The Poverty Rate: Income and Consumption Estimates

Each September, the U.S. Census Bureau releases its annual estimates of the U.S. poverty rate, and even when the news isn't worse, it's hasn't been good for a long time. The essential problem, as shown in the figure below, is not so much that the poverty rate bumped up during the Great Recession, bur rather that the official poverty rates has been stuck at about the same level of about 13-15% since the early 1980s.

This pattern would seem to require endorsing some combination of the following dispiriting views: either government anti-poverty policies are ineffective in reducing poverty, or any effectiveness of anti-poverty programs in reducing poverty is being counterbalanced by other economic or demographic factors that are creating an offsetting rise in poverty.

However, in a paper published in the Fall 2012 issue of the Brookings Papers on Economic Activity, Bruce D. Meyer and James X. Sullivan present some alternative interpretations and more cheerful conclusions in "Winning the War: Poverty from the Great  Society to the Great Recession." They conclude: "Despite repeated claims of a failed war on poverty, our results show that  the combination of targeted economic policies and policies that support  growth has had a significant impact on poverty. ... Noticeable improvements have been made in the last decade; although not as big as the improvements in some earlier decades, they are comparable to or better than the progress made in the 1980s. We may not yet have won the war on poverty, but we are certainly winning."

To understand how Meyer and Sullivan get from a flat-looking official poverty rate to an optimistic conclusion, you need to understand how the official poverty rate is measured. There is an official poverty level of income, which is adjusted for the number of people in a household, and anyone who lives in a household with less income is officially in poverty. The Census Bureau Report explains: "The official poverty definition uses money income before taxes and tax credits and excludes capital gains and noncash benefits (such as Supplemental Nutrition Assistance Program benefits and housing assistance). The thresholds
do not vary geographically. ... The official poverty thresholds are updated annually for inflation using
the Consumer Price Index (CPI-U)."

Meyer and Sullivan offer a number of different ways of adjusting these official poverty measures. For example, many low-income people receive support through the Earned Income Tax Credit, which isn't counted in the official poverty line, as well as getting support from food stamps, Medicaid, and other programs. Economists have also long argued that the Consumer Price Index overstates the true rise in the standard of living (for example, by not adequately taking new goods and inventions into account), and so by increasing the poverty line each year using the CPI inflation rate, the poverty line actually is creeping a little higher in terms of actual standard of living each year. This effect is quite small in any single year, but over the last half-century, it adds up.

Here's one of their illustrative calculations. The official poverty line is in blue. They then calculated income in a way that included taxes and the value of noncash benefits. They set up the calculation so that the two measures would have the same poverty rate in 1980, and then adjusted the poverty rate over time using the inflation rate. But when after-tax income is used in the calculation, the poverty rate falls more sharply over time, including during the last 30 years.

But perhaps their most striking result uses data on consumption, rather than data on income, to calculate the change in poverty rates over time. Consumption data comes from a different national survey than does income data (the Current Expenditure Survey rather than the Current Population Survey). Meyer and Sullivan point out that at the bottom of the income distribution, the answers about income on the Current Population Survey clearly understate the amount of income received. For example, only about half of welfare payments seem to be reported in the Current Population Survey. The proportion of economic activity that goes unreported to the tax authorities--and to the government survey--is probably higher at the bottom of the income distribution, too. In addition, when we talk about poverty what we are really worried about is more accurately captured by consumption rather than by income.

Meyer and Sullivan used consumption data, and again they set up the calculation  so that the poverty rate for consumption data is the same as the poverty rate for income data as of 1980. Again, the blue line shows trhe official poverty rate. The red line shows the poverty rate with a broader definition of income, adjusted for after-tax income. The green line shows the change in the poverty rate if consumption is used to measure poverty. By this measure, the poverty rate almost reaches zero percent in 2007, before the Great Recession.

Thus, they write: "The results in this paper contradict the claim that poverty has shown little  improvement over time and that antipoverty efforts have been ineffective.  We show that moving from traditional income-based measures of poverty to  a consumption-based measure, which is arguably superior on both theoretical and practical grounds—and, crucially, accounting for bias in the cost-of-living adjustment—leads to the conclusion that the poverty rate declined by 26.4 percentage points between 1960 and 2010, with 8.5 percentage points  of that decline occurring since 1980."

