Speech by Global Lessons in Apprenticeship: International Seminar Urban Institute, Washington, DC Monday, 9th June 2014 © INSSO (UK) Ltd. 2014 All rights reserved. 1 It’s a real pleasure to be with you all this morning. And it’s a privilege to share the platform with Secretary Perez, especially on what I hear is the White House’s ‘working dads’ day! So that puts us both in the same boat. Mr Secretary, I admire the scale of your ambition to double the number of apprenticeships in the United States over the However, I’m reminded of a warning from the independent Leitch Review, which we commissioned in 2006 when I was in the UK Treasury. He said of our skills programmes: “ Despite substantial investment and reform plans already in place, by 2020 we will have managed only to ‘run to stand still’ and the UK’s comparative scale of the challenge is daunting.” of the Union Address. It recognises the challenges that are now central to the labour market in our age of continuing Leitch Review, December 2006 they just can’t get a decent start to their working life. I know bi-partisanship has become all too rare in US politics, but I hope your reform gets the wide backing it deserves, both in Congress and in the individual states. As a Member of the UK Parliament, I am proud of the broad consensus in Britain behind sustained investment in apprenticeship. Support for a publicly funded scheme is shared across parties and between employers and unions. After all, better skills bring shared gains and should be a shared responsibility. That assessment is even more telling now than it was then. People in both our countries are struggling. Many feel left behind as their wages, living standards, and opportunities are all squeezed. The belief that the chances for their children will be better than their own – the American Dream or Promise of Britain – seems beyond reach. When record numbers of young people are either unemployed or underemployed – many of them college jobs and growth in our societies. priority, as you have argued this morning. This waste of talent and potential shames us all. It is also the standout brand, one with extraordinary resilience and potential reach, both in your country and in mine. Nothing less than a national mission is needed to back our young people and create more middle-income jobs, which are the backbone of any country’s aspiring middle classes. And perhaps we should look to measure our ambition against the powerful New Deal of President Roosevelt or President Johnson’s Great Society programmes. We did, however, legislate a little earlier than you for a national system of apprenticeship training – in 1563! – with Four hundred years later, in the mid-1960s, one third of male school leavers in the UK still entered apprenticeships. But by the time the Labour government I served in was elected in 1997, apprenticeships had all but died out – just 65,000 started that year. We gave great weight to supply-side reforms – on raising school standards, rebuilding community colleges, expanding further and higher education, improving adult basic skills – as well as demand-side changes with new employer-led sector skills councils, a national apprenticeship service, and trade union learning reps that boosted training in the workplace. starting that year had more than tripled, to 300,000. As some of the best economies in the world demonstrate, high-class apprenticeship and skills training can help answer the challenge. Research by INSSO and others has shown that countries with advanced systems of apprenticeship generally have lower youth unemployment, less skills shortages, and a workforce that can compete to make the higher value-added goods and services that the world wants to buy. apprenticeship that consistently found at least a ten-fold return on every pound of public expenditure. So, in public policy terms, we have to frame this debate as an economic investment, and not just as an exchequer cost. © INSSO (UK) Ltd. 2014 All rights reserved. 2 275,900 / 328,700 +19% Australia 86 83,814 / 85,470 +2% Canada 87 224,800 / 520,600 +132% England 88 Ireland 89 6,763 / 1,434 -79% 192,128 / 104,332 -46% United 90 States 2007 2012 % Change over 5-year period Source: FISSS (2013) ‘21st Century Apprenticeships’ And, as politicians, we have to avoid presenting apprenticeship either as the single big solution or as a social inclusion initiative. Fundamentally, apprenticeship is a contract between an employer and an employee. In 2010, the Coalition was certainly able to build on Labour’s strong apprentice legacy but they made policy mistakes that could also serve as a useful caution to you here in the US. So, I think our current UK skills minister is making a serious mistake. He declared in a speech last week that his goal is ‘that all young people when they leave school or college should go on either to university or into an apprenticeship’. Other government-funded schemes re-badged as ‘apprenticeship’ his coalition predecessor made four years ago. Last summer, INSSO led a piece of international research that looked at the performance of the English-speaking world in apprenticeship. that we as near cousins had been put in the spotlight, as opposed to the usual comparisons between our AngloSaxon and the Germanic models of apprenticeship. 16-week training programmes qualifying as ‘apprenticeships’ One in 5 employers not paying apprentices their legal minimum wage Double and triple-counting as providers registered growth in apprenticeship numbers. This chart shows the comparative growth of apprenticeship An increase of 132 per cent is either miraculous or ludicrous alongside similar economies – and, remember, all of us were Outright provider fraud and phantom apprentices Recent work in the UK has had to concentrate on putting right these policy problems. © INSSO (UK) Ltd. 2014 All rights reserved. 