Education & Workforce
day one project

Investing in Apprenticeships to Fill Labor-Market Talent and Opportunity Gaps

10.21.24 | 9 min read | Text by Jan Jaro

Over the last 20 years, the cost of college has skyrocketed, with tuition costs far outpacing wage growth. At the same time, many employers complain that they’re unable to find high-quality talent, in part due to an excessive focus on the signaling effect conferred by college degrees. Although the last three administrations have made significant strides towards expanding the number of pathways to high-earning jobs through apprenticeship programs, they remain under-utilized and have significant potential for growth. To maximize the potential of apprenticeship programs, the federal government should develop a cohesive approach to supporting “apprenticeships of the future,” such as those in cyber, healthcare, and advanced manufacturing. These apprenticeships provide high pay and upward mobility, support economic growth, and serve vital national interests. To maximize the benefits provided by an expansion of high-quality apprenticeships, the federal government should articulate degree pathways and credit equivalencies for individuals seeking further education, collaborate with industry associations to create standards for skills acquisition, and develop an innovation fund that supports cutting-edge labor market innovations, including those in apprenticeship programs.

Challenge & Opportunity

While recent student debt cancellation received significant attention, the key underlying driver is the spiraling cost of college: tuition at four-year universities has risen by more than 125% in the last twenty years, far outpacing inflation and leaving students with an average debt load of $28,000 by graduation. To alleviate the strain, policymakers have increasingly recognized the potential of non-degree training, particularly apprenticeships, which mix on-the-job training with targeted academic skills acquisition. Apprenticeships, which typically last between a few months and 2 years, enable an individual in a high school or tertiary education program to work with an employer, earning a wage while developing skills that may lead to a permanent position or enhance future employability. President Obama spent $260 million on apprenticeship training, while the Trump administration spent $1 billion. Thus far, the Biden administration has spent $730 million to expand registered apprenticeships

Nevertheless, apprenticeships in America remain vastly underutilized compared to some of our peer economies. In Germany, 1.2 million adults are enrolled in apprenticeship programs across 330 occupations. By contrast, the U.S. has roughly half as many apprentices despite enrolling 6.5 times as many college students as Germany. Moreover, apprentices are overwhelmingly concentrated in roles such as electricians, machinists, plumbers, and other industries historically classified as “skilled trades.” 

American employers have put a significant premium on college degrees. Research from the Harvard Business School highlights the pervasiveness of degree inflation in many middle-skill, well-paying jobs. The figure below shows the “degree gap percentage,” which is the difference between the percentage of job descriptions requiring a college degree and the percentage of job holders holding a college degree.

OccupationDegree gap %
Supervisors of Office Administrative Support Workers37%
Bookkeeping, Accounting, and Auditing Clerks27%
Secretaries and Administrative Assistants, Except Legal, Medical, and Executive17%
Sales Representatives, Wholesales, and Manufacturing27%
Executive Secretaries and Executive Administrative Assistants47%
Supervisors of Production and Operations Workers51%
Supervisors of Retail Sales Workers22%
Supervisors of Food Preparation and Serving Workers26%
Supervisors of Construction Trades and Extraction Workers44%
Sales Representatives, Services, All Other22%
Supervisors of Mechanics, Installers, and Repairers35%
Inspectors, Testers, Sorters, Samplers, and Weighers25%
Childcare Workers20%
Computer User Support Specialists19%
Billing and Posting Clerks21%

Historically, employers’ emphasis on degrees has made wide-scale adoption of apprenticeships outside of skilled trades more challenging. However, attitudes towards apprenticeships continue to change as more employers realize their versatility and applicability to a variety of industries. Over the past few years, companies have started to take action. For instance, JP Morgan Chase has provided $15 million since 2018 to create apprenticeship programs in operations, finance, and technology, while Accenture has led the way in developing apprenticeship networks across the U.S. Apprenticeships have clear momentum and strong applicability to critical, strategic jobs, and federal, state, and local officials should capitalize on the opportunity to create a coherent strategy.

