Are apprenticeships the way out of this recession?

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2 Jul 2020

Becci Newton

Becci Newton, Deputy Director, Public Policy Research

Follow @beccinewton13

The government is right to be concerned about the impact of this recession on young people, and IES is mobilised along with others as part of the Youth Employment Group to ensure strategies are in place that help avoid the lifetime scarring that will result from lengthy inactivity at a young age. So far on the table are plans for an ‘opportunity guarantee’ encompassing work placements, support to get into work as well as for those who have jobs, and apprenticeships. This has shifted somewhat from the initial thinking and the emphasis on skills is welcome. I think we need to take a closer look at what the apprenticeship offer might mean and how far it can contribute to the right solution for now.

I hope it will go without saying that I fully support the offer of apprenticeships. Nonetheless, I think we need to recognise that apprenticeships are in employers’ gift and to be high quality, expansive experiences requires employers to invest time and supervisory resources in on-the-job training alongside releasing apprentices for their off-the-job training. Providing these high quality experiences could be challenging at a time when employers’ resources are constrained, and taking in new, less experienced staff at a time when they are considering redundancies within the workforce may not feel viable. These factors may make it a tough ask on many companies.

We also need to consider how the apprenticeship system has changed, with the push to Level 3 and beyond. There has been much criticism, including from me, of providing state funding for MBA apprenticeships although the provision of Higher and Degree apprenticeships has received much more support and provides a useful alternative to full-time higher education. A question however surrounds whether apprenticeship opportunities at Levels 3+ (should they exist) would be well matched to young people entering the labour market in the recession – and particularly those most at risk. Prior qualifications are a good guide to labour market vulnerability and those most at risk will need Level 2 provision in order to take the next step up.  

More broadly, there has been a longstanding government intention to achieve a step-change in the number of apprenticeships, which has failed miserably. Government already funds 95% of the costs of training for most apprentices – this is why Degree apprenticeships provide an attractive option for individuals compared to the costs of full-time higher education. However, from the employer perspective the training costs represent only one part of the costs of apprenticeships. They are more concerned with what they have to spend: alongside the supervisory and on-the-job training costs, employers have to meet the wage and overhead costs of the apprentices they recruit. Admittedly, given the national living wage rate does not apply to the under 25s, wage costs are relatively low reflecting national minimum wage rates, and there is the even lower apprenticeship national minimum wage (ANMW) rate for apprentices who are young and/or in the first 12 months of training. However, these lower-than-experienced-worker wage costs have not been sufficient to increase the provision of apprenticeships – so what more is government thinking of doing?

Options might include programme-led apprenticeships or hires through apprenticeship training agencies (ATAs) – though, given concerns over quality in the past, these options require careful planning. That said, according to some employers, ATAs operated very effectively in some sectors including the now growing pharma sector. Alternatively, perhaps government is considering subsidising the wage costs? These could equate to £124.50 per week for under 19s on the ANMW or up to £246.00 per week for someone under 25 assuming a minimum 30-hour weekly contract. To put that in context, the monthly rate of Universal Credit for single claimants aged under 25 is £342.72, though housing costs could be covered on top. Paying the wage costs for apprenticeships is therefore not a cheap option and a question remains over whether even with this funding it would provide sufficient incentive for employers to ramp up delivery?

An alternative that is more within the government’s control is high quality classroom-based training. If this can be made attractive, perhaps in a one-year format or modular accreditation, it could help deter young people from the labour market at a time when it is highly competitive and job quality will be low. However, while fully funded in respect of the training costs of a first full Level 3, young people still face living costs and there is no provision currently to cover these. If we can’t grow apprenticeships at sufficient pace – and we must also remember that they are not an option for everyone since they must be full-time (30+ hours per week), should we consider a maintenance grant to young people in FE to lock them in? And would the equivalent of the basic Universal Credit rate be sufficient incentive for young people?

Locking in for a year (or less) and improving skills could shield some of the most vulnerable from the lifetime negative impacts of the current recession. But young people do need incentives to do this, especially if they struggled in the education setting. It is only when trying to access the labour market that young people realise their skills are poorly matched. However, they are unlikely to understand their options to improve skills and connect to the labour market. So, there are two key things I believe young people need: active transition support to ensure they make the best choices for their next steps and then to ensure they take their next step – ideally into full or part-time learning or training. We also need models of learning and training that allow for ‘alternance’ between full and part-time modes so that young people can improve their qualifications and skill levels and move between education and the labour market seamlessly. Providing financial support to run alongside periods spent in full-time training will ensure young people can afford to improve their skills while they wait for the labour market to recover. Apprenticeships may be part of the solution, but they are not the complete package and we need much more on the table.

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Any views expressed are those of the author and not necessarily those of the Institute as a whole.