Improving the transition from school to work Contents

Chapter 8: Incentivising Employer Involvement

322.As it stands, no-one is responsible for transitions to work at either a national level (we say more about this in Chapter 9) or at a local level.

323.There are a number of mismatches between the supply of young people through the education system and the demand for them in the workplace. For example the LGA told us that alongside high youth unemployment, there are 14.8 million high skilled jobs, with only 11.9 million high skilled workers.484 Mary Alice McCarthy and the Government, for example, showed there is a large middle group of young people485 but a lack of intermediate roles available for them.486 The PSHE Association told us there is demand from employers for personal and social skills, but young people—particularly those from less advantaged backgrounds—are often considered to lack these skills.487 Demand for apprenticeships—particularly from young people—far outstrips supply.488

324.Other evidence showed that local planning for post-16 provision is patchy, with unclear accountabilities and split responsibilities.489

325.Many of our witnesses told us that employers are fundamental to making transitions work.490 We have seen this through their role in the provision of good quality work experience, labour market information, and careers education and guidance. However, our witnesses said that because the system does not set out who is responsible for preparing young people for their first jobs, employers do not see it as their role.491 Professor Kate Purcell and colleagues told us there has been a shift in responsibility from employers to the education sector and individuals themselves.492

Incentives for Employers

326.Professors Fuller and Unwin explained that regulation of the labour market in the United Kingdom is ‘voluntarist’: businesses self-select to participate in initiatives.493 They will do so if they can see a benefit to their business. This poses a challenge to any attempt to incentivise employers to engage with schools or to recruit young people.

Financial incentives

327.Many of our witnesses suggested financial incentives could work to engage employers.494 Previous incentives, however, have not had the desired effect.

328.For instance, in November 2011, the Government announced that small businesses could receive up to £1,500 for hiring a young apprentice. This was known as the Apprenticeship Grant for Employers. The requirements of the grant were updated in January 2015. The number of grants which could be claimed was reduced to five and only employers with 50 or fewer employees could receive the money.495 Employers were only eligible if they had not employed an apprentice in the previous year.

329.Our witnesses criticised the application of the grant. TQ Training told us: “The Apprenticeship Grant for Employers has been available for some time, but the criteria keep changing. Some stability would be useful.”496 Mr Clegg said:

“[The grant] just did not work at all. It did not work probably, with the benefit of hindsight, because if you are an employer who is prepared to spend the money and the effort on employing somebody you are not necessarily going to be swayed by a oneoff £1,500 bung.”

330.Professor Keep told us that “incentivising employers is not about money”.497 Neil Carberry agreed: “businesses in CBI membership said that they were not interested in Government money in terms of pure cash but that they would like some support for training [for new recruits and apprentices].”498 Training is a key part of an apprenticeship, for example, otherwise it is just low paid employment. In Chapter 2, we discussed the reluctance of employers to recruit young people as they did not have confidence in their skillsets. It is clear to us that smaller companies need more than financial support to encourage them to recruit young people, and to help train them so they do gain the skills they need.

331.It is clear that financial incentives have varying effects on employers. We are not convinced that they drive collaborative behaviour by employers.

Environmental, Social and Governance matters

332.Environmental, Social and Governance (ESG) matters (formerly known as corporate social responsibility) can drive behaviour. John Taylor said that: “Any change in the [Corporate Governance] Code to require disclosure … would be likely to have a significant impact.” He added that “Whilst it would not directly apply to the non-quoted sector499 it would apply to FTSE350500 constituents which are major UK employers”.501 He gave as an example “ … provisions being added to the Code requiring companies to take account of gender diversity … had a significant impact and is widely regarded as having brought about an increase in gender diversity on Boards.” 502

333.Professor Keep cautioned that ESG may not have much effect on smaller firms.503 Peter Grant agreed, telling us that smaller companies would not know how to assess CSR. However, Mr Grant said that the principles of ESG were becoming embedded into companies organically.504 Nick Chambers and Ann Spackman told us that companies now tended to be driven by the business case and HR practices, as much as ESG rules.505 EY said what is needed is targeted engagement, rather than generic ESG.506

334.Changes to the Corporate Governance Code may incentivise listed companies to change their behaviours: to offer apprenticeships, work placements, other experiences of the workplace such as mentoring, and to work with schools and colleges to promote opportunities to young people.

