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Government should do more to increase 16 to 18 apprenticeships, new report urges

10th April 2018

The government should do more to boost the number of 16- to 18-year-olds doing apprenticeships due to the “overwhelming” benefits to both employers and apprentices, a new report has urged.

‘Apprenticeship training in England – a cost-effective model for firms?’, published by the Education Policy Institute, looked at the potential costs and benefits for businesses and individuals if England adopted a Swiss-style apprenticeship model.

The report, by education economist Professor Dr Stefan C Wolter and Eva Joho, concluded that the benefits for both apprentices and employers were greatest for the youngest apprentices.

While the main benefit for employers came through the lower wages paid to apprentices under the age of 19, the report found that – despite the lower wages – “the returns to apprentices are higher if they start their apprenticeship at a younger age”.

“This is a concern for England, where 60 per cent of new apprentices in 2017/18 are aged 19 or older,” it said.

“Given the overwhelming benefits to both firms and apprentices” the report urged the government to “consider the case for expanding apprenticeships in England among 16- to 18-year-olds, in line with other advanced economies”.

The report, produced in partnership with German think-tank Bertelsmann Stiftung and supported by JP Morgan, analysed whether English employers could expect a net benefit when training apprentices in a similar manner to Swiss firms.

Features of the Swiss model included longer training programmes, normally a minimum of three years, and more off-the-job training.

The authors looked at three potential costs or benefits to employers: costs during the apprenticeship, benefits of an apprentice doing work that would otherwise be done by a more highly-paid worker, and any further benefits to the employer after the apprentice has completed their apprenticeship.

They used data from Switzerland, alongside UK wage data, to simulate the costs and benefits to both employers and apprentices in 10 occupations.

The report concluded that employers with apprentices under the age of 19 for the duration of their apprenticeship had the highest chance of “breaking even at the end of the training period” because “minimum wages increase substantially afterwards”.

Apprentices under 19 can be paid the national minimum apprenticeship wage, now £3.70 an hour, for the duration of their apprenticeship. Those over 19 must be paid at least the national minimum wage – which is higher – after they’ve completed their first year.

But “from the perspective of apprentices” programmes that started “at an early age, even at a very low pay, would in most cases also generate the highest private rates of return” compared with starting later.

Longer apprenticeships were “likely to bring higher returns for both employers and apprentices”, the report said, “due to productivity increases over the course of training”.

In a three-year apprenticeship, similar to the Swiss model, an employer’s “costs usually surpass benefits” in the first year, but by the third year “a net benefit arises”.

Other recommendations from the report include targeted support for small companies “especially in sectors or regions dominated by small- and medium-sized enterprises”.

This was because “big companies may be more likely to experience net benefits from hiring apprentices than SMEs, due to economies of scale and a different salary structure”.

“This report brings some much needed evidence to debates on the future of apprenticeships policy,” said David Laws, the EPI’s executive chairman.

“In learning from countries with successful training programmes, England can ensure that a sustained expansion in apprenticeships sees positive returns for both employers and young people.”