Just to be clear, the notion that the consumption-based poverty rate nearly reached zero percent does not mean that the war on poverty is won. After all, the poverty rate was originally set back in the early 1960s, and although the poverty line has been adjusted upward by the rate of inflation over time, it has not been adjusted for the amount of economic growth that has occurred. All poverty lines are set in the context of the society's overall level of income: thus, a very low-income country the poverty rate per person might be set at $1.25/day or $2/day, while in the United States, the  poverty rate for a family of 3 is around $16-$17 per person per day. One can argue that because the U.S. economy has grown dramatically in the half-century since the poverty level was set, the poverty line should be higher. But still, it's worth knowing that the U.S. has made progress in terms of the existing poverty line--when using more appropriate standards of well-being like consumption or broader definitions of income,

The Long-Term Budget Deficit Outlook

My go-to source for budget deficit projections is the Congressional Budget Office, which has just released "The 2013 Long-Run Budget Outlook." Here's the long-run overview in one diagram, showing federal debt held by the public a a share of GDP during the history of the United States--and projected into the future.

The figure illustrates a few overall patterns worth remembering. First, through most of U.S. history, spikes in the ratio of federal debt/GDP were related to wars: the Revolutionary War, Civil War, World War I, and World War II. Before the last few years, there were two other bumps in the debt/GDP ratio. One was the Great Depression. The other was the deficits of the 1980s. Second, the run-up in federal debt during the Great Depression and its aftermath has been quite steep, and the level of debt/GDP ratio we have reached has been exceeded in U.S. history only during World War II.

Of course, these facts do not make a case that the deficits of the last few years were improper public policy; indeed, given the depth of the Great Recession, it seems to me that large federal deficits for a few years were an appropriate response (although I have my disagreements with the specific spending and tax choices that were made). But the recession ended four years ago in June 2009. The pattern historical data, and the projections, do suggest that the federal debt is on a trajectory that makes it a legitimate reason for concern.

At several places, the CBO report rehearses the four main arguments for why a rising debt/GDP ratio can have negative effects. First, when the government borrows heavily, it can mean less financial capital available for private investment. Second, heavily government borrowing leads to high interest payments, which put pressure on the rest of the budget. Third, running high deficits now reduces the flexibility of the government to use high budget deficits in the future. (I sometime say: "The federal government can afford the big budget deficits associated with one Great Recession, but I'm not sure it can afford to pay for a second one.) Fourth, if the borrowing becomes very large indeed, there is a heightened risk of a financial runs and crisis.

The CBO report is full of details about the rationale behind its underlying "baseline" projections for all the different categories of federal spending and taxes. The main difficulty with the "baseline" projections (which are the ones shown above) is that they are based on the assumption that everything in current law will happen. However, Congress has become astute at gaming these projections, by inserting deficit cuts that are scheduled to take place in the future like cuts in the Medicare program to physician payment, and thus make the baseline debt projections appear lower, but then these cuts don't actually take place when the time comes. Thus, the CBO also looks at an alternative fiscal scenario that seems to me more realistic. This  "extended alternative fiscal scenario" assumes "that the automatic reductions in spending required by the Budget Control Act for 2014 and later will not occur (although the original caps on discretionary appropriations in that law are assumed to remain in place); that lawmakers will act to prevent Medicare’s payment rates for physicians from declining; that after 2023, lawmakers will not allow various restraints on the growth of Medicare costs and health insurance subsidies to exert their full effect; and that after 2023, federal spending for programs other than Social Security and the major health care programs will rise to its average percentage of GDP during the past two decades, rather than fall significantly below that level, as it does in the extended baseline."

In this scenario, "according to CBO’s central estimates, debt under the extended alternative fiscal scenario
would reach 190 percent of GDP in 2038—compared with 108 percent of GDP under the extended baseline ..."  These estimates are based on a model that reflects how the higher deficits will slow down the economy. According to the CBO central estimates: "when the deficit goes up by $1, private saving rises by 43 cents (so national saving falls by 57 cents), and foreign capital inflows rise by 24 cents, ultimately leaving a decline of 33 cents in investment ..."

