The Answer to America’s Skilled Labor Problem

July 24, 2017, 2:57 PM UTC
Germany Seeks To Raise Both Automation And Employment
TELTOW, GERMANY - APRIL 20: Trainees practice designing electronic circuit configurations during a visit by German Education Minister Johanna Wanka to the Ausbildungverbund Teltow job training center on April 20, 2017 in Teltow, Germany. Wanka announced that the German government is seeking to enhance the digital qualifications of its workforce in order for the German economy to not only increase the automation of its manufacturing sector but also to raise employment at the same time. A recent study in the USA showed increased automation was having no positive effect on employment in the US. (Photo by Sean Gallup/Getty Images)
Sean Gallup Getty Images

Very few policy ideas excite both parties in this period of political polarization. Apprenticeship and the renaissance of technical education is, however, one of them. The Obama administration invested millions to launch a federal apprenticeship office, while President Trump has made it one of his signature ideas as he tries to address the re-industrialization of economically depressed regions of the country.

Twin goals are at play on the right and the left: the revival of manufacturing industries, which are desperate for skilled labor, and the need to develop pathways to good jobs—especially for non-university-bound youth—that technical high schools, community colleges, and training programs have been trying to forge. Virtually everyone in the policy world accepts that we must do more to move the American labor force toward the kind of high-skilled foundation that is common in Germany and Austria.

Despite this consensus, the U.S. is very far behind in expanding apprenticeship and the technical education that underpins it. We currently have 506,000 federally registered apprentices and have allocated $2.7 billion dollars to support them. In Germany, with an economy one quarter the size of the U.S., there are 1.4 million apprentices and the annual expenditure for them is $9 billion. The skill of the German labor force is unparalleled in the world and has helped that country become a dominant force in international trade. Its investment has paid off handsomely.

Political accord about the value of apprenticeship in the U.S. has not been accompanied by agreement on how to fund its growth. American employers complain about the difficulties they face finding qualified workers, but do not seem eager to invest in upskilling the labor force. They worry about ‘free riders,’ firms that will scoop up the workers they have paid to train. Few are eager to be first movers, to incur expense that their competitors are avoiding. State governments—especially in South Carolina, Tennessee, Michigan, and Massachusetts—are experimenting with tax breaks that make it less costly to support training, and they have a lot to show for their investments. But their efforts are not sufficient to answer the national demand.

With the impending retirement of the Baby Boom blue-collar labor force, many firms are worried about where they will find the workers of the future. In Massachusetts alone, we are expecting a shortfall of more than 44,000 skilled workers over the next decade. Nationally, the shortages are skyrocketing: Over 600,000 manufacturing jobs are posted at any given time that require post-high school training, but less than a college degree. These are exactly the kinds of jobs for which technical education and apprenticeship are the best preparation. Employers report that they can’t fill many of these jobs, and they’re wondering where they are going to find these workers.

We should look carefully at one model that could be a game changer in the U.S.: the U.K. apprenticeship tax. Passed into law by the conservative Tory government, this tax is igniting rapid growth in apprenticeships at modest cost to individual firms. It is creating a true pathway to robust technical training to the benefit of manufacturing firms and service industries alike. The levy is expected to support 3 million new apprenticeships in the next three years.

British employers with a payroll exceeding 3 million pounds ($4 million) pay a modest .5% payroll tax into a fund specifically earmarked for apprentices. Smaller companies—which amounts to 90% of the firms in England—will instead pay only 10% of the cost of apprentices, while the government will pick up the rest. (Scotland, Wales, and Northern Ireland have their own programs.) For companies that have fewer than 50 employees, the government picks up all costs for new apprentices aged 16 to 18. The U.K. government adds 10% to the funds in every English company’s apprenticeship service account, applied monthly.

Employers can draw on these funds to pay the wages of their apprentices, to pay for training services (including subsidies to senior employees they may choose to provide training), and any other expense associated with the program. They can use these resources to train apprentices at all levels, from a semi-skilled operator to a graduate engineer. Each employer has an allowance of 15,000 pounds ($25,000) to offset against their tax payment, and they have up to two years to make use of their apprenticeship funds.


Because the cost of training varies by occupation, the U.K. government provides for 15 different “bands” of funding. Engineering and technology-related apprentices qualify a firm for a higher band than service-sector training. Recognizing these differential costs enables high-tech firms to participate as readily as any other kind of company.

If the United States wants to solve its labor demand problems in manufacturing and service industries, it has to get serious about technical training and shop-floor experience. It will not be able to do that just by talking about what a good idea apprenticeship is. The country has to settle on a financing system that will make it easy for companies to get into this game. We could do worse than look across the pond at our British cousins to see how it could be done.

Katherine S Newman is the Torrey Little Professor of Sociology at the University of Massachusetts, Amherst. Hella Winston is a Senior Fellow at the Schuster Institute for Investigative Journalism at Brandeis. They are coauthors of Reskilling America: Learning to Labor in the 21st Century.

Read More

Great ResignationClimate ChangeLeadershipInflationUkraine Invasion