An Apprenticeship Guarantee: Is it the new English answer?

Will we get a #SeptemberPromise? 

As the country opens up again, it feels a bit like we are returning back to a house after a storm to survey the damage.

What state will the economy be in and what will be the state of the labour market?

We probably won’t really know until the extended Furlough scheme ends. But it seems inevitable that unemployment will be higher than it was before and that young people will be impacted most. It also seems likely that the employers that have survived will need to adapt to the new virtual working world and that this will create a new skills need.

Increased youth unemployment combined with increased employer training needs – sounds like a job for Apprenticeships. So it seems obvious that Apprenticeships will be part of the national post COVID recovery plan. And over the past week several people have mentioned an Apprenticeship guarantee as one of the things that could help in this scenario.

Employment experts call for £1bn Youth Guarantee and back-to-work support https://t.co/XKgXSRBNWd via @FENews

— Mat Corbett (@antevista) May 20, 2020

A guarantee always sounds reassuring in times of crisis – but what exactly is an Apprenticeship Guarantee?

The first thing to consider is what are we are guaranteeing.

There are broadly 2 options here:

1. Funding guarantees for every Apprenticeship created, or
2. The guarantee of an Apprenticeship for anyone who wants one

Let’s look at them each in turn….

A) Funding guarantees

The purpose of this would be to reassure anyone that if they can find an employer who will offer them an Apprenticeship opportunity that their training will be funded. 

This should:

• Give individuals more confidence to approach employers and could increase the number of individuals looking at Apprenticeships
• Encourage more companies to set up Apprenticeship schemes, as they know that support will follow. Creating more opportunities for people to move into.
• Allow training providers to operate with the confidence that their work will be paid for

We have had these types of ‘funding guarantees’ before in England, but they were restricted to younger age (16-19) apprentices and only covered the cost of training, not wage costs for example. And at the time, they didn’t make much difference to the amount of Apprenticeships created. I.E. Apprenticeship opportunities for 16-19s increased by only 10% between 2011 and 2014 – the effective period of the last funding guarantee.

Pre COVID there was a sporadic shortage of Apprenticeship funding for smaller companies in England (this may no longer be the case given the drops in volumes seen this month).

However if this is still the case then;

Making more funding available for training and providing greater funding security (the Guarantee) could marginally increase Apprenticeship opportunities, especially at non-Levy paying companies in England.

But it is likely to only impact the behaviour of smaller employers and not the large employers needed to quickly create mass employment opportunities. And so although welcome, it would probably not even be enough to mitigate the end of Apprenticeship Frameworks this autumn.

The keys to Apprenticeship growth are releasing the latent individual and employer demand. So how could a guarantee release their potential?

B) The guarantee of an Apprenticeship for anyone who wants one

This sounds a lot more exciting and seems to have more potential.

After all the Government made the number of University places unlimited back in 2015…and that led to a rise in full time degree students.

And back in 2018, in my own hometown no less, our Mayor Andy Street made The West Midlands Apprenticeship Promise (not quite a guarantee but close) – a West Midlands Combined Authority (WMCA) commitment to all young people aged 16 to 24 in the region that they will be able to access a good apprenticeship or training opportunity.

This promise involved dedicated careers advice and employer support but however well-intentioned it has not prevented there being a reduction in Apprenticeship starts in the West Midlands this year.

It is patently not as easy to ‘create’ Apprenticeships (remember the failed 3m starts target) as it is to create college or university course places. Each Apprenticeship is dependent upon their being a job available, which provides both their value and their illusiveness. 

That is unless you row back on some of the core modern Apprenticeship principles and allow Apprentices to be unpaid students (and thus not employees) for some of their Apprenticeship…. This was the principle of the Programme Led (or sequential) Apprenticeship in England which were popular in some sectors (Engineering, IT, Construction) for a while.

Under this approach Apprentices spent some time in full-time study, usually at the start of their programme. Then once they had mastered basic skills, and are deemed ‘safe’ to work, in sometimes dangerous environments, they begin their ‘on the job’ training and their paid employment.

