An Open Letter to Building & Construction Contractors:

Posted by Heather Stefan - On November 14, 2009 (EST)

Most building, construction, manufacturing companies and organizations have heard of registered apprenticeship.  Some know it intimately, by sponsoring a program or graduating from one.  Some think they inherently know because those programs are “union” and “old school,” they want nothing to do with it, and immediately stop listening.  Some have remotely heard of it, but not in detail, and others are one step removed, having a family member or friend who was an apprentice once upon a time.  Everyone understands the meaning of the word “apprentice” but many do not have a true appreciation for how it can apply to their situation. 

Allow me to enlighten you.  Potentially hundreds of thousands of dollars in profit, perhaps even millions in added revenue.  Did that get your attention?  Good.  It should have – but let’s review the what, why and how before we talk about the how much.

What is registered apprenticeship you now ask, with one eyebrow suspiciously raised?  It is the premier model for training and educating your workforce.  It is a highly structured, in depth vehicle for developing highly skilled workers to your specifications.  It is industry driven.  It has significant economic development ramifications.  It is the insurance a business needs, now more than ever, to ensure that they have an ongoing stream of talent development that will maximize productivity, reduce turnover, increase the level of safety while reducing workers compensation costs, and develop loyalty and dependability in employees.  It provides a high return on investment.  It gives companies the ability to pay below Davis Bacon rates.  It provides national recognition, distinction and added respect for your business among your industry peers.  It helps attract a higher quality candidate who wants a post secondary education at little cost, nationally recognized certification and career path, not just a job.  In many cases, it is a management training tool as well.  Simply put, it is a strategic investment in the sustainability and future growth of your company and industry combined.

On the flip side, here is what registered apprenticeship is not.  It is not a “union” program – it’s a training program.  Any business, organization, or association can sponsor one.  It is not necessarily expensive.  Doing nothing and depending on others to provide a skilled workforce, who oftentimes fail miserably, is far more costly in workers compensation costs (because we all know that unskilled workers = unsafe working conditions), OSHA violations, recruiting costs due to high turnover, and lower productivity, just to name a few.  It is definitely not a government run program.  It is not obsolete.  It is not for the high school losers who dropped out.

Let’s take a moment to discuss the union versus non-union tug-of-war, the elephant in the room, if you will.  Are labor unions known for having registered apprenticeship programs?  Yes.  If it weren’t for organized labor, apprenticeship wouldn’t exist in this country.  It had all but died out in the U.S. until unions reinvigorated it.  Keep in mind, though, that there is not one union-sponsored program in this country that is not in partnership with a large number of employers to jointly run that program.  Without those businesses, their apprenticeship programs would be defunct, and these same businesses, as an industry, dictate the skills they need their workforce to have, and it is the union’s responsibility to deliver them.  In most cases, the labor unions across this country, and every other country for that matter, have the apprenticeship thing down to a science.  If they can’t provide high quality labor for their contractors, then they’re out of business.  A very smart man once said, “Leadership drives destiny.”  I’m going to tweak this a bit to read, “Leadership and value drive destiny.” This is true whether you’re a union, a non-union association, a contractor, a politician, or a babysitter. Your future depends on your ability to remain valuable to employers, set an example for others to live up to, and be relevant and productive.

Are union apprenticeship programs better than non-union ones?  Well, that’s subject to debate, but there are plenty of excellent union programs, and there are excellent non-union ones as well.  It doesn’t matter which way you swing, you can’t use that oversized elephant as an excuse anymore for not taking advantage of the program.  Welcome to the registered apprenticeship system of the 21st century!  Where have you been?

So what about all of this profit, you’re wondering?  If there is so much financial and industrial value in registered apprenticeship, how come I’ve never heard about it before?  How come it’s not used more widely by employers?  The fact of the matter is that registered apprenticeship is known in a few circles as the best kept secret of workforce development.  Let me break it down for you in terms of bacon – Davis Bacon, to be precise.  This federal act gives the U.S. Department of Labor the authority to determine prevailing wage rates per occupation and location for any federally funded or assisted construction projects.  Moreover, many states, cities and municipalities have determined their own prevailing wage levels, but for the purposes of this explanation, we’ll stick with the federal rates.  This means that if you are a contractor or subcontractor doing work on a federal project, you must pay EVERYONE on that jobsite the wage that USDOL has set by occupation.  It doesn’t matter if you’re a helper, a journey worker, or a foreman, you must be paid at or above the prevailing wage – with one notable exception.  Registered apprentices can be paid less.  That’s right, you heard me.  Whichever step an apprentice sits on the progressive pay scale, which is determined by their program sponsor’s Standards of Apprenticeship, is the amount they can legally be paid on a federal job. 

