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Dr Deborah Talbot, Employment and Education Editor, MWS Technology Ltd

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With the Plan for Jobs and Skills for Jobs – the two big policy initiatives on skills over the last year – it looks as if the importance of vocational training is hitting home. But does the government really know why skills matter? And why are apprenticeships lagging, when they should be growing exponentially? In this article, I look at apprenticeships and data, and why we need more of it.

In February 2021, the Department for Education hosted National Apprenticeship Week, a chance to big up some of the success stories of apprentices and employers. As usual, there was much commentary on social media, and among them some interesting comments made by Ben Pike, CEO of EdTech firm MasterStart of EdTech firm MasterStart, who said:

“Are apprenticeships just a nice idea? No. They are one of the most sensible investments anyone can make.”

Citing statistics from the National Audit Office (NAO) and elsewhere, he noted that:

  • The return on investment for government is £26-£28 per £1 invested*. 
  • For the apprentice there is an average of a 32% premium in salary and transformed prospects.

At first glance this seems impressive and raises the issue of why there is so much concern about how much apprenticeships, and standards in particular, cost. Furthermore, why there has been a drift in emphasis towards Kickstart and Restart, even though these are valuable in themselves especially with the pandemic?

It might be because the government doesn’t have enough data relating to the impact of apprenticeships on the economy. So it’s worth taking a closer look at the NAO analysis of value added by apprenticeships.

NAO findings

In recent years, the NAO has published two reports on apprenticeship policy – one in 2016 and the other in 2019.

In 2016, while there were attempts to boost apprenticeships, initiatives such as the three million apprentices from 2015 to 2020, Trailblazer groups, the levy, and the Institute for Apprenticeships had not been implemented. Funding had risen from £1.2 billion to £1.5 billion in the five years from 2010 to 2015. During that time, there were 2.4 million apprenticeship starts, compared to 1.1 million in the previous five years, and most of the growth was from the over-24s at Level 2 (1).

The NAO’s key findings in 2016 were that:

  • The government had not established how apprenticeships would improve productivity, which was lagging behind comparable countries such as France and Germany. In particular, it had not outlined “the factors upon which such an impact is dependent”. If there was no “strategic underpinning,” it said, “there is a clear risk that the drive to deliver greater numbers is delivered at the expense of delivering maximum value.”
  • The DfE had not defined what success would look like, beyond the three million apprentices target and greater ethnic diversity.
  • The DfE’s emphasis was on employer-led programmes – in other words, to let the market decide. However, the NAO argued that it was unclear whether the Department was guided by evidence that showed “different apprenticeships offer significantly different benefits”. Key indices would be: wage analysis (which apprenticeships offered the best earnings); overall economic return compared to traditional learning; and employment outcome measures for apprenticeships, which would, alongside achievement rates, hold training providers to account.

The NAO’s 2019 report analysed the progress made on each of the findings and after the implementation of apprenticeship reform. By 2018, public spending on apprenticeships had increased slightly to £1.6 billion. Apprenticeship starts had fallen, however, and there had been a gradual shift to standards.

The report found that:

  • The average cost of training an apprentice was double what had been anticipated, because employers were “developing and choosing more expensive standards at higher levels than was expected”. As we know, Level 4 and above has been a high growth area.
  • While the DfE outlined ways spending could be reduced, they were “likely to be unpopular and could damage confidence in the programme”.
  • The DfE would not meet its two targets of three million apprentices by 2020 and greater ethnic diversity (though recent figures show a growth in participation rates for BAME groups, which is positive), a target the NAO referred to as lacking ambition.
  • The DfE has published performance data; however, the performance has been “mixed”. Apprentices have higher earnings on completion of their studies, but the proportion staying with their existing employer fell. Around a third of apprentices don’t complete the programme.
  • The Department produced a Skills Index, showing the impact on earnings of completing an apprenticeship – a core way of measuring productivity gains. It had not, however, “set out how these calculations feed into the index, or what kind of increase in the index would constitute ‘success’”.
  • There is a clear risk, says the report, that public funding may be insufficient to meet demand, leaving three options: increase funding, inhibit growth in apprenticeships or reduce funding for some apprenticeships.

