Creating a level playing field for apprenticeships

Welcome to The Tassel, FREOPP’s newsletter on higher education policy, written by senior fellow Preston Cooper. Each month, The Tassel dives into our latest work on higher education, along with a handpicked selection of research and articles from around the web that we think are worth your time. To manage your subscription preferences, visit your Substack settings.

Politicians of both parties are in love with apprenticeships. The cross-ideological appeal is easy to see: hiring an inexperienced young person, training them on the job, and transforming them into a highly-skilled professional earning six figures is the essence of the American dream. The right also likes apprenticeships as an alternative to college, while the left sees them as a way to boost union membership.

Both parties face a challenge, however, in turning these warm feelings into policy. America is making progress on expanding apprenticeships: according to the Department of Labor, the number of registered apprentices has doubled over the last ten years. However, America lags behind peer nations such as Britain, which has eight times as many apprentices as a share of the labor force. Germany has fifteen times as many. Moreover, apprenticeship has struggled to gain a foothold in America’s fast-growing digital-economy jobs, where employers still depend on the traditional college degree.

Apprentice Nation

Apprenticeship expert Ryan Craig’s new book, which I reviewed for Forbes this week, couldn’t be more timely. “Apprentice Nation: How the Earn and Learn Alternative to Higher Education Will Create a Stronger and Fairer America” examines successful models of apprenticeship at home and abroad, and meditates on policy changes that could allow the model to reach its full potential.

Skilled blue-collar occupations such as electricians, plumbers, and carpenters still dominate the apprenticeship landscape in America. But Ryan profiles many apprenticeship providers starting up apprenticeships in new fields, such as cybersecurity. While there are traditional college degrees available in this field, they are typically expensive, and curricula don’t keep up with the latest developments in the space. Instead, cybersecurity firm Ultraviolet offers a twelve-week apprenticeship: six weeks in the classroom, and six weeks training on the job. Full-time positions await completers.

Why don’t more companies embrace the model, particularly with the job vacancy rate near record highs and constant complaints from bosses about shortages of talent? Simply put, the cost of setting up an apprenticeship is high; companies must not only pay new apprentices while they are unproductive, but cover the costs of designing an apprenticeship and pay for training components that take place in a classroom.

In other countries, firms typically don’t design apprenticeships from scratch. Instead, they rely on third-party organizations known as intermediaries to establish and operate the apprenticeship on behalf of many different companies. Intermediaries can spread the fixed costs of apprenticeship program across many more participants. Intermediaries are also typically the beneficiaries of government subsidies for apprenticeship, rather than firms themselves.

A thumb on the scales

In America, it’s impossible to understand the relative paucity of apprenticeships without considering government subsidies for traditional colleges. Young people who want to attend college can qualify for Pell Grants, subsidized student loans, Federal Work-Study, and tuition tax credits; the institutions they attend enjoy direct government appropriations and massive tax exemptions. Most of these funding streams operate as entitlements, meaning they are available to any eligible student.

Contrast this with the funding structure for apprenticeships. While there is some money available for apprenticeship through the Department of Labor, providers must go to the trouble of registering their apprenticeship, which involves several months of hoop-jumping and complying with a long list of requirements. At the end, federal funding is not guaranteed, and usually goes to incumbent players who know how to navigate the system. Many of America’s most successful apprenticeship models, such as the Kentucky FAME program, don’t bother seeking federal funding at all.

The federal government has its thumb on the scales in favor of traditional college. By Ryan’s reckoning, traditional colleges and universities receive $1,000 for every $1 that flows to apprenticeship providers. Fortunately, he has ideas to change that.

A blueprint for expanding apprenticeships

Ryan proposes funding apprenticeships by formula: any apprenticeship program that meets certain conditions should receive funding. His specific proposal is to reward apprenticeship providers with a $4,000 payment for each apprentice they successfully train and place in an upwardly-mobile job paying at least $40,000 per year. The federal government should also pick up the cost of classroom training for apprentices, within certain limits.

The idea would help level the playing field between college and apprenticeship. A big new government program, however, might be a tough sell in an era of thirteen-figure budget deficits and still-elevated inflation. I wonder whether we might be able to achieve the same effect by modifying existing programs to make them friendlier to apprenticeships, as I discussed in more detail in a statement for the record for the House Committee on Oversight. Pell Grants and Federal Work-Study could support apprenticeships, but contain arbitrary restrictions that steer those dollars toward traditional colleges instead.

I also like some of Ryan’s smaller-potatoes ideas, such as public-sector apprenticeship programs to fill government jobs (currently, governments are among the worst offenders when it comes to unnecessary bachelor’s degree requirements). Stripping degree requirements from occupational licenses, as we discussed in this newsletter last month, could also boost the apprenticeship pathway for more occupations.

Widespread dissatisfaction with higher education means apprenticeship boosters have a unique opportunity to advance their cause. Anyone interested in the model should check out Ryan’s book to learn about a promising path forward.

What I’m writing

• The Supreme Court may have blocked student loan cancellation, but President Biden’s “Plan B” is alive and well. The Education Department is considering a supposedly more targeted version of student debt cancellation using a novel legal authority; only borrowers who meet certain conditions would be eligible for relief. Among those eligibility criteria? Receiving a Pell Grant or not finishing college—two categories which, together, cover 71 percent of college students. Adding other criteria will bump that number even higher. The “targeted” branding of the new debt-forgiveness plan is just a fig leaf for mass cancellation, I argue at OppBlog.

• The House of Representatives may have finally chosen a speaker, but comprehensive higher education reform is unlikely anytime soon. Fortunately, there are plenty of options for states interested in fixing the sector’s many problems, Annie Bowers and I write in the Washington Examiner. These include tying state funding for colleges to student outcomes, lowering barriers to entry for innovative new schools, and removing degree requirements from government jobs and occupational licenses.

What I’m reading

• Five and a half million borrowers enrolled in the Biden administration’s new income-driven repayment plan, and most of them have $0 monthly payments. The generosity of the plan is one reason for its immense cost—half a trillion dollars by some estimates—and why many analysts think it will induce colleges to raise tuition and push more loans onto students.

• Daily payments to the Department of Education are back up to pre-pandemic levels, say researchers at the Philadelphia Fed. While the data are still early, they are an encouraging sign that the transition back into student loan repayment may go smoother than expected. Survey work from the New York Fed also finds no reason to suspect a major coming spike in delinquencies, nor a substantial drop in consumer spending.

• A judge blocked the Department’s attempt to recoup $24 million in borrower-defense discharges from DeVry University. The borrower defense regulation empowers the Department to cancel loans for students who were allegedly defrauded by their universities—and recoup the costs from schools. Earlier this year, another court blocked the administration’s changes to borrower-defense, which relaxed the standards for a successful discharge.

• Waiving certain licensing requirements for teachers in Massachusetts due to the pandemic, unsurprisingly, increased the supply of teachers, find researchers at Boston University. The (temporary) changes also helped diversify the profession.

• The share of student debt held by the top two quintiles increased between 2019 and 2022, according to new data from the Survey of Consumer Finances. If the case for student debt cancellation before was weak, it’s even weaker now.

What I’m doing

The fall color is coming in hot in the DC area. Here’s a snap from a couple weeks ago near Mary’s Rock in Shenandoah National Park:

FREOPP concluded its annual Freedom and Progress conference this week. We’ll get some recaps up on the website in the coming days, but you can watch a recording of a couple plenary sessions here.

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