Apprenticeship policy in England: Increasing skills versus boosting young people’s job prospects
Hilary Steedman, 6 October 2012
As in every downturn, youth unemployment is a serious concern. This column looks at apprenticeship policy in England. It argues that England is a long way off the apprentice numbers of countries like Germany but with a clear strategy, some nudging, and flexibility, England could realistically aim for the prize that has so far eluded it – higher skills and high youth participation in the workforce.
Apprenticeships improve the employment prospects of young people by raising their skill levels (Ryan 2001). They provide craft, technician and associate professional skills that are valued by employers. And in England there are substantial wage returns to apprenticeships: an average premium of 18% for those at Level 3 (equivalent to A-level standard) compared with people whose highest qualification is Level 2; and a premium of 16% for those at Level 2 (equivalent to GCSE standard) compared with people whose highest qualification is Level 1 (McIntosh 2007).
As the issues of skills and youth unemployment have moved steadily up the policy agenda in Britain over the past 30 years, apprenticeships have been supported by all parties. Youth unemployment is currently at almost one million but it had started to rise in 2004, well ahead of the latest recession (Petrongolo and Van Reenen 2011).
Labour and Conservative governments have differed in the priority they have given to policy aims for apprenticeships. Labour has focused on increasing the numbers of young people in apprenticeships, whereas the Conservatives have focused more on using apprenticeships to generate higher skills. It has proved difficult to shape apprenticeship policy to achieve these two outcomes simultaneously.
With sufficient employer demand for apprentices, there should be no need to choose between these two highly desirable policy objectives. But successive governments have developed a dysfunctional funding and delivery model for apprenticeship.
This model has failed to provide the appropriate incentives to encourage employers to engage with apprenticeship. The limitations of the model have meant that no government in recent times has succeeded in raising the employer offer of apprentice places for young people at the higher skill levels routinely offered in other European countries. Demand for apprenticeships from employers may be held back by fears that young workers they have trained may be ‘poached’ by another firm that has not paid the training costs. In England, weak employer willingness to sponsor apprenticeships has been identified as a key challenge for policymakers promoting apprenticeships (Payne and Keep 2011).
The 1994 Conservative vision: Modern Apprenticeships
In 1994, the Conservative government revived and reinvented apprenticeship. The 1993 Competitiveness White Paper made clear that apprenticeship was to be focused on growth through investment in skills1. It introduced ‘Modern Apprenticeships’ as a major plank in this policy, developing skills comparable to those of other developed countries.
The 1993 White Paper cited skills levels – in particular in science and mathematics – in Germany, Scandinavia and Switzerland as benchmarks for the British skills drive. It can be assumed that this was the reason for setting the minimum qualification level for the Modern Apprenticeship at NVQ Level 3 and apprenticeship duration of three years.
The Labour government 1997-2010: Prioritising social inclusion over skills
When it came to power in 1997, the Labour government carried forward the model established by the Conservatives but found that the Level 3 target was an obstacle to increasing numbers of young people in apprenticeship. Employers claimed that the young people applying for apprenticeships lacked the educational prerequisites for Level 3 apprenticeship.
The solution adopted was for government training programmes (to be rebranded as Level 2 apprenticeships. The numbers of 16-18 year olds in apprenticeships rose dramatically between 1996 and 2009 but only at Level 2. The numbers in Level 3 apprenticeships actually fell – see Figure 1. All this was against a background of rising numbers of 16-18 year olds and a fall in total government-funded work-based training for young people.
Figure 1. 16-18 year olds in government-funded work-based learning by programme, England 1995-2010
Source: SFR 15 2011 supplementary table C13
The Labour government succeeded in switching young people from work-based programmes to apprenticeships, and thereby improved training quality for those who had previously been on lower level programmes. But it failed to increase the number of firms employing apprentices. Employers showed little interest in offering Advanced Apprenticeships to under-19s, and fewer under-19s were taken on to Advanced Apprenticeships in 2010 than in 1997 – see Figure 1.
