The cost-benefit methodology for this study was originally developed by Prism Economics and Analysis, and subsequently modified by R.A. Malatest & Associates Ltd. to more fully capture a range of benefits that accrue to employers who participate in apprenticeship training. Highlighted in this section are the major elements that comprise the cost-benefit model adopted for this study.

2.1 Overview of the Model

The model is based on a standard cost-benefit analysis for a single firm that hires apprentices. Net benefits (or costs) are calculated per apprentice, per year of pprenticeship.

The benefit of apprentices is quite simply their value added; that is, the market price paid for their services versus the cost of these services. Included is the complete value added of apprentices as well as the full costs associated with an apprenticeship program.

2.2 Cost Components

2.2.1 Wages and Benefits
These are the fully loaded wage rates which include base pay and non-compulsory and compulsory (e.g., Workers Compensation, Employment Insurance, Canada Pension Plan) benefits.

2.2.2 Opportunity Costs
Opportunity costs are related to the resources that apprentices draw from the organization as part of their training process. These include journeyperson time and wastage. In each situation, an attempt was made to price these factors and to determine the scale of their usage by apprentices. In the case of journeyperson time and wastage, a per apprentice, per year cost was estimated. It should be noted that lost productivity of major assets (i.e., tools and equipment valued at more than $50,000 that are pulled out of production to train apprentices) is another opportunity cost associated with apprenticeship training. However, as only a small percentage of surveyed employers (12.5%) indicated this as a cost, it was excluded from the analysis.¹¹

2.2.3 Disbursements
Disbursements are primarily related to employer shares of costs to support the ongoing training and development of apprentices. These include costs associated with registration fees and continuing education training.

2.2.4 Administration
An estimate of administrative costs associated with hiring and training apprentices was made. These costs were allocated on a per apprentice basis.

2.3 Benefit Components

2.3.1 Revenue Generated by Apprentice
In most cases, apprentice labour is priced to market either in terms of direct charge-out rates or mark-ups on labour. Given data on the total annual chargeable hours of work, an estimate was made of the average revenue associated with each apprentice.

2.3.2 Tax Credits
Where applicable, per apprentice tax credits were included in the model. For example, Ontario employers in a qualifying trade are eligible for the Apprenticeship Training Tax Credit. The details of the tax credit are discussed in Section 3.1.

2.4 Reporting Framework

Results are reported by trade and broken out by year of apprenticeship. This analysis demonstrates the time profile for costs and benefits. The results of the model are presented in a simplified table format that clearly shows the net benefit (or cost) by year of apprenticeship. There is no attempt to discount these through a present value type of analysis.

The reported net benefits (or costs) are best interpreted as partial gross benefits (or costs) per apprentice per year. Even though the model may produce a positive benefit in a particular year, each firm will have its own standards on the necessary level of benefit required to participate in an apprenticeship program (the so-called hurdle rate). These hurdle rates will depend on the broader cost structure of the organization, particularly the cost of capital.

11. Source: Apprenticeship Survey (Q17a, n=433

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