Why do we bother with qualifications?

Simon Field, Senior Analyst, OECD Directorate for Education and Skills, on the relationship between qualifications and skills 

After all, they are just pieces of paper with fancy script and impressive-looking designs, and employers are surely interested in what people can actually do – their skills – rather than pieces of paper? A new OECD study, entitled Building Skills for All, A Review of England casts a spotlight on this question.

Qualifications are useful because they make skills visible. It is confidently assumed that the holder of a school-leaving certificate can read and understand instructions, and make calculations, and that those with university degrees can do much more. This confidence allows employers and others to decide how to make the best use of the skills of the labour force.

The labour market effects of academic and vocational education over the life cycle: Evidence from a British cohort

Giorgio Brunello and Lorenzo Rocco from the University of Padova look at the benefits and costs of academic and vocational education over the long-term.

Education economists often point out that individuals with a vocational education face a trade-off between short term benefits and long term costs. In the short term, this type of education facilitates the transition from school to work by providing ready to use skills. In the long term, however, vocational skills may depreciate relatively fast and individuals who specialize in these skills may be less capable of adapting to technical change than individuals endowed with a more general (academically oriented) education.
 
The view that the labour market benefits of vocational education are short lived has been recently supported by Hanushek, Schwerdt, Wossmann and Zhang (2015), who compare the life cycle patterns of employment (and wages) for individuals with vocational and academic education using cross-sectional data from the International Adult Literacy Survey (IALS). Since IALS does not allow to follow individuals over time and to distinguish between age and cohort effects, their estimates rely on the assumption that age - employment and age – wage profiles do not vary across cohorts, so that today’s old people in each education category are a good proxy for today’s young people when they will become old. What this literature does is compare someone’s wage with a vocational education at age 50 with the wage of someone holding a vocational qualification aged 30 in the same year, and assumes that today’s 30 year olds will fare in 20 years’ time like today’s 50 year olds. But it is possible that today’s 50 year olds do quite differently because the labour market they entered was very different or because the composition of the older labour force (e.g. in terms of qualifications) is quite different than among the younger cohorts. This makes it difficult to infer the true effects of vocational education by comparing older and younger workers.

The impact of youth unemployment on adult employment trajectories

Dr Stefan Speckesser and Vahe Nafilyan, from the Institute for Employment Studies, look at patterns of young people's movement into and within the labour market over the last 40 years

Long-term trends and effects of the economic cycle

In a recent project for the Department for Business Innovation and Skills, we examined how the transitions of young people to and within the labour market have changed over the last four decades.[1] These changes were analysed for all people in the UK born between 1959 and 1997 with descriptions of some broad trends in the labour market and education activity using all available years of the Labour Force Survey (LFS) from 1975 until 2013.

Our video below shows how much education participation and patterns of entry to the labour markets have changed in the UK since the 1970s. It shows both the continuing trend of education expansion as well as effects of the economic cycle, resulting in varied initial labour market transitions and potential impacts on adult employment trajectories for different cohorts.

Apprenticeships improve employment prospects, but do they help to grow local economies?

Following the publication of the latest evidence review on the effect of apprenticeships by the What Works Centre for Local Economic Growth, Henry Overman looks at the positive effects of apprenticeships.

Given the considerable policy interest in this area, there’s already a whole set of reports and opinion pieces discussing the costs and benefits of apprenticeships. As ever, our report tries to add to our understanding by identifying evaluations that try to carefully identify the causal impact of apprenticeships – that is, what changes for workers or firms as a result of participating. In common with many of our other reviews, these evaluations represent a small subset of the large number of studies available (27 out of more than 1,250 studies met our minimum criteria).

The findings are broadly positive – at least in terms of improving employment prospects. Of the 9 studies that looked at employment, 7 found positive effects for those completing apprenticeships. This compares pretty favourably to many of the other policy areas that we have looked at. Although, interestingly, we also found these kind of success rates for (generally) shorter employment training provision providing that included an in-firm component. This raises an important question about cost-effectiveness of the two types of approaches – one which is, unfortunately, difficult to answer with the evidence available (we’ll do some further work over the next few months that tries to look at this issue). The evidence is a little less positive when it comes to the effects on wages and on encouraging further training – although even here a majority of studies usually show positive effects.

