The story of recent apprenticeship reforms so far: a fall in quantity, but an increase in quality

Published on Jobs, Skills and Pay

Before long the apprenticeship levy – the focus of much of the debate around post-16 education – will be a year old. Yet there’s more to the apprenticeships story than the levy. Since last April, all apprentices are required to spend at least 20 per cent of their time on off-the-job training and they must also undergo a rigorous process of end point assessment. The old ‘frameworks’ that dictated the content of different apprenticeships have been gradually switched off, with new employer-designed standards slowly replacing them. The upshot of all this flux remains uncertain. Today’s figures on apprenticeship starts confirm that the post-levy drop in numbers has continued, but we don’t know for how long it will persist.

What is clear, however, is that the system has long been in need of reform. Although much of the recent focus has been on the post-levy drop, it’s worth remembering that apprenticeship starts had grown by almost 200 per cent in the ten years to 2015/16, with many offering young people significant employment and earnings gains. However, a large proportion of starts have been taken up by older apprentices (aged 25+) at a lower qualification level, often in lower-paying sectors, as the chart below shows.

Government-commissioned surveys illustrate a wide range of experiences: 95 per cent of Level 2 (GCSE equivalent) and Level 3 (A-level equivalent) apprentices aged under 19 were aware that they were an apprentice, which we might expect. In stark contrast, fewer than half (45 per cent) of Level 2 and 3 apprentices aged 25+ knew that they were actually classed as an apprentice.

During their first year, apprentices of all ages only have to be paid at least the apprenticeship minimum wage (currently £3.50). This bumps up to the National Minimum Wage (currently £7.50) for apprentices aged 25+ in their second year. While the rate of underpayment is low for older apprentices during their first year, the most recent available figures show that underpayment rises to nearly a third (31 per cent) when in their second year.

There have long been apprenticeships that successfully progress young people from education into higher levels of training and onto skilled, rewarding work. But the patterns outlined above show that some apprenticeships have been used to subsidise less-intensive forms of employee training, as a substitute for low-pay work.

Some of the patterns and trends outlined above may begin to change. When the first quarter of post-levy data came in, a year-on-year drop in starts of about 60 per cent became apparent. When the second quarter’s figures came in that year-on-year gap persisted, even though it was slightly smaller (40 per cent) than the quarter before.  However, these drops are heavily concentrated among basic level qualifications for older apprentices. There was also an indication that levy-payers are less likely to invest in apprenticeships at Level 2 and more likely to invest at Levels 4+, as the chart below shows.

Today’s figures capture the number of starts between November 2017 and January of this year, (Q2 2017/18). Overall, the year on year number of starts is 37 per cent lower than it was during the same time last year (before the levy had come in).

As in previous quarters, the main driver of the gap with this time last year is the fall in the number of starts taken up by those aged 25 or older at Level 2 (down 59 per cent). Again, we see growth in the number of 19-24 year old apprentices taking up programmes at Levels 4 and higher, but a small drop off for the other age groups at that level.

Looking ahead, what does this tell us about the future shape of the apprenticeships market? It’s likely that employers both large and small are still adjusting to the new system – not just the levy but also the new rules on training and assessment. Many are also waiting for new standards to come online. Until the system stabilises the permanence of the trends outlined above will remain in doubt.

However, if trends do continue we might begin to see whether policy changes are serving to weed out poor quality apprenticeships, specifically those in which (mostly older) apprentices are either unaware of their status or are being used to substitute low-wage work.

And while a reduction in training opportunities should not be celebrated, it’s important that opportunities genuinely serve to build skills and knowledge. The composition of levy-paying firms could serve to encourage apprenticeships at higher-levels, although there is a risk that some of these will be taken up by already highly-skilled professionals entering onto apprenticeships offering MBAs.

Ultimately, the apprenticeships system would offer young people the opportunity to transition from education into skilled, and fulfilling, work. Apprentices would have the opportunity to progress onto higher levels of training; they would complete their programmes having developed the skills and capacities that allow them to succeed in a career, rather than the narrow competencies suited for a one-off job. How far the recent reforms take us towards that goal remains to be seen. We’ll be setting out further reforms as part of a wider drive to give vocational training a bigger role in our post-16 education system in our next report to the Intergenerational Commission.