Three key messages from EPI’s cost benefit analysis of apprenticeships

Apprentices in England should be supported to train longer, train earlier, and train better. Three things I learnt from EPI’s latest report on Apprenticeships.

Why the report matters

I have a bit of a vested interest in apprenticeships. In 2010, working at the Department for Education, I had a target to increase the numbers of apprenticeship starts in the schools and childrens’ workforce from a starting point of about 3, to over 3000. It was hard. I’ll spare you the gory details of the various challenges and barriers I faced, but as frustrating as it was at times, when I eventually moved on (someway short of the target I should add!) I did so pretty convinced of the central importance of high-quality apprenticeships as part of a broader educational offer.

The Government sees the systems used by Germany, Switzerland and Austria as the model for a wider use of apprenticeships in the UK. This was also the case back in 2010. These countries all have high rates of participation, low youth unemployment and well-established transitions into the labour market for apprentices. Crucially, they also have a system where firms bear the bulk of the cost of training their apprentices, albeit with some contributions from the state in Austria.

Here in the UK the Government appears to be moving towards a similar employer funded model, through its use of an apprenticeships levy on larger employers (and smaller contributions from small and medium sized firms).  However, the levy appears to have suffered from an unintended consequence. Business doesn’t appear either to like or understand the levy and apprenticeship starts have fallen as a result.

In this context the latest report from EPI makes interesting reading. It considers what costs and benefits for businesses and apprentices might occur if, as appears to be the intention, a “Swiss” model of apprenticeships were applied here in the England. I’ve  picked out the three findings that stood out most for me.

Three key messages

1. Longer apprenticeships create more benefits, both for apprentices and their employers. Firms that offer three-year apprenticeships stand more chance of breaking even than those that offer a one-year apprenticeships (the standard model currently in England). In other words, the longer a firm has an apprentice on its books, the likelier it is that the value added to the firm by the apprentice matches the cost of training them.

2. Apprentices gain more benefits over their lifetime if their apprenticeship starts earlier, i.e. at 16 rather than at 19, as the majority in England currently do, and younger apprentices are better for employers too. Younger apprentices can expect to receive greater returns on their training over their lifetime, presumably thanks to their additional years of experience, and their initial earning differential compared to their peers who stay in school or college. Firms also benefit, basically because they don’t have to pay as much in wages to young apprentices.

3. It is more difficult to see benefits for apprenticeships in some sectors than others. EPI’s report shows that the catering and hospitality sectors face more difficulties in recouping their investment on apprentices. This is not to say those sectors shouldn’t take on apprentices. This is more about the quality of the apprenticeship training. If apprentices receive better training, they may become more productive, and be less likely to drop out, therefore increasing the chance of the employers in those sectors seeing a return on their investment (higher quality training is also better for the apprentice too).

What next?

These three lessons show that we have some way to go in England before we can convince firms, and young people, that apprenticeships are worth investing in. Government is going to have to accept that it needs to continue to invest in apprenticeships. This means raising quality, re-thinking how apprenticeships interact with other academic pathways, and reducing drop out rates. These are the prerequisites before apprenticeships are universally seen as a viable pathway for both employers and  young people.