Turning from workers to firms, we found much less evidence (only a couple of studies). There is some evidence from these studies that firms participating in apprenticeships experience economic gains, such as higher productivity or profits. This fits with survey evidence, but more impact evaluations are needed – especially if expanding the number of apprenticeships is going to need firms who don’t currently offer apprenticeships to start doing so.

This lack of good quality evidence on the benefits to firms, highlights one of the big challenges for the government’s drive to increase the number of apprenticeships. Another concerns the lack of evidence on how the detailed design of apprenticeships affect employment returns, completion rates and take-up. For all the strong opinions out there, we have precious little evidence to help shape the development of future apprenticeships.

In this context, it’s worth highlighting a final point. Despite the fact that the evidence we review in our report is broadly positive, it is difficult to extrapolate from this to the effect of a large scale expansion in apprenticeships. The government points to the evidence of positive effects, while critics point to the dangers that pushing out low quality apprenticeships will dramatically lower (or even eliminate) those returns. This is one of those occasions on which both sides could be right – but we won’t know what’s actually happening unless we carefully monitor and evaluate the returns to expanded apprenticeship provision. There’s no reason why we can’t do this, as well as use variation at local level to try to answer questions about the effectiveness of different design aspects of apprenticeships. In the end, a little more boring than huge sweeping arguments about policy, but more likely to improve effectiveness in the long run.

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This piece was originally posted on the What Works Centre for Local Economic Growth blog - http://www.whatworksgrowth.org/blog/apprenticeships-do-work-but-the-devil-is-in-the-detail/

The apprenticeship levy: employers’ reluctance to contribute to apprentice training costs leaves government little choice

CVER's Hilary Steedman looks at how the UK government is tackling the issue of employers' contributions towards the cost of apprenticeship training.

In his summer budget presented to Parliament on 8 July, the Chancellor George Osborne announced the introduction of a levy on large employers that is intended to provide an employer contribution to supplement government funding for apprenticeship training.

Funds raised by the levy would provide apprenticeship employers with an electronic voucher that could be used to purchase training from recognised providers. Further details of the apprenticeship levy were then provided by the Treasury in their productivity plan.

UN World Youth Skills Day: Estimating the returns to apprenticeship

Steve McIntosh, from the Department of Economics at the University of Sheffield, is an applied labour economist, with a particular focus on education issues and how they relate to labour market outcomes. Here he asks why the focus on apprenticeships in the recent election, and what are their apparent benefits?

A previous post in this blog series, by Gavan Conlon, discussed the wage and employment returns to vocational education and training in general. In this new entry, we focus more specifically on apprenticeships. During the recent General Election, all of the major parties promised to prioritise apprenticeships and increase their numbers. Why was there such focus on apprenticeships? Do the apparent benefits of apprenticeships justify this attention? This is an area in which CVER researchers have previously worked extensively, and I summarise some of that previous work in this post.

The basic methodology shared by all research in this area looks at the wages and employment rates of those who complete an apprenticeship, compared to the same outcomes for a comparison group, controlling for as many other wage-deterrmining characteristics of the two groups as possible. Where different studies vary is in their choice of comparison group. Those studies that use survey data, such as the Labour Force Survey, typically compare apprentices to those who have not undertaken an apprenticeship, and whose highest qualification is one level below. For example, for advanced (level 3) apprentices, the outcomes of those with a level 2 qualification as their highest is taken as the estimate of what would have happened to the apprentices if they had not undertaken their apprenticeship. Those studies that use administrative data often compare the outcomes of those who complete an apprenticeship to those who undertake an apprenticeship but do not complete.

UN World Youth Skills Day: Enabling young people to achieve better skills and education and a more productive working life

Dr Stefan Speckesser, from the Institute for Employment Studies, celebrates UN World Youth Skills Day. He takes stock of the current situation in the UK and the EU for young people's skills and looks to the future.

