Professor Terence Hogarth and Peter Dickinson will present their report ‘Apprenticeships, Reforms and COVID-19 Findings’ from IER’s research on vocational education and training to the All-Party Parliamentary Group on Apprenticeships on Tuesday, 17 May, 3.00 to 4.00 pm.

Discover more about the event and how to register here.

The Low Pay Commission's Report 2020 was launched on 9th December 2020, and was used to set National Minimum Wage (NMW) rates for 2020/21 as announced by the Chancellor Rishi Sunak on 25th November 2020.

IER's report 'How Employers Set Pay For Apprentices' involved a multivariate analysis of apprenticeship pay data, and 30 case study interviews with employers delivering apprenticeship frameworks where low pay was greatest.

The study found that the minimum wage for apprentices applied almost exclusively to new recruits rather than existing employees, who were paid their existing rate for the job. For new recruits, few employers paid the apprentice minimum wage. Instead they added a bonus: as a recognition of the apprentices contribution to the business; out of 'fairness' as part of a Corporate Responsibility; and due to wider market rates either as a result of market forces or because of occupation or sector wide agreed pay rates. The NMW apprentice rate was most likely to be used in those sectors where fully qualified workers were paid the NMW age rate in order to maintain differentials.

Are apprenticeships in peril?

Apprentices are employees of the companies that train them. It stands to reason that if employment falls then the number of apprentices will fall. But looking back to the 2008 economic crisis, it is apparent that the number of apprentices actually increased, in large measure due to the apprenticeship programme expanding its occupational coverage. This time around it looks as if apprenticeships will have little fertile ground to feed any further expansion. Other things being equal it seems reasonable to expect the number of apprentices to show a potentially precipitous fall, at least over the short-term.

A new report by Lynn Gambin and Terence Hogarth looks at the demand for STEM apprenticeships, the costs and risks incurred by employers taking on apprentices and how these might be mitigated. The report, drawing on evidence from studies carried out by IER since the mid-1990s, highlights that there is demand in the UK labour market for intermediate-level STEM skills which Apprenticeships can help to meet. They note that STEM Apprenticeships can offer substantial returns to individuals and employers, however, the cost to the employer for this form of training is relatively high. Estimates indicate that, at the end of the training period, an employer that has delivered a Level 3 Engineering Apprenticeship will have incurred a net cost of around £40,000. It can take an employer around three years after the end of formal training period to recoup this investment. The report also considers how the employer's risk on investing might be reduced and more employers thus encouraged to take on apprentices. You can now download the full report, Employer Investment in Intermediate-level STEM Skills: how employers manage the investment risk associated with Apprenticeships.