Employers are increasingly vocal about the growing shortages of skilled workers across a wide range of industries, especially manufacturing, construction, mining, and some technology sectors. Addressing this growing problem was a major theme in the 2016 election, on which there was rare bipartisan agreement. President Trump and his cabinet are actively using the bully pulpit and executive orders to spur rethinking of skills training programs, such as apprenticeships and vocational education. However, there is less agreement on how to accomplish the objectives.
As Congress begins to work with the administration, hopefully in a broad, bipartisan way, there are some practical principles that can guide its efforts, based on new approaches with proven track records here and in other advanced industrial nations.
First, most federal programs are only marginally effective in addressing the problem, whatever name they are given: vocational education, adjustment assistance, dislocated workers, career and technical education, or job corps. Many programs are expensive and show few lifetime income or employment gains. Generally, fewer than 50 percent of workers or students who enter such programs complete them. There are some 43 separate training programs spread around 13 agencies, costing some $17 billion or more, yet there is little interaction or coordination among the providers. Trump’s recent executive order on apprenticeships is a good start toward evaluating existing programs, consolidating the better ones, and eliminating those that are ineffective.
Second, serious consideration should be given to moving federal involvement toward block grants to states. Most of the creative and effective programs are launched at the state and local levels, often in conjunction with local development authorities and employers. Many of the most visible and effective new programs are based on apprenticeships. Although they have been offered for generations in the United States — mostly in building trades, electric power and resource distribution, and heavy industries, like autos and aerospace — apprenticeships are experiencing a much broader expansion into new areas.
Foreign automakers from Germany and Japan have brought with them new types of apprentice programs in recent decades. In South Carolina, a partnership with the state has allowed BMW, the biggest auto exporter to third countries from the United States, and its supplier network to build a training system with local high schools and community colleges. In turn, the state has used this success story to broaden apprenticeships to other industries. Volkswagen has had similar success in Tennessee.
Toyota’s successful program in Kentucky and Indiana has been adopted by more than 300 companies in the region, including GE, because it works so well. Research by academic experts such as Robert Lerman documents the higher lifetime earnings and career satisfaction for those who participate in apprentice programs. Average starting salaries for graduates is around $60,000.
The third principle is to be proactive rather than reactive. Job retraining is much harder than preparing young students for careers in fields with proven labor shortages. Federal programs tend to be reactive. Older workers need more than technical training to succeed, as many are single parents or have family situations precluding flexible hours or geographic mobility. In the United States, apprenticeships also start much too late: the average age of apprentices is around 30, and only 20 percent are under the age of 25.
The widely admired German model, which places about 90 percent of its graduates in career-path jobs, including in service industries, has students entering programs around the age of 16. The aspirational goal of U.S. culture is for all students to complete four years of college, so attracting younger students into apprenticeships or other skilled training pathways will require a change in cultural perceptions. Changing standards for federal and state scholarships to include apprenticeships and other forms of skills or vocational education, and allowing older students to use individual retirement accounts (IRAs) to support retraining, might be helpful in changing public perceptions.
The last principle is to include the private sector more deeply and consistently in developing and sustaining skills training programs. Employers are the best source of knowledge on current needs and are best at sensing the future direction of employment trends. Successful models can be emulated as well, like those involving foreign automakers, but also domestic programs such as the aerospace consortium in Washington state or the century-old apprenticeship school run by Huntington Ingalls for its shipyards.
Federal and state governments can encourage such partnerships by providing tax credits, as South Carolina does to help support training by companies. It might also be helpful to consider allowing capitalization of training programs. Companies, too, must show their commitment by investing time and resources in their training programs and promoting the attractiveness of mid-level skills through internships, factory visits, and involvement with K-12 schools.
As of April, there were around 775,000 unfilled jobs in manufacturing, construction, transportation, utilities, and information technology in the United States. If the Trump administration’s growth agenda is to succeed, it will require new ways to support skills training. The best ways to meet this need are to consolidate federal programs or turn them into block grants to support the innovative programs developed at the local and regional levels, to be proactive in attracting young students into the sectors most in need, and to include the private sector more fully.