Manufacturing Apprenticeships Increase Profits, Productivity, and Employment

Written by: Farah Yamini
Written by: Farah Yamini

Current Employment Challenges
With presidential nominees unveiling economic plans, American voters are thinking about job security. Many are asking themselves, “Will my job be relevant in five to ten years?” and “Will my children be entering a job market full of economic opportunity?” Currently, the unemployment rate is at 5.5%, which is considered “normal.” However, Jeffrey Dorfman, Private Consultant and Professor of Economics at the University of Georgia, told Forbes magazine that this figure is not an accurate picture of the labor market. According to Dorfman, there are 90 million Americans not included in this figure, such as retirees and stay-at-home-parents. The figure also doesn’t include “those who would prefer working but have given up on finding a job.”

There are also those who are not being accurately represented in the national unemployment average. For instance, the unemployment rate of young adults between the ages of 18-34 is at 7.8%. This figure is even higher than the national average. Thus, in order to get an accurate picture of the labor market, it is necessary to be aware of specific subgroups – such as young adults and people who have become too discouraged to continue looking for work.

The high unemployment rate in the United States presents many challenges for our nation’s leaders, who must brainstorm solutions that can be implemented in a relatively short period of time. For the answer, many economists are pointing at major industries like manufacturing that have demonstrated steady and positive growth.

The Manufacturing Industry Continues to Grow
The manufacturing industry is ripe with economic opportunities. Accenture, a global consulting company, collaborated with the Manufacturing Institute to conduct a study on the job market. The July 2014 study showed that more than 50% of U.S. companies plan to increase their U.S.-based production by at least 5% in the next five years. Nearly a quarter of the study’s correspondents reported that they are ready to grow production by over 10%. Despite the projected growth, many of these jobs will go unfilled due to the shortage of skilled workers. The shortage threatens future earnings for Americans as well as growth prospects for developing companies.

An apprentice makes a weld at Cooper Standard in Spartanburg, S.C. The state’s Apprenticeship Carolina program has seen the number of companies with apprenticeship programs go from 90 to 670 since its inception in 2007. The number of apprentices has risen from about 750 to nearly 11,000 in the same period.
An apprentice makes a weld at Cooper Standard in Spartanburg, S.C. The state’s Apprenticeship Carolina program has seen the number of companies with apprenticeship programs go from 90 to 670 since its inception in 2007. The number of apprentices has risen from about 750 to nearly 11,000 in the same period.

The Labor Market: A Potential Talent Pool for Manufacturing
The shortage of skilled workers, coupled with thousands of young adults looking for work, seems like a perfect opportunity to create a pool of talent. And the shortage of skilled workers is only expected to grow. The U.S. Department of Labor reports that the average age of the manufacturing laborer in 2011 was about 44 years, which means that a substantial amount of workers are nearing retirement age. As this demographic increases, there will be an even higher demand for skilled labor.

In order to reduce the skills gap, and tap into the potential talent pool, companies are offering apprenticeship opportunities. According to the July 2014 study, the manufacturing skills shortage has a direct negative impact on company profitability, so companies are doing everything they can to better prepare future laborers. In states like South Carolina, some manufacturing companies have responded by successfully implementing an apprenticeship model.

The Proven Benefits of an Apprenticeship Model
Studies have shown that there are many benefits for companies to incorporate the apprenticeship model. For example, in July 2012, Mathematica Policy Research conducted a study called “Effectiveness Assessment and Cost-Benefit Analysis of Registered Apprenticeships in 10 States.” The study found that the primary benefit of an apprenticeship is the added productivity of workers. Employees who graduate from an apprenticeship program will add about $59,000 in productivity benefits over the medium term (9 years), and about $124,000 over the long term (36 years). In other words, companies can expect substantial gains in productivity. However, apprenticeships don’t just benefit the company. The Mathematica Policy Research study suggests that earnings and employment rates will be higher for people that complete an apprenticeship. Apprenticeship programs also help lower government spending. On average, each paid apprentice adds about $10,000 to federal, state, and local government coffers. Government agencies also experience a decrease in the need for public assistance.

 Leading Manufacturers Measure Business Impact of Apprenticeship Programs
Accenture and the Manufacturing Institute used the following metrics to measure the business impact and profit generated by apprenticeships in manufacturing:

  • production cycle time
  • downtime
  • inventory
  • overall equipment effectiveness (OEE)
  • order lead time
  • ability to scale for peak production
  • percentage of filled on time
  • lost orders due to inability to fill
  • overtime cost
  • cost of goods sold

Companies that have implemented the apprenticeship model have seen improvements in many of these categories. For example, Gina Vasallo, the Talent Developer and Manager at Caterpillar, stated: “… when you look at the top 30% of our facilities, you’ll see that they have improving scores and they have the improved results. So we see that correlation.” Companies also benefit from having direct control over quality and curriculum. According to Dale Hutto, Controller and Interim Plant Manager at Goodrich Delavan, “Quality and expertise play an important role in the design and manufacture of Delavan products. What better way to ensure that quality and build that expertise internally than through an apprenticeship program? This apprenticeship program gives us the opportunity to invest in and grow our own workforce.”

 “Investing in” and “growing your own workforce” allows manufacturing companies to form a mentoring relationship. This means that both students and companies have confidence in each other, which translates to a time-efficient and smooth turnaround between training and work. According to Shawn Kaufman of Riggs industries, “We have built a really good relationship with a high school that has a welding program. In fact, the relationship is to the point where we have helped them with their curriculum, we’ve donated materials to them, and we’ll go down once or twice a year to meet with instructors for onsite interviews. We had four or five people that we hired right after graduation.” Being hired right after graduation is every apprentice’s dream. The manufacturing companies leading the way in creating these apprenticeship programs see more than just profits. They are building a better long-term labor force for America.

Looking for an apprenticeship program? AWS WeldLink can help. AWS WeldLink is a career planning and management system specifically designed to bring together individuals, businesses, and schools in the welding industry. Use the site’s Find an Apprenticeship feature to locate a program near you.