DWE0036

Written evidence submitted by Dr Stefan Speckesser

Developing workforce skills for a strong economy

Dear Members of the Public Accounts Committee

In response to this Call for Evidence by the Public Accounts Committee, I would like to summarise some key recommendations how workforce skills can be improved by further developing the existing post-16 education offer. 

What I recommend is based on my own research as a labour economist, which over the course of almost thirty years covered a wide range of areas, from enhancing high-level technical skills via improving mid-range skills required in many occupations to training programmes for (formally) low-skilled people, who left school after GCSEs with very little subsequent education participation and achievement.

About me

I am Dr Stefan Speckesser, Associate Dean for Research and Knowledge Exchange at the School of Business and Law, University of Brighton.  I am a Higher Education professional, a labour economist, and an applied econometrician with an active research interest on the earnings and employment outcomes of vocational education, skills programmes and retraining in adult life. 

Since 1994, I published empirical studies, which contributed to the national and international academic debate as well as policy and practice around the economics of skills and vocational education[1].  My work has always been guided by the objective to achieve the highest standards of originality, significance, rigour, and impartiality in my research, but also to help inform education policy with its findings. 

Therefore, I hope that the research findings I share are helpful to improve vocational education and skills to increase the number of workers in well-paid and highly productive employment, which will help reduce earnings inequality – and social inequality more widely, for a fairer society.

Recommendations and related research studies

Recommendation 1: More routes for Non-A-Level students need to be created to achieve highest-level technical education at university

Students with successful achievement in Non-A-Level programmes would benefit from a tailored offer of tertiary education, which is specific in that it builds on their previous vocational and technical education.  Implementing the recommendations of the Augar review – i.e. the Lifelong Loan Entitlement of four years post-18 education – will only benefit achievers of vocational and academic routes alike if Further and Higher Education Institutions (FEIs/HEIs) offer attractive education routes for both of them.

This recommendation is based on my study with Dr Matthew Bursnall (University of Sheffield) and Dr Andreina Naddeo (Cardiff Metropolitan University), which followed 650,000 English secondary school leavers of the academic year 2009/10 through the education registers until 2012/13, and found very different patterns of education progression.  It found wide gaps in education progression to Higher Education (HE) for people after KS5 when comparing “high achievers” of vocational and academic routes.

While some of these differences in education progression are likely to result from the higher labour market value of Non-A-Level qualifications and preferences of young people to start work rather than attending HE, the limited progression of people leaving vocational and technical routes in KS5 points towards a barrier for further education investment and social mobility.

Recommendation 2: More “Below-degree” tertiary education will enhance advanced and high-level specialist technical skills

Currently, the number of people in HE studying for technical and academic education below degree level (Level 4 and Level 5) is tiny.  However, there are substantial productivity and related earnings effects resulting from such education, often similar to a graduate earnings premium, and education below degree level should expand to provide a cost-effective mechanism to gain high-level expert knowledge and skills.

Again, this recommendation is based on my CVER study (with my co-author Dr Hector Espinoza, now working at the Greater London Authority) making use of data of hundreds of thousands English secondary school leavers.  On the one hand, this study confirms that earnings of degree holders in many subject areas are consistently higher by age 30 than those of people with higher vocational qualifications. On the other hand, we also find that people achieving Level 4-5 qualifications in STEM (Science, Technology, Engineering and Mathematics) subjects earn more than people with degrees from most universities, similar to earnings of graduates from prestigious Russell Group universities.

With many higher apprenticeships involving some form of tertiary education below degree level resulting in lower costs due to shorter programmes and/or local provision by further education colleges, higher vocational education could indeed be a useful alternative to university for professional roles.

Recommendation 3: Apprenticeships need to be focused on labour market entrants, not existing staff, to maximise their economic benefits

Apprenticeships are central to the Government’s ambition to enhance mid-range skills – not least because their positive effects on earnings and labour productivity have been found consistently in many empirical studies looking into British or international labour market data.  In recent years, apprenticeships have been offered increasingly to existing staff in many firms.  However, using apprenticeships in this way is inefficient as there are little or no economic benefits from engaging existing staff. 

My recommendation is based on a rigorous econometric study (“Return to apprenticeships: a comparison between existing apprentices and newly recruited apprentices”), which I published earlier this year in the Oxford Economics Papers journal (with Dr Lei Xu from the University of Bournemouth).  This research makes extensive use of large data from the Department for Education linking learner records of individual apprentices, their earnings outcomes and firm-level information. 

We find that only 25% of apprentices start apprenticeships within a year after they join the firm and that such ‘new entrants’ more often start intermediate apprenticeships, 75% of the apprentices have been in their firms for more than one year. Using robust regression models, we find wage increases of completion of apprenticeship of around 13–35%, reflecting the increase in productivity after successfully completing apprenticeships.  The new entrants benefit much more than existing workers.

