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What future for apprenticeships after coronavirus?

The Covid-19 pandemic and the ensuing economic uncertainty are causing interruptions to apprenticeship training. This is putting the future of apprenticeships at risk just at the time when they will be most needed to protect employment and sustain the recovery.

Apprenticeships offer a mix of training on the job and additional off-the-job training. This is generally a successful combination, but it has made apprenticeships particularly vulnerable during the current crisis.

A survey of firms currently employing apprentices reveals that, on average, only 40% of apprenticeships are continuing as normal with the rest facing learning disruptions or being furloughed or made redundant. Training providers are also under great financial strain.

This raises the fear that even as the crisis subsides, there will be fewer apprenticeships on offer and fewer providers to deliver them. Unless the government intervenes, a decline in apprenticeships remains likely: evidence from past experiences suggests that apprenticeships fall during economic downturns, particularly among young people.

Survey evidence also points to a possible reduction in new apprentices. Worryingly, this would be at a time when the need for apprenticeships may be most pressing: economic predictions point towards large swathes of jobs at risk as a result of the Covid-19 outbreak.

Workers employed in higher-risk sectors (such as retail, hospitality and construction) tend to be younger and have lower education and skills: for many of these workers, retraining via apprenticeships may be an effective route back into stable employment. If the market does not provide as many apprenticeships as needed, the government should intervene.

What do we know about the current impact on apprenticeships?

In recent years, there has been much emphasis and public support for apprenticeships as a route for young people into the labour market and as a way for firms to invest in the skills of their workforce. Apprentices are employed by a firm and spend about 80% of their time receiving on-the-job training with the remaining time devoted to off-the-job training delivered by an independent training provider or a further education college.

This combination of workplace training and education is generally considered to be behind the labour market success of apprentices. In England, this is corroborated by recent evidence showing that young apprentices reap higher earnings in their early years in the labour market than other vocational students qualified at the same level (Cavaglia et al, 2020).

At the same time, economic disruption brought on by the Covid-19 pandemic is making the vulnerabilities of this system plain. For a start, the on-the-job training component of an apprenticeship is inherently linked to economic activity: in many sectors of the economy, either as a result of enforced social distancing or due to fall in demand for goods and services, economic activity has been reduced to a standstill or significantly scaled down.

As a consequence, many apprentices have been furloughed or made redundant, causing a temporary or permanent interruption in their apprenticeships. In addition, apprentices’ participation in off-the-job learning has also been disrupted.

Related question: Which firms and industries have been most affected by Covid-19?

Unfortunately, official statistics on apprenticeship interruptions are not available, which makes it impossible, at this stage, to draw a complete picture of the impact of Covid-19 on current apprenticeships.

A survey of firms employing apprentices commissioned by the Sutton Trust helps to cast some light on firms’ response to the crisis by early April. Figures in the survey should be interpreted with caution as it only includes 150 respondents and was administered to human resources staff, possibly making smaller firms less represented. The survey finds that, on average, only 40% of apprenticeships were continuing as normal; 36% of apprentices employed by the respondents were furloughed; and 8% were made redundant.

While the survey does not report the equivalent figures among the non-apprentice workforce, we can draw a cautious comparison by looking at wave 3 of the Office for National Statistics (ONS) Business impact of Covid-19 Survey: in roughly the same period, firms surveyed by the ONS reported that they have furloughed around 28% of their workforce with less than 1% made redundant.

This gives an initial indication that apprentices are more likely to be furloughed or made redundant than the average worker. This is because apprentices (especially if recently hired) may lack the skills and experience to be temporarily redeployed in different roles: this is partly borne out by the Sutton Trust survey where 29% of employers (potentially up to one in two of those who had to furlough apprentices) claimed that their apprentices could not be moved to other desirable roles because of lack of skills.

Lack of work has been compounded by problems in accessing learning: 40% of respondents in the Sutton Trust survey reported that their apprentices could not continue learning as a result of the training provider closing or interrupting provision.

This stands partly in contrast with evidence collected by the Association of Employment and Learning Providers (AELP) whose survey of 150 training providers on 9 April reveals that 81% of their apprentices were still in active learning thanks to learning switching to online provision. Most providers whose apprentices take a break in learning or leave the apprenticeship (19%) have seen their payments from the government suspended.

The fall in revenue for providers is exacerbated by the reported fall in new apprenticeships starts: a more recent survey of 80 providers by AELP finds that about 60% of employers with which they normally work have stopped all new apprenticeship starts since the outbreak of the pandemic. This is backed by preliminary government statistics reporting that apprenticeship starts from the beginning of the lockdown (23 March) to end of April were down 51% compared with the same period in 2019. Many providers are scaling down their activities accordingly, with some voicing concerns that they may go out of business.