Non-financial incentives

335.Our witnesses suggested many other non-financial incentives to get employers on board.

336.UKCES recommended agreements between local stakeholders. It described an agreement as:

“A collectively established, written agreement identifying both the skills needs in a local area and the solutions to address them. Outcome agreements would involve local education and training providers, employers and local/combined authorities/LEPs. Partners would be held to account for delivery of their parts of the agreement.”507

337.UKCES also suggested the pairing of schools and employers should be mandatory as proposed by the Wood Commission.508

338.Other witnesses told us of several ways to incentivise growth of intermediate roles:509

339.Some of our witnesses said local action between schools, employers and local authorities’ needs to be connected nationally.514 We say more about this in Chapter 9.

340.Professor Keep told us that incentivising employers “is about collective organisation”.515 UKCES explained that:

“As employers primarily determine the terms and conditions of employment and how work is organised, including the balance of temporary and permanent workers, skills requirements and progression structures through their human resource management and practices, initiatives to address low-pay and low-skilled work should seek to connect with employer interests in terms of improving competitiveness.”516

Local collaboration

341.Many of our witnesses told us the solution for responsibility in the transition from school to work lies in collaboration at the local level.517 For example, Professors Hodgson and Spours told us: “The practical first steps to support the progression of all 14–19 learners, therefore, requires the building of a collaborative infrastructure at the local level where schools and colleges work with a wider range of social partners, including employers, third sector organisations, regeneration agencies, local authority services and higher education institutions, to strengthen the transition to working life while still supporting access to higher education.” Moira McKerracher told us: “In Scotland, for example, the colleges, employers and local authorities are coming together, and colleges are increasingly being measured on these outcomes agreements. Part of that is moving their people into employment and building better relationships with employers.”518

342.Representatives from the Association of Colleges and the Association of Teachers and Lectures agreed. Malcolm Trobe said:

“Ideally, we would like the leaders of all our schools and colleges to work together in a regional and area strategy, to ensure that what they are doing is meeting the needs of all the youngsters, no matter what their background or current educational achievement.”519

343.Sometimes education providers do not work well together. For instance, Malcolm Trobe told us that competition between providers (see paragraphs 185–186) “particularly at 16 to 18, because we are in demographic decline in numbers, means that in some parts of the country we are not seeing … collaboration and strategic planning … ”520

344.Industry and education relationships are not easy either. Over the years there have been many initiatives to link employers and education more closely.521 There are several good schemes across the country.522 However, past initiatives have not been sustained, but have come and gone, and good schemes across the country are specific to particular areas.

Brokerage as a means to aid SMEs

345.Some employers who gave evidence to us cautioned that it takes a lot of school resource to organise employers.523 They said it was impractical for schools to take on the responsibility. Many of our witnesses told us that businesses, especially small businesses, lack a mechanism for accessing schools.524

346.To get over this, Ofsted suggested “… a system of brokerage and support to enable a far greater proportion of small- and medium-sized businesses to be involved in providing work experience and apprenticeships.”525 Many of our witnesses agreed.526 Neil Carberry told us: “While we have made some progress, we should not pretend that there is no issue among smaller businesses with employers and potential employees not meeting in the middle. Of the CBI’s 190,000 members, the majority are small businesses”.527 The Federation of Small Businesses said over half of all small firms have never engaged with a school or college in spite of over 90 per cent of them thinking it is important.528

347.Witnesses suggested various bodies who could take responsibility for brokerage. They included:

348.An increased role for employers is fundamental to improving school to work transitions.

