Jobs for Youth Des emplois pour les jeunes United Kingdom (Jobs for Youth Desemplois Pour Les Jeunes) [Pap/Ado ed.] 9264046461

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Jobs for Youth

Jobs for Youth

UNITED KINGDOM

UNITED KINGDOM

Improving the performance of youth on the labour market is a crucial challenge in OECD countries facing persistent youth unemployment. As labour markets become more and more selective, a lack of relevant skills brings a higher risk of unemployment. Whatever the level of qualification, first experiences on the labour market have a profound influence on later working life. Getting off to a good start facilitates integration and lays the foundation for a good career, while a failure can be difficult to make up.

Des emplois pour les jeunes

Ensuring a good start will require co-ordinated policies to bring the education system closer to the labour market, to help disadvantaged young people to find a job or participate in a training course and to facilitate the hiring of young people by firms. OECD has launched a series of reports on the school-to-work transition process in sixteen countries including the United Kingdom. Each report contains a survey of the main barriers to employment for young people, an assessment of the adequacy and effectiveness of existing measures to improve the transition from school-to-work, and a set of policy recommendations for further action by the public authorities and social partners. This report is based on the proceedings of a seminar and is published in English only. However, a French translation of the summary and main recommendations has been included in this volume.

Jobs for Youth UNITED KINGDOM

Already published in the same series: Belgium Canada Korea Netherlands New Zealand Slovak Republic Spain The full text of this book is available on line via these links: www.sourceoecd.org/employment/9789264046467 www.sourceoecd.org/socialissues/9789264046467 Those with access to all OECD books on line should use this link: www.sourceoecd.org/9789264046467 SourceOECD is the OECD online library of books, periodicals and statistical databases. For more information about this award-winning service and free trials ask your librarian, or write to us at [email protected].

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Jobs for Youth (Des emplois pour les jeunes)

United Kingdom

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT The OECD is a unique forum where the governments of 30 democracies work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies. The OECD member countries are: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The Commission of the European Communities takes part in the work of the OECD. OECD Publishing disseminates widely the results of the Organisation’s statistics gathering and research on economic, social and environmental issues, as well as the conventions, guidelines and standards agreed by its members.

This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Organisation or of the governments of its member countries.

Corrigenda to OECD publications may be found on line at: www.oecd.org/publishing/corrigenda.

© OECD 2008 OECD freely authorises the use, including the photocopy, of this material for private, non-commercial purposes. Permission to photocopy portions of this material for any public use or commercial purpose may be obtained from the Copyright Clearance Center (CCC) at [email protected] or the Centre français d'exploitation du droit de copie (CFC) [email protected]. All copies must retain the copyright and other proprietary notices in their original forms. All requests for other public or commercial uses of this material or for translation rights should be submitted to [email protected].

FOREWORD – 3

FOREWORD The OECD’s Employment, Labour and Social Affairs Committee has decided to carry out a thematic review of policies to facilitate the transition from school to work and to improve the career perspectives of youth. This review is a key part of the implementation of the Reassessed OECD Jobs Strategy. Sixteen countries (Australia, Belgium, Canada, Denmark, France, Greece, Japan, Korea, Netherlands, New Zealand, Norway, Poland, Slovak Republic, Spain, United Kingdom and United States) have decided to participate in this review which will take place between 2006 and 2009. Once all these countries have been reviewed, a synthesis report will be prepared highlighting the main issues and policy recommendations which will be discussed subsequently by Employment and Labour Ministers. In this thematic review, the term youth encompasses “teenagers” (i.e. youth aged 15/16-19) as well as “young adults” (aged 20-24 and 25-29). This report on the United Kingdom was prepared by Glenda Quintini, with statistical assistance provided by Sylvie Cimper and Thomas Manfredi. It is the eighth such country report prepared in the context of this thematic review. A draft of this report was presented at a seminar which was organised in London on 13 March 2008 by the Department for Children, Schools and Families, the Department for Innovation, Universities and Skills, and the Department for Work and Pensions.

JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

TABLE OF CONTENTS – 5

TABLE OF CONTENTS List of Abbreviations ................................................................................................. 9 Summary and Main Recommendations ................................................................... 11 Résumé et principales recommandations................................................................. 23 Introduction .............................................................................................................. 39 CHAPTER 1. THE CHALLENGE AHEAD ....................................................... 41 1. Demographics and labour market outcomes ................................................. 41 2. Incidence and dynamics of youth non-employment...................................... 49 3. The transition from education to employment .............................................. 52 4. Characteristics of jobs performed by youth: stepping stones or traps? ......... 57 5. Key points ..................................................................................................... 62 CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB ....... 65 1. Performance of the education system ........................................................... 66 2. Improving education outcomes through quality early childhood education and care......................................................................................... 74 3. Combating failure in education through financial support, guidance and remedial programmes ............................................................................. 77 4. Engaging 14-19-year olds in England through a broader spectrum of learning options ........................................................................................ 84 5. Raising compulsory education requirements .............................................. 100 6. The tertiary education system and its main challenges ............................... 105 7. Training on the job ...................................................................................... 108 8. Key points ................................................................................................... 110 CHAPTER 3. REMOVING DEMAND-SIDE BARRIERS .......................... 113 1. Economic growth and youth employment .................................................. 113 2. Employers’ views of youth labour market readiness .................................. 116 3. Wages and labour costs ............................................................................... 117 4. The strictness of employment protection legislation in the United Kingdom ................................................................................ 125 5. Key points ................................................................................................... 126 CHAPTER 4. PASSIVE AND ACTIVE LABOUR MARKET POLICIES TO MOBILISE YOUNG PEOPLE INTO WORK .......................................... 127 1. The role of passive labour market measures for youth ............................... 127 2. Activation of unemployed youth ................................................................. 132 3. Reducing NEET and engaging youth at risk ............................................... 146 4. Key points ................................................................................................... 153 Bibliography .......................................................................................................... 155 JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