The U.S. budget deficits are not some Sword of Damocles, hanging by a thread over the U.S. economy. Instead, they more resemble water erosion digging away at the base of a riverbank and making the land above unstable, or the process of aging and metal fatigue that eventually makes a bridge unsafe. The costs of sustained excessive government borrowing sneak up over time.

The Parenting Gap for Pre-Preschool

For a number of American children, a preschool program like Head Start is too late and too little. It's too late because it doesn't start until age 3 or 4, and for a number of at-risk groups substantial cognitive gaps are already apparent at that age. It's too little because whatever the merits of Head Start (and I've expressed some skepticism about the program here and here), it's a program that only has the children for a few hours a day. It's time to tackle a more controversial and difficult reality that is blocking equality of opportunity for many American children: the low quality of the parenting they receive. Richard V. Reeves, Isabel Sawhill and Kimberley Howard open up this subject in their essay "The Parenting Gap," which appears in the Fall 2013 issue of Democracy. (A background paper with some statistics and numerical calculations by Reeves and Howard is available here.)

Reeves, Sawhill, and Howard discuss some of the evidence that parents with lower levels of income or education provide a lower quality of parenting in terms of time and enrichment For example: 

"High-income parents talk with their school-aged children for three hours more per week than low-income parents, according to research by Meredith Phillips of UCLA.They also provide around four-and-a-half extra hours per week of time in novel or stimulating places, such as parks or churches, for their infants and toddlers. Less-advantaged parents are struggling to make a living and often lack a partner to help them build better lives. Less money typically means more stress, tougher neighborhoods, and fewer choices. This is not to say that there has been a deterioration in parental investment in poorer families. In fact, parents without a high-school diploma spent more than twice as much time each day with their children in the 2000s than they did in the mid-1970s, according to data from the American Heritage Time Use Study, marshaled by Harvard’s Robert Putnam. But parents with at least a bachelor’s degree increased their investment of time more than fourfold over the same period, opening up a gap in time spent with kids, especially in the preschool years. The quality of time matters as much as the quantity of time, of course. In a famous study from the mid-1990s, Betty Hart and Todd R. Risley from the University of Kansas found large gaps in the amount of conversation by social and economic background. Children in families on welfare heard about 600 words per hour, working-class children heard 1,200 words, while children from professional families heard 2,100 words. By the age of three, Hart and Risley estimated, a poor child would have heard 30 million fewer words at home than one from a professional family. .... Our analysis suggests that the biggest gaps are not between the helicopter parents at the top and ordinary families in the middle, but between the middle and the bottom.  "

The effects of different qualities of parenting are apparent early in life.

"Gaps in cognitive ability by income background open up early in life, according to research by Tamara Halle and her colleagues at Child Trends, a non-profit research center focused on children and youth. Children in families with incomes lower than 200 percent of the federal poverty line score, on average, one-fifth of a standard deviation below higher-income children on the standard Bayley Cognitive Assessment at nine months—but more than half a standard deviation below higher-income peers at two years. This is the social science equivalent of the difference between a gully and a valley. These early months are critical for developing skills in language and reasoning—and, of course, months in which parents play the most important role. Closing ability gaps in the first two years of life—pre-pre-K, if you like—means, by definition, closing the parenting gap. ... Research to date suggests that parenting accounts for around one-third of the gaps in development ..."

 As the authors point out, public policy about parenting is an ideological hot potato. Conservatives tend to be comfortable with judging some parenting as low quality, but uncomfortable with enacting any public policy to change the situation. Liberals are in theory more comfortable enacting policies to help low-income children, but are often so deeply uncomfortable with making any judgments about the quality of parenting that they prefer to advocate policies like government support of preschool, or assistance with income and jobs for those in need. The authors are also brutally honest that the evidence for the effectiveness of public policy in this area is not strong: "Let us be blunt: The evidence, in fact, is that many attempts  to use tax dollars to improve parenting have failed to show significant effects. In particular, it is hard to find evaluations providing strong evidence that outcomes for the children are permanently influenced—surely the ultimate objective."