349.Employers need an easier way to work with schools and colleges. Employers and schools need to be supported to work together to meet the needs of young people who do not follow an academic route to work.

350.There is good practice to be found locally, but practice across the UK is varied.

Devolution

351.Some of our witnesses told us that ‘city deals’—devolution of powers to areas in England—would enable greater collaboration at the local level.

Box 17: City deals and devolution across England

The Localism Act 2011 provided for ‘City Deals’, which are agreements between central government and partnerships of local authorities aimed at devolving specific powers and funding decisions to help these authorities to support economic growth, create jobs or invest in local projects. Eight such deals were drawn up with “core cities” in the first wave of City Deals in July 2012. A further 20 smaller cities and regions had deals in place by July 2014.

In 2012, Lord Heseltine conducted a review for the Government on how to create wealth and reduce the disparities in economic growth between the North and South of England. Lord Heseltine’s report, No Stone Unturned,539 led to the development of ‘Growth Deals’, announced in 2014, which merged several funding streams and local enterprise partnerships to bid for funding on a competitive basis.

In 2014, the Government announced a further set of decentralisation measures in the form of ‘devolution deals’. The first of these deals was the devolution in November 2014 of a number of programmes and budgets to the Greater Manchester Combined Authority, with more to follow on the election of a directly-elected mayor. Seven540 additional devolution deals have been since been agreed with combined authorities or (in the case of Cornwall and Isles of Scilly) through the Local Enterprise Partnership.541 Many more deals are under negotiation—the Government had received 38 bids as of 4 September 2015. Each of these deals has its own terms. Many deals include powers in relation to the policy areas considered in this report, including further education, business support, and welfare-to-work.

352.The Federation of Small Businesses said: “ … it would appear that regions where funding has been devolved are seeing greater collaboration on skills between a range of partners including local authorities, Local Enterprise Partnerships (LEPs) and combined authorities, local businesses and education and training providers.” The Learning Revolution Trust told us that devolution: “would enable local stakeholders, including vocational education providers, local authorities and employers to build effective partnerships which can use local knowledge to anticipate future skills and employment needs more effectively, plan provision accordingly, and engage employers in the provision of work placements, apprenticeships, the identification of recruitment needs and matching these to the employment aspirations of young people entering the labour market.”542

353.However, the Federation of Small Businesses acknowledged “… it is too early to assess the extent to which this is happening.”543

Box 18: Greater Manchester Combined Authority544

Through the devolution agreements The Greater Manchester Combined Authority is in a unique position to be able to take a system view of the improvements it needs to make in order that all residents progress and achieve sustainable employment outcomes. This draws upon new powers and levers offered by devolution as well as being able to strengthen existing levers and duties through strong integration of work and skills. The strategic partnership approach led by Greater Manchester Combined Authority offers Greater Manchester the flexibility to ensure its system responds to its economic and social needs which in turn support growth and reform, benefitting young people in the middle.”

Box 19: Leeds City Region Enterprise Partnership545

Leeds City Region Enterprise has been using devolution arrangements to implement the Apprenticeship Grant for Employers (AGE) at a local level. Launching the programme on 1 August 2015, AGE allows the Partnership to encourage more of the 72,000 SMEs across the West Yorkshire Combined Authority geography to offer Apprenticeships. The arrangements will enable the region to provide higher level apprenticeships and develop opportunities in fast growing sectors, such as manufacturing and digital—providing valuable employment opportunities for young people and making a significant contribution to their ambition for above-trend growth that drives the Northern Powerhouse and the nation’s economy.

The region will further build on this strong track record of collaborative working following the Government’s agreement under the Leeds City Region and West Yorkshire devolution deal to re-commission provision for the West Yorkshire Combined Authority to ensure that a new, forward-looking Further Education system is in place by 2017.

