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Borrowing a Training Idea from Germany

Interest in the U.S. apprenticeship system is gaining as more skilled workers are needed to replace an aging workforce. Apprenticeship programs in the United States would do well to emulate some areas of Germany’s centuries-old system.

In Germany, the apprenticeship program is the main path young people take to enter the workforce directly from high school. The successful program is often cited as a leading reason for Germany’s high productivity and relatively low youth unemployment rate, which is 7.8 percent as of May 2014, according to Statista, an online portal that provides access to government data. As a result, the German apprenticeship system is drawing increased interest from industry, education and government sectors in the United States. By comparison, the US has a youth unemployment rate of 14.3 percent as of July 2014, according to U.S. Bureau of Labor Statistics.

Germany’s dual-system apprenticeship program approach provides training and education between the apprentice and the employer in a formal agreement that lasts two or three years. An apprentice spends some time at the employer receiving on-the-job training to develop practical market skills. The remaining time is spent at a government-funded vocational school, where the apprentice receives a theoretical knowledge of the practical skills. The apprentice receives a wage that increases over the apprenticeship period.

After completing the apprenticeship, they are often hired permanently to work for the company. They also receive a certificate that allows them to transfer to similar companies should the employer not retain them.

Can this successful German approach be implemented in the United States? “A close relationship between government, learning institutions and companies is needed to give apprenticeship programs a push in the U.S.,” said Christine Benz, training manager at TRUMPF Inc., a fabricating equipment and industrial laser manufacturer in Farmington, Conn.

Currently, the U.S. apprenticeship system is state-driven. The federal Department of Labor’s (DoL) Office of Apprenticeship works with state agencies that administer and oversee its nationally registered apprenticeship program on the local level. All states can participate in the program, although some are more successful than others, such as programs in Georgia, Wisconsin, Illinois and Michigan.

South Carolina’s Apprenticeship Carolina, a program of the S.C. Technical College System, Columbia, S.C., works with the state’s technical college system to develop registered apprenticeships. The program had 777 apprentices and 90 registered apprenticeship programs in 2007, the year it began. Today, it has more than 10,000 apprentices and roughly 650 programs.

Apprentices receiving hands-on training as part of the MAT2 program from Michigan Economic Development Corp.

Similar to requirements in Germany, the three components that the DoL requires for a registered apprenticeship program are on-the-job training, job-related education — whether through an associate degree in alliance with a technical college or conducted internally at the employer or with contractors — and a scalable wage, according to Kelly Steinhilper, vice president of communications for the SC Technical College System. An apprenticeship can range from 18 months to four years. However, unlike in Germany, the employer typically pays the apprentice’s tuition, although some do leave it up to the apprentice.

After completing the program, the apprentice typically is kept on as a skilled worker by the employer. “It is an investment on the company’s part and nine times out of 10 they get that return on investment,” Steinhilper said. “The apprentice sees it as an investment too. They are receiving an education while they have a paying job.”

Statistics on the percentage of apprentices hired permanently or retention rates were not available from the S.C. Technical College System, nor was data on the costs employers incur for an apprenticeship program.

The apprentice also receives a certification, which is portable. “They are gaining skills they can use anywhere,” Steinhilper added. “They can go to another company or even another state because the federally registered certificate is acknowledged nationwide.”

Manufacturing and construction are the two main industries that offer DoL registered apprenticeship programs. “We also do outreach to other industries people don’t necessarily consider when they think of apprenticeships, such as advanced manufacturing and mechatronics,” Steinhilper said. Other industries include health care, banking, higher education and tourism. It is not just large companies that offer these programs. “We have them at small job shops and medium-size companies as well.”

An apprentice working on a project for a company participating in South Carolina’s Apprenticeship Carolina, a program of the S.C. Technical College System.

A Piece of Home
As expected, German-based companies with divisions in the United States are apt to offer apprenticeship programs. Volkswagen is known for its effective program at its plant in Chattanooga, Tenn.

TRUMPF Inc. is the North American subsidiary of TRUMPF GmbH, Stuttgart, Germany. TRUMPF initiated a DoL registered apprenticeship program modeled after the German program at its Farmington plant, enrolling the first apprentice in 2006. On average, TRUMPF enrolls one apprentice into its program per year.

The two-year program has three modules. Apprentices spend a certain amount of paid time in each of the company’s departments. They also attend TRUMPF’s internal training center, where classes are split between classroom theory and hands-on training. For the third module, apprentices attend classes at community colleges, for which TRUMPF pays the tuition. “After two years, they are about 50 percent done with their associate degree,” Benz said.

Benchmarks and evaluations are put in place as the apprentice moves through the program. Upon successful completion of these benchmarks, the hourly pay increases.

Although successful, the apprenticeship program is a risk on TRUMPF’s part. “We have no guarantee they will accept employment,” Benz said. “Be we feel confident they will stay with us after the two years. And as further incentive, after they complete the program, we will continue to pay for their classes to attain their associate degree.”

TRUMPF pays approximately $100,000 per apprentice per year. The graduation rate is 88 percent and its retention rate after graduation is 75 percent. Graduates receive a certification that is acknowledged nationwide.