 

For instance, you have a first year carpenter apprentice, and we’ll call him Danny.  (Bear with me here.)  Danny is in his first year in the apprenticeship program, so he is on the lowest step, which is 55% of the predetermined journey worker hourly rate.  He receives consistent on-the-job training by an experienced journey worker and several hours of classroom training each week as well, with evaluations to test his expansion of knowledge.   As he gains more skills and becomes more productive, Danny will advance up the pay scale until he reaches the end of his apprenticeship, where he will then be making that journey worker wage. 

Working on the same job but for a different contractor is Buddy, who was just hired off the street and has no experience or training whatsoever.  Buddy is not a registered apprentice, so if you put him on a federal job, you’ll have to pay him the prevailing wage of $19.92/hour, because you have to pay everyone working as a carpenter, no matter what the experience level, that rate.  Yet Danny, being a registered apprentice, will be paid 55% of that wage initially.  Let’s look at the long term outcome, with fringes being equal, in a very simplified format.

 

Status

Prevailing Wage

Hourly Rate (1st Yr)

Annual Pay, 1st Year (2,000 hours)

Pay Over 4 Years*

Savings Over Four Years

Savings for 10 Apprentices, 4 Years

Savings for 50 Apprentices, 4 Years

Danny

R.A.

$19.92

$10.96

$21,920

$115,540

$43,820

$438, 200

$2,191,000

Buddy

n/a

$19.92

$19.92

$39,840

$159,360

n/a

n/a

n/a

*The average length of a carpenter registered apprenticeship program.

But wait!  There’s more!  Some states, such as mine, have tax credits for registered apprenticeship program sponsors.  Ours happens to be $1,000 per apprentice per year.  Your revenue increases even more.  For one apprentice over a four year period, add $4,000.   For ten apprentices over four years, add $40,000.  For fifty, add $200,000. 

Money talks, doesn’t it?  You’re actually banking hundreds of thousands of dollars on Danny and his counterparts, who are receiving rigorous training in four years time, and becoming highly skilled journey workers that gain nationally recognized credentials.  The figures don’t even take into account the higher productivity that will be gained as a result of Danny and his fellow apprentices!  Compare that to Buddy.  He didn’t receive any structured training, performed sub-standard work, then was hurt on the job about ten months after he was hired due to his ineptitude.  He was replaced by more inexperienced, low skilled workers, doing minimum wage work for almost $20 per hour.  They produced less and were far less knowledgeable. Danny, on the other hand, eventually became their supervisor, and foreman a few years after that.  When the job came to an end, Buddy’s compadres went on unemployment because they weren’t skilled enough to find more work in private sector projects.  That unemployment insurance came out of your pocket, along with Buddy’s workers comp claims (assuming, of course, that you’re not misclassifying your employees as independent contractors – but that’s another blog for another day).

Meanwhile Danny, and the other forty-nine apprentices that graduated from the apprenticeship program about the same time he did, found work right away.  The next guy that hired them was thrilled to get such highly skilled workers, and paid them handsomely for those skills, which gave them significant income to spend in the community.  There is the economic development angle that deserves recognition as well.  From the day they started the apprenticeship program, they were paying local, state and federal taxes.  Between them, during their four year apprenticeships combined, they paid an estimated $200,000 in taxes that were reinvested into their community, adding to the stability of the local economy.  From a government perspective, the return on investment is enormous.  For every dollar spent by the federal government to support registered apprenticeship, $50 in tax revenue is generated, not to mention $100 in private sector investments.  There is no other program like it with such a positive financial impact.  Not a single one.

Registered apprenticeship has come a long way.  It has been modernized to be more flexible while still maintaining the high standards that are demanded so that this country can compete in the global marketplace.  It is industry and business driven, provides a structured and highly beneficial training model, many financial incentives, up-skills your workers to be what YOU need them to be, and produces a steady stream of experienced journey workers to replace your aging workforce.  Sponsoring a registered apprenticeship program is an investment for the future, not an expense, in your business and community.  I dare you to sit there and expect another entity to provide a labor pool that you can pay low wages for high skills.  Skilled labor is already hard to come by.   Do you really think the labor market will miraculously improve without any effort on your part?  It ain’t gonna happen, my friend, but you can watch your business die while you’re waiting, or stand by while INS raids your worksite and carts off 50% of your undocumented workers.

So, the question before you is this:  What’s your excuse for not having one?  




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Modified On : November 14, 2009
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