The post-2019 apprenticeships landscape

Since 2019, the above trends – dominance of standards since frameworks were ended, growth of higher apprenticeships to a third of new starts, falling percentages of new starts, participation and achievement – have continued.

In 2018/19 the Skills Index fell. This was mainly due to a drop in apprenticeship achievement rates, which declined by 33% in 2018/19. While the value added by apprenticeships had increased for the previous five years, it fell by 26% in 2018/19. The Index says this is because of lower starts and longer programmes.

However, this measure is not intended to be an assessment of the economic value of apprenticeships or the value to an individual over their working life; as such, it remains a fairly narrow measure of economic value and return. Indeed, Dearden, Reed and van Reen (2006) argue that relying on wage levels alone (frequently a governmental tool to assess productivity gains from training) implies a perfectly functioning market where skills and productivity gains are always rewarded by wage increases. The impact of apprenticeships on productivity might be two times greater that wage levels suggest. Currently, I could not find any plans to rethink how to assess productivity, though I would welcome any input.

In the Apprenticeship Evaluation 2018/2019 – an employer survey, published in 2020 and based on interviews with 4,000 employers – 86% said it had improved their employees’ skills and 76% said it had improved productivity. While these are valuable indices, they are based on employer feedback rather than hard economic data.

The apprenticeship levy raised £2.9 billion in 2019/20. Government spending on the apprenticeships programme was £2.6 billion in 2019/20, a rise of £400 million from the previous year (Source: Julian Gravatt, Association of Colleges). As a result of the pandemic, and until March 2021, employers will receive a payment of £2,000 for each apprentice under 25 they hire, and £1,500 for apprentices over 25, in addition to the £1,000 received for apprentices aged 16 to 18 or those under 25 with an Education, Health and Care Plan. All great news, but if we were to classify these policies, would they come under the heading of short-term crisis management (to cope with the growth in unemployment, for example) or long-term planning around skills?

Conclusions

It has become something of a truism that skills training and apprenticeships deliver economic benefits. Evidence, however, about the impact of UK skills policy is incomplete though efforts have been made to establish some benchmarks by government. But it seems not much progress has been made since the Department for Business, Innovation and Skills report on skills and productivity in 2015, and that was a broad-focus analysis.

When so much policy focus is on the relative merits of skills versus academic education, or on which level of training delivers the best benefits, or whether employer-led programmes have a palpable benefit over government-led ones, it seems clear that there should be less guesswork and more evidence-based decision-making. It is good news that the government announced a new Skills and Productivity Board last year to lead on data, but currently its remit seems to be related to delivery, not impact. That, of course, may change.

For example, as trends have indicated the rapid growth of Level 4 and above apprenticeships – largely driven by employer demand – we really do need to know what impact this has had on core indices of economic growth, productivity and life chances compared to traditional educational routes.

Does more emphasis need to be placed on Levels 2 and 3, or on progression through various levels, not solely because of social justice but hard economic realities? Should the government be less reliant on employer-led initiatives, particularly when it comes to labour market needs, where making use of big data can help plan provision? And is the spending on apprenticeships enough for the impact it needs to have?

The benefits to the nation and our fellow citizens of a functioning vocational training system are so large that policy should be based on long-term, holistic data. We need to move away from the current situation where different lobby groups each attempt to shout louder in order to have their opinion prevail.

  • The 2016 NAO report says that the benefits of apprenticeships over traditional learning when considering ROI is particularly notable at Levels 2 and 3 (this was when frameworks were dominant). However, “the advantage fades away when total funding from government, employer and learner is considered.” Again, this assessment is only based on wage premiums and not on the long-term economic benefits to the economy and individuals from the skills and experience accrued.

Dr Deborah Talbot, Employment and Education Editor, MWS Technology Ltd.

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