Policy Framework For Strategic Jobs

To identify areas of policy synergy, policymakers should consider the following criteria for jobs that should attract government funding and policy support:

  1. Essential to economic growth: roles that are frequently employed in high-growth industries, or else required to improve the future general productivity of businesses.
  2. Necessary to protect American interests: jobs that have broader implications for American national interests, including economic competitiveness, national security, green energy, and public health.
  3. Middle-skill roles that do not require college degrees: while higher educational attainment is generally desirable, it is not a suitable nor affordable option for all individuals, and many roles can or should support workers who have alternative credentials. Simply put, these jobs should provide pathways into the middle class without excessive education debt burdens.
  4. High current job shortages: demand for roles far exceeds current labor supply.

Using this framework, there are three  areas in which the U.S. has clear, pressing needs:

  1. Tech job shortages in the United States will cost the American economy over $160 billion in revenue, driven by a shortage of over 1.2 million workers.
    1. Cyber attacks alone cost the American economy 1% – 4% of GDP , which can be partially addressed by eliminating the existing talent shortage of 350,000 cyber professionals.
    2. In addition, 50% of the federal tech workforce is over the age of 50 and just 20% is under the age of 40, indicating a large “retirement cliff” in the medium-term horizon.
  2. Although the U.S. has had a long-standing need for nurses and medical professionals, the COVID pandemic highlighted their importance and exposed systemic workforce shortages. By 2030, the country will be short over 500,000 nurses.
    1. The country also suffers from a lack of healthcare educators, with nearly 80,000 qualified nursing applicants turned away due to a lack of training capacity.
    2. While many critical healthcare roles (e.g., RNs and NPs) require at least a bachelor’s degree, apprenticeships are a great way to increase the pipeline of lower-level medical staff (e.g., medical assistants, CNAs, LVNs), who can then be upskilled into the RN role or higher.
  3. Today, the U.S. has over 600,000 unfilled manufacturing jobs, which may hamper efforts to bring back clean energy and semiconductor manufacturing despite the hundreds of billions invested by the Inflation Reduction Act, CHIPS Act, and Bipartisan Infrastructure Law. Cumulatively, this talent shortage could reduce American GDP by $1 trillion. The gap is most acute in a handful of roles, including assemblers, production supervisor, inspectors, and welders. However, these roles are essential to empowering the advanced manufacturing revolution, and need to be filled in order to maximize American industrial potential.

Policy Recommendations

In order to maximize the potential of apprenticeship programs in key strategic areas, the next administration should focus on coordinating resources, defining standards, and convening key stakeholders, which include employers and higher education providers, including private sector providers who demonstrate strong outcomes. To achieve this, the next administration should focus on the following policies: 

Recommendation 1. The Departments of Labor and Education should jointly lead the creation of a national strategy for increasing apprenticeships and blended work-learn programs in essential roles and industries. In conjunction with other government agencies, they will stand up a “Strategic Apprenticeships” Task Force. This task force will consist primarily of governmental agencies, including the Department of Defense, Department of Treasury, and the Fed, that have clear mandates for improving worker outcomes which are tied directly to national strategic priorities. This task force will cooperate with the Advisory Committee on Apprenticeships (a committee convened by the Department of Labor that consists of labor unions, community colleges, and other institutions) to set short, medium, and long-term priorities, propose funding levels, and develop a coherent apprenticeship and training strategy.

Recommendation 2. Congress should commit federal funds for apprenticeships in cyber, software engineering, healthcare, and advanced trades (“apprenticeships for the future”), which will be allocated by the Department of Labor as prioritized by the Strategic Apprenticeships Task Force. Given the strategic value and existing job shortages for these roles, the Department of Labor should direct at least 50% of funds to roles that (a) provide strong pathways into middle-class jobs and (b) address pressing economic and strategic shortages in our economy:

Under the Biden administration, progress has been made on higher education accountability: for example, the Gainful Employment Rule was reinstated, requiring for-profit programs to demonstrate that typical graduates’ debts are less than 8% of their earnings, or 20% of their discretionary income, to maintain access to federal student aid. Moreover, the rule requires more than half of graduates to demonstrate higher earnings than a typical high school graduate.

