1.1 Background

Given the anticipated shortages of skilled trades workers, an understanding of the barriers to hiring and training apprentices is critical. The findings of a recent study commissioned by the Canadian Apprenticeship Forum – Forum canadien sur l’apprentissage (CAF-FCA) indicates that employers perceive the cost of apprenticeship as a major barrier to apprenticeship training.⁵ Costs not only include wages but also the time of the journeyperson who trains the apprentice. On the other hand, there may be significant benefits of apprenticeship training. If the apprentice stays within the organization and becomes a qualified journeyperson there may be advantages to the employer, such as increased productivity. However, there is a risk that a competitor may hire away a recently qualified journeyperson who was trained as an apprentice within the organization (i.e., a homegrown journeyperson). From the employer’s perspective, this poaching risk is a disincentive to investing in apprenticeship. These are some of the issues that are examined in this report.

Previous research in this area has focused mainly on the costs of apprenticeship training.⁶ In addition, the perceived cost of apprenticeship and the lack of research on the benefits of apprentices were catalysts for the current study, which examines both the costs and benefits of apprenticeship training across a range of service, construction and industrial trades. A similar research project conducted in the UK quantified the costs and benefits of apprenticeship training in five industries, including engineering, construction, retailing, business administration and hospitality.⁷ Employer costs included wage costs, supervisory costs and training costs while employer benefits were measured as the productive contribution of the apprentice and government funding provided for apprenticeship training.

A frequent finding of this and other studies is that, on average, for many employers who invest in apprenticeship, the costs exceed the benefits. This finding is counterintuitive. It would appear, therefore, that benefits which are not easily quantifiable have been omitted or discounted by a number of studies. Excluding these factors could underestimate the benefits derived from apprenticeship training. In addition, many studies use book costs rather than opportunity costs to estimate the cost of the journeyperson’s time that is spent training apprentices. For example, if the training takes place when the journeyperson’s time would not otherwise have been used productively (i.e., to generate revenue), then the opportunity cost is less than the book cost. In this case, using the book cost overestimates the cost to the employer of apprenticeship training. This study incorporates opportunity costs into the analysis and attempts to assess other qualitative benefits associated with apprenticeship training.

1.2 Objectives and Scope of Study

To gain a more comprehensive understanding of the cost of apprenticeship and the return on apprenticeship training investment to employers, CAF-FCA commissioned R.A. Malatest & Associates Ltd. and The Conference Board of Canada to assess the costs and benefits of apprenticeship training.⁸ The overall objectives of this research are:

• To determine the overall costs incurred by employers within the apprenticeship community in hiring and training apprentices;
• To determine which factors (e.g., employer size, region), if any, influence cost and the return on training investment; and
• To identify monetary and non-monetary benefits of apprenticeship training.

Data was collected through a national survey of employers across 15 trade areas, which was administered by R.A. Malatest & Associates Ltd. from September 2005 to February 2006. The survey instrument was initially developed by Prism Economics and Analysis and subsequently modified by R.A. Malatest & Associates Ltd. in consultation with CAF-FCA to ensure that it would capture the information required to conduct a detailed cost-benefit analysis. Using the data provided by employers, The Conference Board of Canada produced trade-specific cost-benefit estimates to determine the net benefit (or cost) of apprenticeship training.

To ensure that a range of skilled trades were represented in the study, the costs and benefits of apprenticeship training were assessed for the following 15 trade areas:

• Automotive Service Technician;
  
• Bricklayer;
  
• Carpenter;
  
• Construction Electrician;
  
• Cook;
  
• Heavy Duty Equipment Technician;
  
• Industrial Mechanic (Millwright);
  
• Insulator;
  
• Machinist;
  
• Mobile Crane Operator;
  
• Motor Vehicle Body Repairer;
  
• Refrigeration and Air Conditioning Mechanic;
  
• Sheet Metal Worker;
  
• Sprinkler System Installer; and
  
• Tool and Die Maker.

The Return on Apprenticeship Training Investment for Employers: A Pilot of 15 Trade Areas project was intended to collect information from a minimum of 300 employers across the 15 trade areas, or 20 employers per trade. This report summarizes the findings associated with the information provided by 433 employers who participated in the project. A description of the sample of employers is included in Appendix A. In addition, details regarding the survey administration process are discussed in Appendix B.

