Blog by Professor Philip Taylor*
During these turbulent economic times, employers have to make many difficult decisions. They are considering the sustainability of present staffing levels while also thinking ahead to when the economy starts to pick up again. Against a backdrop of significant economic uncertainty and immense pressure from stakeholders, it is important that any important decisions made about whether to invest in or let go of staff are informed by the best available evidence.
This blog explores five aspects for employers to consider with regard to the employment of older workers, and closes with a call to action for employers.
Will the Job Support Scheme Work? Blog by Terence Hogarth
The Job Support Scheme announced by the Chancellor of the Exchequer on 24th September is a form of short-time working subsidy found in countries such as Germany and France. If an employee’s working hours are reduced and thereby their pay, the state will make up a third of the lost earnings and the employer a further third. In summary, the scheme is designed to distribute available work over a larger group of workers than would be the case otherwise thereby helping to offset any increase in unemployment resulting from the pandemic.
There is something unusual in the Job Support Scheme: it potentially increases the employer’s labour costs. Take the following example as an illustration.
Someone working 40 hours a week for ₤12.00 an hour has their hours of work reduced to 24 a week. This means that the weekly wage will reduce from ₤480 to ₤288. The employer will pay a third of the employee’s lost earnings (₤64) and the state a further third. The impact of this is to increase the employee’s hourly rate from ₤12.00 to ₤14.67; an increase of 22 per cent. If this were maintained over six months, to when the scheme is currently scheduled to end, the employer will have ended up paying an additional ₤1,651 to the employee for hours worked.
It is hard to escape the fact that it will be cheaper for the employer to retain as many employees working their usual hours and not use of the scheme, and make the others redundant. Of course redundancy costs and potential income from the Job Retention Bonus for previously furloughed employees may offset the employer’s additional hourly labour costs from using the scheme. Plus the employer will retain a full complement of skilled employees to take advantage of the eventual recovery thereby avoiding future recruitment costs or those which result from difficulties finding people with the right skills.
Nevertheless, the potential effectiveness of the Job Support Scheme would appear to be finely poised between success and failure simply because it requires employers to increase their hourly labour costs.
Blog by Chris Warhurst and Christian van Stolk
The Covid-19 pandemic has exposed job-related health risks, leading to fatalities amongst frontline health and social workers, and worsened physical and mental health for other essential workers as well as non-essential workers.
What might happen to Apprenticeships in England during the Covid-19 economic downturn? Blog by Terence Hogarth and Lynn Gambin*
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.
Trends to date
If one compares the number of apprenticeship starts in April 2019 to one year later, it is possible to gain an indication of the potential fall in the number of apprentices (see Figure 1). In April 2020, the total number of apprenticeship starts was one third of that in April 2019. Should this level of decline persist, this would indicate that 2020 will see around 200,000 fewer people starting apprenticeships than in 2019. In addition to fewer starts, there is a risk that existing apprentices might be unable to complete their training if they are made redundant.
Figure 1: Apprenticeship starts in April 2018, 2019 and 2020
Source: Department for Education Monthly Apprenticeships Statistics Data
Table 1 illustrates the uneven impact of the economic downturn on apprenticeship starts by age group. The number of starts by apprentices under 19 years of age in April 2020 was equal to 17 per cent of the level observed in April 2019. The April 2020 number of starts as a percentage of those in 2019 was 39 per cent for those aged 25 years and over, and 35 per cent for 19-24 year olds (see Table 1). While all age groups are affected, younger people appear to fare worst.
It may be that interventions of one kind or another will ensure that the fall in the number of apprentices will not be as bad as the simple extrapolations presented here suggest. Countries across Europe are hurriedly trying to find the means to prop up their apprenticeship systems. This reflects not only the urgency attached to making sure that existing apprentices complete their training, but also the need to both find places for those exiting compulsory education this year and to protect future skills supply.
Government support for VET during the crisis
On 8th July 2020 the Government announced a range of measures, supported by sizable public funding, designed to secure young people’s access to vocational education and training. These measures included:
- bonus payments to businesses in England to take on new apprentices in the next six months (£2,000 for apprentices aged 16 to 24 and £1,500 for those aged 25 and over. This bonus is on top of the current £1,000 incentive already in place for employers to take on 16 to 18 year old apprentices, and those under 25 years of age with an education, health and care plan;
- a £2 billion Kickstart Scheme in Great Britain paying the wages of 16 to 24 year old universal credit claimants to take six-month work placements;
- tripling the scale of “proven” traineeships in 2020-21 supported by £111 million of investment.
