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Study Finds Apprenticeships Raise Employee Wages, Deliver Positive Employer Returns on Investment

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Study Finds Apprenticeships Raise Employee Wages, Deliver Positive Employer Returns on Investment

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A six-year study of the U.S. Department of Labor’s (DOL) American Apprenticeship Initiative (AAI) found that apprentices’ wages increased and employers experienced a positive return on investment. AAI apprentices’ annual earnings grew by 49 percent, on average, from the year prior to starting the apprenticeship to the year after, rising from $35,408 in the year before the program to about $52,876 one year

after program exit. Five years after the end of the apprentice’s time in the program, the typical employer experienced an estimated 44.3 percent return on investment—that is, for every dollar invested in the apprentice, the employer ultimately earned $1.44 in benefits.

The $175 million, five-year grants program, which the DOL launched in 2015, promoted equity by expanding apprenticeships to populations underrepresented in apprenticeships: women, people of color, veterans, and people with disabilities. It also extended such programs to nontraditional occupations such as manufacturing, information technology, healthcare, finance, transportation, and logistics. Only eight percent were in construction-related industries, the traditional apprenticeship sector.

The study led by Abt Associates found that almost 70 percent of the 29,553 apprentices were from underrepresented populations. Most AAI apprentices completed their programs and reported that they had positive experiences and that the programs prepared them well for their occupations. Most programs lasted less than two years.

Apprentices initially earn less than comparable workers but caught up early in the apprenticeship and ultimately earned more by the end. Black and Hispanic apprentices’ earnings increased by 38 percent and 54 percent, respectively, far more than comparable Black (15 percent) and Hispanic (18 percent) workers. Earnings growth for white AAI apprentices was similar to that of Black AAI apprentices. Annual earnings grew by about 65 percent for women and 43 percent for men.

During the program, the typical employer didn’t recoup all its costs, but after the program, employer benefits were estimated between $33,000 and $40,000 for each apprenticeship when counting both direct benefits (the apprentice’s productivity) and indirect benefits, such as reduced turnover and improved talent pipeline, worker loyalty, and company culture. The study projected estimated five-year direct and indirect benefits based on the first year after the program. Nearly all surveyed employers (99 percent) reported one or more indirect benefits, and 94 percent experienced at least five. More than a quarter reported experiencing all 10 indirect benefits the survey asked about.

“This study shows that registered apprenticeship benefits workers and employers in a variety of industries. Workers, including populations traditionally underrepresented in apprenticeship, earn wages while they learn new skills. Benefits to employers extend beyond the apprentice’s work. In the current tight labor market, registered apprenticeship shows promise to help employers identify and develop workers for a variety of occupations and improve company culture,” said Karen Gardiner, the study director.

Additional research could answer some important questions:

  • Did apprentices in longer-term programs experience earnings increases?
  • Did earnings gaps between subgroups (e.g., women and men) narrow further over time?
  • Did returns for employers change as programs mature?
  • Did employers retain programs over time—a sign they’re worth the investment?

Abt’s partners in the evaluation were the Urban Institute, MEF Associates, W.E. Upjohn Institute, Capital Research Corporation, and George Washington University.

Learn more: https://www.abtassociates.com/insights/podcast/equitable-earnings-recognizing-the-benefits-and-addressing-the-shortfalls-of

About Abt Associates

Abt Associates is a global consulting and research firm that combines data and bold thinking to improve the quality of people’s lives. We partner with clients and communities to advance equity and innovation—from creating scalable digital solutions and combating infectious disease, to mitigating climate change and evaluating programs for measurable social impact—and more.

http://www.abtassociates.com

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