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Next Time on The Apprentice: The Manufacturing Industry

December 04, 2018

This article explains some of the challenges facing manufacturing companies and attempts to show how an increase in apprenticeships may be a viable solution.

Manufacturing is far from back

The US unemployment rate has been in decline, reaching 3.9% in May 2018, the lowest it has been since 2000. The last time the rate was sustained below 4% was in the 1960s.[1] With openings in the US consistently topping 6 million, many claim that this shows people are finding jobs more easily than they have since the 1980s.[2] This decrease in unemployment, however, has not necessarily been better for companies. Employers are having difficulty finding experienced workers to fill the positions they need for the price they are able to pay.

Despite claims that it is roaring back, manufacturing has been one industry that has been disproportionally affected by the lack of qualified labor. Foreign competitors and rising material prices are forcing the manufacturing industry to evolve in order to remain competitive. Such evolutions often include technological advances and more efficient techniques, both of which require training, experience, and computer or advanced technical skills that are not standard in the current labor market. As the aging Baby Boomer generation retires, unfilled positions in manufacturing continue to rise.

Image: Declining manufacturing industry, Source: FREDImage: Declining manufacturing industry, Source: FRED

Image: Manufacturing vs. construction industry, Source: FREDImage: Manufacturing vs. construction industry, Source: FRED

This shortage of qualified employees is stifling production for an American manufacturing market that is trying to expand. The industry has shown yearly growth since the recession, adding 196,000 jobs last year. However, as of January 2018, manufacturing was still 1.2 million jobs short of its pre-recession levels.[3] At this rate, it would take another five years to reach pre-recession levels. Furthermore, labor productivity fell 4.4 percent in the third quarter of 2017, the largest decline since 2008. Over the same period, output decreased 1.1 percent and hours worked increased 3.5 percent.

Apprenticeships provide a viable solution

Apprenticeships are one way to actively create workers that meet the specific qualifications needed. In contrast to President Trump’s admittedly entertaining TV show, apprenticeships allow employees to attend school, usually a technical school or community college, to acquire the skills needed for a position while simultaneously working for the company, thereby picking up on-the-jobs experience needed for the position. Instead of looking to hire qualified workers in the field, companies create the workers they need by training them.

Of course, there are some barriers to the use of apprenticeships. Education is costly and requires the company to wait for fully trained and educated employees. Furthermore, the partnership between the school and the company is not a natural occurrence and therefore requires a lot of coordination and cooperation. Registering a program through the Office of Apprenticeship (Department of Labor) is a complicated and costly process. On top of it all, manufacturing apprenticeships must deal with the stigma from both employers and workers based on misconceptions about the benefits of apprenticeships and the appeal of working in manufacturing. Such barriers have made apprenticeships difficult to implement. In 2003, there were about 489,000 registered apprentices in the U.S., according to the Labor Department. In 2014, there were only 288,000.[4] Unless something is done to help companies deal with these challenges, apprenticeship programs will be unable to grow to the level needed to reform the manufacturing industry. Policy changes promoting the use of apprenticeships would be a logical and effective way to promote such change. In other countries, government policies have led to large improvements across many industries. Germany has a very successful apprenticeship program that combines technical education with on-the-job experience. Through a 1969 law, the government works closely with employers and labor unions to provide funding and overcome challenges to the various industries utilizing apprenticeships. It is therefore not surprising that in 2017 Germany is experiencing its lowest unemployment rates in nearly 37 years.[5]

Increasing the use of apprenticeships, particularly for the manufacturing industry, has been a goal of the Trump administration. Last year, President Trump signed an executive order expanding the role of apprenticeships in the US.[6] The order provides $200 million in taxpayer money to “learn-and-earn” programs through a grant system called ApprenticeshipUSA. It also reduces regulations regarding apprenticeships in order to give companies more flexibility in designing their own programs.

But critics claim that the executive orders do not go far enough to address the problem. Only 0.35% of the 146 millions jobs in America are filled by active apprenticeships in 2016.[7] Significant impact to the labor market would require a much more in-depth and active action from the government, including way more funding. The order also fails to address the need to educate companies and workers about apprenticeships in order to clear up misconceptions that may be causing stigma against them. In order to truly aid the manufacturing labor market, more comprehensive policies are needed.