The emphasis in these announcements is on young people as their economic prospects are most at risk from the current health crisis. Whether these measures will prove sufficient and whether more intervention is required, only time will tell. But they mark a substantial intervention into the provision of training of young people by Government.
Apprenticeships the world-over are recognised as being particularly effective in helping people make the transition from school to work and, at the same time, matching the supply of skills to the needs of the labour market. It is for this very reason that policy makers have persisted with this form of training in England even though it has proved to be an uphill struggle at times to persuade employers to provide apprenticeship places.
Avoiding the mistakes of the past
If the bounce back from the recession is relatively rapid, then all that may be required is short-term assistance to ensure that a sufficiently large number of apprenticeship places are available. A wage subsidy may be one means by which this can be achieved. But if the recession proves to be more protracted, then a more root and branch review of vocational education and training may be required. No apprenticeship system worth the name can withstand year-on-year calamitous falls in the number of apprentices. It may be that T-Levels can pick up the slack. The combination of classroom based training allied to a substantial amount of time spent practising skills in the workplace potentially provides a credible alternative to apprenticeships, especially when relatively few of the latter are available.
A more damaging outcome, should any recession prove protracted, could result from ad hoc policy-making. If a cohort, or successive cohorts, of young people are funnelled into makeshift training programmes in order to avoid levels of youth unemployment last seen in the 1980s and 1990s, or even higher, then nothing will have been learnt from the policy mistakes associated with the Youth Opportunities Programme (YOP) and Youth Training Scheme (YTS). The failings of these programmes to deliver training which conferred economic value on their participants led to the establishment of the publicly funded apprenticeship programme in England in 1994.
It would be a pity to make the mistakes of the past once again by resorting to ad hoc policy responses which have a whiff of YOPS/YTS about them. There is a need to maintain access to high quality structured training opportunities so that the current cohort of would-be apprentices are not disadvantaged compared with their counterparts in the past or their likely ones in the future. This is why public support for programmes which provide high quality training opportunities, be it through apprenticeships, T-levels, or something else, is so important at the current point in time. It will not only safeguard young people’s futures, but also the future skill needs of the economy.
* Associate Professor, Department of Economics, Memorial University Newfoundland, St Johns, Canada
Interested in Terence Hogarth’s expert comment on the Kickstart scheme for 16-24 year olds? Read more here.
Interested in other blogs? Read more here
Job growth and job quality: Harnessing the potential of the Social Economy in the post-Covid recovery - Blog by Peter Dickinson
Social economy enterprises (SEEs) – such as cooperatives and social enterprises – comprise around 7% of UK employment. A recent study published by the Institute for Employment Research (IER) found that SEEs weathered the storm of the 2008 Financial crisis better than other enterprises and were able to deliver inclusive growth, sustainable development and higher quality jobs. Moreover SEEs in Italy, Poland, Spain, Sweden and the UK provided faster jobs growth compared to other organisations. The resilience and jobs growth of SEEs in the wake of the 2008 Financial crisis should therefore be harnessed to support the current pandemic economic recovery.
The impact of the 2008 Financial Crisis
The 2008 Financial Crisis created the deepest UK recession since World War II, and the longest for more than a century according to the Office for National Statistics. UK Gross Domestic Product (GDP) did not reach pre-recession levels until 2013. Employment only recovered in 2014.
There were similar impacts across Europe with the severity and length of impact varying between countries. Southern European countries (such as Spain and Italy) fared worse whilst Northern and Eastern European countries (for example, Sweden and Poland) improved more quickly.
Compared to 2007/08, Sweden’s GDP had recovered by 2010, Poland’s by 2011, the UK’s by 2013, Italy’s by 2016, and Spain’s by 2017. Employment levels took longer to resurface: the UK and Poland reached pre-recession rates by 2014, Sweden by 2015, Italy by 2018, and Spain’s has yet to fully recover according to data from Eurostat.