Overall, available evidence is not conclusive and only the publication of complete official statistics will reveal the actual impact on apprenticeship provisions. Yet some indications are clear: a significant amount of apprentices are out of work after being furloughed or made redundant, a higher proportion than among other workers. What will happen to these apprentices?

While many apprenticeships can resume and be completed once economic activity recovers, in some sectors, protracted social distancing or a slower recovery put apprentices at risk of losing their jobs and becoming unemployed unless they are transferred to a new employer. Finding employers willing to take up apprentices may prove hard though.

What does the future look like for apprenticeships and why should we care?

The availability of future apprenticeships will crucially depend on firms’ willingness to hire and train new apprentices. Economists tend to think of firms’ decisions to take up new apprentices both in terms of current production needs and as an investment in future skilled labour. Reduced economic activity is discouraging firms from hiring new apprentices and so will uncertainty about the length of the crisis.

Economic research confirms that apprenticeship training is generally pro-cyclical (Brunello, 2009), with provision going up when the economy does well and falling during economic downturns. For the UK, we can draw some more recent lessons by looking to what happened to apprenticeships during the Great Recession of 2008/09.

Figure 1 plots the number of apprenticeship starts in England officially recorded by the government between the academic years 2002/03 and 2016/17. Apprenticeship starts are reported by age group and we can see that the number of new apprenticeships among under 25 year olds experienced a small year-on-year contraction in 2009 before growing again in 2010 whereas for over-25 (who are predominantly existing employees), apprenticeships actually increased.

Figure 1: Yearly apprenticeship starts by age group

Graph showing yearly apprenticeship starts by age group

Source: Individualised Learners Records
Notes: The figure reports the number of apprenticeships started in each academic year (August-July) by age group.

More direct indications come from the Sutton Trust survey of 150 firms’ future hiring intentions: when asked how many apprentices they intend to hire in the year after the Covid-19 pandemic, one in three firms say that they will offer fewer or no apprenticeships with 20% saying they will offer more.

Overall, this seems to suggest that, even if the Covid-19 outbreak comes to an end, firms are likely to reduce their apprenticeship provision. Without any additional policy intervention, it is quite likely that in the course of at least the next year, fewer apprenticeships will be available, particularly for young people. This is bad news, as it will come at a time when apprenticeships will be particularly needed to retrain workers who lose their jobs.

Related question: How can labour market policy help to get people back into the right jobs?

While any attempt to predict the impact of the Covid-19 crisis on future employment should be considered with circumspection, in some sectors, many jobs are undoubtedly at high risk of being lost, especially if the government eventually withdraws its financial support.

Forecasts by McKinsey indicate that jobs at higher risks of being lost are concentrated in sectors such as Wholesale and Retail, Hospitality and Construction, which are the sectors with the highest proportion of furloughed workers in April, according to the ONS business survey.

The McKinsey analysis also emphasises that workers employed in jobs more at risk tend to be younger, have a lower pay and, crucially, a lower level of education. These workers are particularly vulnerable and unless they are offered access to education and training opportunities, they risk being excluded from the labour market for long stretches of time thus bearing the negative ‘scarring’ effects documented among the long-term unemployed.

Related question: What are the prospects for young people joining the labour market now?

In the coming weeks and months, the government should focus on crafting a comprehensive education and training strategy: an increase in apprenticeship provision will be desirable as, in many sectors, apprenticeships proved to be significantly more beneficial in the labour market than other types of vocational education (especially among young people). In many sectors, this will require getting private firms on board by devising the right incentives.

Related question: How will exam disruptions affect young people's futures?

Economists are also called to do their share of work: today we still know too little about how firms make their training decisions and how apprenticeships affect their productivity. This knowledge gap needs to be closed if we are to build a large-scale, financially sustainable apprenticeship system that increases workers’ productivity and shields them from adverse labour market shocks. The Covid-19 crisis serves as a stark reminder of this: it should not go unheeded.

Where can I find out more?

The future of apprenticeships is in the balance: Guglielmo Ventura explains why once the crisis ends and the programme can resume, firms and training providers may not be there.

The Effect of Economic Downturns on Apprenticeships and Initial Workplace Training: A Review of the Evidence: A 2009 OECD review by Giorgio Brunello.

Covid-19 Impacts: Apprenticeships: Sutton Trust survey of how the pandemic is affecting the apprenticeship sector, in particular those from disadvantaged backgrounds

Who are experts on this question?

Author: Guglielmo Ventura, Centre for Economic Performance, LSE
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