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Finding and retaining workers with strong occupational and employability skills can be difficult.37 Achieving a good fit between worker and employer means ensuring the former is able to use their skills effectively in the context of the latter's organization. Employers vary in how they pursue that goal, often framed as “buy or build.” The employer using the buy approach hires workers with the required skills from the labor market. The employer using the build approach hires workers who initially may lack the required capabilities but trains them (whether in-house or through an outside provider) to become fully competent in the skills the employer needs. The estimates developed in this study capture the economic returns to employers choosing to build their own workforce through an AAI registered apprenticeship program.
Like all investments, the costs of registered apprenticeship primarily are incurred at the start; in this case, during the registered apprenticeship itself. The main cost is the compensation paid to the apprentice, followed by the lost value of production of the mentor during the registered apprenticeship period. Other costs include the costs of RTI, supplies and wastage, and registration costs. Once the registered apprenticeship period begins (i.e., worker is hired as an apprentice), the benefits of the registered apprenticeship flow, some during and some for several years after the registered apprenticeship ends, and the apprentice becomes a regular employee. During the registered apprenticeship, the main benefit is the contribution of the apprentice to the employer's productivity. If the benefits outweigh the costs, employers can recoup some of their investment during the registered apprenticeship itself.
After the registered apprenticeship ends, the value contributed by the registered apprenticeship completer ideally exceeds their compensation as a regular employee. Even though the value to the employer of the worker who has completed a registered apprenticeship is greater than their compensation, workers are not likely to leave the employer, due to the cost of changing jobs, due to imperfect information about the apprentice outside the employer, and due to the fact that it may be employer-specific knowledge that makes the apprentice more valuable to the training employer than to other employers (Wolter and Ryan 2011). Added to the former apprentice's own productive contributions are indirect benefits, such as improved employee loyalty and engagement, pipeline of skilled workers reduced downtime, and process or product innovations.
Most employers more than recoup their investments in registered apprenticeship. Of the 68 employers surveyed, 46 (68 percent) achieved a positive net return over the 5 years since the registered apprenticeship ended, counting both direct and indirect benefits. Even when using the low valuation of apprentice productivity, two-thirds of employers gained financially from their registered apprenticeship investment. During the registered apprenticeship, 60 percent of employers recouped at least 80 percent of their costs, and almost 40 percent recouped their full costs. Thus, most apprenticeship investments yield a positive return at least by the fifth year after the apprenticeship and often sooner.
The median estimate of the employer's return on investment in registered apprenticeship is 44.3 percent. This means that for every dollar invested in the apprentice, the employer ultimately earns $1.44 in benefits. This finding is consistent with prior research on individual registered apprenticeship programs.
Net returns to employers are higher when levels of productivity of apprentices are higher. Among the employers able to recoup their investments during the registered apprenticeship, the average productivity of apprentices was nearly 80 percent of the productivity of a fully qualified worker. Apprentices with employers with losses during the registered apprenticeship period averaged about 57 percent.
Total net benefits to employers varied widely, but the median employer experienced an almost $18,000 gain. For employers at the 75th percentile, total net benefits exceeded $100,000 per apprentice, whereas employers at the 25th percentile lost nearly $7,000 per apprentice. The median employer gained almost $18,000 per apprentice.