State level programs may be the key to success

Numerous states have initiated apprenticeship programs in their manufacturing industries that mirror the popular German model, which creates partnerships between the state programs and companies looking to utilize apprenticeships. Direct state funding in apprenticeships has led to successful programs in Iowa, Connecticut, California, Wisconsin, Kentucky, and South Carolina, among others.[8]

South Carolina has been one state that has been particularly successful. Facing a shortage of skilled workers in 2007, the state started “Apprenticeship Carolina. The program offered a $1000 tax credit for each apprentice a company takes on. The state also offered free “Apprenticeship Consultants” to employers who help business start appropriate apprenticeship programs based on a company’s employment needs. Consultants use an extensive network of contacts, including technical colleges, workforce investment boards, economic development organizations, and trade associations to reach out to employers that could benefit from an apprenticeship program and to direct them towards learning about apprenticeships. They streamline the application process from the US Office of Apprenticeships, cutting out costs and hassle for employers. As a result, South Carolina has significantly increased the use of apprenticeships in their state, going from 90 companies and 777 apprentices in 2007 to 670 companies and over 11,000 apprentices in 2014.[9]

Many states have found similar success, yet the nation as a whole has yet to adopt a cohesive apprenticeship plan. States each have their own needs and barriers to entry that require specifically tailored policies. A uniform national policy would both be difficult to apply and highly expensive. Proposed policies involving tax credits for employers hiring apprentices are a necessary first step, but are not sufficient to create such a robust national system.[10] There will be a need for policy measures that create better coordination between states and the federal government, more funding and services from the Office of Apprenticeships, and marketing campaigns to promote apprenticeships to new employers. If such policies are implemented, manufacturing might actually see the “roar back” we have been promised for so long.

Student Blog Disclaimer
  • The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.

References

  [1]https://www.nytimes.com/2018/05/04/business/economy/jobs-report.html

  [2]https://www.washingtonpost.com/news/wonk/wp/2017/12/28/2018s-challenge-too-many-jobs-not-enough-workers/

  [3]https://www.factcheck.org/2018/01/manufacturing-jobs-roaring-back/

  [4]http://www.apprenticeshipcarolina.com/press/in-south-carolina-a-program-that-makes-apprenticeship-work.html

  [5]http://time.com/money/4820268/trump-apprenticeship-plan/

  [6]https://apnews.com/6c006b33b63c4f899e9e8abbbb1a5278?utm_campaign=SocialFlow&utm_source=Twitter&utm_medium=AP

  [8]https://www.npr.org/2014/11/06/361136336/in-south-carolina-a-program-that-makes-apprenticeships-work

  [9]https://www.usnews.com/news/best-countries/articles/2017-07-05/germanys-professional-training-program-remains-a-model-for-other-countries

  [10]https://www.brookings.edu/wp-content/uploads/2016/07/policies_address_poverty_in_america_full_book.pdf#page=81