Local labour markets

354.Witnesses told us labour market demand is not uniform across the United Kingdom, some are faced with too few vacancies in their local area, and other areas have too many low-skilled vacancies.546

355.We have seen, however, that middle-level jobs are declining across the country (see paragraphs 22–25). Moira McKerracher explained the effect of reduced middle-level jobs on social mobility:

“These middle-ranking jobs traditionally acted as a kind of stepping stone, allowing those in the lower-ranking jobs where, if youngsters are going into work, they tend to go into these entry-level jobs and if they were going to progress they could step up and progress through the middle; use the rungs of the ladder, if you like.”547

356.The Rt Hon Alan Milburn told us that, left unchecked, the middle would continue to be squeezed out of the labour market. He said that this would make things worse for young people.548

357.However, when we asked the Education Secretary about the possibility of creating more intermediate roles, she said “that is the wrong way to look at it … We are not going to be able to row back.” Despite the Education Secretary’s view, Alan Millburn told us it was possible for the Government to create intermediate roles:

“When I was doing my health job in government, trying to devolve responsibilities and roles from doctors to nurses and other paraprofessionals helped to create a new tier of intermediate-type jobs. You saw it in criminal justice with PCSOs sitting alongside the police. One thing that Government could do is think about that holistically as a public policy drive: how can we better devolve roles and responsibilities within the public sector workforce.”549

358.Other witnesses provided evidence which suggested it is possible to manipulate labour markets at the local level, if colleges work with employers. For example, Professors Fuller and Unwin said: “the English labour market does provide an opportunity for colleges to work with employers to think through the potential for developing intermediate roles, and the potential to design and create education and training pathways that help them to ‘grow their own’ skills pipelines.” This has been effective in other countries.550 Professor Roberts told us that “Employers alone are able to be the main change drivers in the UK’s weakly regulated labour markets. Their incentives will be the ability to recruit the bright and ambitious 18/19 year olds who could alternatively have entered top universities, and the doubts that many have long harboured about whether the universities really do add vocational value except in cases where they teach occupation-specific expert knowledge.”551


484 Written evidence from the LGA (SMO0011)

485 Written evidence from Mary Alice McCarthy (SMO0141)

486 Written evidence from HM Government (SMO0055)

487 Written evidence from PSHE Association (SMO0016)

488 1,127,000 people who applied for 106,510 places in 2012, NAS apprenticeship index, January 2015

489 Written evidence from Ofsted (SMO0047); the LGA (SMO0011); Telford and Wrekin Council (SMO0009), Supplementary written evidence from Prof Alison Fuller and Prof Lorna Unwin (SMO0147)

490 Written evidence from Telford and Wrekin Council (SMO0009); New Economy (on behalf of Greater Manchester Combined Authority) (SMO0088); Brokerage Citylink (SMO0035); Capp (SMO0069); STEMNET (SMO0109); Inclusion Trust (SMO0107); MiddletonMurray (SMO0013); City & Guilds (SMO0073); ASDAN (SMO0054); Career Ready (SMO0074); National Foundation for Educational Research (SMO0082); National Literacy Trust (SMO0014); Young Enterprise (SMO0122); Association of Accounting Technicians (SMO0102); Chartered Institute of Personnel and Development (SMO0043)

491 Written evidence from Careers South West (SMO0095); The Big Academy (SMO0116); National Foundation for Educational Research (SMO0082)

492 Written evidence from Prof Kate Purcell, Prof Anne Green, Gaby Atfield, Dr Charoula Tzanakou, and Dr Phil Mizen (SMO0145)

493 Written evidence from Professors Fuller and Unwin (SMO0010)

494 Written evidence from Fair Train (SMO0067); Carers Trust (SMO0033); MiddletonMurray (SMO0013); TQ Training (SMO0067); YMCA Training (SMO0077); British Chambers of Commerce (SMO0103)

495 Prior to the January 2015 changes, the firm had to have 1,000 employees or fewer when they took on the apprentice, and could receive up to 10 grants.