However, they also point out that other countries like Netherlands and the United Kingdom have much more active programs of home visitation for parents of newborns. In the U.S., the Affordable Care Act passed in 2010 allocates $1.5 billion over five years for increased home visitation programs. Studies by the Department of Human Services have identified several home visitation programs that had some effect at least one year after enrollment. A private organization called the Nurse Family Partnership has been testing and expanding approached to home visitation for several decades. Under these kinds of programs, new parents and parents of pre-school children might receive biweekly home visits invitations to regular meeting groups of new parents, and perhaps also some access to educational books and toys.

Again, the evidence about long-term efficacy of such programs, especially at a large scale, is still in a nascent stage. But these authors offer a radical thought: It may well be true that the government should reallocate a substantial share of the money that it currently spends on preschool programs and move it toward parental visit programs for families with very young children. Reeves, Sawhill, and Howard write: "Parents influence their child’s fortunes right from their first breath, while pre-K is aimed at 4-year-olds. In child-development terms, four years is an eon. By the time pre-K kicks in, big differentials in test scores are already apparent. ... In the last five years, the federal government has allocated $37.5 billion to Head Start—25 times as much as promised to home-visiting programs over the next five. This may not be the optimum ratio in terms of promoting greater mobility and opportunity. ..."

Shifting Patterns of Global Trade

The World Trade Report 2013 from the World Trade Organization has the theme: "Factors shaping
the future of world trade," which in a number of ways turns out to be factors that will shape the future of the world economy as a whole. Here are some of the facts and themes that jumped out at me.

1) International trade plays a growing role in the world economy. Here's a figure showing the ratio of world exports of goods and services to world GDP. Trade rose sharply from less than one-fifth of world GDP in the mid-1980s to nearly one-third of world GDP in 2012--and world trade seems to have largely recovered from the dip during the Great Recession.

2) The rise is trade is primarily a rise in manufacturing trade. At least so far, services trade is growing in synch with overall trade, but most trade still involves manufacturing. The first figure shows the growth of manufacturing trade relative to agriculture and fuel/minerals.

Perhaps at some point in the future, trade in services in the global economy will grow more rapidly than goods. But at least so far, this isn't true. In particular, the graph on the right shows the share of services in overall trade of goods and services, and it's not budging much.

3) Global manufacturing trade is mostly carried out by a small number of transnational corporations that often make direct investment in other countries as part of building global supply chains in which products are increasing produced in multiple stages across countries.  

"With some notable exceptions, such as the major oil companies, firms that engaged in FDI [foreign direct investment]– that is, the ownership and management of assets in more than one country for the purposes of production of goods and services – were relative rarities before 1945. In the post-1945 period, however, FDI has surged, growing more rapidly than either production or international trade ... By 2009, it was estimated that there were 82,000 multinationals in operation, controlling more than 810,000 subsidiaries
worldwide. Upwards of two-thirds of world trade now takes place within multinational companies or their
suppliers – underlining the growing importance of global supply chains ... Manufacturing is increasingly managed through complex global supply chains – effectively world factories – which locate various stages of the production process in the world’s most cost-efficient locations ..."

Here's a table showing the share of exports from various countries that are accounted for by the largest exporters. For example, in the US economy, the top 1% of exporters account for 80% of all exports. In developing countries, a common pattern is that the top five exporting firms do about about 80% of the country's exports.

In a world of global supply chains,exports from one country embody and include imports from other countries. Thus, it is becoming increasingly important to measure global trade based on the value-added within each country, not on the total value of gross imports and gross

4) The broad currents of world trade have shifted. Three decades ago, the majority of world trade was North-North--that is, it was trade between high-income countries of the world. Now, only about one-third of world trade is North-North, and the share that is North-South and South-South is expanding rapidly.