Today has been designated World Youth Skills Day by the United Nations, marking the importance of fostering the acquisition of skills by young people in order to overcome youth unemployment, a global phenomenon and even more of a problem in developing countries. In the UK, we should commemorate the World Youth Skills Day and think about further institutional changes that could enable people to achieve better skills and education and a more productive working life.

In my view, this is about more than just acquiring skills for labour market entry. Education in late youth forms the main stage of human capital investment for future life trajectories and is a precondition for successful adult roles, including economic independence, family formation and, more generally, strong communities.

Young people in the labour market

The situation in the UK labour market has improved significantly in recent years, with an unemployment rate for those aged 16 and over of 5.5 per cent (February to April 2015), which was significantly lower than a year before (6.6 per cent) and only slightly above the level before the 2008/09 recession (5.2 per cent in late 2007). In the EU, only Germany has a lower unemployment rate (4.7 per cent for April 2015) at present.

Compared to this, the unemployment rate for 16 to 24 year olds continues to be much higher (16.1per cent in the months to April 2015), although we have seen a great improvement compared to its peak in late 2011 (22.5 per cent). However, the international comparison with Germany (7.2 per cent), Austria and Denmark (both 10.1 per cent for April 2015) shows that more can be done in the UK.

Clearly, the overrepresentation of young people in unemployment shows that we don't offer enough opportunities for today's young people to work and participate in prosperity. In the long-term, multiple scarring effects will influence the whole life-trajectory of today's young people and will make sure that 'the impacts of current high levels of youth unemployment will be felt by society for decades'.

Institutional change to improve young people's skills in the UK

In the UK, policy initiatives launched in the new Parliament, like the productivity plan, have a strong emphasis on skills and particularly aim to improve young people's skills. Key areas of institutional change are:

·   More young people should have good English and Maths.

·   More apprenticeships for young people and the introduction of a levy on large employers to fund new apprenticeships.

·   A system of professional and technical education offering clear routes into employment.

The impact of these initiatives will depend on successful collaboration between the key stakeholders, such as colleges and employers, on how the educational offer can be improved. We also need employers to give clear guidance to colleges and learners as to which professional standards and practice should be represented in professional and technical education. Modernised vocational qualifications, which will hopefully emerge from this institutional change, need to serve as a strong signal to employers about young people's skills and productivity. This is most crucial for people outside of apprenticeships, whose training in colleges or specialist providers has to meet industry standards in terms of technology and relevance.

There is a wide consensus that education reform and building better, stronger institutions will be the key element for helping young people to progress with skills, but I also believe that skills need to be more clearly linked to their experiences in work environments.

The crucial role of experience

In the 'Craftsman', Richard Sennett described skills as a 'trained practice' and emphasised the role of routine and practising in the work of crafting physical things, but also on forming relationships with others. His view supports the role of experience, like that expressed in the narrow translation of experience as 'Erfahrung' in German, i.e. the skill, knowledge and proficiency element of experience.

It is this element of education, which makes technical and professional education more successful in countries with Dual Apprenticeships, where it achieves better school-to-work transitions, lower youth unemployment and high returns to investment in vocational education and skills. As written in Steve McIntosh's blog in this series, this also explains the focus of all major parties on apprenticeships in the recent election and the government's recent pledge to increase apprenticeships, including a levy to fund them.

However, with a majority of young people learning towards technical qualifications outside apprenticeships, we have to make sure that 'Erfahrung' becomes a strong element of the education of young people. A recent survey of 3,000 firms by the British Chambers of Commerce (BCC) clearly shows that firms believe 'hiring a young person is a risky move due to their lack of experience, not to mention the investment of time and resource needed to train them'. Consequentially 'business people tend to favour more skilled and experienced applicants - and while they do sympathise, their primary function is to run a business, which means making business decisions'.

In conclusion, I believe we need to extend reform of skills policy beyond the focus on educational institutions, curricula, finance, standards, etc., to improve young people's opportunities for gaining practical experience more generally, regardless of whether they aim for an academic or professional education. The BCC study suggested a universal work experience programme in all secondary schools, which could be one option. Alternatively, schools could involve businesses more in the curriculum, invite more employers to school events or develop projects run in partnership with real firms. It will be important to study examples of such employer-school collaborations to further progress the improvement of skills policies for young people.