team at MTU.
"
For mo einEorma on ahouc MTU's apprenticeship programs,
G2 F.CONOAtIGS AND STATISTICS ADStINIS'I'RATION � OFFICE OPTHE CHIEF ECONO\n5T f1iOVEh1BER 20rG
OVERVIEW OFAPPREN7ICESHIP PROGRAMS AND INTERMEDIARIES
MTU provides the Aiken County Career and Technology Center with curriculum for irn-school technical
training such as blueprint reading, metal working, and measurement. Like all plant employees, the apprentices
must also attend regular company courses on code of conduct, work ethics, and harassment. Finally, die
Apprentice Coordinator from Germany provides training on reading blueprints, taking measurements,
milling, and assembly of metal parts. The Apprentice Coordinator also helps prepare the students for their
final exam, which includes both practical, hands-on testing and written testing,
Upoln fin skiing the program, apprentices have eazned a high school diploma, have gained significant work
experience, and are awarded apprenticeship certificates from DOL and the state of South Carolina. The
training program and exatmination are conducted in consultation with the Association of German Chambers
of Industry and Commerce (DIHK� and in line with the German regulations for occupational training
in metalworking. Upon completion of their final exam, the apprentices also receive an official graduation
certificate for "Skilled Metal Workers," which is recognized internationally.
Costs and benefits
As is typical with appren[iceships, apprentices conuibute to the plants' productimn at a reduced wage relative
to full-time, fully -trained employees, and their pay progresses commensurate with their increasing experience.
and productivity. For their OJT hours, MTU apprentices earn a starting wage of $8.75 per hour and they
receive pay raises every six months through the program. If hired full-time upon graduation, they earn $M.00
per hour. MTU apprentices do not receive a wage for the classroom training time. Besides wages, MTU pays
approximately $500 per apprentice for training and education,
MTU considers its program to be the most cost-effective way to fill its need for industrial mechanic labor,
while also increasing the skills of the greater Aiken labor force and helping to alleviate a potential community
problem of skill shortages. Currently, MTU employs only one of their youth apprentice graduates in
their college cn-op program4' Two of their 2016 graduates are set to begin the firm's new maintenance
apprenticeship program, which is currently in the process of DOL registration. Three graduates are employed
by other firms in the local area. MTU is proud to help improve the skills of the local labor pool and
surrounding employers have provided MTU with positive feedback.
When permanent positions are available, MTU offers them to apprenticeship graduates, and its goal
is to retain its apprentices, That said, the firm considers that the benefits it gains during the two-year
apprenticeship program cover its costs and does not rely on apprentices continuing with the firm as full-time
employees for the program to pay off. One way to consider this cost -benefit calculation is to consider MTU's
alternatives for hiring industrial mechanics. An apprentice graduate is someone with a known skill set who
has been trained specifically for his or her job and is familiar with the company, Alternatively, MTU would
employ contractors or direct hires recruited through various channels including employee referrals, newspaper
and Internet ads, and staffing agencies. All told, MTU estimates that it spends approximately $3,000 to
hire an employee, without taking into account the hires' fit in the company and subsequent training costs.
However, MTU has very low recruiting costs for their youth apprenticeship program. The school advertises
the program through career counseling and the program has received free publicity through the local
news media,
u For inkrmadon on MTU's wllege co-op program, zee: hao:/hvµay.mmamerirarareer om/smdeno-work=p o / -p=p v _,
HOVE\4BER 201G � OPPICE DPTHE CHIEF ECONOMIST � ECONOMICS AND STATISTICS ADMINISTRATION 63
THE BENEFITS AND COSTS OFAPPRENTICESHIPS.A BUSINESS PERSPECT
MTU also sees some indirect benefits of its apprenticeship program. Employees that serve as mentors benefit
by reinforcing their own skills and report a feeling of camaraderie with the apprentices. Additionally, when
apprentices graduate and there are not full-time positions available at MTU, they take their'skills to the
larger South Carolina workforce. This view is consistent with the company's German heritage, which sees
apprenticeships as a natural part of the way they do business and as a way for the company to contribute
to society.
64 F.CONOS11C5 AND STATISTTCS ADSfINIS!RATION � OFFICEOF THECHIF.F ECOA'OWSY � NOVEA1RER 2016
OVERVIE\vOFAPPRMnCESHIP PROGRAMSAND INTERMEDIARIES
North America's Building Trades Unions
Location: Nationwide
Occupations of apprentices: Numerous occupations fall under North America's Building Trades Unions
(NABTU). See http:/hvww.bctd.oW/About-Us/Affiliates ash for a list of affiliate organizations.
Background
The building and construction trades represent the canonical example of apprenticeship in the United States.
These trades —painters, boilermakers, electricians, bricklayers, plmnbers, roofers; and so on —have used
apprenticeships for more than 100 years to train new journeypersons in their crafts. For most people, the
word "apprenticeship" likely calls to mind a member of one of these wades. To this day,
the vast majority —almost two-thirds— of all apprenticeships registered with DOL are in the construction
industry.45 In addition, 74 percent of all construction apprentices are represented by NABTU.
Motivation
The NABTU apprenticeship programs are intended to provide a pipeline ofskilled labor to the construction
industry given the unique labor market conditions faced by construction firms. As one member of NABTU
put it, construction is "the original gig economy." Construction projects are necessarily short term, and the
number of employees needed by a construction firm at any given moment varies depending on the liras
current workload. Many construction firms are very small, often single entrepreneurs who will switch back
and forth from employee to business owner several times.
One of the major roles NABTU plays in the construction labor market is to act as a "hiring hall" where firms
can take on workers for the duration of a project and then release those workers to other projects when they
are finished. NABTU uses apprenticeships to provide a baseline level of skills and competencies that craft
workers can transfer from job to job and employer to employer. As is becoming more common across all
industry sectors, NABTU also sees providing diverse labor —including women, minorities, and veterans —as
an important goal of their apprenticeship programs.
Recrttiting
The program is intended for anyone looking to enter into skilled craft occupations. However, there are
concerted efforts to reach out to populations that are less likely to have the resources to gain occupational
skills on their own. NABTU works with state and local governments and community -based organizations to
target minorities, women, and veterans. The "Helmets to Hardhats" program is specifically targeted to help
military veterans learn the skills needed to be successful in an occupation in construction and to help diem
transition back to civilian life. The program has helped place over 20,000 veterans since its inception in 2003.
Program Details
NABTU has a large apprenticeship infrastructure with over 1,600 training centers in the United States,
collectively known as the joint apprenticeship and training committee (JATC). Journey -level training provided
by these centers includes: health and safety programs sanctioned by the DOL Occupational Safety and Health
" Source:DOls Employment and Training Administration.
NOVFItRER 201G 1 OFAICF.OFTHECHIEF ECONOMIST � ECONOMICSAND STATISTICSAO\tINISIAATION 65
THE BENEFHSAND COSTS OF APPRENTICESHIP&A BUSINESS PERSPECTIVE
Administration; foreman training; instructor certification; and other skill upgrade training such as welding Or
painting certification. Another program, the Nuclear Mechanics Apprenticeship Process, teaches journey -level
workers cutting edge skills used in manufacturing nuclear -related products.