6 – TABLE OF CONTENTS List of Boxes Box 1.1. Box 2.1.

Box 2.2. Box 3.1. Box 3.2. Box 4.1. Box 4.2. Box 4.3. Box 4.4. Box 4.5. Box 4.6.

Measuring the time needed to find a first job after leaving education .................................................................. 55 The role of early childhood and pre-school programmes in reducing school difficulties of children from disadvantaged families ......................................................... 74 Evaluations of EMA pilots and national roll-out in England .......... 79 The minimum wage impact on youth employment, school enrolment and on-the-job training: international evidence ...... 121 The role of the United Kingdom Low Pay Commission............. 123 Active Labour Market Policies for youth ................................... 132 New Deal for Young People: how does it work?........................ 135 The New Deal for Young People: evaluations ............................ 136 New Deal for Lone Parents and New Deal for Disabled People ........ 140 Employment Zones Pilots ........................................................... 144 The US Job Corps programme .................................................... 152

List of Figures Figure 1.1. Figure 1.2. Figure 1.3. Figure 1.4. Figure 1.5.

Figure 1.6. Figure 1.7. Figure 1.8. Figure 1.9. Figure 1.10. Figure 1.11. Figure 1.12.

Share of youth in the working-age population in OECD countries, 1975-2025..................................................... 42 Youth unemployment and employment indicators, OECD, United Kingdom and Europe, 1984-2007 ..................................... 43 Youth unemployment and employment indicators, by gender, OECD countries, 2007 ................................................................... 45 Low- to high-skilled youth unemployment ratio, OECD countries, 1997 and 2005 .................................................. 46 Youth unemployment and employment indicators for teenagers and young adults, United Kingdom and OECD, 1984-2007 ..................................................................................... 47 Incidence of long-term unemployment among youth, OECD countries, 1997 and 2007 .................................................. 48 Share of NEET teenagers and young adults, OECD countries, 1996 and 2005............................................................................... 50 NEET dynamics, United Kingdom, 1991-96 and 2000-05 ........... 51 Persistence of non-employment status in the United Kingdom, 1991-95 and 2001-05 ..................................................................... 52 Activity status of youth aged 15-27, United Kingdom and selected OECD countries, 2002/2005 .................................... 53 Incidence of temporary work one year after leaving education, selected European countries, 2005 ................................................. 57 Transition rates from temporary to permanent employment in Europe, 1996 and 2001 ............................................................. 58 JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

TABLE OF CONTENTS – 7

Figure 1.13. Figure 1.14. Figure 1.15. Figure 1.16. Figure 2.1. Figure 2.2. Figure 2.3. Figure 2.4. Figure 2.5. Figure 2.6. Figure 2.7. Figure 2.8. Figure 2.9. Figure 2.10. Figure 2.11. Figure 2.12. Figure 2.13. Figure 2.14. Figure 2.15. Figure 2.16. Figure 2.17. Figure 2.18. Figure 3.1. Figure 3.2.

Incidence of work-based training among employees, United Kingdom, 1998 and 2005 .................................................. 59 Destination of youth and adults in jobs without training, United Kingdom, 1999 and 2005 .................................................. 60 Incidence of low pay and no pay, United Kingdom, 1995 and 2005............................................................................... 61 Persistence of low pay, United Kingdom, 1991-95 and 2001-05 ......... 62 United Kingdom students’ performance, based on PISA 2006.......... 67 Score dispersion on the PISA 2006 science scale, OECD countries.. 67 School drop-outs in OECD countries, 2005.................................. 69 Share of youth neither in employment nor in education or training by educational attainment, OECD countries, 2005........... 69 Employment rates by educational attainment in OECD countries, 2005 .............................................................. 70 Earnings distribution of adults without an upper secondary qualification, OECD countries, 2005 ............................................ 71 Enrolment in vocational versus general education in upper secondary education in OECD countries, 2005 .............. 72 Population that has attained tertiary education in OECD countries, 2005 .............................................................. 73 Returns to vocational and academic tertiary qualifications, selected OECD countries, 2004 .................................................... 73 Access to licensed ECEC services for children under three, selected OECD countries, 2004 .................................................... 75 Distribution of apprentices across industry, 2007 ......................... 91 Gender distribution of apprenticeships in selected industries, 2007 .............................................................................................. 92 Average net weekly pay of apprentices in selected industries, United Kingdom, 2004.................................................................. 94 Average net pay by gender, age and apprenticeship level, United Kingdom, 2004.................................................................. 94 Apprenticeship completion rates in selected industries, United Kingdom, 2006.................................................................. 96 Hours of training and working per week in selected industries, United Kingdom, 2004 ......................................................................... 97 Projected participation in education and training of 16-17-year olds, United Kingdom, 2007-2017 ....................... 101 Incidence of job-related training by duration of the training course, United Kingdom and European countries, 2003 .............................. 109 Youth employment rates and GDP, 1985-1995 and 1996-2006 ........ 114 Youth and adult employment rates and economic cycles, United Kingdom, 1985-2006 ...................................................... 115

JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

8 – TABLE OF CONTENTS Figure 3.3. Figure 3.4. Figure 3.5.

Figure 3.6. Figure 4.1. Figure 4.2. Figure 4.3. Figure 4.4. Figure 4.5. Figure 4.6.

Employers dissatisfied with the key skills of young recruits, United Kingdom, 2006................................................................ 116 Employers’ views of government priorities in improving skills and education, United Kingdom, 2006 .............................................. 117 Wage profiles of full-time workers by gender in the United Kingdom and selected OECD countries, 1997-2006 ................................................................................... 118 Overall strictness of employment protection legislation and its three main components, OECD countries, 2003 ............. 125 Net unemployment benefit replacement rates, in OECD countries, 2005 ............................................................ 129 Trends in benefit recipiency in the United Kingdom, youth aged 18-24, 1999-2007 ..................................................... 131 Sustainability of employment outcomes for NDYP leavers, 1998-2007 ................................................................................... 138 Immediate destination of young people leaving the NDYP, 1998-2007 ................................................................................... 138 Distribution of youth across NDYP options, 1999-2006 ............ 139 The reformed New Deal programme .......................................... 142

List of Tables Table 1.1. Table 1.2. Table 2.1. Table 3.1. Table 3.2. Table 4.1. Table 4.2.

Youth labour market indicators by age group, United Kingdom, 1987, 1997 and 2007 ...................................................................... 46 Scoreboard for youth aged 16-24, United Kingdom, 1997, 2002 and 2007........................................................................................ 63 Tomlinson’s Diploma Framework proposal ................................. 87 Minimum wages for adults and youth in OECD countries, 2006 ............................................................ 120 Tax wedge including employers’ social security contributions in OECD countries, 2000 and 2006............................................... 124 The cost of youth activation schemes in the United Kingdom, 2005 ............................................................................................ 134 Connexions Services by level of disadvantage ........................... 148

JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

LIST OF ABBREVIATIONS – 9

List of Abbreviations ALMPs

Active Labour Market Policies

CBI

Confederation of British Industry

E2E

Entry to Employment

ECEC

Early Childhood Education and Care

EMA

Education Maintenance Allowance

EZs

Employment Zones

FD

Foundation Degree

FE

Further Education

FLT

Foundation Learning Tier

GDP

Gross Domestic Product

GBP

British Pound

GCSEs

General Certificates of Education

IFP

Increased Flexibility Programme

JSA

Jobseeker’s Allowance

LEPs

Local Employment Partnerships

LPC

Low Pay Commission

LSC

Learning and Skills Council

MPEZs

Multiple Employment Zones

NDDP

New Deal for Disabled People

NDLP

New Deal for Lone Parents

NDYP

New Deal for Young People

NEET

Neither in Employment nor in Education or Training

JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

10 – LIST OF ABBREVIATIONS PISA

Programme for International Student Assessment

SMEs

Small and Medium Enterprises

SSC

Sector Skills Council

SSCCs

Sure Start Children’s Centres

SSLPs

Sure Start Local Programmes

YAs

Young Apprenticeships

JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

SUMMARY AND MAIN RECOMMENDATIONS – 11

SUMMARY AND MAIN RECOMMENDATIONS

The labour market performance of young people In the United Kingdom, measures of youth labour market performance and indicators describing the transition from education to work over the past 15 years paint a mixed picture. On the one hand, there is evidence that youth labour market integration and career progression have improved considerably since the mid-1990s thanks to a combination of specific youth labour market measures, sound reforms of the welfare system and favourable economic conditions. In 2007, the incidence of long-term unemployment among youth was just 16% – 7 percentage points lower than in 1997 and 4 percentage points below the OECD average. Upward wage mobility for youth holding low-paid jobs also increased significantly between the early 1990s and the early 2000s. However, other indicators paint a less rosy picture. First, employment and unemployment rates have deteriorated recently. In 2007, 56% of 16-24-year-old youth were employed, 5 percentage points fewer than in 1997 although 12 percentage points above the OECD average. More importantly, the significant improvement in the youth unemployment rate achieved between the mid-1990s and the early 2000s has partly been undone since 2004. In 2007, the youth unemployment rate was 14%, slightly above the OECD average, compared with just 11% in 2004. These figures hide significant differences between teenagers (16-19-year olds) and young adults (20-24-year olds). The decline in the youth employment rate between 1997 and 2007 was entirely driven by the worsening employment prospects of teenagers while the position of young adults improved up until 2004. However, both age groups were affected by the recent deterioration in labour market performance and this trend could well continue in the short term as projected GDP growth for 2008 and 2009 is revised downwards in the wake of the current uncertain economic climate. Second, 13% of 16-24-year olds were neither in employment nor in education or training (NEET) in 2005 (the latest year for which comparable data are available), and many youth in this group are at high risk of poor JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

