Reviving Youth Apprenticeships

By Daniel Sandford Smith Director of Programmes, Gatsby Charitable Foundation

The challenge

To encourage employers to use apprenticeships to train young people, offering a different approach to adult upskilling and reskilling.

Why?

Apprenticeships are an effective route into skilled employment for young people. Government benefits because apprentices are starting to pay tax and training costs are largely covered by employers. Apprenticeships give businesses the skills they need to grow. They reduce youth unemployment. They give young people opportunities for rewarding careers.

However, despite significant political attention and reform, we're still a long way from realising this vision. There has been a significant drop in the number of young people starting apprenticeships and employers are left frustrated by the apprenticeship levy.

The age and skill profile of those who do take up apprenticeships has also shifted. In 2004, the age cap was removed, enabling over-25s to take up apprenticeships. The number of adult apprentices increased further after the government-funded initiative, Train to Gain, ended in 2010. Significant numbers of working adults began taking shorter and lower-level apprenticeships in sectors, such as retail, that had not traditionally offered apprenticeships.

The shift was a concern to Doug Richard. And so in his 2012 Review of Apprenticeships he recommended that they “should be clearly targeted at those who are new to a job or role that requires sustained and substantial training. Training and accreditation of existing workers that are already fully competent in their jobs should be delivered separately; as should provision aimed primarily at supporting entry into employment.”

This guiding principle of the Richard Review seems to have been forgotten in the policy changes that have followed.

In 2017, the apprenticeship levy was introduced in response to concerns about declining employer investment in training. It is a tax on UK employers that funds an annual apprenticeship budget of around ￡2.5 billion for England alone and pays for the off-the-job training of all apprenticeships, whether with levy paying or non-levy paying employers. But employers and other stakeholders suggest it is not working.

Employers also have employees who do not have the right skills for the role they are in. According to the 2022 Employer Skills Survey, 10% of employers have a skills shortage vacancy and 15% of employers have at least one employee who does not have the necessary skills for their role. But despite this, employer investment in training continues to fall.

For much of the last decade apprenticeships have been the only substantial form of publicly funded training available to adults. Because of this, many employers have tried to use apprenticeships to solve all their upskilling and reskilling needs. A CIPD survey found that 76% of employers used their levy funds to convert existing management or leadership training programmes into apprenticeships. It has also led to employers creating apprenticeships for occupations that in other countries would never be an apprenticeship.

The levy has also led to increasing numbers of apprenticeships. There are now more than 700 different apprenticeship standards, which is more than any other country. In addition, around 20% of these standards allow for different occupational specialisms (524 in total). The proliferation and complexity of apprenticeship standards is a real risk to the system, because:

• large numbers of different apprenticeship standards makes it harder to ensure rigour and quality;
• apprenticeships become too narrow – reflecting specific job roles rather than occupations – and do not provide the transferability that justifies public funding;
• employers who have not been involved in the development process cannot identify which apprenticeships are most appropriate for their skills needs training providers find it challenging to meet demand for the off-the-job element of many different apprenticeship programmes.

In other countries, employers and unions work together to ensure that there is the right balance in the breadth and depth of training so that it meets the needs of both the employer and the apprentice. The unopposed voice of employers in the English system has led to some narrow and very specialised standards that are not suitable for apprenticeships.

The rising number of young people not in employment, education or training (NEET) and skills shortages in key sectors of the economy are barriers to growth.

How?

The new UK Government has indicated that it will use Skills England to identify qualifications that the levy could be spent on, rather than the levy being used solely for apprenticeships. The same approach could be used to increase apprenticeships targeted at young people, by restricting the occupations the apprenticeship element of the levy can be used for.

The key change to apprenticeships that followed the Richard Review was that the training became occupationally focused. Using the Standard Occupational Classification (SOC), occupational standards can be mapped to the labour market. It is then possible to identify which standards are particularly suited to young people by:

• comparing the occupations with those in other countries where youth apprenticeships are predominant;
• using labour market information to identify where there is a high prevalence of younger workers, for example, 42% of all bricklayers are aged 16-24;
• using vacancy data or the US occupational database O*NET to explore what experience is needed for an occupation and the level of training required.