The much smaller impact of apprenticeships for existing staff became totally insignificant when we restricted the analysis to cover only people, who continue to work in their apprenticeship firms.  Therefore, the labour market (and likely related: productivity) effects of apprenticeships are much higher when training new entrants rather than existing staff; they are not suitable to enhance the productivity of existing staff.

I recommend that the government should review current apprenticeship regulation/practice in the light of the findings from our indicative study on this topic. 

While businesses can use apprenticeships also to further develop skills of existing staff (making use of their levy funding), introducing conditionality to target levy-funding towards new staff would lead to much higher growth of workplace productivity, which will ultimately benefit the apprenticeship businesses and society at large.

Recommendation 4: Apprenticeships and other programmes for mid-range skills need to include some more advanced/occupation-specific digital skills

Currently, apprenticeships include some education related to Information and Communication Technologies (ICT), which mainly consist of “Functional Skills” at Level 2.  Instead of being occupation-specific, Functional Skills – previously known as Skills for Life – are focusing on managing life in the digital era, i.e. are more related to digital inclusion than job roles.  Of course, education enhancing “digital inclusion” must be a key priority to make sure the opportunities of the computer age can be accessed by the wider population, to avoid social exclusion in a world increasingly requiring some digital skills and to manage new resulting from this.  However, low-level digital skills do not enhance workplace productivity and wages.

To improve mid-range workforce skills, some more advanced and occupation-specific digital skills need to be included in apprenticeship training.  This recommendation is based on an ongoing research project (with Dr Lei Xu from Bournemouth University) funded by the Nuffield Foundation on Digital skills in apprenticeships, which finds positive associations between digital skills and wages only resulting from (relatively) advanced digital skills, while lower-level digital skills like Microsoft Office, computers, email and social media show in several specifications negative associations with observed wages. 

Again, this evidence is based on rigorous research, using data of more than 300,000 adverts from the https://www.gov.uk/apply-apprenticeship website, i.e. for most apprenticeship opportunities in England open to recruitment. 

Recommendation 5:  Low-level vocational education, improving non-cognitive skills in particular, should be enhanced

There remains a large proportion of people with very low (formal) levels of skills in adult life in the UK.  Indeed, my analysis of a recent cohort of secondary school leavers shows that almost a quarter of them have a highest education achievement at Level 1 or below (cverdp019.pdf) by age 25, which largely corresponds to their leaving qualification from secondary education with low-level GCSEs and no subsequent FE attainment. 

With the extension of education participation until age 18, many young people with low GCSE attainment start Level 1 or Entry Level programmes at FE Colleges.  The economic literature suggests that such programmes do not yield significant labour market returns (e.g. cverbrf006.pdf).  However, in my view, many of the studies lump together a wide range of programmes from English for Speakers of Other Languages (ESOL) via non-cognitive skills interventions to Level 1 vocational skills, and a more differentiated view offers important insights. 

When I looked into the impact of such programmes a few years ago (Evaluation of the impact of learning below Level 2), I found significant wage/productivity effects from achieving Entry Level and Level 1 vocational programmes (= when excluding participants in ESOL).  Importantly, achievers remained in education for longer and ultimately acquired higher-level skills.  In addition, one of my more recent studies (with Dr Augustin De Coulon from King’s College and Dr Vahe Nafilyan from the Office for National Statistics) found that remedial and non-cognitive skills interventions – often not creating any certified education outcomes at all – also have large long-term benefits (cverdp028.pdf).

Combining the evidence from the studies, I believe that enhancing post-16 education for young people with low level entry qualifications will be crucial to improve productivity and earnings of people, who at present remain in the labour force with very low (formal) skills. Increased investment here would yield high returns in the present situation, where the impact of Covid made matters much worse for this group of young people, exacerbating many of the well-known barriers to higher education attainment, including low household incomes, peer group effects or living in a low-income area[2]. 

As evidenced by the IFS, targeted support for families like former Education Maintenance Allowance would improve the situation. However, Dr Nafilyan and I also found – when evaluating the Youth Contract a few years ago – that mentoring and 121 support are highly effective ways to help young people remain engaged or re-engage in education, which ultimately leads to higher level skills.  Both financial support and mentoring young people therefore would need to be enhanced to help young people gain valuable mid-range skills and qualifications needed in adult life.

I hope my five recommendations are useful for your investigation.  I am grateful to have been given the opportunity to present my research findings in this way for them to be considered as part of the evidence you are going to review.

I am happy to answer any further questions you may have.

November 2022