12 – SUMMARY AND MAIN RECOMMENDATIONS labour market outcomes and social exclusion. This rate is just above the OECD average of 12% and has increased slightly over the past decade. Low-skilled youth are more than twice as likely to be NEET as their more educated counterparts and there is evidence that some become trapped in this status. Third, while the main activation programme for young people in the United Kingdom – the New Deal for Young People – has helped many youth return to work, sustainable employment outcomes have proved difficult to achieve and there are signs that the programme is no longer as effective as in the early days. In 2007, one in five young people who found work through the programme held a job lasting less than 13 weeks. As a result, the most difficult clients alternate short employment spells with benefit dependency. The government is well aware of the challenges described above and is taking specific actions to address them. The English education system and the UK activation framework are currently undergoing considerable change and a number of ambitious reforms will be implemented over the coming years. The purpose of this report is: i) to analyse the barriers to further progress in youth employment, particularly among the least skilled; ii) to suggest improvements and fine-tuning to the current reform plans; and iii) to put forward policy options to tackle issues that the current reforms do not address.

Note that most of the education system discussion here and in Chapter 2, unless otherwise specified, relates solely to England given the different education systems in parts of the United Kingdom.

Recent reforms Over the past five years, efforts have been stepped up to encourage more young people to stay on in education and training after completing compulsory education, particularly in England. A number of measures have been introduced to this effect, including financial support – through the Education Maintenance Allowance rolled out nationally in 2004 – and the guarantee of a place in an educational institution after age 16 – the September Guarantee launched in 2007. Evaluations have shown that the Allowance has improved beneficiaries’ attendance, retention and achievement in post-16 education and training. The Guarantee has only just been introduced, but it is likely to help keep youth in learning longer by ensuring that every 16-year-old receives an offer to stay in education or training. The Guarantee is currently being extended to cover 17-year olds in 2008.

JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

SUMMARY AND MAIN RECOMMENDATIONS – 13

In 2003, new services for advice and support to 13-19-year olds – Connexions services – were rolled out in England. Connexions were given the double mandate of providing advice and guidance to all 13-19-year olds and of helping youth at high risk of marginalisation in this age group. Notably, they play a key role for 16-17-year olds who are NEET and are not entitled to the financial support or re-employment services that their older counterparts receive from Jobcentre Plus – the public employment service. In 2006, the role played by Connexions for at-risk 16-17-year olds was strengthened by the launch of Activity Agreement pilots in eight areas. This new scheme mimics the mutual obligations approach applied to older unemployed youth and, if successful, could inform the future activation strategy for this specific age group. In 2005, the English administration also launched an ambitious programme – the 14-19 Strategy – aimed at broadening learning options to ensure that every young person finds a learning pathway that suits him/her beyond compulsory schooling. The strategy comprises various initiatives, including an apprenticeship entitlement for suitably qualified 16-19-year olds wanting to engage in work-based learning and the introduction of 17 new Diplomas – composite qualifications combining theoretical and practical learning and designed to bridge the gap between academic and vocational programmes of learning. In addition to financial support, the September Guarantee and the provision of more learning options, England is in the process of approving legislation – the Education and Skills Bill – requiring young people to participate in education and training until they are 18 or until a qualification is obtained (A-levels or equivalent), whichever is earlier. The changes will come into force gradually, requiring youth to participate until they turn 17 from 2013 and until they turn 18 from 2015. Despite its compulsory nature, the reform is designed to allow more flexible participation than just keeping young people in full-time education until they are 18: i) available learning options will be broadened through the 14-19 Strategy; ii) participation will be either at school, in a college, with a private training provider, in work-based learning or in accredited training provided by an employer; and iii) young people working more than 20 hours per week will be allowed to participate in training on a part-time basis. In terms of the activation framework, starting in October 2009, long-term unemployed youth will be referred to a new, more flexible, New Deal programme. With the new programme, the government hopes to improve the sustainability of employment outcomes and to increase costeffectiveness. Changes will be informed by experience with existing New Deal programmes and by two pilots launched in the early 2000s – Employment Zones running since 2000 and the Employment Retention and JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

14 – SUMMARY AND MAIN RECOMMENDATIONS Advancement scheme since 2003. The pilots have involved testing partnerships with private sector providers, increasing competition among providers to drive better value services, and rewarding both providers and clients for sustainable outcomes. Finally, for employees in jobs without training who lack basic qualifications – including youth – the Train-to-Gain programme was rolled-out in England in April 2006. The scheme helps businesses get the training their employees need through impartial advice, referrals to suitable training providers and guidance on funding. In addition, for 16-17-year olds in jobs without accredited training, pilots for Learning Agreements were launched in 2006 in eight areas. The pilots are testing the combination of individually tailored learning agreements and financial incentives to encourage both 16-17-year olds in jobs with no accredited training and their employers to engage in training.