5) For decades after the late 1940s, the political focus of efforts to increase world trade looked at how to reduce tariffs. But that effort has been so successful that the more important trade barriers today are nontariff barriers, and how to reduce costs of  transportation. The report cites evidence that "transportation costs represent a greater barrier to trade than policy-induced obstacles, such as tariffs. At a price of US$ 100 per barrel of oil, they estimate transportation costs to be equivalent to an average tariff of 9 per cent, nearly double the WTO’s estimate of the average applied tariff." Transportation and communications infrastructure are likely to be especially important in building ties from the less-developed economies of the world to the global economy. For example, the report cites evidence that the continent of Africa has fewer kilometers of road now than it did several decades ago.

6) Many countries have seen increasing remittances from migrants. "Officially recorded migrant remittances to developing countries, estimated at US$ 406 billion in 2012, are now more than three times the size of ODA [official development assistance--aka, "foreign aid"]. Compared with other private capital flows, remittances have showed remarkable resilience during the recent financial crisis." Here's list of some of the countries where the level of remittances is equal to 20% or more of GDP.

7) Comparative advantage has become more fluid. Classroom examples of the drivers of international trade tend to dwell on how identifiable products like cars and computers and oil and wheat are traded between countries, and how the key driver of trade is that it is relatively cheaper (in an opportunity cost sense) to produce certain goods in one country than in another. But with the changes in world trade, these sorts of examples do a less good job of representing what trade actually happens and what determines that trade. In a world economy where trade involves a supply chain of partially-completed intermediate goods, looking at examples of completed goods like cars and computers will miss some of the point. The locations of production will be determined by choices made by a relatively few large exporters about global production chains, and by their decisions about foreign direct investment. In turn, these decisions will be shaped by local investments in transportation and communications infrastructure, and in the other institutional, legal, and human capital support that a local economy can give to an international producer. These sorts of advantages are less related to wages, productivity, and natural resources in a static sense than in the common textbook examples. Instead, this is a sort of flexible comparative advantage that will often shift and change.

Geographic Practice and Cost Variations in Medicare

Medicare is same insurance program across the country. Everyone across the country pays the same taxes to support Medicare and the elderly across the country pay the same premiums. But Medicare spending per enrollee varies considerably across states. Here's a table from the Kaiser Family Foundation showing spending per Medicare enrollee by state of residence, using data from the Center for Medicare and Medicaid Services. Some states like Florida, Illinois, Louisiana, and Texas have average spending per Medicare enrollee more than 10% above the national average; a number of others, like Hawaii, Montana, and Idaho have spending more than 10% below the national average.

This well-known leads to some obvious questions: Can these differences in spending can be accounted for by differences in age, income, health status, or variations in the cost of health care across regions? Joseph P. Newhouse, Alan M. Garber, Robin P. Graham, Margaret A. McCoy, Michelle Mancher, and Ashna Kibria discuss the evidence on this question in "Variation in Health Care Spending: Target Decision Making, Not Geography," published by the Institute of Medicine (a part of the National Academy of Sciences) in July. The report can be read for free on-line, and the prepublication galleys can be downloaded here.

They look at Medicare data by "hospital referral region," or HRR, which can be thought of the geographic region in which most people are referred to a certain group of hospitals.  They report: "Recent reports
by the Dartmouth Institute for Health Policy and Clinical Practice and the Medicare Payment
Advisory Commission (MedPAC) estimate that unadjusted Medicare spending per beneficiary is
50-55 percent higher in HRRs in the highest quintile of spending relative to those in the lowest
quintile. Medicare service use (adjusted for demographics and beneficiary health) is approximately 30 percent greater in the highest quintile compared with the lowest ..."

The report also looks at variation across hospital referral areas (HRRs) after adjusting for patient demographics, health status, and also for the costs of health care inputs in that area. After these adjustments, here is a bar graph ranking the HRRs from lowest montly cost (Rochester, NY) to highest (Miami, Florida). They write: "Areas to the far left in Figure 2-5a have utilization roughly $50 to $150 below the adjusted national mean, whereas those on the far right have utilization roughly $100 to $200 above the adjusted national mean."