Working with colleges
As with other DoL registered apprenticeship programs, TRUMPF is involved with developing the college curriculum to make sure it fits what they need. “We work with the colleges to explain what our apprentices need to know,” Benz said. “Other colleges have great classes that fit our needs. So we pick and choose the classes. The good thing is the community colleges work together so one college acknowledges the credits from another here in Connecticut.”

In addition to a traditional registered apprenticeship program, where each company can customize the work experience and curriculum for their apprentices, Michigan offers another apprenticeship program more reminiscent of Germany’s program. The Michigan Advanced Technician Training (MAT2), established in 2012, is similar to DoL registered programs, but with one big difference.

“It is based on the German model where a consortium of employers help define the competencies that are going to be taught, then partner with a community college to develop a customized curriculum for the apprentices,” said Amy Cell, senior vice president, talent enhancement, Michigan Economic Development Corp., Lansing, Mich. “The apprentices attend classes in blocks, say eight weeks, then do their job-related work in blocks.” MEDC helps attract, launch and grow new businesses, and within that, help businesses find the talent they need.”

Right now, MEDC has three MAT2 programs—mechatronics, information technology and technical product design, but hopes to offer more and is currently evaluating a CNC program for the 2015.

The three-year program had 31 participants in 2013 and 76 started in 2014. First-year retention was around 95 percent. Costs to the employer, including the tuition, stipend and wages, are around $70,000 over the three years.

“The program is structured in a way that meets German guidelines,” Cell noted. “In fact, apprentices are eligible for German certification after they graduate.”

However, typically the employer requires apprentices to remain with the company for two years after they complete the program, or pay back the tuition and the stipend they received while in school.

Apprentices taking a software training class for TRUMPF.

 
What is Different?
The lack of industry/education cooperation is one of the big differences between German and U.S. apprenticeship programs. “In Germany, there is a close embedding of the courses with the vocational schools and the apprenticeships,” said Robert I. Lerman, institute fellow, Urban Institute, and professor of economics, American University, both in Washington, D.C. Lerman is a recognized apprenticeship expert. “They have fairly elaborate negotiations over the skills standards that apply to the entire country.”

This is not the case in the United States. “The interest and willingness to invest in these apprenticeship programs is there,” TRUMPF’s Benz said. “What is needed is more guidance, especially for smaller companies that don’t have the resources to develop a curriculum. Close cooperation between the community colleges and industry is necessary. If curriculum was somehow standardized and a program put in place statewide or even nationwide, all the apprentice would have to do is enroll and the rest would be standardized.”

Another difference between German and U.S. apprenticeship programs is the stigma attached to community college as a lesser choice to a four-year university in the U.S. However, as the cost of university increases and placement after graduation grows questionable, this perception may start to lessen.

Lerman mentioned another difference is that most of the apprentices in the United States are in their mid-twenties. In Germany, it is embedded in the post high school range of 17 to 19 years old.

Also, apprenticeships in Germany cover a broader range of occupations, according to Lerman. “In the United States, we offer a lot of options but the number of participants is minimal in the nonconstruction and /nonmanufacturing sectors.”

Perhaps the biggest difference is that in Germany, everyone knows about apprenticeships. “It is a mainstream system that perhaps 55 to 60 percent of young people go through, even if they subsequently go to college,” Lerman said. “All the workers know about it and so do all the companies. The owners and management themselves have gone through the program.”

In the United States, it is far different. “Many U.S. companies have apprenticeship programs in economically strong years, but they are often the first thing that goes when money is tight,” Benz said. “In Germany, it is deeply held that it is the company’s responsibility to build up the workforce. Here, there is no focus on the next-generation workforce being prepared.” Indeed, a possible source contacted for this article had put its apprenticeship program on hiatus a few years back due to economic concerns.

And the cost of an apprenticeship program is a concern. Apprenticeship programs are expensive on the company’s part, especially for smaller companies. “We are very aware of the need to address the cost and try to mitigate that concern as much as possible,” MEDC’s Cell said. “One way to address this is to reimburse the employer for some of the costs. Another option we plan to explore is a ‘co-op’ model for apprentices that aren’t employed by the employer. MEDC would cover the tuition, and the apprentice would rotate through work experiences at a variety of employers. Hopefully, we would still end up with trained and experienced talent that would be available for interested companies.”

Any tax incentives for these programs are low. In South Carolina, companies receive a $1,000 tax credit per apprentice for up to four years, and in Connecticut it is $4,800 per apprentice per year, according to Benz.

But all told, the benefits outweigh the expense. “The biggest incentive for us is to have employees that have exactly the right skills we need,” Benz said. “The skill set they need is very specific to TRUMPF so it is difficult to hire from the outside. The apprenticeship program is an effective way for us to grow employees from within.”

Lerman noted people do not recognize the role of nonacademic skills. “They think you can make it into a purely academic preparation, but that is not true. In the real world, employees need hands-on experience and occupation-specific knowledge.” But he added that he is optimistic that more companies will begin to offer apprenticeships.

It should be noted that Germany is not the only country with large, successful apprenticeship programs. Others include Australia, Canada, England and Switzerland, which Lerman noted “is the best.”

Cell also believes there could be a significant change happening in the next five or 10 years. “In Michigan, we don’t have our entire industry economy structured in the German manner, but we have taken the first steps toward taking the best of the German program and fitting it into a U.S. framework that also respects the benefits of the U.S. education system.”