Suggested recommendations in response to the remaining challenges The recent efforts to raise the share of youth who participate in postcompulsory education and training and to improve activation services go in the right direction. However, some of the reforms may need fine-tuning to ensure that their objectives are met. In addition, particular attention needs to be paid in order to ensure that the new initiatives will improve significantly labour market outcomes for the NEET group. Some additional measures are needed to draw up a more effective and coherent strategy. These measures would ideally help achieve three main objectives: improving retention rates in post-compulsory education and training; ensuring the effectiveness of the 14-19 Strategy; and improving the design and coherence of the new activation strategy for disadvantaged youth.

Improving retention rates in post-compulsory education and training In terms of the education system, the priority is to reduce early leaving from education and training. In 2005, the latest year for which comparable data are available, 16% of youth left education without an upper secondary qualification or with just a basic school-leaving certificate.1 This compares with an average of 14% for the OECD area. The labour market performance of these low-skilled youth is rather poor. In 2005, one in five was NEET and the ratio of low-skilled to high-skilled youth unemployment rates stood at five, the second highest in the OECD after Finland. Overall, the labour market 1.

For a definition of “upper secondary education” and a “basic school-leaving certificate” and how these concepts are measured for the United Kingdom and other OECD countries, see Chapter 2. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

SUMMARY AND MAIN RECOMMENDATIONS – 15

performance of this group in the United Kingdom is below the OECD average, while better qualified youth tend to outperform their OECD counterparts. Provision of free early childhood education, which helps reduce early leaving from education and training particularly when interventions are sustained beyond the pre-school period, is lower in England than in many OECD countries. For children aged 3-4, the current entitlement to 12.5 hours per week of free childcare is due to increase to 20 hours per week by 2010. While this is a significant step in the right direction, it still falls short of current international good practice of full-time, year-round, publicly funded pre-school services. For 0-3-year olds, there is no entitlement to early childhood education and care at all, and in 2004 only 25% of children in this age group used licensed childcare facilities. To extend participation in early childhood education and care of children aged 0-3, Sure Start Children’s Centres are due to open in each local community in England by 2010; the initiative began with the 30% most disadvantaged areas in 2006. In disadvantaged communities, the Centres provide child-care services while they focus on guidance for families in the most affluent ones. Recent evidence has found significant beneficial effects for all children and families living in the Centres’ areas, including the most disadvantaged. It has also suggested that stronger effects of the Centres on disadvantaged children than were found in the first evaluations may be due to more pro-active targeting of families in need. Raising the age of compulsory participation in education and training to 18 by 2015 has the potential to ensure that youth enter the labour market better prepared for work. However, the part-time learning participation option may bring in its wake some enforcement problems when job separation occurs. Under the current reform proposal, young people participating part-time who are fired by their employers or who quit voluntarily would not necessarily be required to participate in education or training full-time. Connexions services would support them with meeting the requirement to participate in learning – be it full-time or part-time alongside employment. As a result, there is a risk that unemployed youth allowed to continue to combine part-time learning participation and job search will spend much of their time looking for work. This raises important enforcement issues such as: i) how long these young people should be allowed to search for a job before they are required to participate in education and training full-time; and ii) what mechanisms can be used to ensure active job search. On the other hand, for youth who become subject to a full-time attendance requirement, it may be difficult to find quality education and training provision starting soon after they stop working, although it has to be acknowledged that learning provision has become more flexible recently. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

16 – SUMMARY AND MAIN RECOMMENDATIONS To improve retention rates in secondary education and ensure that youth have the basic skills needed to enter and progress on the labour market, the following measures could be envisaged: •

Increase regular participation in quality early childhood education and care and ensure sustained intervention. The planned entitlement to 20 hours of publicly funded pre-school education for 3-4-year olds could be extended further, particularly for disadvantaged families, to align practice in England to that of many OECD countries. Special attention should also be paid to the transition into primary education. Children and their parents should be supported during this phase to ensure that the benefits of pre-school interventions are sustained. In addition, childcare services provided by Sure Start Children’s Centres to 0-3-year olds should be targeted to disadvantaged families.

•

Consider full-time participation in education or training for unemployed youth who have not found a job within three months of active searching and ensure that there is quality learning provision available starting at least once per quarter. This would moderate the enforcement issues arising from the possible combination of unemployment and part-time participation in training by clarifying that 16-17-year-old youth will not be allowed to remain unemployed or inactive for long if a job separation occurs, and there is adequate supply of quality full-time learning options available to them without much delay.