496 Written evidence from TQ Training (SMO0004)

497 Q 45 (Prof Ewart Keep)

498 Q 58 (Neil Carberry)

499 Quoted companies are companies with a stock exchange listing. Non-quoted companies are not listed.

500 The FTSE 350 Index is a market capitalisation weighted stock market index incorporating the largest 350 companies by capitalisation which have their primary listing on the London Stock Exchange.

501 Written evidence from John Taylor (SMO0146)

502 Written evidence from John Taylor (SMO0146)

503 Q 50 (Prof Ewart Keep)

504 Q 50 (Peter Grant)

505 Q 51 (Nick Chambers); Q 73 (Anne Spackman)

506 Written evidence from EY (SMO0134)

507 Written evidence from UKCES (SMO0001)

508 Ibid.

509 Written evidence from Joseph Rowntree Foundation (SMO0023)

510 Written evidence The Found Generation (SMO0101); supplementary written evidence from the Government of Scotland (SMO0140); Supplementary written evidence from Prof Alison Fuller and Prof Lorna Unwin (SMO0147)

511 Q 120 (Dawn Baxendale), (Theresa Grant)

512 Supplementary written evidence from Prof Alison Fuller and Prof Lorna Unwin (SMO0147)

513 Ibid.

514 Written evidence from Herefordshire Council (SMO0020); Develop (SMO0003); Aspire Group (SMO0007)

515 Q 45 (Prof Ewart Keep)

516 Written evidence from UKCES (SMO0001)

517 Written evidence from HM Government (SMO0055); Joseph Rowntree Foundation (SMO0023); Northamptonshire Enterprise Partnership (SMO0094); Leeds City Region Enterprise Partnership (SMO0049); London Councils (SMO0057); Aspire Group (SMO0007); Prospects Services (SMO0091); ASDAN (SMO0054); Hertfordshire County Council, Hertfordshire Local Enterprise Partnership, and Youth Connexions Hertfordshire (SMO0026); BAE Systems (SMO0114); Impetus – The Private Equity Foundation (SMO0066); National Foundation for Educational Research (SMO0082); Nacro (SMO0123); Chartered Institute of Personnel and Development (SMO0043); The Chartered Insurance Institute (SMO0106); ICAEW (SMO0063); New Economy (on behalf of Greater Manchester Combined Authority) (SMO0088); Federation of Small Businesses (SMO0096);EMC (SMO0086); National Union of Students (SMO0080); UKCES (SMO0001); Federation of Small Businesses (SMO0096); Q 14 (Moira McKerracher); Prof Ann Hodgson and Prof Ken Spours (SMO0012)

518 Q 14 (Moira McKerracher)

519 Q 90 (Malcolm Trobe)

520 Ibid.

521 See for instance UKCES, Employer Ownership of Skills (December 2011): https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/305746/employer-ownership-of-skills-web-vision-report-final2.pdf [accessed 22 March 2016]

522 As noted by the UK Commission for Employment and Skills (UKCES) in its report ‘A new conversation: employer and college engagement’. UKCES, Improving engagement between employers and colleges (April 2014): https://www.gov.uk/government/publications/improving-engagement-between-employers-and-colleges [accessed 22 March 2016]

523 Written evidence from Pret A Manger (SMO0041); Develop (SMO0003)

524 Written evidence from Career Ready (SMO0074); UKCES (SMO0001); Ofsted (SMO0047); Pret A Manger (SMO0041); Brokerage Citylink (SMO0035); LGA (SMO0011); Telford and Wrekin Council (SMO0009); (SMO0035); Joseph Rowntree Foundation (SMO0023); Prof Ann Hodgson and Prof Ken Spours (SMO0012); Prospects Services (SMO0091); National Literacy Trust (SMO0014); Herefordshire Council (SMO0020); Develop (SMO0003); Joseph Rowntree Foundation (SMO0023); Aspire Group (SMO0007); Capp (SMO0069); EMC (SMO0086); Institution of Mechanical Engineers (SMO0070); Mr Anthony Ryan (Headteacher, Chiswick School) (SMO0017); BAE Systems (SMO0114); Inclusion Trust (SMO0107); Hertfordshire County Council, Hertfordshire Local Enterprise Partnership, and Youth Connexions Hertfordshire (SMO0026); Impetus – The Private Equity Foundation (SMO0066); Association of Accounting Technicians (SMO0102); British Chambers of Commerce (SMO0103); OCR (SMO0060)