The length of apprenticeships in the building trades varies by occupation. Per craft workers ior e finishing
trades —painting, floor covering, window glazing, and similar crafts —apprentices are required to complete
a minimum of 144 hours of classroom training per year for between two and five years. The classroom
curriculum includes theory, methods, hands-on practice, and development of leadership skills. In addition to
classroom work, apprentices complete 2,000 hours of OJT each year. The training model is a hybrid model,
allowing apprentices to test out of some academic requirements but requiring the full completion of OJT.
Much of the training that apprentices receive can be applied toward an associate's or bachelor's degree, so the
NABTU apprenticeship programs are a head -start for workers that would like to continue their education
further. Apprentices in the finishing trades earn up to 42 credit hours that can be applied to future degree
requirements.
Costs and Benefits
According to the NABTU Research Department, if the JATC were a college or university, it would be the
second largest in the country. The JATC centers are privately funded through contributions in excess of
$1.3 billion per year from the building trades unions and the contractors that hire unionized labor. The
building trades unions use dues from current members to fund the training needs of future members,
establishing an intergenerational link across the entire membership that NABTU believes is one of the core
elements of its longstanding success with apprenticeship. The natural progression among skilled craft workers
from apprentice to journeyperson to mentor further cements this relationship across time.
The finishing trades unions spend $3,000 to $4,000 per apprentice for training and education, while
employers are responsible for wages. Completion rates are not well tracked, but the majority of dropouts likely
occur early before many costs accrue. The Construction Industry Craft Training Research Team stated that
NABTU employers earn an ROI of between $1.30 and $3.00 for every $1.00 invested in craft training due to
improved safety, increased worker productivity, and reduction of rework, absenteeism, and turnover.
66 ECONOMICS AND STATISTICS ADA91NlSTRATION � OFFICE OFTHE CHIEF ECONOAfIST � NOVEAfAEa 201G
OVERVIEW OF APPRENUCESH IP PROGRAMS AND INTERNIEDIAlU ES
Oberg Industries
Location: Freeport, Pennsylvania
Occupations of apprentices:
• Precision toolmaker
• Precision tool grinder
• Press operator
• CNC operator - milling
• CNC operator - turning
• CNC operator - mill/turn
• CNC machinist - milling
• CNC machinist - turning
• CNC machinist - mill/turn
• Heat treater
• CAD die designer
Precision machining specialist
Precision grinding specialist
• Carbide punch and die operator
• Precision EDM operator
Company Web Address: http:/fivww.oberg.com/
Baclrground
Founded in 1948, Oberg Industries is a contract precision manufacturer headquartered in Freeport,
Pennsylvania. This employee -owned company has three manufacturing sites worldwide, employing
approximately 700 at its two locations in Pennsylvania and 100 in Costa Rica. The company specializes in
multi -axis machining, turning, electrical discharge machining (EDM), grinding, lapping, metal stamping,
and tooling for numerous consumer and industrial markets including aerospace, energy, medical, defense,
and metal packaging.
Motivation
At its core, Oberg sees itself as "selling skills" more than manufactured goods. It has operated training
programs since 1953 to build a highly skilled workforce that can "make their machines sing and dance" and
"maintain future generations of skilled workers."46 The company began registering its apprenticeship programs
with DOL in 1971. Over the years, Oberg has graduated nearly 700 apprentices. The majority of its current
staff are graduates of one of its 15 apprenticeship programs. Another 42 apprentices are currently in training.
'� Formore inkrmadon about Oberg lndusuies'apprznriceship program, zee: hrro/hvvsvoberg /b d /gp h'�g--P�.
NOVHMBF.R2616 � OFFICE OFTHE CHIEF ECONOMIST 1 ECONOMICS AND 5rATISTICSADMINI.SIRATION 67
OFAPPRENMESHIPSA
Oberg is growing at a rate of about five percent per year and the company invests approximately five percent
of revenues in capital equipment each year. Beyond growing their capital. stock, Oberg also needs to "grow"
new employees in order to sustain this growth. Hiring fully skilled staff from other companies is not an easy
alternative because there simply are not enough skilled workers to hire.
Recruiting
Selection for Oberes apprenticeship program is competitive. The company seeks independent, creative self -
tatters who perform well under pressure and are not afraid of challenges. Applicants must have a high school
diploma or equivalent but do not need previous experience to apply for entry-level positions.
Oberg screens applicants through industry -approved tests, psychological batteries, and interviews. For the
stamping apprenticeship, the industry -approved test is the Precision MetalformingAssociation's Metalworking
Skills Assessment.17 For apprenticeships in other fields like CNC, grinding, and tooling, applicants take the
National Tooling and Machining Association's Employee Aptitude Test.98 Oberg typically only hires about
5 to 10 percent of applicants,
Once hired, apprentices must continue to show progress by earning a grade of 80 percent or more on their
classroom assessments and demonstrate proficiency of the required competencies for the job.
Program Details
All of Oberg's apprenticeships are competency -based and typically take benveen ttivo and four years to
complete. Oberg had time -based apprenticeships for over 20 years but found that they were better suited
to jobs with repetitive tasks and simple product lines. Oberg's varied work as a contract manufacturer
requires an agile manufacturing staff that is flexible enough to produce constantly changing products with
superior quality and a high rate of precision. Now, instead of using time -based programs, Oberg aligns its
competencies to customer expectations and strategic objectives that promote an extensive cross training
process encompassing multiple machines and product fines. This allows management to send the workforce
where manufacturing constraints exist to reduce cycle time and increase machine utilization. The competency
based programs also align with a performance based reward system much better than time -based programs.
Related instruction is a combination of online, video -based, instructor -led, and distance learning classes.
Apprentices attend instructor -led or distance learning classes a fete days a week but complete online or
video -based classes daily. All OJT and classes take place within the company during the work shift, there
are no after -shift or off -hour classes. Instructors are college faculty and in-house subject matter experts. This
blend of classroom and OJT continues throughout the apprenticeship. Oberg partners with Butler County
Community College (BC3) so apprentices can earn a college certificate and obtain college credits during their
apprenticeship program. They also partner widr Penn State University to provide non-credit classes to specific
apprenticeship programs.
Apprentices will earn industry credentials from the National Institute of Metalworking Skills (NIMS)
during their apprenticeship program. The number and type ofNIMS credential earned depends on the
a Adescription of and order formforthe Metalworking Skills Assessment is available ar.
h t // p � bl'c/ k pI 1pdf/M W kSk'll a B h odF
to For more information, see the National T ling and Machine Association's Fact Sheet available at:
h // g/ pl d /g a I/G 'd - Employee Aptitude Testdadf
68 ECONObI[CS MDSTATISTiCS ADMINLSTRATION � OFFICE OFTHE CHIEF ECONOSf15T � NOVEMBER 2076
OVERVIEW OF APPRENTICESHIP PROGRAMS AND INTERMEDIARIES
apprenticeship program selected. Industry credentials are given college credits through articulation
agreements with academic partners. Upon completion of the program, apprentices will earn a journeyperson
certificate and a cash bonus. Apprentices also receive bonuses for each industry credential they obtain.
Oberg's apprentices often progress to administrative or senior management jobs in the company and former
apprentices have occupied both director and vice president positions.