3 Apprentices per 1000 Workers Youth Unemployment Rate (2013) Completion Rate Employers Hiring Apprentices Female Apprentices Total Score Overall Ranking Australia Canada England USA Ireland 40 (1) 30 (2) 20 (3) 14 (4) 10 (5) 12.1% (1) 12.9% (2) 21.1% (4) 16.3% (3) 28.5% (5) 55% (4) 50% (5) 74% (3) 80% (2) 87% (1) 26.9% (1) 19% (2) 8% (4) 4% (5) 11% (3) 34% (2) 14% (3) 54% (1) 9% (4) 2% (5) 9 14 15 18 19 1 2 3 4 5 Source: FISSS (2013) ‘21st Century Apprenticeships’ And the INSSO research also holds other policy lessons for our two countries. For overall performance on apprenticeship, we came third and fourth. The central challenges facing us both were underlined in the report: High quality apprenticeship experience is too hit and miss, for both employers and apprentices by the mediocre Not enough employers take on apprentices – less It seems to me that, as we contemplate the part that apprenticeship can play in the big economic and social challenges we face, our experience leads us to conclude that we need to build on the best of what is already in Vocational training seen as inferior to college-based learning to devolve responsibility to the real key players, employers and apprentices. Completion rates and opportunities for women are too variable Our UK skills system is still largely a complex and centralised state bureaucracy, so this means reform in three essential dimensions, which can be captured in one word: control. © INSSO (UK) Ltd. 2014 All rights reserved. 4 Control of funding Control of design Control of quality Second, we need to devolve the design and development of apprenticeships more to employers based on industry sector and city region areas. Policies and targets fashioned First, if we really are serious about driving employer demand and extending choice in the system, then we have to hand control of the public subsidy to individual apprentices and their employers. like PwC – will not serve areas like mine in South Yorkshire, where we’ve seen a 15% fall in apprenticeships available in the last year. Our current government plans to provide this subsidy via employers’ payroll systems, which, on a cash basis, is open Such a decentralisation and demand drive could see these developments: Instead, I believe we need a virtual skills accounts system, with a virtual skills currency deposited in both the individual Apprenticeships respond to labour market demands, led by employers The skills credits could then buy the vital on-the-job training that all apprentices need from public or private providers. economic development Cash payments would be routed directly from government to the training provider, though purchasing decisions would like Apprenticeship CarolinaTM – possible National funding and national framework of occupational standards remain And the days of bureaucrats making the calls on what to fund by second guessing employer needs or market demand would be over. Such a system of individual skills accounts (ISAs) would have the following features: Third, we have a problem with consistent quality in our UK system, as recent scandals show. We have at least 24 bodies – from funding agencies to advisory commissions to awarding bodies – all responsible for quality assurance, yet no one is held to account when things go wrong. Training providers compete for employers and apprentices on quality and value for money Employers and apprentices rate their training and act as consumer guides for others, like TripAdvisor Employers and apprentices can add to their skills accounts, and co-payments become more commonplace Fraud risk is reduced by linking ISAs to employers’ unique tax reference (UTR) and apprentices’ national insurance (NI) number Public subsidy cap agreed by Parliament, as with higher education So, we need a new streamlined system with a single overarching and accountable regulator or commissioner – like OFSTED does for schools, or the Children’s Commissioner does for children’s services. The remit of such a skills commissioner would be based on these principles: Be light touch, risk based with tough guarantees to protect whistle-blowers Safeguard the integrity of the apprenticeship system © INSSO (UK) Ltd. 2014 All rights reserved. 5 Report publicly to Parliament and ministers Ensure all apprenticeship statistics are approved by employer involvement increased, and apprentice opportunities expanded. This current century will belong to those countries that can recognise and meet the global competitiveness challenge. And truly world-class apprenticeship has a huge potential part to play in this. Our companies need nothing less. Our young people deserve nothing less. Our countries should settle for nothing less. Thank you. The Rt Hon John Healey MP is a non-executive director of INSSO. He is Member of Parliament for Wentworth & Dearne, South Yorkshire, and served as a government minister from 2001 to 2010. During his time as Adult Skills Minister from 2001-2, he developed the new trade union learning fund and legislated for workplace union learning representatives. He also being responsible for the introduction of sector skills councils. As Treasury Minister, John was for further education colleges. © INSSO (UK) Ltd. 2014 All rights reserved. 6 About INSSO The International Skills Standards Organisation (INSSO) is an independent workforce development consultancy and standards setting body. Our vision is of a highly skilled global workforce that delivers prosperity and inclusive growth for all. Our mission is: shaping the global workforceTM. We achieve our aims by working in a number of innovative ways to meet the needs of our clients. We provide expert strategic consultancy, carry out research, develop and approve skills standards, as well as help our customers develop international opportunities to collaborate on groundbreaking projects. Published by INSSO (UK) Ltd. Company in England and Wales, number 7703188. Email: info@insso.org Website: www.insso.org © INSSO (UK) Ltd. 2014 All rights reserved. 7