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  • <h3>USDA Nutrition Assistance Data</h3><p><img width="180" height="124" alt="" src="/live/image/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg" class="lw_image lw_image485 lw_align_right" srcset="/live/image/scale/2x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 2x, /live/image/scale/3x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 3x" data-max-w="1233" data-max-h="850"/>Data and research regarding the following <strong>USDA Nutrition Assistance</strong> programs are available through this site:</p><ul><li>Supplemental Nutrition Assistance Program (SNAP) </li><li>Food Distribution Programs </li><li>School Meals </li><li>Women, Infants and Children </li></ul><p> Quick link: <a href="http://www.fns.usda.gov/data-and-statistics" target="_blank">http://www.fns.usda.gov/data-and-statistics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Aviation Administration: Accident & Incident Data</h3><p><img width="100" height="100" alt="" src="/live/image/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg" class="lw_image lw_image80 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 2x, /live/image/scale/3x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 3x" data-max-w="550" data-max-h="550"/>The NTSB issues an accident report following each investigation. These reports are available online for reports issued since 1996, with older reports coming online soon. The reports listing is sortable by the event date, report date, city, and state.</p><p> Quick link: <a href="http://www.faa.gov/data_research/accident_incident/" target="_blank">http://www.faa.gov/data_research/accident_incident/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>The Penn World Table</h3><p> The Penn World Table provides purchasing power parity and national income accounts converted to international prices for 189 countries/territories for some or all of the years 1950-2010.</p><p><a href="https://pwt.sas.upenn.edu/php_site/pwt71/pwt71_form.php" target="_blank">Quick link.</a> </p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Reserve Economic Data (FRED®)</h3><p><strong><img width="180" height="79" alt="" src="/live/image/gid/4/width/180/height/79/481_fred-logo.rev.1407788243.jpg" class="lw_image lw_image481 lw_align_right" data-max-w="222" data-max-h="97"/>An online database consisting of more than 72,000 economic data time series from 54 national, international, public, and private sources.</strong> FRED®, created and maintained by Research Department at the Federal Reserve Bank of St. Louis, goes far beyond simply providing data: It combines data with a powerful mix of tools that help the user understand, interact with, display, and disseminate the data.</p><p> Quick link to data page: <a href="http://research.stlouisfed.org/fred2/tags/series" target="_blank">http://research.stlouisfed.org/fred2/tags/series</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>HUD State of the Cities Data Systems</h3><p><strong><img width="200" height="200" alt="" src="/live/image/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg" class="lw_image lw_image482 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 3x" data-max-w="612" data-max-h="613"/>The SOCDS provides data for individual Metropolitan Areas, Central Cities, and Suburbs.</strong> It is a portal for non-national data made available through a number of outside institutions (e.g. Census, BLS, FBI and others).</p><p> Quick link: <a href="http://www.huduser.org/portal/datasets/socds.html" target="_blank">http://www.huduser.org/portal/datasets/socds.html</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>MapStats</h3><p> A feature of FedStats, MapStats allows users to search for <strong>state, county, city, congressional district, or Federal judicial district data</strong> (demographic, economic, and geographic).</p><p> Quick link: <a href="http://www.fedstats.gov/mapstats/" target="_blank">http://www.fedstats.gov/mapstats/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
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  • <h3>National Bureau of Economic Research (Public Use Data Archive)</h3><p><img width="180" height="43" alt="" src="/live/image/gid/4/width/180/height/43/478_nber.rev.1407530465.jpg" class="lw_image lw_image478 lw_align_right" data-max-w="329" data-max-h="79"/>Founded in 1920, the <strong>National Bureau of Economic Research</strong> is a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works. The NBER is committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community.</p><p> Quick Link to <strong>Public Use Data Archive</strong>: <a href="http://www.nber.org/data/" target="_blank">http://www.nber.org/data/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>National Center for Education Statistics</h3><p><strong><img width="400" height="80" alt="" src="/live/image/gid/4/width/400/height/80/479_nces.rev.1407787656.jpg" class="lw_image lw_image479 lw_align_right" data-max-w="400" data-max-h="80"/>The National Center for Education Statistics (NCES) is the primary federal entity for collecting and analyzing data related to education in the U.S. and other nations.</strong> NCES is located within the U.S. Department of Education and the Institute of Education Sciences. NCES has an extensive Statistical Standards Program that consults and advises on methodological and statistical aspects involved in the design, collection, and analysis of data collections in the Center. To learn more about the NCES, <a href="http://nces.ed.gov/about/" target="_blank">click here</a>.</p><p> Quick link to NCES Data Tools: <a href="http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4" target="_blank">http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4</a></p><p> Quick link to Quick Tables and Figures: <a href="http://nces.ed.gov/quicktables/" target="_blank">http://nces.ed.gov/quicktables/</a></p><p> Quick link to NCES Fast Facts (Note: The primary purpose of the Fast Facts website is to provide users with concise information on a range of educational issues, from early childhood to adult learning.): <a href="http://nces.ed.gov/fastfacts/" target="_blank">http://nces.ed.gov/fastfacts/#</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Internal Revenue Service: Tax Statistics</h3><p><img width="155" height="200" alt="" src="/live/image/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg" class="lw_image lw_image486 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg 2x" data-max-w="463" data-max-h="596"/>Find statistics on business tax, individual tax, charitable and exempt organizations, IRS operations and budget, and income (SOI), as well as statistics by form, products, publications, papers, and other IRS data.</p><p> Quick link to <strong>Tax Statistics, where you will find a wide range of tables, articles, and data</strong> that describe and measure elements of the U.S. tax system: <a href="http://www.irs.gov/uac/Tax-Stats-2" target="_blank">http://www.irs.gov/uac/Tax-Stats-2</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>