Training is important for companies to invest in, especially when they can’t find the right talent for a job. In the ongoing conversation about the skills gap, how should companies invest their efforts and money in training people for their careers?
Here, we examine two models: Germany’s apprenticeship approach and the United States’ corporate-higher education partnership model.
Advantages of Apprenticeships
In Germany, around 60 percent of the country’s young people worked as apprentices in 2014, combining classroom and on-the-job training, according to The Atlantic. Compare this to the U.S., where only 5 percent of young people train as apprentices.
Currently, U.S.-based companies can simply make an apprenticeship program and call it as such, with no formal process. If wanting to register it with the Department of Labor, companies can share the competencies and courses for the program, but there is likely not to be much in common between two programs, even within the same industry, said Robert I. Lerman, institute fellow at the Urban Institute, a Washington, D.C.-based think tank focused on economic and social policy. “There’s no uniformity at all, or even base level of commonality,” he said.
One advantage Germany has in its apprenticeship model is that students learn about their chosen occupations over the course of two to four years, while employers gain well-trained talent, said Werner Eichhorst, coordinator of labor market and social policy in Europe for the Institute of Labor Economics, or IZA, an independent research institute from the Deutsche Post Foundation based in Bonn, Germany. While this doesn’t necessarily have to be through apprenticeships, what’s “key to the success of the transition from the education system to the job market is somehow an early acquisition of work experience and some real, work-related training,” he said.
The German model of apprenticeship requires that the students attend classes at a vocational school and spend time working at a company, splitting time between the two. This is called dual vocational training. University education and the vocational tracks tend to both teach general knowledge and skills, Eichhorst wrote in an article for IZA. “Thus, the skills provided by vocational schools are often transferable between employers, although the degree of transferability across occupations can vary,” he wrote. Apprentices receive compensation for their time, and some apprentices end up working full time for the company after completing their schoolwork.
A similar system could work in the U.S., Eichhorst said, but it would require a critical mass of employers at a regional or sector level, which could share costs and help companies come to an agreement that would prevent talent poaching.
Cost is a big factor in what’s keeping American companies from this system of educating and acquiring talent. Germany’s government picks up some of the bill, as it pays for in-school training, according to a Financial Times special report on the topic. Still, the apprenticeship system costs German companies between $25,000 and $80,000 per apprentice, The Atlantic wrote in their aforementioned article. It could cost American companies far more. Siemens USA in Charlotte, North Carolina, spends $170,000 per apprentice. Government support also differs between the U.S. and Germany, though that’s set to change.
On June 15, 2017, President Donald Trump signed an executive order that aims to reduce the regulation on apprenticeship programs and end ineffective programs. He announced a task force for these efforts, which could indicate a long-term investment in apprenticeships, Lerman said. Also, a more controversial take on apprenticeships that the order included was the idea of industry-recognized apprenticeships; this means expanding formal internships beyond the complex system of registered apprenticeships, he said.
Other efforts point to the potential growth that apprenticeships could soon experience in the coming years. The U.S. Department of Labor awarded funding to the ApprenticeshipUSA campaign to expand internship programs. So far, there are 230 corporate “LEADERs,” who are Leaders of Excellence in Apprenticeship, Development, Education and Research, and who are part of the ApprenticeshipUSA initiative, showing that support is ramping up in the private sector. The DOL provides funds for this program, appropriating $90 million “to further the goal to double and diversify Registered Apprenticeships by 2019,” according to the DOL website. There are millions more in funding for states to support local apprenticeships.
According to the Center for American Progress, various states provide tax credits to employers with apprentices. For example, Arkansas give tax credits up to $2,000 for employers with a youth apprentice. Nevada exempts all property used for apprenticeship programs from taxes.
While companies in the U.S. don’t invest in apprenticeships on the same scale as German-based firms, they invest more in educational partnerships, both informal and formal. To influence what students learn, U.S. companies instead partner directly with educational institutions.
Companies looking to improve their available talent start out by assessing the skills and competencies needed for individual jobs. “This has often been a starting point, for not just developing one’s own talent development programs, but also developing these partnerships,” said Maria Ho, senior manager of research at the Association for Talent Development, or ATD, a professional membership organization based in Alexandria, Virginia. They then aim to influence what’s taught in university classrooms. “They’re actually addressing these future skills gaps at the core by partnering with the educational institutions on defining the types of content that should be covered in their curriculum,” Ho said.
These partnerships between educational institutions and businesses are often in the form of an advisory board, said Jennifer Stempel, a managing director at Deloitte Consulting LLP and a contributor to Deloitte’s “Human Capital Trends” report. “The issue is really whether the schools are producing the workers with the right skills. In order for that to happen, there needs to be a dialogue between companies and schools.” She noted that business schools do this well, where the dean will create a board to speak with industry leaders and make sure the professors teach the most-needed skills for private sector jobs. It’s a critical feedback loop, in which curricula are constantly examined.
Additionally, some companies are also collaborating with schools to create MOOCs, or massive open online courses, which reach beyond the typical college student by offering university-quality courses to a mass audience for free through the internet. Universities or individual professors can create these courses, but those taking the class don’t have to be enrolled in the school. “It’s really powerful because they’re taking this, and [companies are] reaching beyond just that student population. From a business standpoint, this can also be very beneficial to the company,” ATD’s Ho said, adding that the corporate-sponsored MOOC can act as a recruiting tool to bring in people who complete the coursework.
MOOCs are just one way to reskill older workers. U.S.-based companies are also providing older workers with new skillsets in more formal methods, Ho said, noting AT&T’s program that’s reskilling thousands of its workers. These older employees often need a career change or skills refresh to stay relevant and keep company services up to date and high quality. Workers receive training on areas of cloud-based computing, coding, data science and more, according to a Harvard Business Review story about AT&T’s strategy. This comes in the form of a $250 million investment in employee education and professional development programs over the course of three years, along with $30 million annually in tuition assistance. To incentivize employees to participate, AT&T redesigned its compensation practices to emphasize in-demand skills and add variable compensation for high performers, the HBR article went on to say.
“When it comes to higher-level skills, the half-life of those skills is very rapidly diminishing,” Deloitte’s Stempel said. The current estimate is five years for these technical skills, she said, whereas trade skills like carpentry, plumbing and electrical are more enduring. Trades can rely on public education for schooling, but higher-level skills need private-sector help to keep up.
So which is better?
The German model of apprenticeship results in companies gaining great talent and workers gaining thorough training at a young age. However, evolving skills and moving education beyond student populations are issues the German model doesn’t always get right, IZA’s Eichhorst said. German companies invest significant capital in young talent by way of apprenticeships, which provide a lot of training early in workers’ careers, but firms are reluctant to provide further education later on, Eichhorst said. This is sustainable in a stable economy where job profiles don’t change much, but “as soon as structural change and technological progress accelerates, this model may face some difficulties,” Eichhorst said.
On the other hand, it could be more cost effective to train workers at a young age, Urban Institute’s Lerman said. “Ideally, we would start younger. But in the United States, this college-for-all mentality is in play,” he said. Schools in the U.S. prepare young people for college, rather than the working world, leading to an emphasis on how to succeed in college and less emphasis on familiarity with industries, like what apprenticeships provide. Having young people in apprenticeships means wages for these workers wouldn’t need to be high, compared to an older worker.
For the U.S. to take on the German model of apprenticeship, though, is too much of a radical change for now, Lerman said. However, “we can be inspired by it and try things that have some similarities,” he said.
Lauren Dixon is an associate editor at Talent Economy. To comment, email firstname.lastname@example.org.