Costs and Benefits
Oberg invests up to $250,000 per apprentice in hourly compensation, bonuses, related instruction,
and benefits over a four-year apprenticeship period. These costs take into account overtime premium pay
that some apprentices earn, as well as pay increases that those progressing satisfactorily will achieve every
six months.
Oberg was one of the few companies we studied that conducts internal ROI calculations on its hires. In
its calculations, Oberg is able to distinguish apprentices from non -apprentice hires, as well as track specific
cohorts of hires. Oberg has been doing these analyses for almost 15 years. Based on Oberg's internal metrics,
there is greater risk in hiring off -the -street "experienced" employees than developing employees through
an apprentice program. This is largely due to a high degree of variability in experience gained from other
employers and the costs to get off -the -street hires up to speed and acclimated to their unique manufacturing
process. Because of this and the graying of the workforce, Oberg is looking to double its number of
apprentices over the next two years. Because of confidentiality concerns, Oberg did not share detailed
data with us, but we can provide an overview of how the company conducts its analysis and the results. Its
approach may well be a model for other companies to follow.
Oberg starts by using the same metrics that it tracks for company production. Metrics for training
effectiveness follow the guidelines first recommended by an outside expert. Its basic ROI metric compares the
actual cost to the predicted cost of a job or task. jobs are broken down into tasks and the tasks are assigned
to machine tools. Benefits are included in the cost calculations. This analysis helps die company determine
ongoing training needs for all manufacturing employees. Other metrics that the company tracks include
indirect labor hours, direct labor hours, training hours, scrap costs, rework costs, and machine hours. These
numbers feed into measures of apprentice productivity, labor utilization, and ROI.
Finally, the company also tracks apprentices' progress through their class grades, number of competencies
demonstrated, and percent of competencies completed. All these measures allow Oberg to examine the
ROI of apprentices during the training program. The apprentice graduation rate is over 85 percent. These
measurements are correlated to the recruitment and selection process to improve targeting sources of
new hires.
Oberg finds a wide -range of consistently positive ROI for its apprentice graduates on average. Typically, the
company's ROI on apprentices is negative for the fast 12 to 18 months depending on the program. Most
programs show a positive ROI by the midpoint of the program. However, the most dramatic increase in ROI
usually occurs during the last year of the program. The apprenticeship process is structured and repeatable. All
programs are reviewed annually and revisions are common due to technology changes and customer demands.
In the end, all apprentices receive the same training and learn how to perform tasks the "Obergway." -
NOVF.MOER 201R 1 OFPICF.OF THE CHIEF ECONOMIST � ECONOMICS AND STATISTICS ADMINISTRATION 69
THE BENEFM AND CASTS OFAPPRENTICESHIP& A BUSINESS PERSPECnW
United Automobile Workers -Ford Motor Company
Location: Headquartered in Dearborn, Michigan; apprentices are tra ned at sites nationwide.
Occupations of apprentices: .
• Industrial electrician
• Millwright
• Tool and die maker
• Machine repair
• Plumber/pipefitter
• Toolmaker
• Welder
• Metal model maker
• Industrial truck mechanic
Organization Web Address: htros://uaw.ore/ and ltttRWwww.ford.com/
Background49
The United Automobile Workers -Ford Joint Apprentice Program is a partnership between the United
Automobile Workers (UA\XI) labor union and Ford Motor Company that began in 1941. Although the
program has changed over the years, what remains the same is the commitment to developing a skilled
workforce. There are currently almost 600 Ford employees enrolled in the UAW -Ford apprenticeship
program and another 1,200 expected over the next three and a half years.
Motivation
Although this apprenticeship program has been around for 75 years, the program was mostly dormant for
over a decade until the economy and the manufacturing sector began to emerge from the Great Recession.
The manufacturing sector was hit especially hard, and many schools stopped providing the technical training
they had previously offered. The auto industry stopped hiring and actually shed workers from 2000 until
around 2010, creating a gap in the workforce between older, skilled workers and young, unskilled workers.
UANVbFord is using the apprenticeship program to re -skull their workforce and prepare for the retirement of
many veteran employees.
Recruiting
Inmost apprenticeship programs, firms hire apprentices from the outside labor market as a way of training
new workers. In the UAW -Ford program, however, Ford apprentices come from the current Ford labor Force.
Although the program is necessary to train newly hired and younger workers, the program also serves as a way
to upskill workers who have worked in manufacturing —at Ford or elsewhere —for some time. A number of
the apprentices in the program are over 50 years old. Because technology is ever -changing, there are always
new skills to learn. For workers that are new to Ford, the training is imperative to learning how to do things
the Ford way.
'B For more information on UAW -Ford apprenticeship progruns, Te:h f/ Fed / /._
70 ECONOMICS AND STATISTICS ADASRJISTRATI0,7 � OFFICE OPTHE CHIEF ECONO.li1SC � NOVPA16ER 2016
OVERVIEW OF APPRENTICESHIP PROGRAMS AND INTERMEDLUUES
Full-time Ford employees, in order to qualify for the apprenticeship program, must complete the Industrial
Readiness Certificate Program (IRCP). The program consists of three standardized courses completed through
one of 12 approved local community colleges or completed online with Penn Foster Career School. The three
courses cover shop arithmetic, machine tool blueprint reading, and trade related preparation. After completing
the three courses, candidates submit a transcript and preference for three trades for review and approval. If
approved, candidates are placed on a waitlist according to seniority, and apprentices are selected from this list.
Program Details
Apprentices begin with athree-week core skills course at Ford's Technical Training Center (TTC) in
Lincoln Park, Michigan, to learn basic knowledge and skills about their trade. Apprentices then complete
rotational on-the-job assignments with journeypersons in their trade, as well as coursework at their local
educational provider and some additional periodic advanced training at the TTC. The total time spent in
the apprenticeship must include 8,000 hours of on-the-job time in the shop and a minimum of 576 hours
of related educational training. The average apprenticeship requires approximately three and a half years
to complete. -
NOVEMRER2016 I OFFICE OF THE CHIEF ECONOMIST I ECONOMICSAND STATISTICSADMINI57RATION 77
7HE BENEFITS AND COSTS OP APPRENTICESHIP&A BUSINESS PERSPECTIVE
Institute for American Apprenticeships at Vennont 1-II1 EC
Location: Williston, Vermont
Occupations of apprentices:
Healthcare
• Certified medical transcriptionist
• Certified medical coder
• Certified phlebotomist
• Certified medical assistant
• Certified pharmacy technician
• Licensed nurse assistant
• practice support specialist
• Registration representative
• Electronic health record go -live support analysts
• Electronic health record data abstractor
• Cancer tumor registrar
Iaaformation Technology
• Software developer (Java)
• Web developer
• Development programmer
• Support programmer
• EDI analyst / programmer
• Softvare installation consultant
• IT support analyst
• IT account manager
• IT interface analyst
• IT application software analyst
Advanced Manufacturing
• CNC machine operator
• Machinist
• Structural steel welder and fitter
Business Services
• Technical documentation writer
Organization Web Address: httn•/hvww.vdtitec.orel
J2 ECONOAtICS AND STATISTICS ADAfIN4STRATION � OFFICE OFTHF. CHIEF ECONOfi15T I NOVEAfeL•R 1a T6
OVERviEwoF APPktNmcESHIP PIfOGRAMSAND INTERhfEDIARIFS
Bacltground
The Institute for American Apprenticeships at Vermont HITEC (Vermont HITEC) is a non-profit workforce
development organization that has been acting as a "workforce intermediary' leader in Vermont and New
Hampshire for over 16 years, developing and implementing apprenticeship programs in the non-traditional
fields of healthcare, IT, advanced manufacturing, and technical services. It acts as a Nvorld'orce "broker"
between employers tvho have immediate job openings to fill but cannot find skilled workers and job seekers
looking for immediate employment but lack the necessary skills employers need. Vermont HITEC has been
approved as a Workforce Innovation and Opportunity Act MOIA) Eligible Training Provider, a Vermont
apprenticeship sponsor, and has joined DOn RA College Consortium as a sponsor member.50
Vermont HITEC, through the use of its accelerated workforce development and competency -based
apprenticeship model, closes the gap by providing employers the newly skilled workforce they need.