A close look at the underlying spending patterns reveals that 73% of this variation across the geographic areas is due to a single category of spending: specifically, spending for "post-acute care"--that is, the follow-up care after hospitalization--and most of the rest of the variation is due to variation in acute (inpatient) care.
These findings for Medicare are representative of a large literature showing that patterns of U.S. health care for all age groups vary considerably across cities and states. For example, the decision between heart surgery and treatment with blood pressure medications, or the proportion of mothers who have a C-section, or the choices about all kinds of minor surgery vary considerably across locations. There is often with no evidence that the area making the more expensive choice has better health outcomes, which suggests that if health providers in some areas could learn from those in other areas--or if health care reimbursement plans can be jiggered to reward certain choices and discourage others--overall health care costs could be reduced with little or no adverse effect on health.

But not much is known along these lines so far. As the Institute of Medicine report notes, "By creating the Center for Medicare and Medicaid Innovation, the ACA [Affordable Care Act] generated a thousand pilot demonstrations of new payment models. It is too early to know which of these models will prove to control health care costs and improve quality." Also, the author suggest: "Additionally, Congress should give CMS [Centers for Medicare and Medicaid Services] the flexibility to experiment with the mix of payment mechanisms, rates, and performance metrics that will align provider incentives with high-value care." Given that rising health care costs and the geographic variations in health care use have both been well-known for several decades, the fact that experimentation with different payment methods "to align provider incentive with high-value care" is really just getting underway seems to me rather disheartening.

Foreign Exchange Markets: Now $5.3 Trillion Per Day

Once every three years, the Bank of International Settlements publishes the results of a survey about the size of foreign exchange markets. The most recent "Triennial Central Bank Survey," subtitled "Foreign exchange 
turnover in April 2013: preliminary global results," has some familiar news.  

Foreign exchange markets are extraordinarily large. "Trading in foreign exchange markets averaged $5.3 trillion per day in April 2013. This is up from  $4.0 trillion in April 2010 and $3.3 trillion in April 2007." The growth rate of the foreign exchange market in recent years has been about 35% annually.

What accounts for this very large total? In round numbers, world GDP is about $70 trillion, and world exports are about 30% of that amount--call it $21 trillion per year. Clearly, foreign exchange markets are not mainly driven by the direct needs of exchanging currency for exports and imports. Flows of foreign direct investment around the world were about $1.3 trillion in 2012. Total global holdings of portfolio investment were about $39 trillion in 2011. Thus, it doesn't seem that the need to exchange currency for either foreign direct investment or for portfolio investment can explain what's happening in foreign exchange markets, either. The remaining possible explanation is that the enormous size of exchange rate market arises primarily out of short-term decisions about hedging risk and seeking return in a global economy, where many financial and nonfinancial firms are continually adjusting their exposure to the possibilities of future movements in exchange rates.

Another main message of the BIS report concerns the role of the U.S. dollar in foreign exchange markets. It continues to be true, as it has been for decades, that many foreign exchange trades between currencies A and B involve first turning a currency into U.S. dollars, and then switching to the other currency. "The US dollar remained the dominant vehicle currency; it was on one side of 87% of all trades in April 2013. The euro was the second most traded currency, but its share fell to 33% in April 2013 from 39% in April 2010. The turnover of the Japanese yen increased significantly between the 2010 and 2013  surveys. So too did that of several emerging market currencies, and the Mexican peso and Chinese  renminbi entered the list of the top 10 most traded currencies."

I'll attach a list of currencies, in the order they are traded in foreign exchange markets. Of course, the report has more details about changes since the first survey in 1998, as well as the specific financial instruments used.

Apprenticeships: Connecting Young Adults to Jobs

The future US workforce needs a wide range of skills, only some of which are likely to be delivered through a conventional two-year or four-year college degree. Natalia Aivazova looks at "Role of Apprenticeships 
in Combating Youth  Unemployment in Europe and the United States," written as Policy Brief PB13-20 (August 2013) for the Peterson Institute for International Economics.

As a starting point, here's a graph showing what share of students age 15-19 are in apprenticeship programs in EU countries. In Austria and Denmark, it's more than one-quarter; in Germany, it's more than one-third. And it's worth emphasizing that this measure of apprenticeships tends to understate what overall share of the population had an apprenticeship at some point in time; for example, a 15 year-old may not have an apprenticeship now, but might have one in the next year or two.