Nonetheless, more can be done to buttress progress that has been made on higher education, particularly given stronger regulations around ROI. The policies suggested above can roll up into an “Apprenticeships of the Future” initiative jointly managed by the Departments of Labor and Education. By using a coordinated approach to apprenticeships, policymakers can ensure that more attention is paid towards strategically important industries and roles while creating clearer pathways for individuals seeking apprenticeships and for former apprentices looking to gain further skills and training in 4-year degrees and other “alt-ed” training programs. Moreover, the initiative could make diversity and economic advancement for underserved communities a core part of its mission.

This idea was originally published on November 29, 2021; we’ve re-published this updated version on October 21, 2024.

This action-ready policy memo is part of Day One 2025 — our effort to bring forward bold policy ideas, grounded in science and evidence, that can tackle the country’s biggest challenges and bring us closer to the prosperous, equitable and safe future that we all hope for whoever takes office in 2025 and beyond.

Frequently Asked Questions
Why are apprenticeships less common in the United States than in Europe? How can they be adopted to fit the American labor market?
In a nutshell, major European corporations are more likely to cooperate with local and provincial governments on labor training and development. Moreover, unlike in America, workers sit on the board of directors of many European-based companies. For example, in Germany, workers comprise nearly half the supervisory board for companies with over 2,000 employees and one-third of the board for companies with 500 – 2,000 employees. As a result, European employers are more likely to take a long-term view of talent development and are willing to invest in apprentices to bring them up the learning curve.
Are apprenticeships just another term for vocational education? What impact might this have on long-term earnings potential?

While apprenticeships have been traditionally applied to fields that most people would associate with “vocational” roles such as electricians or construction work, they are also increasingly used in “new economy” roles such as IT and software development. When properly designed, apprenticeships have excellent earning potential. For instance, Kentucky’s FAME program prepares students for advanced manufacturing careers, with graduates enjoying average earnings of nearly $100,000 within five years of program completion.

Could we fix the skill shortage simply by paying more?
In a nutshell – yes, paying more would greatly alleviate critical skill shortages, with nursing (both at the RN level and below) as an exceptional example given the challenges of the job. However, there are still critical shortages at the front of the talent acquisition funnel that require some training (for example, helping individuals acquire nursing credentials or complete a training course to move into a tech data analyst role). While increased pay would certainly encourage more individuals to move into roles with major shortages, reducing the upfront barriers and cost to entry is also essential, and intelligent deployment of apprenticeship policy can play a major role in removing these barriers.
Do apprenticeships limit students’ ability to later receive a bachelor’s degree?
No! Students can earn a bachelor’s degree at a later point, and in some cases, the academic or work components of their apprenticeship may receive some credit. The apprenticeship to university pathway is more common in Europe, however, given the more widespread use of apprentices in non-trade roles.
What is the typical return on investment for an employer when they employ an apprentice?

Employers generally enjoy a strong ROI for apprenticeships. For example, employers who ran registered apprenticeships in industrial manufacturing received $1.47 of benefits for every $1.00 that they invest in apprenticeships, with benefits generally coming in the form of improved productivity and reduced waste. Depending on the upfront investment amount, the duration of the apprenticeship, and the time required to recoup productivity gains and cost efficiencies, the IRR percentage is somewhere between 5% – 25%.

What is the social return on investment for apprenticeships?
Again, this depends on the subsidy amount and the specific apprenticeship in question, but international studies suggest that the IRR percentage is in the 5% – 12% range, which meets or exceeds many alternatives (e.g., agricultural subsidies)
Why aren’t apprenticeships more popular? Shouldn’t the private sector self-organize their own apprenticeship programs?
In the case of skilled trades, industry has largely self-organized because “learning by doing” is the best way to ensure that an individual has verifiable skills on the job. For example, a welder needs to show that he or she can operate on a harness in the air. However, in many cases, employers may find it easier in the short term to rely on signals such as college degrees to sort through applicants or simply feel that the time and money invested in apprenticeships results in too uncertain of an outcome (e.g., the apprentice isn’t as productive as desired or leaves) relative to the risk level. Thus, public support for apprenticeships to bridge the gap between individual incentives and social returns, particularly in high-need roles and geographies, can be a good way to build a strong labor supply and provide meaningful economic mobility.
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