The Youth Unemployment Crisis: A Fix that Works and Pays for Itself

Economist Bob Lerman proposes a solution to the youth unemployment crisis in the United States. Lerman argues the quickest way to getting unemployed kids off the streets and onto the payroll is through work apprenticeships.

Unlike internships, apprenticeships train young adults with specific skills for jobs in industries that need more workers. More work apprenticeships, like this one for carpentry, may be a part of the solution for reducing youth and young adult unemployment. Photo by Jetta Productions/Getty Images.

Paul Solman: Economist Robert Lerman, professor at American University and fellow at the Urban Institute, is something of an iconoclast.

Lerman made a splash on the NewsHour in 2011 by challenging the data on American economic inequality, insisting that Social Security and Medicare benefits should be included in reckoning a person’s wealth. If they were, America’s wealth distribution would appear a lot less lopsided than we had portrayed it in perhaps the most popular piece we’ve ever done.

A firestorm of viewer protest followed, to which Bob vigorously responded. Bob also played the (mild) skeptic in a story of ours on a seemingly splendid youth-to-work program called YouthBuild. Was the program worth its cost? he wondered.

In short, Professor Lerman was becoming our in-house cynic. So I asked him: Does nothing work?

And that brings us to Bob’s own initiative for getting young people into the workforce economically through apprenticeship. Here is Bob’s take on solving the youth unemployment crisis.

Robert Lerman: What if I told you that a U.S. public-private initiative could reduce youth unemployment, improve the transition from school-to-careers, upgrade skills, raise wages of young adults, strengthen a young worker’s identity, increase U.S. productivity, achieve positive returns for employers and workers, and reduce government spending?

After you asked me what I’ve been smoking, you might think it another pie-in-the-sky scheme put forward by some airhead academic. In fact, the initiative I have in mind is feasible to implement. It addresses what may be the most pressing labor market issue at the moment, and in the coming years: no good jobs for young people. Most important, it has been well-tested and it demonstrably works.

So what is it? To expand apprenticeship training, expand it significantly enough to become a viable alternative for most young people and a common method of recruitment and training by employers.

Why Apprenticeships Are Good for Youth and Good for Business

As a university professor and policy practitioner, I have studied apprenticeship programs for years. They train people by combining work-based learning with classroom instruction in a unified program that leads to a recognized and valued occupational credential.

Young people, especially guys, who hate sitting through classes all day can spend part of their time making something and learning by doing. Trainees earn money and contribute to production while they learn. Apprentices graduate with a sense of pride and identity as a member of a community of practice.

Employers bear most of the training cost but they recoup their investments when the value added by apprentices exceeds their wages. In the U.S., hundreds of apprentices are working in jobs from maintaining ships in Newport News, Va., to helping construct buildings throughout the country.

While U.S. apprenticeships are concentrated in construction and manufacturing occupations, in many countries they cover a wide range of jobs, from chefs and computer network administrators to bakers, commercial sales representatives and health technicians.

In Austria, Germany, and Switzerland — countries with a long history of guilds and craft work — apprenticeships are so commonplace, they cover 55-70 percent of all young people. Because these countries are known for their success at smoothing the transition from school to careers, apprenticeships have been growing rapidly in other countries as well. They have tripled in Australia since 1996 and jumped tenfold — to over 600,000 — in England since 1990.

International organizations are encouraging countries to expand apprenticeship training, including the International Labor Organization (ILO), the Organization for Economic Cooperation and Development (OECD), and the International Monetary Fund (IMF). The G20 attaches high priority to expanding apprenticeships for youth.

One reason for pushing for more apprenticeship training is that youth unemployment rates are lowest in countries where apprenticeships are highest, namely Germany and Switzerland.

A second reason is that apprenticeship training has led to higher employment shares in manufacturing, including 22 percent of German employment and 16 percent of Swiss employment. This is in comparison to the U.S., which is at only 10 percent.

Detailed studies show large gains in wages for those who complete apprenticeships. One recent U.S. study estimates that apprentices gain nearly $50,000 in added wages over what they would have earned otherwise. Another shows gains of this scale within just three years after completing the apprenticeship.

Moreover, the skills apprentices learn to master in one occupational area are generally transferable, and thus quite useful even after switching occupations.

Where Does the Money for Training Come From?

Ah yes, you may be thinking, yet another great idea that is destined to become an expensive government intervention.

Actually, the government costs for training are quite low because most of the investment comes from the company offering the apprenticeship. Since apprentices engage in productive work while learning, companies are often able to recoup their investments within or soon after the training period.

Still, modest sums are necessary to jump-start the system. Funding is required for marketing and technical assistance to help firms set up and maintain apprenticeship slots.

Right now, the federal government spends only about $25 million to oversee apprenticeship programs that involve 400,000 workers. Even tripling the funding for these functions — a $50 million increase — would amount to less than 1 percent of the recent increase in funding for college loans. Failing to provide even minimal funding for apprenticeships means skimping on young people who prefer work-based learning. This is the opposite of progressive, no matter how strong the college lobby.

For evidence of likely impacts of more apprenticeship funding, we can look to the experience of South Carolina, where a low budget, well-targeted marketing effort and a small incentive payment expanded apprenticeships and apprenticeship programs by about 500 percent.

The stimulus to apprenticeship training by firms will pay large dividends. By changing the way firms recruit and train workers, today’s investments can set of a long-term flow of employer-led training that will lessen the government burden to finance human capital.

Once the apprenticeships are operating, the government and social returns are enormous. A government outlay of less than $1,000 per apprentice is associated with a nearly $60,000 increase in productivity and earnings over nine years.

An Academic-Only Strategy Is Failing American Youth

So let’s increase public investment in apprenticeships. It will modestly reduce the enormous gaps in funding for the college-bound vs. funding for young people who prefer work-based, learning-by-doing alternatives along with classroom instruction.

It will widen opportunities for rewarding careers, increase economic mobility, and increase engagement of young people who drift aimlessly through the formal education system. It will give more young people pride in what they do, both in mastering an occupation and in their confidence that they have learned how to learn.

It’s past time that we recognize an academic-only strategy is ill-suited for a diverse population and for the diverse needs in the labor market. Building a robust apprenticeship system can play a far more constructive role in expanding the middle class than maintaining a pure school-based strategy and focusing on raising the U.S. ranking in the percent of young people who graduate college.

I’m trying to do my part by starting the American Institute for Innovative Apprenticeship. It will create an information clearinghouse, document the skills that apprentices master, develop a peer network of apprentices and companies sponsors, and form partnerships with industry groups, community colleges, and workers. If you favor this approach as well, feel free to write me about how you can contribute to this ambitious effort.