The Benefits and Costs of Apprenticeship: A Business Perspective

“91 percent of apprentices find employment after completing [a Registered Apprenticeship] program, and their average starting wage is above $60,000. Because of these positive results, the U.S. Department of Labor…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,…little is known about the payoff to businesses from these investments” (p.1). Through interviews and site visits the authors “examine 13 businesses and intermediaries from a variety of occupations, industries, and regions and ask: What motivated them to create apprenticeships? What are the costs and benefits? And if not apprenticeships, how else would they fill their workforce needs” (p.1)?

“[The] study team [also] worked with two firms, [Dartmouth-Hitchcock in Lebanon, New Hampshire and Siemens USA,] to analyze in detail how company performance was tied to their apprenticeship program. Using internal production data, [the authors] analyzed certain productivity metrics to put a dollar value on some of the benefits these two companies reap from their apprenticeship programs” (p.2).

Finally, “[the authors] identify a series of…decision points that bear significantly on the costs borne and benefits reaped from apprenticeships. [They] 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” (p.6).

(Abstractor : Author and Website Staff)

“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…. Apprentices’ compensation costs over the duration of the program were the major cost for all companies, and together with program length were the major factor in the cost differences among the programs in [this] 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…” (p.1). The report presents these findings from the two firms that participated in the quantitative studies: • Dartmouth-Hitchcock “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. [The] analysis also showed that the quality of [services] was at least as high after the…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….Apprentices also were more likely to finish their work on time and were slightly more productive…” (p.2). The authors share “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” (p.11)? 2. “Where does apprenticeship fit in your overall talent development strategy” (p.11)? 3. “What value can partnerships provide” (p.13)? 4. “How should you develop and deliver the classroom curriculum” (p.16)? 5. “What are the best ways to implement on-the-job training and incorporate apprentices into the workplace” (p.16)? 6. “How do you decide between a competency-based and a time-based apprenticeship program” (p.17)? 7. “How many apprentices do you need” (p.18)? Lastly, the authors offer these strategies for measuring costs and benefits of apprenticeships: “• Determine the total costs of apprenticeship and the costs of alternative hiring 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” (p.20). (Abstractor : Author and Website Staff)

• Last Updated:
• Created:
• Resource Publication Date: 2016
• Author(s): Helper, Dr. Susan; Noonan, Ryan; Nicholson, Jessica R.; and Langdon, David.
• Organizational Author(s): Case Western Reserve University, U.S. Department of Commerce
• Funding Source: Annie E. Casey Foundation, Joyce Foundation
• Resource Availability: Publicly available
• Posted by: Wesley Peterson
• Posted in: Workforce System Strategies