Apprenticeship acts a cornerstone of Vermont HITEC's model. Specifically, every participant selected and
enrolled in a Vermont HITEC accelerated pre -apprenticeship education program who graduates is guaranteed
full-time employment in an apprenticeship at a livable wage with full benefits. In the past 15 years, this model
has been used to create over 1,409 newjobs in 20 different non-traditional apprentice occupations for more
than 25 regional employers.
Motivation
Vermont HITEC's educational programs are all employer-putner sponsored. Starting with guuanteed jobs
for all of its successful graduates, the programs that Vermont HITEC offers are specifically designed to provide
the education and skulls needed for specific occupations. Beyond the technical skills, Vermont HITEC helps
students gain the "communications, human relations, citizenry, and analytical skills" that employers value in
their employees.
From an educational perspective, Vermont HITEC program have the rigors of an academically-reviexved
curriculum and have been awarded college credits through Burlington College and the earning of necessary
position -specific credentials through national certifications by examination. From the student's perspective,
Vermont HITEC's model involves career and program orientation, aptitude assessments, interviewing and
selection, accelerated pre -apprenticeship education, coaching and mentoring, immediate transition into
employment, and intensive mentoring in a competency -based registered apprenticeship. From the employer's
perspective, the model involves business and workforce analysis, recruitment, reverse -engineered curriculum
development, education delivery, apprentice transition into the workplace, performance standards and
metrics, performance reviews, mentoring, and retention. This accelerated model can be used in any industry
for any occupation.
Program Details
Three of the firms with whom we spoke during our study have worked with Vermont HITEC to design and
deliver curriculum for their apprenticeship programs. As noted elsewhere in this report, Vermont HITEC
worked closely with Dmmouth-Hitchcock to reverse engineer the MA occupation to develop a 10-1veek
classroom training. Vermont HITEC also provides instructors to Dartmouth -Hitchcock to teach the
classroom portion of the apprenticeship training.
" The Registered Appsnticeship-College Consonium is wmposed ofemployers,labor-management groups and associations
that have RegisremdApprznd¢ship programs (known as sponsors) and two -and Four-year postucondary insdmtions. For more information,
see: ht ps•l1 d I g / / F .
NOVET10ER2016 1 OFF[CF.OFTHE GHIEF F.CONOTiIST � ECONOMICS AND SrATI5TlC5 ADMINISTRATION 93
THE BENEFnS AND CCM OFAPPRFNnCESFBPS; A BUSINESS PERSPEGME
In addition to Dartmouth -Hitchcock, Vermont HITEC currently works with nThrive (formerly Precyse)
to develop and deliver curriculum for their medical coding apprenticeship program. Vermont HITEC also
worked with Hypertherm, an advanced cutting products manufacturer, to reform their apprenticeship training
in 2005 and continues to recruit apprentices for Hypertherm today. Although health care, medical coding,
and machinist occupations differ greatly, Vermont HITEC's model for providing the classroom training for
apprenticeship in these occupations is the same. Unlike many apprenticeship programs that blend classroom
and OJT over the entire apprenticeship period, Vermont HITEC's model is to provide intensive classroom
training up front before the apprentices begin OJT. The classes are held at an employer designated site or
online, as is the case with Precyse. Apprentices are expected to study and complete homework on a subject
before they learn it in class. The classroom instruction is meant to reinforce the concepts with the apprentices
mostly teaching each other and the instructor acting as a facilitator.
All apprentices in Vermont HITEC programs keep daily journals as a method of Hacking their progress and
communicatingwith instructors. The instructors provide daily written feedback and also correct grammatical
errors in the journal entries to help the apprentices improve their communication skills.
yh ECONOMICS AND STATISTICS ADMINISTRATION I OFFICE OFTHF.CHIEF F.CONO\i1ST � NOVEAiRER 7A16
',1PPENmx 1: QUANTITATIVE MUM
Appendix I: Quantitative Results
The study team visited Dartmouth-Hitdhcock in Lebanon, New Hampshire and the Siemens plant in
Charlotte, North Carolina, to interview the senior executives overseeing the apprenticeship programs, as well
as several apprentices and mentors, in order to gain a thorough understanding of their programs. Subsequent
to our visits, we reached agreements with Dartmouth -Hitchcock and Siemens to gain access to more detailed
production and cost data, which has allowed us to statistically assess costs and benefits of their apprenticeship
programs. The results of that analysis are presented and discussed in the case studies in the report. This
appendix provides a detailed description of the study team's data analysis.
Dartmouth -Hitchcock
From our discussions with physicians, managers, medical assistant graduates and trainees, we found that the
MA apprenticeship program had the following potential impacts:
• "reduced costs, due to reduced overtime of all providers, and lower wages of MA's.
• increased the hospital's ability to deliver care, by making sure available appointment
times were filled and by allowing providers to spend time examining patients rather than rooming
them
• increased provider satisfaction due to increased time spent delivering care they were
trained to do
• increased patient satisfaction, because of reduced it time to obtain an appointment,
We used data provided by DHMC to analyze some of these potential effects. In particula , we looked at
whether the introduction of apprentice MAs in the Lebanon facility had an effect on the number of hours
that patients were seen for appointments and the number of patients up to date on their preventive care
procedures. Separately, we did a preliminary analysis of quality of care metrics, as measured by the provision
of preventive care, specifically colonoscopies and the flu vaccine.
The main method we used to analyze these data is called difference -in -difference, a technique used to
understaztd the effect of a policy change. This is done by compuing outcomes before and after a policy change
has been implemented in a treatment group (a group receiving the policy change) to the outcomes in a control
group (a group not receiving the policy change). The assumption is that the trend in the control group is a
good approximation oftvhat the trend would have been in the treatment group absent a policy change. The
difference4n-difference approach has been used to measure many different policy changes including the
effectiveness of drugs on health outcomes or educational programs on student success. In the classic case of
difference -in -difference the treatment group are comprised of individuals all of whom receive a policy change
while in the control group are comprised of individuals who have not received the treatment.
There are two main components of difference -in -difference analysis, a time variable that indicates the time of
the policy change and a variable that denotes which group received the treatment, In the case of D-H there
are actually three time periods (the three dates the medical assistants started working at Lebanon) and the
NOVF.MRER 1016 I OFF[CF.OF THE CHIEF ECONOMIST 1 ECONOMICS AN➢STATISTICS ADMINISTRA17ON 75
THE BENEFITS AND COSTS OFAPPRFirnCESHIPS.ABUSINESS PERSPECTIVE
treatment is on the facility and not individuals. Ideally the treatment group would be the specific physicians
and nurses with medical assistants, but data matching particular physicians and nurses to particular medical
assistants is not available.