This EU data doesn't include estimates for the United States, but a recent OECD report called "A Skills beyond School Review of the United States," by Małgorzata Kuczera and Simon Field, offers some information on the US situation.

"Registered apprenticeship programs are overseen by the Office of Apprenticeship in the US. There is no direct federal funding for apprenticeship programs, but the Office of Apprenticeship supports programs that seek federal recognition through regulations, technical assistance, maintenance of a national database, issuance of certificates, and promotional activities. Registered Apprenticeship programs are provided by employers, employer associations, joint labor/management organizations, government agencies and the military. Each industry establishes its own minimum age requirement (at least 16 with a typical minimum of 18). Most programs require applicants to have a high school diploma or GED certificate. Some require
completion of subjects such as algebra, or technical topics such as blueprint reading. As of 2008, about 27 000 registered apprenticeship providers were training about 480 000 apprentices — about 0.3% of the total work force. While there are registered apprenticeship programs for over 1 000 occupations, apprenticeship tends to be concentrated in fields that require little or no postsecondary education. But in response to calls from the Government Accountability Office (GAO) the U.S. Department of Labor has made efforts to expand registered apprenticeships in sectors with good employment prospects, and requiring mid and
high level skills such as health care and IT." 

For some sense of the promise of internships, look at unemployment rates for younger people in the 15-24 across a number of countries. Of course, the lack of apprenticeships isn't the only reason, nor even close to the main reason, that youth unemployment is above 50% in Spain and Greece. But it's nonetheless intriguing that the countries with the lowest youth unemployment rates tend to be those with the highest share of apprenticeships.

Most Americans seem to have a constricted view of apprenticeships: sure, they are fine for a few students that are entering the construction trades and not likely to flourish in a four-year college. But perspective is much too narrow. Apprenticeships can cover a wide range of possible jobs. Apprenticeships can build both specific job-related skills and also soft skills like showing up on time, ready to work. They can also help create connections between young people and the workforce at a time in history when the older connections--like following in the same career as your parents, or the friends of your parents--is clearly not working for many young people. And yes, for the substantial portion of U.S. students who aren't likely to flourish if they tried to follow the path of extending their formal education for four more years after high school, apprenticeships offer another path to skilled jobs with decent pay and prospects for career advancement. Here's some background from Aivazova on the situation in Germany and Austria (citations omitted):

"Apprentices typically spend one or two days a week in a vocational school where they are taught based on a federally agreed program of both general and occupation-specific instruction. The rest of the workweek is spent on the job, in a training program designed by the specific firm  in collaboration with education authorities, sector employers,  and employee organizations. Apprenticeships last two to four  years, depending on the profession, and are followed by a final  examination. In Germany, 59 percent of apprentices are then employed by the firm that trained them. Apprenticeships are  offered in over 300 occupations, of which 60 percent are in  the service sector and 40 percent are in industrial production ...

"In 2006, the  top two apprentice occupations in Germany were automotive mechanics and retail sales. In Austria, the most popular  apprentice occupations were retail trade, office work, and  heavy goods and automotive maintenance.  Retail trade and manufacturing are more likely to employ  youth, and apprentices in Austria and Germany are smartly  choosing to enter those sectors. Little wonder then that  German and Austrian youth, already professionally trained in  the sectors most likely to employ them, have an easier time finding work. ...

"To implement successful apprenticeship programs, governments should pass legislation to create nationally recognized  apprenticeship-completion certifi cates as well as regulate apprenticeship content to ensure quality and transferability of skills.  Apprentices should be given a stipend (typically one-third to  one-half of the wage of a regular employee in that sector) and  other benefits such as health insurance. ... Critical to  the success of apprenticeships is participation of labor unions and private businesses. To attract firms they must be given considerable autonomy in developing the on-the-job training components of apprenticeships. If necessary, firms can also be offered tax incentives and training subsidies."

For previous posts on apprenticeships, see "Taking Apprenticeships Seriously" (February 18, 2013) and "Apprenticeships for the US Economy" (October 18, 2011).