To resurrect this model would probably require a change to the current Apprenticeship legislation (ASCL2009), which requires paid employment from day 1. And also runs the risk of creating a mismatch between supply and demand – will there definitely be jobs for all who start?

It seems unlikely that the current policy makers at DfE / IfATE would support a return to this approach – but these are radical times so who knows. And it might be argued that in the post COVID world it is not safe to have new employees in the workplace and so a training led approach is now justified.

Either way a guarantee is really about a targeted job creation scheme, as it is unlikely that Government would want to subsidise training for existing staff and anyone over 19 or over 25 would also be ineligible (without anyone ever saying why ‘25’ always seems to accepted as a fair cut-off point).

An age restriction is not what employers would vote for but they are unlikely to be allowed to lead this.

Does a Guarantee work elsewhere?

The only country with an Apprenticeship guarantee that I know of is Austria. Their ‘Apprenticeship Training Guarantee’ is only available for 16-19s and involves:

• A pre-apprenticeship course (6-10 weeks) to ensure work readiness
• A relatively low Apprenticeship wage paid by employers, starting at just £400 pcm (although rates vary  lot by sector) rather than a wage subsidy
• A requirement for the public sector to act the as employer of last resort and take on those who cannot secure an Apprenticeship in the private sector

Given the relative size of the population, in Austria and the widespread relevance of Apprenticeships in the economy anyway (40% of school leavers take them) the guarantee is in reality peripheral and only covers c5,000 places per anum.

For England to offer a similar guarantee for 16-18s could require the creation of 100,000 places plus per anum and for it to be available for all 16-25s then we might see up to a million places required in a recession….

So the scale of challenge is completely different but the principles are the same.

Applicants must be work-ready and motivated and the employer must have a financial as well as a moral imperative to offer the places.

Making a guaranteed placement scheme work in England

The application / matching element could be supported by a Traineeship programme for those without in-demand skills or qualifications or any work experience. This might also usefully provide employers and individuals with a ‘try before you buy’ option and give younger applicants more confidence and awareness before they start work.

However creating the right financial imperative for employers is more difficult. We currently have a £1,000 bursary for those employing a 16-18 year olds and the evidence is that this is useful but doesn’t make a huge difference to the attractiveness of younger applicants to employers. I.E. the £1,000 subsidy has not made 18 year olds more attractive to employers than unsubsidised 20 year olds for example.

From conversations with employers I believe that you would need to increase the subsidy to at least £5,000 for it to be enough to create genuinely additional places.

Thus you might need £5k x 1 million to create places for all unemployed 16-25s..

The alternative is to keep the Apprenticeship wage low and hope that the variable between that and the minimum wage makes employing an Apprentice more affordable and thus more likely than creating a full wage post.

With either approach there is a risk of:

1. Deadweight, as you might end up paying a premium for places that would have been created anyway, &
2. Exploitation, with employers replacing existing staff with ‘cheaper’ Apprentices

However if the purpose of the Guarantee is to support employers in order to create Apprenticeship places that would not otherwise exist then these issues are inevitable.

And these places would need to be viewed as paid training opportunities and not jobs with a small element of training included.

Overall the risks and costs of an Apprenticeship guarantee are relatively small compared to those of the much larger Furlough scheme, which seems to have generally been viewed as a success. And so it would be no surprise if a bold new skills minister and an embattled PM come up with a grant of say £2,500, possibly enhanced by regional Mayors, for non-levy employers who take on a 16-25 year old.

After all this was the Apprenticeship policy response to the last recession and what goes around comes around in Apprenticeships as much as it does anywhere else.

And although it is unlikely that any Government departments (except the DWP & the NHS) will see budget increases again for a long time there is £3bn trapped within the levy system if someone can just work out how to shake the spare change out of that jar…..

Richard Marsh, Director of Apprenticeships, Kaplan Financial