Do Employers Earn Positive Returns to Investments in Apprenticeship? Evidence from Registered Programs under the American Apprenticeship Initiative
An Abt-led evaluation of the American Apprenticeship Initiative (AAI) found that employers experienced positive returns on their investment in registered apprenticeship programs. For every dollar invested in an apprentice, the employer ultimately earns $1.44 in benefits—a 44.3 percent return on investment.
During the program, the typical employer who hired apprentices with assistance from AAI grantees didn’t recoup all costs. But after the program, projected employer direct benefits (the value of the worker’s productivity) and indirect benefits (such as reduced turnover and improved talent pipeline, loyalty, and company culture) were estimated at between $33,000 and $40,000 for each registered apprenticeship program. Two-thirds of employers interviewed for the study recouped their apprenticeship investments. The study estimated direct benefits from increased productivity through a combination of observed data from the year after the apprenticeship ended and projected data for the ensuing four years.
The study estimated both return on investment and net benefits. The study calculated return on investment by subtracting the costs of a program from the benefits of the program and then dividing that value by the costs. Net benefits equal the benefits accruing to the employer minus the employer’s costs, discounting both costs and benefits to account for the time value of money.
The study, which used low, medium, and high productivity estimates for apprentices, found that median post-program benefits using only direct benefits are all positive. They ranged from about $4,300 for the low estimate to about $16,000 for the high estimate. Indirect benefits added about $25,000 to $30,000 to the median employer’s post-program benefits.
The study offered several lessons for program improvement:
- The finding that most employers gain from registered apprenticeship investments adds to the compelling case for scaling up registered apprenticeships in the United States. This result is especially notable because the programs are often a new component of talent recruitment policies.
- Employers would experience greater returns if they gave apprentices productive tasks right away
- Registered apprenticeships bring a range of benefits beyond productivity, particularly improvement in the pipeline for skilled workers
- Employer incentives to pay for related technical instruction could improve employers’ returns and contribute to robust apprenticeship expansion
- The wide range of estimates of employer returns may narrow as employers improve their programs and minimize cost.