The economic impact of the Covid-19 pandemic is likely to be significant. The OECD recently predicted
that the UK could be the worst effected economy in the developed world, forecasting a fall of 11.5% in national income over the course of 2020. The unemployment rate is also predicted to rise
sharply in the UK as a result of the downturn, with an average of independent forecasts for 2020 and 2021 standing between 6.4% and 7.9% - almost double the current rate.
Young people, especially those who have recently left education, are likely to be particularly hard hit by the subsequent economic downturn of the pandemic, even after bearing the brunt of the initial economic impact.
According to recent research by the Institute for Fiscal Studies
the lockdown will have hit the youngest people the hardest, with employees under the age of 25 around two and a half times more likely to work in sectors that were shut down compared to other employees.
Young people are also likely to be disproportionately affected in the longer term, as the full economic impact of the crisis hits the labour market. Recent research by the Resolution Foundation
has estimated that low skilled young people could face a 37% lower employment penalty over the next three-year period, and for those that do manage to access work, pay could be depressed by 19%.
Apprenticeships have long been heralded as a key mechanism to ease the school-to-work transition, by providing structured training pathways into skilled jobs for young people. Alongside this they can support better labour market outcomes: evidence gathered during the last recession
suggests that in countries with well-developed apprenticeship systems, such as Germany, Austria and Switzerland, young people were shielded from the worst of the economic downturn.
Yet, in England it can be argued that apprenticeships fail to provide a strong route into the labour market for young people - most apprenticeship places go to older workers and those who are already employed. During the current crisis, and beyond, we need to make sure the right policies are in place to ensure young people don’t lose out.
Short-term financial measures to incentivise the creation of jobs and apprenticeships for young people
Financial incentives to create apprenticeships have been widely used by governments around the world, particularly in times of economic crisis when employers may be more reluctant to invest in training.
In response to high youth unemployment in the last recession, the Government introduced a £1,500 grant, over and above the cost of training, to encourage smaller employers to take on apprentices aged between 16-24 years old (‘AGE 16-24’). Evaluation evidence
suggests that this delivered a net return to the state of £18 for every £1 pound spent for Intermediate Apprenticeships, and £24 per pound spent for Advanced Apprenticeships.
The Government should introduce a similar, but more generous £3,000 grant for employers with less than 50 employees who take on a young apprentice for the first time to help boost the number of apprenticeships available to young people. This should be done as part of a suite of measures to reduce youth unemployment as part of a wider youth jobs or training guarantee.
Longer-term reform to ensure a greater share of apprenticeships go to new labour market entrants
Yet, it should be recognised that the system hasn’t been working as well as it could for young people for a considerable period of time.
Most apprenticeships go to existing employees (61%) rather than new labour market entrants, and almost all the pre-levy growth in apprenticeship numbers was down to the expansion of the system to the over 25s - with starts for younger apprentices remaining relatively flat. Starts overall have been down for all age groups since the introduction of the apprenticeship levy in 2017, and while the most recent data showed that they had begun to recover, this again was concentrated amongst those aged over 25.
To ensure that apprenticeships work as a strong pathway into the labour market for young people, wider scale reform of the system is needed. This could include changes to funding rules, such as eligibility criteria, as well as enhanced careers advice.