Technical Fault: Options for promoting human capital growth

Since its launch in June 2016, the Intergenerational Commission has uncovered a wealth of evidence that raises questions about the extent to which we should expect the steady generation-on-generation living standards progress experienced during the 20^th century to continue into the 21^st century. The research has shown time and again that today’s young adults are facing challenges that differ from those of their predecessors – raising the need for a fresh approach to policy.

This is the 20^th paper for the Intergenerational Commission and fourth in our policy options series that explores potential ways of providing that fresh approach. We find that after decades of rising educational attainment the pace of that attainment growth appears to have slowed in the 21^st century – contributing to a stalling of gains in pay among younger cohorts that pre-dates the financial crisis. In addition, the report finds a reduction in-work development opportunities for younger workers when compared to those afforded to previous generations.

We propose a ‘twin-track’ approach to reforming the skills landscape in order to restart generational progress on human capital. This involves both ‘fixing’ the technical (non-A level/university) education offer for future generations of young people, and providing additional support for those lower-qualified young adults who have already passed through the education system but who find themselves less well-served by the development.

The options for promoting growth in the UK’s human capital set out here will feed into a suite of policy recommendations in the Intergenerational Commission’s final report, due for publication in May.

This paper looks at a wide range of policy options for restarting human capital progress, including:

‘Fixing’ technical routes for the future

• The Institute for Apprenticeships should remain firm on its requirement that apprenticeships now include 20 per cent off-the-job training; firms who do not provide this should face sanctions.
• Ofsted should inspect every apprenticeship training provider within the next three years.
• The government should replace its numerical target of achieving 3 million apprenticeship starts by 2020 with three directional targets: on boosting the number of starts, the number of starts at more advanced levels, and progression.
• If in the medium term the current drop in the quantity of apprenticeship starts is sustained, the government should review its causes including whether they are linked to the funding system.
• The Department for Education (DfE) should prioritise the communication and culture change challenges of delivering T level work placements. It should engage with employers and ensure that the lessons learned from work placement trials inform future policy.
• DfE should assess where regional T level work placement gaps exist and build in flexibility for those students who wish to pursue a course even where there are no related employers locally, such as through online training courses or homestay options for students.
• DfE should deliver the ‘bridging’ provision that will allow someone to switch between the ‘academic’ and T level tracks, and also that clarify whether (and which) T level courses will have options for further study at Levels 4 and 5.
• The government should make available comprehensive information on further education options, availability and employment outcomes; it should present this information on a course comparison website akin to the publicly funded higher education comparison platform, Unistats.

Providing additional support for lower-qualified young adults

• The government should develop sector deals with low pay industries like care, retail and hospitality. These deals should incentivise firms to design clearer progression paths, make better use of the skills they have and improve the skills of their workforce. They should also include targeted funding for filling skills gaps.
• The government should adopt a ‘Better Jobs Deal’ which would include mechanisms to help young, lower-qualified career ‘switchers,’ such as providing support with the upfront costs of a new career, including the costs of training.
• DfE should review barriers to adult learning and consider whether a system of credit transfer would boost educational participation among lower-qualified adults. It should prioritise these challenges – specifically those around technical study and adult learning – within its major review of post-18 education.
• Boost the funding of technical education provision and underpin the ‘Better Jobs Deal’ by cancelling 1p of the corporation tax cut planned for 2020.