Lessons Learned The study has important lessons for employers with registered apprenticeships, employers considering registered apprenticeships, policymakers, and other stakeholders. Although the estimates apply only to AAI employers, many of which are new to registered apprenticeship, these are the types of employers that must offer registered apprenticeships if the U.S. registered apprenticeship system is to expand significantly. Findings in this study suggest that employers are likely to do well when they emphasize apprentice productivity and use registered apprenticeship to infuse their company with cultural and organizational changes that provide indirect benefits beyond productivity. • First, the finding that most employers gain from registered apprenticeship investments adds to the compelling case for scaling up registered apprenticeships in the United States. This result is especially notable because registered apprenticeship programs are often a new component of their talent recruitment policies for many employers. • Second, employers would experience greater returns to their registered apprenticeship investments if the direct productivity benefits provided by the apprentice were higher. Greater returns could potentially be accomplished if they take full advantage of the productivity of apprentices during and soon after their training. Cost-effective programs begin giving apprentices productive tasks to accomplish right away. For example, industrial maintenance technicians could conduct as much OJL as feasible directly on machines that are in use, rather than on simulators or by shadowing mentors who do machine maintenance. • Third, the findings show that registered apprenticeships bring a range of benefits beyond the apprentice's productivity. Especially valuable is the improvement in the pipeline for skilled workers. Nearly 60 percent of employers ranked this benefit as more valuable than the productivity gain of the apprentice. One reason is the “option value” of having additional skilled workers in times of uncertainty in demand for the employer's products or services. Employers cannot know what business conditions will be like at the end of an apprentice's training, but a reliable pipeline of apprentices gives them the option of retaining a skilled workforce in the future. A related benefit reported by employers is more on-time deliveries, although only 30.9 percent of employers identified more ontime deliveries as more valuable than the productivity gain of the apprentice. Other important indirect benefits are reduced turnover (48.6 percent identified the benefit as more valuable than the productivity gain of apprentices), employee engagement and loyalty (55.8 percent), and improved firm culture (50 percent). • Fourth, the costs of RTI can be substantial for many employers, reducing their returns on their investments. Higher RTI costs borne by employers are negatively correlated with net benefits during the registered apprenticeship. For the 42 of 68 employers paying for RTI tuition and fees, the median cost is $3,600 (the median for all 68 employers, including those not paying any RTI tuition and fees, is $1,100). Gardiner et al. (2021) report that AAI grantees who provide financial support to employers to pay for RTI made more progress towards their registered apprenticeship targets than grantees who did not. Together, these findings suggest that employer incentives to pay for RTI could improve employers' returns to apprenticeship investments and contribute to robust registered apprenticeship expansion. Financial support to employers for registered apprentices would also boost the employer returns to apprenticeship investments during the registered apprenticeship program, when those returns are lowest. • Fifth, the wide range of estimates of employer returns may narrow as employers learn how to improve their programs and minimize costs. Additional research could help determine the key factors that drive differences in direct and indirect benefits. A limited follow-up to clarify estimates for selected employers found that even some employers with estimated negative returns are planning to continue and, in some cases, to expand their apprenticeship programs. The findings in this report indicate EXECUTIVE SUMMARY Abt Associates Do Employers Earn Positive Returns to Investments in Apprenticeship? ▌ES-8 somewhat counterintuitively that positive returns are more difficult to achieve for larger employers, registered apprenticeship programs in healthcare occupations, and longer registered apprenticeship programs. This report discusses possible explanations for these findings and future research needs. Finally, employers operating registered apprenticeship programs, policymakers, and other stakeholders could publicize the ability of most employers to achieve positive returns to apprenticeship investments. If more employers recognized the high likelihood of recouping their registered apprenticeship investments, more employers would likely adopt registered apprenticeship as a talent recruitment tool. This report expands the evidence base on the costs and benefits of registered apprenticeship in the U.S., but it has limitations. The respondents to the Employer Survey were not randomly selected and are distributed across many occupations, so it is difficult to infer anything about the experiences of specific occupational programs. Although findings cannot be generalized to all employers that operate registered apprenticeships generally, they are particularly valuable for understanding the experiences of employers in nontraditional occupations new to registered apprenticeship, such as healthcare and IT, and where apprenticeship is expanding. Almost 60 percent operated in either the healthcare and social assistance industry (24 percent) or the manufacturing industry (35 percent). The occupational distribution of apprentices described in the AAI Employer Survey is similar to the distribution of all AAI apprentices across occupational categories, although apprentices nationally are more concentrated in the building trades (Gardiner et al. 2021). Certain costs and benefits are also difficult to measure, including the value of the apprentice's productivity and the indirect benefits of registered apprenticeship. Finally, the direct productivity benefits of registered apprenticeship are projected into the future rather than directly measured, since even the earliest AAI apprentices had only recently completed their registered apprenticeship programs at the time of the survey.