Lebanon is the treatment group while Manchester is the control group. There are four different time periods:
1. No apprentice MAs: January 2012 through October 2014
2. 21 apprentice MAs: November 21 through May 2015
3. 40 apprentice MAs: June 2015 through November 2015
4• 55 apprentice MAs: January 2-16 through June 2016
We considered Manchester to be a sound control group because both facilities operate under the same
corporate management, in the same state, and in the same industry. We must note, however, that booked
hours did tick up in Lebanon prior to the apprenticeship period, reflecting in part the move to the Heater
Road facility and the use of provider overtime hours instead of MAs. There was not a comparable uptick in
booked hours at Manchester. Based on our extensive interviews with Dartmou&I-litchcock management and
staff, we do not consider this uptick to he sustainable over the long term. Ultimately, there remains a question
about what booked hours in Lebanon would have been in the absence of the MA apprentices. In our analysis,
Nye implicitly assume that hours would not have continued increasing relative to Manchester.
MA placement schedule:
Cohort 1 Nov-14 21 1S o '
Cohort Jun-15 19 11 8
Cohort Dec-15 18 8 7 1 2
Primazy Care Appo
The primary care appointment file has information on appointments from January 2012 to June 2016. Fields
of interest were:
1. A unique identifier for each provider
2. The facility of the provider (Lebanon and Manchester)
3. The cost center of the provider (primary care, internal medicine, and family medicine)
4. Booked hours: the number of hours spent at appointments that day
intments
5. Date (month and year)
A time category was created to represent the four time periods of MA placement.
The original dataset included 114,364 observations:
• Because medical assistants were concentrated in primary care, internal medicine, and family
medicine all other cost centers were dropped (393588)
• We dropped some observations because appointments were not linked to a particular
provider (2,005)
7G ECONO\1IC5 AND 51ATISTICS AO.lBNISTRATION � OFFICE OFTHF.CHIEF ECONOMEST l NOVEAIBER 201C.
'APPENDIX 1: QUANTITAnv6 RESULTS
Sample:-Daw Booked hour
0001 Lebanon Jan-12 4
0001 I Lebanon . I Feb-12 7
0001 Lebanon Mar-12 5
0002 Manchester I Jan42 3
0002 Manchester Feb-12 4
0002 I Manchester I Mar-I2 3
Boolted hours were then summed by month and facility, leaving 108 observations.
Booked Hours = /30 + �31(Lebanon) + f3y(ERA: 21 MAs) + P3 (ERA: 40 MAs) + MBRA: 55 MAs) +
/15(ERA: 21 MAs) x (Lebanon) +,86(ERA:40 MAs) x (Lebanon) +(17(ERA: 55 MAs) x (Lebanon)
�37 represents the effect of having 55 MAs on the number of booked hours.
From January 2012 through October 2014 (right before the first cohort of Mt1s started working) providers
in the Lebanon facility were seeing patients for 3,368 appointment hours per month. From the time the
third cohort began working in December 2015 through June 2016 appointment hours jumped to 4,128
a month an increase of 760 (tours, or 23 percent. Booked hours in the Manchester facility also rose, from
1,933 to 2,376, a difference of 443 hours. The difference in the difference is therefore 318 hours. This
result is represented by 3.era#ltreated.
Booked Hours by Cohort
(sum) booked hr
lbn•era
-101,227
(1.00)
2.era
85.223
(0.79)
3.era
4424933
(4.36)**
Ltreated
11434,632
(24.18)**
lbn.era#Ltreated
235,559
(L64)
2.era#Ltreated
546.169
(3.56)**
3.era#ltreated
317.551
(2.21)*
Constant
13933.159
(46.07)**
RZ
0.92
N
108
*p<0.05; **p<o.ol
NOVFA{RER 201G � OFFICF.OF THP.CH(EF ECON0�11ST 1 ECONOMICSAND 51•ATISTICSADAfINIS7RATION T7
THE BENEM SAND COSTS OFAPPRENTICESHn'SA BUSINESS PERSPECTIVE
Preventive Care Procedures
Providers, physicians and nurses, have multiple patients who have recommended preventive care procedures.
Based on data availability, we looked at colonoscopies and flu vaccines. The preventive care file has the
number of procedures administered and the number of procedures recommended to be administered for each
provider from January 2012 through May 2016. Procedures recommended are based on characteristics of
patients including medical history, age, and risk factors.
The fields used for analysis u'e:
1. A unique identifier for each provider
2. The.facility of the provider (Lebanat and Manchester)
3. The procedure (colonoscopies and flu vaccines)
4. Procedures administered
5. Procedures recommended
6. Date (month and yeaz)
A time category was created to represent the time period after November 2014.
Because of multiple data issues, ex[reme caution should be used in drawing conclusions from [here results.
The original data set contained 14,860 observations. Data issues include:
• Data were not available for October 2013 or November 2015
• If administered or scheduled procedures were missing those observations were
excluded (7,937)
• Because of data issue in December of 2015 and January of 2016 those observations were
excluded (774)
• Because of a definitional change data on mammograms, and other issues, these data were
excluded (4,608)
• Because of a data outlier in colonoscopy procedures in Manchester in June of 2014, these data
were excluded
Srtrr:ple:
il�--��-�•irT-t:.,- :a'�114€� .,tam i3�r�_�.rrt��riaorrnsrr■
0001 Lebanon Colonoscopy Jan-12 110 91
0001
Lebanon
Colonoscopy
Feb-12
98
78
0001
Lebanon
Colonoscopy
Mar-12
133
111
0002
Manchester
Flushot
Jan=12
46
27
0002
Manchester
Flu shot
Feb-12
35
27
0002 Manchester Flu shot Mar-12 50 40
Procedures were swnmed by month, region, and procedure. This leaves 98 observations for flu vaccines and
96 observations for colonoscopies.
Measure = /3B + Pt(Lebanon) + /iy(Post Nov2014) +Q3(Post Nov2014) x (Lebanon)
Using these very limited data 838 more patients were up to date on their flu vaccines while 194 more patients
were up to date on their colonoscopies, although the latter result was not statistical significant.
�e ECONOMICS AND STATISTICS ADABNISTRATION � OFFICE OA THE CHIEF ECONOMIST � NOVEMBER 2816
APPENDIXI: QUANTITATIVE RESULTS
Siemens USA
I
In order to estimate the productivity benefits from the Siemens apprenticeship program, the study team
received two large data files and other supporting documentation from Siemens. The data files are described in
more detail below.
LaborArulitTrail
Each time a Siemens employee cloclu in or out on an operation, his or her hours are recorded, The Labor
Audit Trail is a record of all such transactions from October 1, 2015, through August 31, 2016, for all
machinists employed by.Siemens in its Charlotte turbine facility. Of the fields provided in the data set, the
following were used for analysis:
1. A unique identifier for each employee
2. The order number for each project
3. The operation type performed
4. The date and time at which the employee clocked in
5. The date and time at which the employee clocked out
6. Elapsed time (derived)
The data contained 90,1$6 observations over the 11-month studyperiod.