Whilst the UK’s jobs rebound was relatively swift it was also problematic. As the UK’s 2017 Taylor Review of Modern Working Practices reported, the jobs recovery from the Financial Crisis led to more atypical and precarious employment, especially amongst disadvantaged groups of people, and was also characterised by slow wage growth.
The full extent of the Covid-19 induced recession is yet to materialise and so the impact on economic growth and jobs is harder to calculate. Most analysts expect a much sharper recession but a swifter recovery compared with 2008. The latest analysis by HM Treasury suggests a 25% reduction in GDP to midyear, then positive GDP growth from the autumn onwards. The jobs trend is more difficult to predict. In the countries cited above, the jobs lag compared to GDP (in terms of regaining pre-recession levels) varied from one year in the case of the UK to five years in Sweden.
What is more certain is that the impact of the pandemic will not be equal across the working population. The Institute for Fiscal Studies predicts the greatest impact to fall on the most disadvantaged groups in the economy: those on low incomes; young people; Black and Minority Ethnic workers; and women.
SEEs and recovery in selected countries
The response of the SEE sector to the 2008 Financial crisis provides evidence that jobs growth and job quality can both be achieved. Employment growth can be gained alongside inclusive growth and quality jobs benefitting employers, workers, disadvantaged people, their communities and the national economy.
The size and structure of the SEE varies across the five countries in the study. SEE employment accounts for around 17% of jobs in Italy, 12% in Sweden, 9% in Spain, 7% in the UK and 6% in Poland. The sectoral distribution also varies. In Poland, Spain and Sweden, most co-operative jobs are in agriculture but in Italy they are in health and social work, and in the UK it is banking (thanks to building societies).
Whilst the SEE sector varies there has been a consistent pattern across the countries in terms of jobs growth and business performance. SEEs recovered from the 2008 Financial crisis better than mainstream businesses and demonstrated higher growth rates. In Italy, SEEs recorded jobs growth between 2007-11 whilst employment levels elsewhere declined. In the UK, the number of SEEs increased whereas the number of mainstream enterprises fell. In Spain, SEE employment levels reached pre-recession levels by 2016 whereas they have yet to recover in the economy overall. The survival rate of Spanish SEEs was also higher compared to mainstream businesses.
The enhanced business and employment performance of SEEs has been achieved along with providing good quality jobs. Job quality tends to be higher in SEEs, for example, they employ higher proportions of permanent and full-time workers. SEEs are also more likely to be run by and employ women, as well as employing more disadvantaged groups such as disabled people and migrants.
The relative expansion of SEEs, we found in the study, was due to their business performance. Put simply they were better run businesses. They were more innovative, more effective at meeting market and customer needs, and were better managed.
Key practices, inherent to SEEs, contributed to their better management and business performance: governance and internal decision-making structures and processes; reinvesting (rather than extracting) surplus value; prioritising jobs over wages and profit; sharing risks and rewards; and a long-term focus and shared values among members and workers.
SEEs demonstrate human resource practices more widely viewed as underpinning high performance businesses more generally, such as: effective communication structures; generating employee engagement; better skills utilisation; greater worker task discretion; employee involvement in task-related decision-making; and investing in workforce skills. These practices appear to create a ‘virtuous circle’ by which internal practice generates positive organisational performance that, in turn, provides positive employment outcomes, thus reinforcing the practice.
Supporting SEEs to deliver job growth
There is every reason to believe that SEEs can be an important component of the Covid-19 recovery. This possibility is recognised by the OECD and European Commission. The UK Government should therefore be encouraging SEEs as a route to rebuilding the economy and good jobs. In our study, we identified policy pointers to support SEEs, many of which are relevant to the current situation:
- Provide general policy support from Government, LEPs and Combined Authorities, as well as targeted specific support, such as, start-up and business support relevant to SEEs;
- Raise the profile of SEEs amongst business support organisations, and encourage SEE to take-up business support (e.g. via Growth Hubs);
- Promote social value clauses in public tendering so that cost is not the only factor when awarding contracts;
- Mainstream SEEs in enterprise and business education so that budding entrepreneurs are aware of these business models;
- Further support the development of management skills across the sector.
Through supporting and promoting SEEs, local and regional agencies can maximise the benefits of more and better quality jobs, and inclusive economic development. They can help the UK economy be built back quicker and better.