Ensuring the effectiveness of the 14-19 Strategy To increase retention in post-compulsory education and training, England has undertaken to broaden the learning options available to youth through the 14-19 Strategy. This broader offer of education pathways will also be instrumental to the introduction of the longer compulsory education and training requirement. Along with existing A-levels and GCSEs, the 14-19 Strategy includes the 14-19 Diplomas and Apprenticeships. Besides, this 14-19 learning offer will be underpinned by the Foundation and Learning Tier, available from 2010, which will rationalise and simplify the mix of qualifications available at entry and Level 1, and provide clear progression pathways to Level 2 qualifications. Seventeen 14-19 Diplomas will be rolled out between 2008 and 2013 and will be available as an entitlement from 2013 on. The Diplomas will be available at three levels from foundation to advanced. Extended Diplomas have also been announced recently and will offer young people opportunities to broaden their studies at each level, with particular attention paid to additional English, maths and science learning. Diplomas will combine academic and vocational learning and will include work experience for a minimum of ten days as a key feature. In the longer term, the JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

SUMMARY AND MAIN RECOMMENDATIONS – 17

government envisages that Diplomas will simplify the qualifications framework by building on the best of existing vocational qualifications. In addition, the government is planning to review A-levels in light of the outcomes achieved by the new Diplomas in 2013. From 2013, all suitably qualified 16-19-year olds who wish to enter an apprenticeship will be entitled to a placement. In early 2008, the government also launched a two-month consultation phase on new legislation to expand the use of apprenticeships in the United Kingdom. Proposals include: i) the creation of a national apprenticeship service to lead the expansion; ii) targets for increasing apprenticeships in the public sector; and iii) a pilot wage subsidy programme to make it more attractive for small businesses to offer apprenticeships. As apprenticeships will take on a more prominent role in the transition process, it is important that current problems with the framework are solved before the entitlement takes effect. First, gender segregation is a problem with current apprenticeships and, despite recent improvements, ethnic minorities continue to be under-represented. Second, apprenticeship places are currently insufficient to match demand and the situation is likely to worsen when compulsory participation in education and training is extended to the age of 18. Third, considerable variation exists across industries in terms of apprenticeship quality. Apprenticeships in the traditional trades – particularly in the manufacturing sector – provide more and better training, enjoy higher completion rates and guarantee higher post-completion returns. Manufacturing apprenticeships also record the largest share of apprentices hired externally – as opposed to existing employees starting an apprenticeship – which tends to favour new labour market entrants. Many service sector apprenticeships, on the other hand, are problematic under all these aspects. Overall, active participation of employers in the delivery of the 14-19 Strategy, particularly through the offer of sufficient work placements for apprenticeships, will be essential to the success of all the initiatives. The cost of taking a trainee may be an issue for apprenticeship schemes in some industries, as well as for small and medium-sized enterprises. On the other hand, the 10% of employers currently offering apprenticeship places often pay well above the minimum recommended, suggesting that too-high apprenticeship wages may not be the only cause of insufficient placements. Some studies have suggested that other aspects of apprenticeships may involve high opportunity costs for employers. For instance, because returns from apprenticeships for employers tend to accrue closer to completion while costs are borne upfront, high drop-out rates turn out to be very expensive. Besides, small employers may find it difficult to provide training internally or to identify suitable training providers in remote communities, keeping them from offering placements. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

18 – SUMMARY AND MAIN RECOMMENDATIONS To ensure that the provision planned within the 14-19 Strategy is met and is of high quality, the following measures should be considered:

•

Consider using Diplomas to simplify the academic and vocational qualifications framework. The new Diplomas should be seen as a first step towards the full implementation, in the longer term, of the proposals put forward in the Tomlinson report. The report recommended the creation of a unified framework of Diplomas under which young people would learn literacy, numeracy and other core subjects and would be able to choose a number of options including vocational courses. This recommendation will be particularly relevant when the administration reviews A-levels vis-à-vis the new Diplomas in 2013.

•

Fight gender segregation in apprenticeship training and improve participation of youth from ethnic minorities. Recruitment of new apprenticeships should focus on improving gender and ethnic balance in all apprenticeship schemes, through the use of case studies and the provision of information to school pupils on the pay rates and working conditions in different industries. Current government proposals for so-called “critical-mass” pilots informed by positive discrimination rules in targeted areas may also have the intended effect of providing strong case studies and changing expectations among underrepresented groups.

•

Set guidelines on the minimum number of hours of training to be provided on an apprenticeship. The existence of a substantial training component – whether on-the-job or off-the-job – is essential to apprenticeship training and should be ensured. Unfortunately, at present total hours of training per week – both on-the-job and off-the-job – vary considerably across industries, ranging from 5 in customer service apprenticeships to 29 in electrotechnical apprenticeships.

•

Promote employer-provided off-the-job training and the involvement of Group Training Associations in apprenticeship schemes. There is evidence that the best quality training is provided by employers themselves. Training provided in-house also tends to promote the development of a training culture within firms with little experience of training. However, this option is often only available to large employers. For smaller employers in remote local communities, Group Training Associations – bodies bringing together a number of small employers for the purpose of training provision – have proved to be an effective way to offer apprenticeship places that provide high-quality training and should be promoted. Dedicated help to set up Group Training Associations should be among the tasks of the envisaged national apprenticeship service.