Order Operation Hour;
For each operation on each project, Siemens sets a target time, Because employees may clock in and out
several times on the same operation —and several employees may all contribute to the same operation —the
Labor Audit Trail contains no information on target times. The Order Operation Hours file provides that
information with much less detail. Of the fields provided in the data set, the following were used for analysis:
1. The order number for each project
2. The operation types performed on each project
3. Planned labor (target time) for each order/operation pair
4. Actual labor performed for each order/operation pair
The Order Operation Hours file contained 12,533 order/operation pairs, For various reasons —including
non -machinist work performed and inclusion or exclusion of break time —the actual labor listed in the Order
Operation Hours matched the sum of labor hours for each order/operation pair in the Labor Audit Trail in
only 66percent of cases. Non -matching cases were excluded from analysis after the study team determined
that they were not significantly different from matching cases in terms of mentor hours or difference between
planned and actual time.
Other lnformation
In addition to these two data sets, Siemens also provided a list of all machinists with their job categories and
grade levels. In the absence of detailed employment history, using employee grade levels can help estimate the
NOVEMEER 20r6 I OFFICE OA THE CHIEF F.CONOAtIST � F.CONOMICSANDSTATfSTICS ADMINI.TTfiATION 79
THE BENEFITS AND COSTS OFAPPRENTICESHMA BUSINESS PERSPECTIVE
relative experience of each employee and control for expected differences in productivity that are unrelated to
mentor status.
Finally, Siemens provided a class schedule for their apprentices during the study period, Each apprentice was
in class certain days during the week but present on the shop floor other days, In addition, each apprentice
was assigned to a specific mentor. Using this information, the study team estimated when a given machinist in
the data was likely to have an apprentice present and when that would be unlikely.
To understand the relationship between actual time and planned time, while controlling fot various employee -
level factors, it was necessary to transform the Labor Audit Trail data into an operation -level dataset. Because
multiple employees can contribute labor to any operation, the study team calculated the percentage of total
hours contributed to each order -operation was calculated for each of the following employee groups:
1. Mentors working alone (on days when apprentices were in class)
2. Apprentice graduates
3. Mentor -apprentice pairs (on days when apprentices were on the shop floor)
4. Low experience workers, defined as workers in grades 1 through 5 (of 8 total grades); given internal
promotion procedures at Siemens, these were workers likely to be in their first three years of
employment
5. High experience workers, defined as workers in grades 6 through 8 (excluding mentors, who were
drawn exclusively from these grade levels and are represented in groups 1 and 3 instead)
The following sec[ions present a detailed summary of the study team's findings for the benefits of the Siemens
apprenticeship program.
Overview of Results
Using the existing data, there are four Idnds of benefits apprentices and apprentice graduates might provide:
I. Better adherence to planned times per production schedule.
II. Higher capacity, because apprentice grads are even more productive than pre -trained off -the -street
hires.
I11. Filling a job that would otherwise go unfilled, in which case the entire margin on the apprentice's
product counts as a benefit, because that product would not otherwise have been produced.
V. Increased capacity to do a variety of jobs, such as machining new generators and repairing old ones.
The costs and benefits of apprenticeship are measured using the "internal rate of return," or the rate of return
generated by invest ng in the apprentice's training upfront.
The study team finds that, compared to hiring a machinist off the street, apprentices are less likely to be late
and achieve a level of productivity that is even greater than other low -experience pre -trained workers. Based
on our analysis of this scenario, these direct benefits yield an internal rate of return of about 8 percent over
hiring existing labor.
We also explored the benefits of apprentice flexibility and found a much larger return. In fact, we found that
the program would easily pay for itself by the end of a journeyperson's first year. Compared [o off -the -street
hires or even other Siemens employees with much greater experience, apprentice graduates are all cross -trained
on a variety of tasks and can be assigned to almost any operation,
80 ECONOR11C5 ANDSTPTISTICS ADhfINISTRAiION � OFFICE OFTHE CHIEF ECONOMIST I NOVEA(BER 20IG
APPENDIX 1: QUANTITATIVE RESULTS
To tire. extent that the local labor market is unable to supply off -the -street hires with the right skills at the
wage being offered, then the alternative to apprenticeship is likely to be leaving a position unfilled and turning
down work —either by declining contracts or extending deadlines on all work to create schedule slack, which
have the same financial impact in the long run. In this case, the benefit of having an apprentice graduate is
the entire margin of that employee's work. Given the margins on Siemens' products —large, complicated,
advanced energy -producing machinery —the program would easily pay for itself by the end of an apprentice
graduate's first year of full-time work.
I. Adherence to planned time: Apprentice graduates are less likely to exceed planned time.
During the study team's tour of the Siemens facility, employees emphasized the importance of keeping to the
schedule. Exceeding planned time created a variety of problems, such as extra crane moves, idle machines,
and workers at other stations. The study team analyzed the benefits of apprentice graduates using several
definitions of late: any time an operation took longer than the planned time, as well as actual times that were
one, two, or four hours over the scheduled time. The team used regression to estimate how the probability
of a project running late Tvas affected by the percentage of hours contributed by each of the employee groups
defined at the beginning of this section,
The analysis shows that if only low experience employees worked on an operation, approximately 33
Percent ofjobs would be more than two hours late. Substituting an apprentice graduate would decrease the
proportion of late jobs by 20 percentage points, down to 13 percent of total jobs,
The next step is to calculate how much it is worth to reduce late jobs by 20 percentage points. On average, an
operation lasts approximately 9 hours. For a low experience worker, a 2,000-hour work year would include
around 220 jobs, ofwhich 33 percent, or 74, would exceed planned time. Siemens estimated that this lateness
would cost an average of $500 (with wide variation), for a total lateness expense of $37,000 per worker.
By contrast, an apprentice graduate, with a lateness rate of only 13 percent, would have about 29 late jobs per
year, for on average of only $14,500 in lateness expense. Reducing lateness using apprentice graduates would
save approximately $22,500 per year in lateness expenses per worker.
II. Costs of capacity: Apprentice graduates are more productive than similar pre -trained hires
The study team used the following regression equation to evaluate the productivity of apprentices in
comparison to similar pre -trained low -experience workers, their most direct comparison group:"
Actual time = 0(planned tune) + (lip(percent of work)I+ Y, yi*(percent of work)i*(planned time) + E,
Where (percent ofwork)1 is the percentage of hours contributed to each operation's total actual time by each of
the employee groups defined at the beginning of this section.
This analysis shows that apprentice graduates are even more productive than their low -experience peers. An
average operation in the data lasts approximately 9 hours, and apprentice graduates save six to eight minutes,
for a total savings of about $500 per year per worker. While this benefit is smaller than the previously -
discussed benefits from reduced lateness, it illustrates that Siemens is succeeding in training machinists with
little or no prior experience,
s' This proc<durealleviatu problems with ratios described by Kronmal,RA.(1993),•Spuriouzcorreladon and the fallary of the ratio standard
revisired; Jo+mulofrJe RoprtlStrt6ui afSorieryt nrierA, 15G:37-392,uh lg„l jig/t6I /2983u 4 q 8A'p za6 �),
NOVEMRF.R IA16 � OFFICE OP THECHIEF ECONOMIST I ECONOMICSAND STATfSTICSADAfINISTRATiON 81
771E BENUM AND COSTS OFAPPREKnCCSRW&A BUSINESSPERSPECnYH
In fact, the analysis also shows that apprentice graduates have productivity similar to or greater than even
their mentors, who are highly experienced machinists often with decades of experience. Officials at Siemens
suggested that the intensive training their apprentices receive likely accounts for this increased productivity.