525 Written evidence from OFSTED (SMO0047)

526 Written evidence from the LGA (SMO0011); Telford and Wrekin Council (SMO0009); Brokerage Citylink (SMO0035); Prospects Services (SMO0091); National Literacy Trust (SMO0014); EY Foundation (SMO0134); Pret A Manger (SMO0041); Brokerage Citylink (SMO0035); Joseph Rowntree Foundation (SMO0023); Prof Ann Hodgson and Prof Ken Spours (SMO0012); Develop (SMO0003)

527 Q 54 (Neil Carberry)

528 Written evidence from Federation of Small Businesses (SMO0096)

529 Written evidence from the Association of Accounting Technicians (SMO0102)

530 Written evidence from British Chambers of Commerce (SMO0103); Develop (SMO0003)

531 Written evidence from Mr Anthony Ryan (Headteacher, Chiswick School) (SMO0017); BAE Systems (SMO0114) Joseph Rowntree Foundation (SMO0023)

532 Written evidence from Develop (SMO0003); EMC (SMO0086)

533 Written evidence from Capp (SMO0069)

534 Written evidence from LGA (SMO0011); Telford and Wrekin Council (SMO0009); Brokerage Citylink (SMO0035)

535 Written evidence from Capp (SMO0069)

536 Q 176 (Prof Kevin Orr)

537 Written evidence from Ofsted (SMO0047)

538 iCeGS (see Appendix 6); Written evidence from Leeds City Region Enterprise Partnership (SMO0049); KPMG (SMO0121); Fair Train (SMO0067); Inclusion Trust (SMO0107); National Foundation for Educational Research (SMO0082); National Literacy Trust (SMO0014); The Sutton Trust (SMO0111); Young Enterprise (SMO0122); British Chambers of Commerce (SMO0103); Careers England (SMO0044); Federation of Small Businesses (SMO0096); Chartered Institute of Personnel Development (SMO0043); ICAEW (SMO0063); Institution of Mechanical Engineers (SMO0070); Dr Deidre Hughes (SMO0045); Middlesex University London (SMO0036)

539 Department for Business, Innovation and Skills, No Stone Unturned: in pursuit of economic growth (October 2012): https://www.gov.uk/government/publications/no-stone-unturned-in-pursuit-of-growth [accessed 22 March 2016]

540 The Manchester deal has also been expanded twice, and a second deal was signed with Sheffield.

541 Further deals have been announced with Sheffield City Region, West Yorkshire, Cornwall, North-East, Tees Valley, West Midlands and Liverpool City Region, with a further one in draft for North Midlands. At least 38 other deals are understood to be in the process of negotiation.

542 Written evidence from the Learning Revolution Trust (SMO0022)

543 Written evidence from the Federation of Small Businesses (SMO0096)

544 Written evidence from New Economy (on behalf of Greater Manchester Authority) (SMO0088)

545 Written evidence from Leeds City Region Enterprise Partnership (SMO0049)

546 Written evidence from The Edge Foundation (SMO0024); The Brokerage Citylink (SMO0035)

547 Q 13 (Moira McKerracher)

548 Q 160 (The Rt Hon Alan Milburn)

549 Q 160 (The Rt Hon Alan Milburn)

550 See for example Christoph Ernst and Janine Berg, ILO, ‘The Role of Employment and Labour Markets in the Fight against Poverty’, OECD (2009) https://www.oecd.org/dac/povertyreduction/43280231.pdf [accessed 22 March 2016]

551 Written evidence from Prof Ken Roberts (SMO0002)




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