AlphaUSA needs to hire die makers, electricians and maintenance workers to keep growing.
Its executives are among the throng of Southeast Michigan employers lamenting the skills gap that threatens productivity, growth and the economy at large. Yet the family-owned metal fastener and engineer services supplier in Livonia ended its apprenticeship programs years ago and has no immediate plans to launch another.
Alpha understands the benefits. The state offsets the costs with significant grants per apprentice. For every dollar spent on an apprenticeship program, an employer gains $1.47 on average in productivity increases, according to a recent Georgetown University study. Turnover is reduced. Skilled workers are created.
But all the supplements mustered can’t revive a practice that’s been gutted of its lifeblood — workers who want in and will complete the programs.
“There is, frankly, a lack of interest,” said David Lawrence, vice president and chief administrative officer for Alpha. “We keep getting approached and that the state can offset the costs, but our current employees have no interest in learning or going back to school…”
The state is trying to boost learn-while-you-work programs, which are up to 999 registered programs this year from 782 in 2014, according to the U.S. Department of Labor. However, registered apprentice programs are still down more than 50 percent since 2005 after taking a huge hit during the Great Recession.
Marcia Black-Watson, administrative director for industry engagement at the state’s Talent Investment Agency, said employers have reached a tipping point where building their own workforce is critical.
“Because the labor market is so tight, because we have the lowest unemployment rate we’ve seen in years, it’s become difficult to find talent in skilled occupations,” Black-Watson said. “Employers now are really considering investment to grow their own talent, and apprenticeships are one of those (investments).”
Federal and state governments are trying to fuel that growth, Black-Watson said. Gov. Rick Snyder initiated the Skilled Trades Training Fund in 2013, which provides $1,500 per apprentice for classroom training, $1,500 per apprentice for wage reimbursement and allocates an additional $3,000 per new apprentice from the labor department.
The use of public funds serves a purpose. Professional trades will account for more than 500,000 jobs in Michigan’s economy by 2024, accounting for 16 percent of all job growth during that period, according to the state. Skilled trades are also projected to grow 50 percent faster than the statewide average during that time and offer a median wage 45 percent higher than the median for all occupations in the state.
In 2015, a new apprentice made an average of $14.51 per hour and an apprentice graduate earned $25.21 per hour. Higher-paying, more stable jobs equal more tax revenue and less reliance on social safety nets.
But Anthony Carnevale, director of the Georgetown University Center on Education and Workforce in Washington, D.C., said U.S. employers still struggle to rationalize the expense of apprenticeship programs, even though there is a clear return on investment.
An apprenticeship can cost an employer from $25,000 to $250,000, according to data gathered by Carnevale.
“The U.S. does not have a tradition of employers being willing to pay to have people in the workplace only three days a week at their own cost,” Carnevale said. “We know that apprenticeships work, they provide higher earnings and productivity, but no one wants it.”
And despite increasing numbers joining apprenticeships, fewer have the skills they need to complete programs, Carnevale said.
Between 2008 and 2015, the number of newly registered apprentices in Michigan grew 69 percent from 3,132 to 5,305, according to a November report by the Michigan Department of Technology, Management and Budget. Apprentices completing programs dropped to 765 in 2014 from 1,275 in 2012, largely due to shrinking enrollments after the Great Recession. That figure is now rising, with 878 completions in 2015 and 1,116 in 2016. Apprenticeships typically take one to four years to complete.
Experts say Michigan’s strong economy may actually harm enrollments. Michigan’s unemployment rate remains low at 5.1 percent in March, down from 5.3 percent in February.
“Apprentices who find higher-paying work are likely to drop out of their apprenticeship program,” said Wallace Hopp, associate dean for learning design and professor of industrial and operations engineering at the University of Michigan Ross School of Business. “And as the more qualified people find regular jobs, the apprenticeship programs are forced to dig deeper into the pool and hence wind up getting more people with problems — drug use, family issues or just a lack of motivation — that will make them less likely to see the program through to completion.”
Michael Richard, business manager and financial secretary for the International Brotherhood of Electrical Workers Local 58 in Detroit, confirmed the economy is constricting talent.
Local 58, which operates its own apprenticeship school in Warren funded by its members, uses a strict entrance exam to weed out potential dropouts. But they’re struggling to fill growing demand in the construction sector, he said.
The local recently began a 10-week pre-apprenticeship program to help get candidates up to speed on the requirements before enrolling in the regular program. Roughly 87 percent of its apprentices complete the program.
IBEW currently has 600 in its apprenticeship program, down from a peak of 725. Richard said the program hopes to reach 725 this year, but will not commit to more even if there’s increased demand.
“We have to be careful because of the cyclical nature of our industry,” Richard said. “We’re feast or famine. I can’t put people in the program only for them to be two years in and have the rug pulled out. That’d be a tragedy.”
The fix, Lawrence said, is on the supply side of the workforce-education equation: getting young people, educators, and their parents interested in the skilled trades.
“We need to get to young people in middle school or before; that’s when young people are engaged on whether their future includes education or not,” Lawrence said.
The state is beginning to make headway on this front. Last month, it launched the second phase of its Going Pro campaign, which is focused on increasing the visibility of skilled trades to students and parents. The campaign started last year with billboards; the second phase will now focus on educating parents and students on career choices beyond a four-year degree.
Carnevale said engaging students in vocational training is now more critical than ever — because civil unrest begins with employment stagnation.
“In Europe, governments focused academic reform on vocational training by passing laws because they were fearful of war and revolution. They had to do something for the workforce, and in a hurry, because they were scared,” Carnevale said. “We’ve never had that ‘come to Jesus’ moment in America. But it’s here now. Apprenticeships are the world gold standard for creating jobs. Let’s hope our (local and national) governments listen.”