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SUMMARY AND MAIN RECOMMENDATIONS – 19

•

Set apprentice recruitment targets that favour jobless candidates. At present, on average only 55% of apprentices are new to their employer, ranging from 70% in manufacturing industries to just 21% in hospitality. The remainder were already employees of the firm before training started. This is partly because providers in charge of recruiting apprentices tend to concentrate on those who already have a job to fulfil their targets, making little effort to attract and place new applicants. Remuneration schemes could seek to offset this hiring bias by including targets for the placement of new applicants, particularly in industries where they are under-represented.

•

Take action to raise apprenticeship completion rates. Several actions may help increase completion rates: i) better selection of apprentices; ii) better quality of off-the-job training; iii) more monitoring and follow-up during the apprenticeship to identify trainees at risk; and iv) greater efforts to re-direct drop-outs to another, more suitable apprenticeship, as is done in Denmark and Germany where completion rates are higher. The introduction of a trial period may also help eliminate, within a short timeframe, those who have made the wrong choices. Finally, mentoring of apprentices, alongside supervision, could help raise completion rate and this is an area where Union Learning Representatives could help.

•

Ensure more involvement of unions in the design of new qualifications with a work-based component. In countries with a long tradition of apprenticeship training, unions are a key player alongside employers and the institutional actors. In Germany, unions have been instrumental in securing action from employers when apprenticeship places proved to be insufficient to meet demand. In England, unions should be involved in the design of apprenticeships and other work-based learning initiatives alongside Sector Skills Councils – industry-specific bodies actively involved with government to develop the skills that business needs. While some Sector Skills Councils include trade union representatives, this is not a requirement and serious consideration should be given to making it one.

Improving the design and coherence of the new activation strategy for disadvantaged youth The United Kingdom moved from passive to active management of unemployment benefits a decade ago and the mutual obligations approach has informed public employment services for the unemployed ever since. In terms of action for unemployed youth, the New Deal for Young People (NDYP) was introduced in 1998 with the objective of improving the employability of long-term unemployed youth and helping them find a job. Early evaluations of the NDYP were rather positive although they already JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

20 – SUMMARY AND MAIN RECOMMENDATIONS pointed to limited sustainability of outcomes – i.e. some young people fell back into unemployment soon after exiting the scheme. However, the performance of the NDYP has worsened over time. The share of young people leaving it for employment was very high immediately after the programme was introduced – in 1998, it stood at 64% – but fell rapidly thereafter, from 55% in 1999 to 47% in 2006. This deterioration is partly explained by the fact that significantly fewer youth are able to participate in the subsidised employment option – which evaluations have shown to be the most effective one – than when the programme was launched because of a shortage of placements. Sustainability of outcomes still remains a major issue, with one in five youth who leave the programme entering jobs lasting less than 13 weeks. In light of these developments, the government is in the process of reforming the various New Deal schemes – including the NDYP – to create a single new programme. The new scheme will have a more flexible and personalised approach for more disadvantaged customers. For young people, two features will be key. First, youth will be able to count time spent in NEET before they turn 18 towards the six months required for entry into the new programme. Second, the new system will allow fast-tracking of individuals facing particularly severe barriers to work. Hence, young people who lack the skills required to find a job will get faster access to the right training provision. The flexible New Deal will make increased use of partnerships with private, public and voluntary sector providers and will place fewer restrictions governing their activities. The government will also introduce a Star Rating system that will inform performance management and contribute to decisions on awarding future contracts to providers. In this way, the government is hoping to improve performance, increase competition and obtain better cost-effectiveness. The experience with the Employment Zones pilots shows that more freedom to design tailored interventions and payment schemes aimed at incentivising early entry to jobs and sustainable outcomes yield significantly better employment outcomes than the current New Deal programmes. Unfortunately, the Employment Zones pilots were not tendered for on a competitive basis so it is difficult to draw conclusions on the procurement strategy that the government is planning for the flexible New Deal. However, since 2007, Employment Zones have allowed jobseekers to choose their provider, a mechanism that could improve cost-effectiveness if jobseekers are informed about providers’ performances and exercise their choice on the basis of such performance. With few exceptions, the programmes mentioned above are available from age 18, leaving behind a hard-core group at high risk of labour market and social exclusion. This group includes many youth who disengage from JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