In 2009, the Labour government passed the Apprenticeships, Skills, Children and Learning Act. This provided for the creation of a National Apprenticeship Service, which was given the task of convincing employers to offer increased numbers of places. The same Act provided for an entitlement to an apprenticeship for every school-leaver who was appropriately qualified (defined as five or more GCSE passes at any grade). The Education Act introduced to Parliament by the coalition government in January 2011 removes this entitlement.
Many builders but no architect
In other countries, legislation guarantees the quality of apprentice training and sets a minimum duration for apprenticeship, which allows the apprentice to practice and gain confidence in the skills acquired. The minimum duration – usually three years – allows the employer to recoup some or all of the costs of training incurred in the first year or so of the apprenticeship. Public funding for off-the-job apprentice education and training is provided for a fixed period – usually three years.
Apprenticeship in England turns the European model on its head. As Table 1 shows, the latter is based on modest apprentice wages, long-duration apprenticeships, work-based training and government-funded off-the-job vocational training.
Table 1. Comparing apprenticeship models in England and other European countries
Note: For further information, see Steedman (2010).
British employers are now finding that they are paying the price for failure to take ownership of apprenticeship. An employer-led commission’s recent report, which was published by a government agency, identified the plethora of government agencies with which apprentice employers are required to liaise as a major obstacle to participation. The report revealed a truly staggering amount of submission writing, documentation, data recording and data returns required of employers receiving public funding for apprentice training (Learning and Skills Improvement Service 2011).
Multiple government agencies with overlapping responsibilities impose this burden as a condition of the receipt of public funding for providing apprentice training. Training programmes are highly prescriptive and the competency-based assessment model adds to the burden of data recording, reporting and storage. A substantial proportion of government funding for apprenticeship training is thereby swallowed up by the processes required to account for it. The employer-led commission complained that the system had ‘many builders but no architect’.
The coalition government: Prioritising skills over social inclusion
The new coalition government has made no fundamental changes to the dysfunctional apprenticeship delivery model that it inherited.
Apprenticeships are not mentioned in the Department for Education’s six policy priorities set in 20102 while Department for Business Innovation and Skills is clearly claiming ownership of apprenticeships with a stated commitment to ‘expand and improve the quality of apprenticeship programmes’. But closer examination reveals that the expansion envisaged is adult apprenticeships together with a commitment to increasing the numbers of Levels 3 and 4 apprenticeships. An additional commitment to expand apprenticeships in the retail sector (a sector with notoriously low apprenticeship standards) is hard to reconcile with this goal3.
The coalition government’s Education Act abolishes the entitlement to an apprenticeship place for all suitably qualified young people as provided for in the Labour government’s 2009 Apprenticeship Act. This decision signals that the emphasis of apprenticeship policy has switched from enabling young people to access skills and jobs through apprenticeships to raising workforce skill levels without special regard to age.
Given these priorities and the reluctance of the Department for Education to fight the corner of the under-19s, it is unsurprising to find that the latest figures for apprenticeship starts in both 2010 and 2011 show a huge rise in adult apprenticeships.
Adult apprenticeships attract a smaller government contribution to training costs compared with the under-19s, and they therefore provide the places to meet target numbers at lower cost to government. Employers like them because, in many cases, adult apprenticeships help to train their own employees.
The coalition government has increased adult apprenticeships, actually overshooting their own target. While overall apprenticeship starts have increased from 280,000 in 2009/10 to 443,000 in 2010/11 (an increase of 58%), under-19 starts have increased by just 10%. The under-19s now get a smaller share (29%) of apprenticeship places than do the over-25s (40%) – see Figure 2.
Figure 2. Shares of apprenticeship starts by age 2005/06-2010/11
Source: DS/SFR 12 October 2011 Table 8.1 and p. 13.
Note: (a) Provisional.
The coalition government deserves credit for expanding the numbers achieving Level 3. But while in 2010, there were 60,000 Level 3 apprenticeship completions, under-19s accounted for only one third of these – just 20,0004. Indeed, the 1994 Conservative government’s target of 40,000 young people a year qualifying at Level 3 has still not been achieved.
