Apprenticeships and traineeships for 16 to 19 year olds - Education Contents

3  Benefits of apprenticeships

The benefits of an apprenticeship

35. Drawing on its annual survey of employers and apprentices, the DfE summarised the benefits of undertaking an apprenticeship or employing an apprentice. For employers:

    84% of employers surveyed were satisfied with apprenticeships and 60% were highly satisfied. When asked about the benefits of the programme:

·  72% of employers said apprenticeships improved their product or service quality;

·  68% said apprenticeships improved their productivity; and

·  6% of employers report benefits to their business of hiring an apprentice.

    Evidence suggests that employers recoup their investment within one to two years, if they retain their apprentice.[48]

For apprentices, looking at the impact one to three years after starting:

·  89% said the skills and knowledge gained as part of the apprenticeship could be used across a range of jobs and industries;

·  87% said their career prospects had improved; and

·  68% said their literacy had improved, and the same proportion said the same about their numeracy.[49]

36. Many other submissions highlighted potential benefits for employers and apprentices. BT described apprenticeships as providing a loyal workforce that could be trained to meet forecast skills gaps,[50] while EEF suggested that employing apprentices would give businesses a competitive edge:

    UK manufacturers can no longer hope to compete on price alone; they need employees with the higher level skills which can be acquired from apprenticeships.[51]

The University and College Union emphasised that employers could recoup their investment in an apprentice within three years.[52]

37. We received a number of submissions about the impact of apprenticeships on salary. The DfE's figures, looking at apprentices of all ages, show an increase in lifetime earnings of between £48,000 and £74,000 for those who complete a level 2 apprenticeship, and between £77,000 and £117,000 for those who complete a level 3 scheme.[53] City and Guilds provided different figures, drawing on their own research, showing an average increase in salary of £1,524 per year for level 2 apprenticeships and £1,634 per year for level 3.[54] In each case the baseline figure was average earnings for those with a level 2 or level 3 qualification who have not competed an apprenticeship.

38. Government funding for apprenticeships for 2013/14, provided through the Skills Funding Agency, totalled £750m for 16 to 18 year-olds and £712m for those aged 19 and over.[55] Funding for 2012/13 was £860m and £750m respectively.[56] The UK is one of the few countries, alongside Canada and Australia,[57] where Government invests in apprenticeships for people aged over 26. The data we have seen on benefits to salary for apprentices covers all apprentices, as opposed to those aged 16 to 19 who are the focus of our inquiry. At present it is not possible to determine whether Government funding would deliver greater benefits if investment focused only on younger apprentices.

39. Another way of looking at the benefits of apprenticeships is through their value for money to Government. Many of the submissions to our inquiry[58] referred to research by the National Audit Office in 2012 which suggested returns of £18 per pound of government investment.[59] This was calculated by estimating the net value to the economy (comparing future benefits to the economy against future costs) against the amount of public funding invested.[60]

Quantifying benefits of different frameworks

40. There is clear data to show that when considering all apprenticeships, completion has a positive impact on earnings, but at present, the data is simply not available to allow for a comparative assessment of different frameworks. David Massey from UKCES suggested to us that the overall picture in terms of wage gains for apprentices did not tell the whole story:

    Earnings overall have gone up in all the BIS evaluation evidence. On average, earnings do increase, especially for younger apprentices. But I suspect that if we had the data at a granular level so that we could look at individual frameworks, we would find somewhere that earnings increases are fairly marginal if not at all. Then we would be looking again and saying, "Does this achieve the outcomes we want it to achieve?" but until we have got those data, we cannot make that judgment.[61]

41. Matched administrative data is being collected by HMRC and BIS.[62] This may provide a better picture of what happens to apprentices once they have completed an apprenticeship, but if it does not allow for a framework to framework comparison, it will be difficult to determine whether an individual apprenticeship has had the sort of positive impact that should be necessary to qualify for Government support, under our fifth principle of income transformation. The Minister told us that data on apprenticeships needed to be able to provide an answer to the question "in three to five years after leaving school, what are the earnings and employment rates of particular programmes and institutions?".[63]

42. Once the data is available to make comparisons between different frameworks then apprenticeships can be assessed as to whether they are income transformative. Controlling for other factors that might affect income, apprenticeships that are not income-transformative should cease to be accredited.

43. Further data collection on why individuals undertake apprenticeships and their experiences whilst in training and after completion of the apprenticeship would also help illuminate how different apprenticeship programmes lead to different labour market outcomes (including earnings) for different people.

Conclusions and recommendations

44. There is a general consensus in the evidence that government investment in apprenticeships represents good value for money and provides a range of benefits for employers.

45. Good quality apprenticeships can provide long term benefits for young people.

46. We recommend that the Government review the benefits provided by funding adult apprenticeships and apprenticeships for young people respectively and assess whether more or all of the money would be better spent on 16 to 19 year-olds.

47. We recommend that the Government expand the existing matched administrative data sets on apprenticeship outcomes with information on the occupation and industry in which individuals are employed. This would help prospective apprentices make informed comparisons between different frameworks and would aid in evaluating the impact of apprenticeships policy.

48. We recommend that the Government review the data collected on apprenticeships to allow assessment of the effect on income of different apprenticeship frameworks.

49. Having accepted our fifth principle, that apprenticeships should be income-transformative, the Government should set out how it will put this into practice.

48   DfE () paras 1.6-1.7 Back

49   DfE () para 1.3 Back

50   BT () p.1 Back

51   EEF, The Manufacturers' Organisation () para 4 Back

52   University and College Union () para 21 Back

53   DfE () para 1.5 Back

54   City & Guilds (AAT0020) para 15 Back

55   Skills Funding Agency, Annual Report and Accounts 2013/14, June 2014, p.8 Back

56   Skills Funding Agency, Annual Report and Accounts 2012/13, June 2013, p.8 Back

57   Taking Action for Canada, Expanding Apprenticeship Training in Canada: Perspectives from international experience, April 2014; National Centre for Vocational Education Research, Australian vocational education and training statistics: Apprentices and trainees - Annual 2013, June 2014 Back

58   Association of Employment and Learning Providers (), para 9; CBI (), para 5; OCR (), para 27 Back

59   National Audit Office, Adult Apprenticeships: Estimating economic benefits from apprenticeships - technical paper, February 2012, p.5 Back

60   Ibid., p. 25 Back

61   Q12 [David Massey] Back

62   Q5 Back

63   Q468 Back

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Prepared 9 March 2015