Apprentice graduates are less experienced than their mentors but often have a more detailed knowledge of
theory, machine programming, tool design, and even esoteric subjects like metallurgy.
Finally, the analysis shows that mentors have approximately the same productivity whether they are work ng
with apprentices or not. Due to small subsamples, there was not enough data to separate out the performance
of mentors in tandem with beginning apprentices and those with working with more advanced apprentices.
Costs and benefits of timeliness and cheaper capacity
If the local labor market is able to supply off -the -street hires to perform the duties of a low -experience worker,
then the annual benefits from using apprentices are approximately $23,000 per year., beginning when the
apprentice graduates from the program —approximately four years after hire. The total net cost of training is
calculated as,follows:
Costs (per apprentice)
�i/ages and training costs ..:........ .............................................. $181,000
Pre-apprenticeshipPrc-apprenticeship and internship $5,000
Administration and recruiting. $1,000
Total costs per apprentice.90....................................0.04.6...6..0.6$1873000
The total costs of apprenticeship, however; should be offset by the cost of hiring the off -the -street hires that
Siemens would require in the absence of apprentices. We estimate the cost of hiring a low -experience worker
in the local labor market at $56,000, making the net cost of apprenticeship only $131,000.
To calculate the internal rate of return, the study team constructed a stream of benefits of $23,000 per
year over a 40-year career with Siemens, subtracting off me upfront cost of $1311000 per apprentice. The
calculation yielded an annual internal rate of return of 8 percent, fora modest but positive investment
performance. Due to the effects of discounting cash flow over a long time horizon, shortening the assumed
length of the apprentice's career has little effect on the analysis.
III. Costs of vacancy
The above calculations assume that Siemens is able [o hire pre -trained machinists in tke local labor market
instead of apprentices. If the local labor market is unable to supply off the -sweet hires, however, then the
alternative to apprenticeship is likely to be leaving a position unfilled and turning down work —either by
declining contracts or extending deadlines on all work to create schedule slack, which have the same financial
impact in the long run. In this case, the benefit of having an apprentice graduate is the entire margin of that
employee's work. Given the margins on Siemens' products —large, complicated, advanced energy -producing
machinery —the program would easily pay for itself by the end of an apprentice graduate's first year of full-
time work.
82 ECONOMICS ANDSTATISTIC5 ADS11NISTRATION � OFFICE OF THF. CHIEF ECONOMIST I NOVEdiBYA 2al6
APPENDIX f: QUANTITATIVE RESULTS
IV Value of variety
In addition to their relative productivity, one of the key benefits of apprentice graduates is their flexibility.
Compared to off -the -street hires or even other Siemens employees with much greater experience, apprentice
graduates are all cross -trained on a variety of tasks, so they can be assigned to almost any operation. In
particular, two kinds of flexibility are important at Siemens:
a. the ability to work on almost any machine if demand for operations requiring that machine is higher
than usual or if the person who usually runs that machine is oil leave, and
b. the ability to repair existing generators and turbines (in addition to building new ones).
Both of these types of value are potentially quite large. The data collected by Siemens, however, makes
estimation of the first type of benefit difficult, so the study team focused on the value of the second type
of flexibility, Because apprentice graduates have a strong grasp of the principles of their work —as well as
the ability to read blueprints and program machines —they are particularly well suited for tasks involving
judgment, such as repair work. The plant seeks work servicing pre-existing generators and turbines when it
has excess capacity.
The plant would like to ensure that it has enough capacity to complete all orders for new generators in a
reasonable (and contractually specified) time. However; demand fluctuates. Data we received from Siemens
suggests that given the value of generators and fluctuations in demand, the plant on average should maintain
about 20 percent flexible capacity." If the plant has apprentice graduates, and if demand for repair work is
sufficient to fill the 20 percent flexible capacity, it can use this downtime to perform repair work. We make
the strong assumption that workers hired off the street cannot perform this work, which may allow us to
capture the value of the first type of apprentice flexibility as well. In this scenario, the internal rate of return
easily reaches 50 percent and can be higher. Although these assumptions are a bit crude, they capture a robust
finding: since apprentice graduates have the necessary skills and judgment to take on complex work and fill
slack time in the plant by doing this type of repair work, Siemens can rapidly recoup the costs of training —
likely -within the first year of apprentice graduates working frill -time.
Conclusion
Using a conservative estimate of the benefits of apprentice graduates —reduced lateness and greater
productivity relative to other low -experience workers —the study of Siemens' internal data shows that
apprenticeship has an internal late of return of approximately 8 percent. Without internal knowledge of
Siemens' finances, it is impossible to say how this compares to other investment opportunities the company
may have, but the evidence shows that Siemens receives a positive net return on apprenticeships even under
a restrictive set of assumptions. If Siemens —and many other companies in this study —are correct, and
the local labor market cannot supply low -experience workers to compete with apprentices, the benefits of
apprenticeship are significantly higher.
In addition, we find that apprentice graduates' ability to perform many types of work make the program
especially compelling. Since apprentice graduates have the necessary sk lls and judgment to take on complex
work and fill slack time in the plant, Siemens can rapidly recoup the costs of training —likely within the first
year of apprentice graduates working fill -time. Finally, these estimates are necessarily conservative because
they exclude a variety of potential benefits, such as improved quality control, lower turnover, -and the creation
of a durable pipeline of skilled labor and management.
°2 For methodology to determine optimal operation whenaplant has the ability to make bothatime-s<nsitive product with Huauating demand anda timeins<nsitive producg see "Options -Based Costing and the volatility Portfolio; Suzanne de Treville, Kyle Cananib, Lauri Saarinenan, Universityof Lausanne Working Paper, 2oIG.
NOVEMBER 2lIIG 1 OFFICE OF THF.CHIF.F ECONOA415T l ECONO\21CSAND STATI57TC5 ADMINISTRATION 83
APPENDIX II: LITERATURE REVIEW
Appendix II: Literature Review
In general, existing ROI studies rely on a model that compares apprent cc output during the course of the
program to the training, wage, and other costs associated with the apprentice. Some include indirect benefits
as well, such as reduced recruitment and on -boarding costs associated with off the -sweet hires. We see two
main challenges faced by these and similar studies. First, calculating apprentice output is very difficult,
whether because of the nature of a firm's products or often because a firm's work processes do not allow one
individual's productivity to be easily disentangled from a larger group, team, or even plant. In many cases,
because apprentices are not treated as regular employees for administrative purposes, their hours and output
are not tracked by the same systems used for their coworkers. Existing research tends to work around this
difficulty by making educated assumptions about worker productivity, whether using subjective performance
reviews or asking firms to estimate the relative productivity of an apprentice compared to a fully -trained
worker. Real data on apprentice productivity is difficult to obtain.