The failure to ensure that each cohort of young people gains the skills needed for productive employment ensures that we will continue to struggle to make good this deficiency in their later working lives. Adult apprenticeships may be needed now to make good the deficiencies of the past. But if good quality apprenticeships were also there for young people in the numbers needed, adult retraining would no longer be so necessary.
Successive governments have committed substantial public resources to apprentice training, but far too few young people benefit and not enough high value skills have been developed. In the absence of employer leadership, government has assumed responsibility for driving the policy forward. This has produced a system obsessed with accountability and unfriendly to employers who should be key players. The system fails to provide incentives for training young people to high (Level 3) skill levels.
Like other governments in Europe, the British government should be prepared to change an apprenticeship model that is not functioning to produce high skills for young people. The aim of the new model should be to direct public funds so as to:
– Maximise incentives for employer participation and management of training;
– Ensure that young people are not ‘crowded out’ by adults;
– And create conditions that encourage high value-added training5.
Policy levers that could be deployed to implement these aims include:
– Extending current pilots of simplified direct funding to medium-sized employers;
– Introducing a sector levy to contribute to the cost of sector skills bodies and thereby increase employer commitment;
– Switching funding for adult (over-25) apprentices to under-25s to release resources for Level 3;
– Re-introducing the entitlement to an apprenticeship place for 16-19 year olds – but at Level 3, with Level 2 as a prerequisite;
– And funding employers of 16-19 apprentices for providing the transferable (education) elements of the apprenticeship programme – recommendation 14 of the Wolf Report (DfE 2011).
Investment in apprenticeship by government, individuals and employers has already shown substantial returns. A nucleus of committed employers, offering high value- added apprenticeships, has grown up despite the heavy bureaucratic burden associated with government funding. Unfortunately, more young people apply for each of these apprentice places than for a place at an Oxbridge college (Oxford and Cambridge).
It may not be realistic to aim for apprentice numbers on the scale of Germany. But with a clear strategy, some nudging and flexibility, England could realistically aim for the prize that has so far eluded it – higher skills and high youth participation.
BMG Research (2011), An Evaluation of the Apprentice Grant for Employers (AGE) Programme, National Apprenticeship Service
Department for Education (2011) Review of Vocational Education – The Wolf Report (http://www.education.gov.uk/16to19/qualificationsandlearning/a0074953/re…)
Fuller, Alison and Lorna Unwin (2003) ‘Creating a Modern Apprenticeship: A critique of the UK’s multi-sector, social inclusion approach’, Journal of Education and Work 16(1): 5-25
Learning and Skills Improvement Service (2011) Simplifying End-to-end Apprenticeship Processes for Employers.
House of Lords Economic Affairs Committee (2007) Apprenticeship: A Key Route to Skills, HL Paper 138-I
McIntosh, Steven (2007) A Cost-Benefit Analysis of Apprenticeship and Other Vocational Qualifications, Department for Education and Skills Research Report No. 834
Payne, Jonathan and Ewart Keep (2011) ‘One Step Forward, Two Steps Back? Skills policy in England under the coalition government’, SKOPE Research Paper No. 102 (July), SKOPE, Cardiff University
Petrongolo, Barbara and John van Reenen (2011) ‘Youth Unemployment’, CentrePiece (June), CEP
Ryan, Paul (2001) ‘The School-to-Work Transition’, Journal of Economic Literature XXXIX (March)
Steedman, Hilary (2010) The State of Apprenticeship in 2010: International Comparisons.
4 DS/SFR 12,October 2011 Table 8.2
5 Examples of what can be done already exist in the results of pilot schemes and ongoing pilots. A pilot, now ended, provided modest incentive payments (ranging from £1,000 to £2,500) to employers to offer an apprenticeship to a young (16-19) person. These produced a greatly increased place offer (BMG Research 2011). Simplification of payment to large employers who are directly contracted to provide apprenticeships is currently being piloted, and could, if successful, be extended to medium-sized employers, according to a speech by the Minister for Skills, John Hayes (6 September 2011 CBI London).