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The Real Apprentice: American Apprenticeship Grants
May 29, 2018 Suhail Karim Beg, Business Development Specialist, Office of Small Business

Finding qualified workers is the most significant problem facing small business manufacturers, according to a February 2018 report by the National Federation of Independent Business (NFIB). The problem is getting worse, especially for small businesses. As unemployment drops to 3.9 percent,[i] tightening labor markets are driving up the cost of acquiring the skilled workforce needed for today’s technology augmented manufacturing.

To solve this problem manufacturers are looking to "up-skill" their existing workforce and build new talent streams turning to an age-old workforce development model - apprenticeships. However, recruitment and training are costly, disproportionately so for small businesses. American Apprenticeship Grants provide small business an affordable solution to address the skills gap and stay competitive.

The Problem of the Skills Gap

According to an industry survey conducted last year by Deloitte and the Manufacturer's Institute, 74 percent of all respondents were unable to find skilled labor to fill open positions. This shortage is significantly affecting manufacturers ability to expand operations, improve efficiency, and develop new products. Over 60 percent of companies with 500 to 1000 employees cited the skills gap as their single most significant problem. Furthermore, the skills shortage hinders the ability of U.S. manufacturing to maintain high production levels and quality control, reducing our global competitiveness.

The problem of the skills gap is persistent and worsening. According the Deloitte survey, nearly 3.5 million manufacturing jobs will be available by 2025 but 2 million of those jobs will go unfilled. Last year alone, there were approximately 350,000 vacant manufacturing positions.

Several factors contribute to the problem. First, many companies still rely upon old recruiting techniques such as word-of-mouth or direct advertising. Second, the velocity of technological change in manufacturing in scale, scope, and complexity is unprecedented and demands new skills sets. Finally, as a generation of skilled workers retires, skilled production jobs are going to be the hardest hit.

The Real Apprentice: The American Apprenticeship Grants Program
Apprenticeships provide a solution, but they can be expensive to operate, especially for smaller companies. A February 2018 Industry Week article, "A Nation of Apprentices,” cited the stand-alone cost of running an apprenticeship can vary from $25,000 to $50,000 per apprenticeship per year.
The American Apprenticeship Grants is a government program that provides the money and the management structure to implement an employer-driven apprenticeship, leveraging government money with the private sector using existing programs. On June 15, 2017, the White House issued an Executive Order providing the U.S. Department of Labor (DOL) additional funding to implement public-private sector programs to expand apprenticeship grants and vocational training.

The program significantly increases the role of "third-party" entities like companies, unions, and trade associations making apprenticeships more accessible to industry. The application process is also more user-friendly allowing employers to establish industry-specific criteria for training programs for DOL consideration.

The Benefits of American Apprenticeship Grants Program to Employers

Any program that helps defray operational costs is good news for small businesses. Here are some top line benefits provided by the DOL.

  • Helps recruit and develop a highly skilled workforce, replaces outmoded recruitment methods such as word-of-mouth or direct advertising, shifting hiring from “finding the right person” to “training the right person." [ii]
  • Improves productivity and the bottom line. Every dollar spent on apprenticeship returns employers an average of $1.47 back in increased productivity, reduced waste, and more significant front-line innovation.
  • Provides opportunities for tax credits and employee tuition benefits in some states. Early involvement gives students and the company time to identify vocational passions and determine competencies providing more targeted higher education choices for which several federal student grant funds are also available.
  • Reduces turnover costs and increases employee retention, 87 percent of apprentices receive employment offers after completing their programs at an average starting wage above $50,000.
  • Creates industry driven and flexible training solutions to meet national and local needs. The program can be structured for new hires or to up-skill current employees.
  • Allows workers to earn and learn at the same time. Apprentices earn a cap of anywhere from $16.50 an hour to $22 depending upon the pay scale of the apprenticeship. [iii]

The DOL has a short “Quick-Start Toolkit” describing how the program works, illustrative case studies, and links to get started. To learn more about apprenticeship programs, other federal workforce development resources, and whether an apprentice program is right for your company visit Apprenticeship USA at the DOL website.

Unleash Your Manufacturing Potential

Small businesses need new skill sets to adopt technology enhancements that will keep them competitive. American Apprenticeship Grants help by lowering the all-in costs of acquiring this talent in the face of higher labor costs. However, retaining a skilled workforce means wooing employees into manufacturing careers they view as a steady job with career growth potential. How do you grow your company while facing increasing costs?

Growing your business through exports builds a resilient manufacturing base and is a crucial driver of small business success, according to the Small Business Exporters Association (SBEA). Businesses that export are 8.5 percent less likely to go out of businesses than those that do not and 26 percent more likely to outperform in their market segment, keeping your production lines humming and your employees working.

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[i] https://www.bls.gov/news.release/pdf/empsit.pdf

[ii] http://www.industryweek.com/education-training/are-apprenticeships-answer

[iii] ibid