In addition, these studies approach the calculation of ROI largely from an accounting perspective rather than
an economic perspective. While some include cost savings associated with hiring apprentices rather than
advertising, on -boarding, and training already -skilled workers, very few identify a counterfactual case —that
is, what are the costs of getting the same work in some other way? At what cost could the firm have hired
workers "off the street," and how would the productivity of those workers compare to apprentices? 'What were
the firm's overall productivity gains from apprenticeship, and how much of those gains can be attributed to
apprentices rather than other secular business cycle factors? Constructing such a counterfactual, identifying a
control case, and rigorously analyzing company data would provide a much more robust picture of the value
of apprenticeship.
An overview of some of these studies and their findings are Uelow.
Return for Businesses
Much of the previous work done to estimate the ROI of apprenticeship for businesses has focused on the
European apprenticeship environment, particularly in Germany and Switzerland, wh ch have the most robust
apprenticeship systems. This body of literature is summarized in great detail in many other papers and reports,
so we will present only a brief overview here.53
A few common threads emerge from much of the literature. First, the net cost of apprenticeship varies fairly
widely across firms, suggesting that apprenticeship is not a one size fits all model. For instance, there is
evidence that apprenticeships in unskilled or semi -skilled occupations serve as a substitute for traditional labor
in those fields, yielding a profit over the course of the apprenticeship itself apprenticeships in more skilled
fields, however, may be better understood as human capital investments that will pay off further into the
sa Robert Lerman ofAmeriran Universityandthe Urban lnstimte has written aparticulady snccina and informative mview
of the existing literamtt. See Lerman, Robert. (May 201�, `Do firms benefit f amapprenticeship invesrmenn?" IZA\\orld oFLabor.
Available ar. hno:/hvol'za org/ari des/do-fir -be fit-fr - pp ' esh'p--' �[
NOVEAiRER 20rG 1 OFFICF.OP THE CHIPP ECONOMIST I ECONOMICSAND STATISTICSADMINISTRATION 85
THE BENEFITS ANp COM OeAPPRENTICESHIPS:ABUSINESS PERSPECTIVE.
future, regardless of whether they payoff during the apprenticeship period itself.54 Our study mainly focuses
on firms that use apprenticeship to fill skilled positions.
Second, even averaging net costs over all firms in a given country, there is substantial variation across
countries. A 2013 paper for the European Commission gathered evidence from other studies on
apprenticeships in Germany, Switzerland, Austria, and the United Kingdom, finding that Swiss firms were
the only ones, on average, that received net benefits during the apprenticeship itself" More than 60 percent
of Swiss firms found that apprenticeships were profitable within the apprenticeship period itself, compared to
around 35 percent in Austria, 30 percent in Germany, and 0 percent in the UK.
Conversely, retention rates for apprentices in Germany are much higher than in Switzerland— above
50 percent in Germany and around 35 percent in Switzerland. Whether these retention rates represent a
firm -level response to differences in profitability or underlying labor market realities that condition the
initial design of apprenticeships is unknown, but they indicate that a thorough understanding of ROI should
consider future streams of net benefits beyond the end of the apprenticeship. Indeed, evidence from the UK
shows that,.while none of the studied firms showed positive profits over the apprenticeship period, all were
likely to recoup their costs within one to three years following completion of the program.i6
Finally, evidence from a forward -looking projection of apprenticeship in Spain indicates that firm size
may also play a role in apprenticeship profitability.57 Overall, while the authors' model estimates that
apprenticeship could have average net benefits, larger firms would generate larger net benefits than small
firms. In fact, small firms with fewer than 10 workers would be much more likely to incur net costs. This
difference is attributable both to economies of scale, due to the large fixed costs of setting up and maintaining
an apprenticeship program, as well as the relative gap between wages paid to apprentices and fully -trained
workers at large and small firms.
Return for Apprentices
There is also existing research on the benefit of apprenticeship to the apprentices themselves. In the Americatn
context, the most well-known and thorough work was done by a team at Mathematica Policy Research.58
Specifically, the goal of the Mathematica study was to determine whether Registered Apprenticeship is a
way to raise the annual wages of participants and if the social benefits outweigh the social costs. The study
concluded that participants who completed their apprenticeship programs earned, on average, over $240,000
more over their careers than nonparticipants. Additionally, the study found that the social benefits outweigh
the social costs by $49,000 over the career of an apprentice, justifying the investment of resources into
such programs.
sr Mohremveiug Jens and Thomas Zwick.(March 2008),`\'Uhy Do FirmsTmin Apprentices?The Net Cost Puzsle Reconsidered; Centre for
European Economic Researdr(ZEW), Dismssion Paper No.O8A19. Available ar. Fip//k d /p b/ -d !do/do08019 df.
ss Muehlemann, Samuel and Sxf C. Walter. (November 2014),"Remrn on investment of apprenticeship systems for enterprises: Evidence from
cost -benefit analyses,' IZAJournal oflabor Policy, 201403:25. Available ach//'ajQlp_p�o / ' I /]01186/2193-9004-3-25.
ss Gambin,Lynn, Chris Hasluck, and Terence Hogarth.(2010),`Recouping the costs of apprenticeship training: employer case study evidence from ,
England,'Empirical Research in Vocational Education and Training. Volume 2, Number 2, 2010, pp. 127-146(20).
sv Wol[ey Stefan C.andSamuel Muehlemann Apprenticeshiptraining in Spain," Stdy commissioned byBertehmann Stirmng and the Fundaci6n
Bertelsmann. Available at: littp-1/skbFh/filcadminifil/pdf/newiZAhip training in Spain.pdf.
ss Reed,Debbie, Alber[Yung-Hsu liw Rebecca Kleinman, Annalisa Masai, Davin Reed, Samina Sacs ,and Jessica Ziegler. Quly 2012),
'An Effectiveness Assessment and CostBenefitAnilysis of Registered Apprenticeship in 10 Stares,' Marhemadca Polity Research.
Available at: hit // al d Ism g / h/F In' t D /ETAOP 2012 10 dF.
86 ECONOAfICS AND STATISTICS ADMINISTRATION � OFFICE OF THE CHIEF ECONOMIST � NOVEi,1BEft 201G
APPENDIX IT: LITERATURE REv1Ew
Another study ofworkfarce training programs in the state of Washington also found net benefits for
apprentices.59 The study found that, over the short term, apprenticeship participants saw a nearly 50 percent
increase in average quarterly earnings due to increased levels of employment, higher hourly wages, and
increased work hours. Longer term benefits were also positive but smaller, indicating that apprenticeship
may provide ajump start while other kinds of worker training take longer to have an impact.
While research on the benefits to apprentices —or overall social benefits —is valuable for policymakers
and workforce development agencies, this study's focus is confined to the direct benefits for sponsoring or
participating firms, who ultimately are the ones making the investment in the apprentices
" H❑Ilenbeck, Kevin and\'VeiJang Huang.(200,Q,"NetImpaa and BenefinC❑xEstimata ofthe Wor�rce Development Sysrem in Washingr❑n State,° W.E. Upjohn Instimre For Employment Research.
Available'ar. hn❑•//res h ' h / g'/ ' c gi ' I 102i& ❑ h i P
NOVEh10ER 201G � OPPICF, OFTHCCHIEF F.CONOhfIST 1 ECONOMICS AND STATISTICSADhI1NI,STRATION 87
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