Skills England could carry out these analyses and create a list of occupational standards that would be eligible for apprenticeship levy funding. Skills England could also assess whether the selected standards are broad enough to provide a springboard for apprentices at the start of their career.

The concept of occupational competence is critical to technical education and is one of the ways that it differs from academic education. Occupational competence is, like a driving test, a pass or fail criteria-based assessment. The criteria of what counts as competence needs to come from the employers in the sector, and getting this right is important for all future employers of the apprentice.

The confirmation of occupational competence through an end point assessment (EPA) is similar to the examinations seen in other countries with strong apprenticeship systems, such as Austria, Norway, Germany and Switzerland. Skills England should undertake an analysis of how these examinations work to see how EPAs in England can be simplified and potentially made cheaper.

In these countries it is possible for an adult with an appropriate level of experience to take the same examination as an apprentice and be awarded the same qualification. In England, this would mean making the EPA standalone, so young people would achieve the diploma by completing an apprenticeship, whereas adults would complete only the training they needed to pass the EPA. This additional training and assessment could be paid for from the non-apprenticeship element of the levy, but could be done at lower cost and with far greater flexibility for the adult and for the employer.

It is also inconsistent that the state pays for the education and training costs of classroom-based 16-18-year-old students, but employers have to pay for training an apprentice. The government could instead meet these costs from general taxation. This will not only reduce costs for employers, but it may also significantly reduce bureaucracy, which may encourage more small businesses to take on apprentices. The government could consider including apprenticeships in the approved training category for child benefits.

Impact and trade-offs

Currently, apprenticeships are being used to tackle the problems of there not being enough skilled workers, and of workers not having the right skills for their roles. Smarter use of the levy would make it possible to provide more targeted initiatives that will help reduce the scale of both these problems.

The issue for youth apprenticeships is the supply rather than the demand; there are large numbers of young people who would take an apprenticeship if they could get one. The number of apprentices in the economy is the result of decisions made by employers. The changes proposed here will encourage employers to take on younger apprentices. However, it is also important to keep in mind that the levy only pays for the off-the-job training and there are other costs associated with an apprenticeship.

In other countries, apprenticeship salaries are often set by employers and unions and are initially lower than the equivalent apprenticeship salary in England, but the salary rises as the apprentice gets closer to occupational competence. A London Economics study found that, in England, apprentices were paid around 50% of the equivalent skilled worker wage throughout their apprenticeship, whereas in Germany the apprentice’s wages was around 25%. These differences are in part driven by the number of adult apprentices in England. German apprenticeships are also longer, generally lasting three or four years compared to an average of less than two in England. Longer apprenticeships means that firms can recoup their investment in training before the apprenticeship is completed. The recent increase in the minimum hourly wage for apprentices in the UK may have been well-intentioned, but it will make apprenticeships less attractive to employers.

Research has highlighted the substantial costs associated with taking existing members of staff away from their day jobs to train an apprentice. This is particularly true at the start of an apprenticeship when the apprentice is unable to make a significant contribution to the productivity of the firm. The costs are such that if the firm cannot keep the apprentice after their apprenticeship is completed, they risk making a substantial loss on training and the firm will not benefit at all. In Germany, apprenticeships are more attractive to firms partly because taking on an apprentice and training them is less risky than recruiting an unknown worker who would then be difficult to dismiss due to workers’ rights. If the new government improves the rights of workers, employers may find youth apprenticeships more attractive.

Employers are sometimes reluctant to train because they are concerned that other companies will poach their trained workers and their investment r investment in skills will be wasted. Government should not fund non-transferable firm-specific skills training, but rather focus on using funds to reduce the risk to employers of developing and accrediting general occupational skills that are of value to all employers.

Nationally-agreed standards would need to underpin any government investment in skills, whether the money comes from the levy or general taxation. IFATE’s framework of national occupational standards is a good foundation but it would need to be used more flexibly if we are going to solve the skills issues in the economy.

This article originally appeared in the UK 2040 Options Education report in September 2024, published by Nesta in collaboration with the Education Policy Institute . The report includes ten ideas which offer food for thought for policymakers looking to innovate in an area of policy that is vital for improving outcomes between now and 2040, when children born today will be taking their first steps into adulthood.