1.3 Research Considerations

This study estimated the costs and benefits of apprenticeship training to employers across 15 trade areas; however, it should be noted that it was not possible to capture all variations in each trade due to the small sample sizes. The results are based on averages across all employers and may not necessarily reflect the costs and benefits of apprenticeship training on an employer-by-employer basis.

Although the costs associated with apprenticeship training are generally quantifiable, the benefits are more difficult to measure. The questionnaire was designed to capture qualitative measures of the benefits derived from apprenticeship training; however, it should be noted that these are based on employers’ subjective assessments. In addition, while the national-level data can be viewed with considerable confidence given the participation of more than 400 employers, in some cases the trade-specific data should be interpreted with caution given the small, non-representative sample of respondents.

During the sample selection process, it was difficult to identify employers who hire apprentices in trades with a relatively small workforce. For example, the number of workers employed in the Mobile Crane Operator (11,245), Sprinkler System Installer (17,730), and Tool and Die Maker (17,025) trades is significantly lower than the combined average employment of 58,414 of the 12 remaining trades.⁹ As a result, the sample sizes for these trades are below the minimum target of 20 employers. Therefore, the reader should use caution in generalizing the cost-benefit results for these trades to all Canadian employers.

To provide context as to the challenge of identifying employers who hire apprentices, only 1,941 (or 16.8%) of the 11,550 employers contacted by R.A. Malatest & Associates Ltd. qualified for the study (i.e., they currently employed apprentices or had hired apprentices during the past two years). Approximately one in five qualifying employers completed the survey questionnaire.

Overall, the majority of employers indicated that completing the survey questionnaire was a challenge, not only because of the length of time required to complete the survey (one to two hours) but also the level of detail of the information requested. As a result, extensive follow-up with employers was necessary in order to verify the accuracy of the information provided. Given the limited availability of employers to complete the survey, several attempts were required to contact a single employer to clarify his/her responses.

1.4 Validation Roundtables

R.A. Malatest & Associates Ltd. and CAF-FCA facilitated a series of roundtables across Canada with economists and employers to determine if any significant costs and benefits of apprenticeship training had been excluded from the methodology and to validate the cost-benefit results.¹⁰ A roundtable was held with economists and four roundtables were held with employers representing the following trades: Automotive Service Technician; Construction Electrician; Industrial Mechanic (Millwright); and Refrigeration and Air Conditioning Mechanic. For the economist roundtable session, R.A. Malatest & Associates Ltd. and The Conference Board of Canada presented the methodological approach used in the study. For each of the employer roundtable sessions, R.A. Malatest & Associates Ltd. presented the trade-specific cost-benefit results. A discussion of the feedback received during the roundtable discussions is included in Section 3.3.

Information obtained through the survey research is presented in several sections. Detailed in Section 2 is a description of the cost-benefit model. Summarized in Section 3 are the detailed cost-benefit results for the 15 trade areas and the findings of the validation roundtables. Outlined in Section 4 is a discussion of the survey results and the conclusions are contained in Section 5 of the report.

5. CAF-FCA (2004), Accessing and Completing Apprenticeship Training in Canada: Perceptions of Barriers.
6. For example, see Roslyn Kunin & Associates, Inc. (2002), Assessment of Training Costs for Machinists, Auto Mechanics and Plumbers Engaged in Apprenticeship Training and R.J. Sparks Consulting Inc. and WGW Services Ltd. (2002), The Cost of Apprenticeship Borne by Employers: Machining and Tooling Trades – Ontario.
7. Institute for Employment Research (2003), Net Costs of Modern Apprenticeship Training to Employers.
8. Funding for this study was provided by the Government of Canada’s Sector Council Program.
   
9. Source: Statistics Canada, 2001 Census. It should be noted that the employment estimate for the Sprinkler System Installer trade includes Steamfitter/Pipefitter.
10. Roundtables were held in Halifax, Nova Scotia (automotive service technicians); Ottawa, Ontario (economists); Regina, Saskatchewan (construction electricians); Edmonton, Alberta (industrial mechanics (millwrights)); and Vancouver, British Columbia (refrigeration and air conditioning mechanics).

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