It makes financial sense for FE colleges to ease the pain of unemployment sparked by Covid-19, say John Widdowson and Mark Corney
We are heading for a youth unemployment crisis this September. Thankfully, the prime minister is on the case and a policy package is expected as part of an economic statement due early next month.
When the pandemic started, 2.5 million 18 to 24-year-olds were in employment and 300,000 of them were apprentices. Employment, however, could quickly fall by 500,000 and unemployment rise to 750,000.
Boris Johnson has promised an apprenticeship guarantee for young people. The key question is whether it is workable.
To have any chance of success, the Treasury will need to contribute towards wage costs.
The apprenticeship rate is £4.15 an hour. Working and training time must be at least 30 hours a week and apprenticeships must last 52 weeks. Restricting the employer wage grant to a single payment for each apprentice, the cost for 52 weeks would be £6,474.
This is higher than the average maintenance loan award for full-time higher education students of £6,150 where the Treasury gets 55 per cent back in repayments on earnings above £26,575.
Set at the £6,474 per apprentice, the cost of the wage grant to assist 500,000 newly unemployed 18 to 24-year-olds would be £3.25 billion. A further £2 billion would be needed to cover training costs assuming, say, an average of £4,000 per apprenticeship. A further £0.3 billion might be needed if 30,000 of the present 60,000 16 to 17-year-olds in apprenticeships lose their jobs. Together, the total cost could be £5.6 billion.
An alternative would be for the Treasury to limit the employer grant to the amount it pays unemployed 18 to 24-year-olds on JSA for a full year of £3,062.80 (ie, £58.90 x 52 weeks). This would reduce the employer grant to £1.6 billion. With training costs unchanged at £2.1 billion, the bill would c£3.7 billion.
Some of the extra cost might emerge from what the Department for Education pencilled in for the apprenticeship programme budget in 2020-21, before the pandemic as existing apprentices lose their jobs and the job retention scheme ceases in October.
But the problem lies not with the promise of wage subsidies but with the promise of a guarantee. Whatever the amount, bankrupt and downsizing employers don’t need apprentices and the danger is some young people will feel desperately let down. Other parallel pathways are needed.
Eighteen to 24-year-olds can shield themselves from the labour market by staying in full-time education (FTE). Sadly, this option with maintenance support is only open to full-time HE students. About 1.5 million 18 to 24-yearolds are in FTE. During the summer, more than 250,000 will leave full-time HE and will compete for non-graduate jobs or seek a one-year postgraduate degree.
Loans worth £11,200 are available for taught master degrees. Some universities are pricing them at £8,000. The remaining £3,200 is available for living costs, just a tad over JSA for a year.
Eighteen to 24-year-olds with relevant level 3 qualifications can also shield themselves by entering full-time undergraduate HE. The minimum maintenance loan payment is £3,410 a year and 92 per cent of full-time HE students take them out.
There are 150,000 18-year-olds in full-time FE; 90,000 19 to 24-year-olds. However, 19-24 FE students are not entitled to maintenance loans, let alone grants. Moreover, even though education is “free”, only 14,000 study for a first level 3.
From this September, the government should introduce a full-time study entitlement for 19 to 24-year-olds to achieve a first full level 3. Free education should be backed up by maintenance loans of at least £3,062.80 (equivalent to JSA for a year) so at last full-time 19-24 FE students will be eligible for maintenance loans alongside full-time HE students, redressing a serious inequality.
A maintenance loan entitlement to study full-time FE would help to shield more 19 to 24-year-olds from unemployment and supply more STEM and vocational level 3 qualifications, at a time when apprenticeships cannot guarantee to do so.
FE colleges would be at the heart of helping the other 50 per cent who do not go to university to get higher qualifications. And young people will be proud to be full-time students rather than welfare claimants.