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Higher earnings

Category: Blog
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Philip Kirby and Conor Ryan on today’s report on apprenticeships.

Since the 1980s, mass higher education has brought with it many benefits. But its growth also saw a fall-off in traditional apprenticeships that has only recently started to reverse. And with the rising debts facing students – even higher in the wake of the 2015 summer budget reforms, as Sutton Trust research has recently shown – the popularity of higher and degree apprenticeships is likely to grow.

Our new report today, Levels of Success, may play a small part in encouraging that growth. It suggests that those that undertake the best apprenticeships (higher apprenticeships at level 5) earn £50,000 more over their lifetime than those with degrees from non-Russell Group universities (a calculation based on a statistical model created by the Boston Consulting Group). It also, incidentally, shows a similar premium for level 3 apprenticeships over A-levels.

All of which suggests that apprenticeships have the potential – although it largely remains potential – to offer a genuine vocational alternative to the traditional academic pathway, and a vehicle for social mobility. Before this potential can be realised, though, the UK apprenticeship system needs to change. So while it was good to see apprenticeships argued over between the parties in the recent election, the pledge of three million additional apprenticeships by 2020 suggest a focus on quantity over quality.

Two years ago – again with research from BCG – we highlighted the shortcomings of a system where most young apprentices are setting their sights at level 2 – GCSE standard – rather than a more demanding level 3. Despite some improvements – shelf-stacking for a few months in a supermarket is no longer seen to cut the mustard – six in ten apprenticeships for young people don’t have any progression to level 3 built into them.

We are realistic enough to realise that the totemic three million is non-negotiable for ministers. But we do think that they should ensure that future level 2 apprenticeships (too many of which offer little more skills-training than work experience programmes) need to incorporate automatic progression to level 3 as standard. Level 3 apprenticeships should be seen as the benchmark standard when it comes to apprenticeships.

And we can aim higher still. Over the last two years, just 30,000 higher apprenticeships have been created. That’s a sign of progress – two thirds of them came in the last year – but it is still a small proportion of over 300,000 undergraduate places taken by 18 and 19 year-olds each year. In the future, many more of these best apprenticeships need to emerge. So the government’s creation of ‘degree apprenticeships’ – in effect, higher apprenticeships with a mandatory degree component – is a promising sign, with estimates suggesting that about 1,500 have been created so far.

Alongside these changes, the culture around apprenticeships also needs addressing. Vocational qualifications are often seen as ‘second best’ or a ‘fall back option’. Given their provision to date this is perhaps understandable. Improvement in the quality of apprenticeships needs to go hand-in-hand with efforts to improve their public perception. Partly, this will come naturally as apprenticeship quality improves, but the government could go further, tasking the Careers and Enterprise Company with ensuring that students are advised of the benefits of vocational as well as academic qualifications at careers events.

It seems strange in 2015 that gender stereotypes are still perpetuated so much in apprenticeships. 96% of engineering apprenticeships are undertaken by men – a surprisingly high number – and 99% of beauty therapy apprenticeships are undertaken by women. The nature of these apprenticeships is reflected in wages, with men earning, on average, over £1 an hour more as apprentices than women. Research by Oliver Wyman also suggests that the very best apprenticeships are disproportionately populated by those from wealthier backgrounds, and that apprentices on the best schemes are more likely to have been given specialist preparation by their school.

Our economy demands that we do much more to craft an apprenticeship sector in the UK that is world class. The UK currently falls a long way behind other developed European countries – Germany, Austria, Switzerland – in the provision of top apprenticeships, in terms of both quantity and quality. This is especially important, because apprenticeships are disproportionately undertaken by those from lower socio-economic groups, and so failure in their provision disproportionately affects this group, too. Levels of Success shows that the best apprenticeships can rival many degrees in terms of earning potential, but we need more good apprenticeships. And we need them faster.