SUMMARY AND MAIN RECOMMENDATIONS – 21

education after completing the compulsory schooling requirement and spend several months in NEET before becoming entitled to unemployment benefits and re-employment support. For them, intervening earlier is crucial. At present, in the United Kingdom, this group of difficult 16-17-year olds is directed to Connexions which has a double mandate of providing advice and guidance on learning and career options to all youth aged 13-19 and of providing more intensive and personalised support to at-risk youth in this age group. While users have expressed overall satisfaction with Connexions services, stakeholders have identified gaps in services, particularly in terms of helping youth at high risk of marginalisation and pointed to the need for more resources in terms of funding and staff time. The Activity Agreement pilot could make it easier for Connexions to reach and assist at-risk youth. The scheme includes a small allowance paid to such youth in exchange for compliance with an agreement on a series of actions they should take to move into education, training or employment with training. Indeed, the absence of benefit/services against which engagement from youth can be demanded makes it difficult for Connexions to provide continued support. In 2008, responsibility and funding for Connexions will be devolved to local authorities that will acquire a considerable degree of flexibility in the way they configure youth support services. This is an opportunity for better tailoring of services to local needs and for strengthening support for youth at-risk. The Education and Skills Bill, currently passing through Parliament, includes proposals that local authorities be directed to continue to deliver a number of operational processes and standards that are seen as key to a successful Connexions service. These include access to personal advisers with a minimum level of qualifications, retention of the Connexions brand and the maintenance of vital information flows to inform client tracking. To help the hard-core of very disadvantaged youth, the United Kingdom might also wish to consider the introduction of a residential programme for them, with a strong focus on remedial learning and employment assistance. The long-standing Job Corps in the United States could provide a good model for such a programme. However, such an initiative would be costly: Job Corps slots cost well over USD 22 000 each. But the social benefits can be significant: some, but not all, rigorous evaluations of this scheme have shown positive benefit-cost ratios for very disadvantaged youth. The following actions are recommended: •

Increase incentives for employers to take on long-term unemployed youth on work placements. In the flexible New Deal, long-term jobseekers who do not move into employment while with a provider will be required to undertake at least four weeks of full-time work-focused activity. To ensure sufficient placements with regular

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22 – SUMMARY AND MAIN RECOMMENDATIONS employers, it is important that employers’ incentives are increased through: i) the introduction of a New Deal employer-centred adviser to ensure that employers’ needs are met; ii) greater consistency in ensuring clients’ employability before they are sent on a placement; and iii) more adequate training subsidies and placement durations to meet the requirement that training on the placement must lead to a nationally recognised qualification. •

Lengthen the definition of a sustainable employment outcome. A change in the definition of a sustainable job from one lasting at least 13 weeks in the NDYP to one of at least 26 weeks in the flexible New Deal – as currently proposed by the UK government – is in line with OECD recommendations in this area and would help reduce churning between short jobs and benefits. However, the government should go further and tie part of providers’ remuneration to achieving sustainable employment outcomes of up to two years or more, in line with OECD recommendations in this area.

•

Ensure greater competition between providers in the flexible New Deal. This could be ensured by shifting providers’ market shares in response to provider performance – as measured by the Star Rating system. Allowing jobseekers to choose their provider could also be considered if Employment Zones’ evaluations show that this enhances cost-effectiveness.

•

Ensure that adequate provision of key Connexions services continues as responsibility and funding move to local authorities. The move will provide an opportunity to tailor services to local needs. At the same time, it is important that current efforts to improve services for youth at-risk are intensified, that numbers of suitably qualified personal advisors are increased in the Connexions partnerships where staff shortages have been identified as a constraint to service provision, and that vital information flows to inform client tracking are maintained.

•

Consider the introduction of a residential-type programme to provide intensive support for the hardest-to-place young people. This hard-core group is likely to include youth with complex needs who are very difficult to mobilise and cumulate a number of problems ranging from behavioural difficulties to alcohol and drug abuse. For this group, a residential programme with a strong focus on remedial education, work experience and adult mentoring may well represent a new start in a proactive environment.

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RÉSUMÉ ET PRINCIPALES RECOMMANDATIONS

Les jeunes et le marché du travail Au Royaume-Uni, les mesures des performances des jeunes sur le marché du travail et les indicateurs décrivant la transition de l’école à l’emploi au cours des quinze dernières années permettent de brosser un tableau contrasté. D’un côté, tout laisse penser que l’insertion professionnelle des jeunes et leur évolution de carrière se sont considérablement améliorées depuis le milieu des années 90 grâce aux effets conjugués des mesures expressément en faveur des jeunes sur le marché du travail, des solides réformes du système de protection sociale et des conditions économiques favorables. En 2007, l’incidence du chômage de longue durée des jeunes se situait à 16 % à peine – soit 7 points de pourcentage de moins qu’en 1997 et 4 points en dessous de la moyenne de l’OCDE. La mobilité salariale à la hausse des jeunes occupant des emplois à faible rémunération s’est aussi sensiblement accentuée entre le début des années 90 et des années 2000. D’autre part, d’autres indicateurs donnent une vision moins optimiste. Premièrement, les taux d’emploi et de chômage se sont dégradés ces derniers temps. En 2007, 56 % des jeunes de 16 à 24 ans étaient pourvus d’un emploi, autrement dit 5 points de pourcentage de moins qu’en 1997 mais 12 points au dessus de la moyenne de l’OCDE. Chose plus importante, la nette amélioration du taux de chômage des jeunes obtenue entre le milieu des années 90 et le début des années 2000 est en partie annulée depuis 2004. En 2007, le taux de chômage des jeunes s’élevait à 14 %, soit un taux légèrement supérieur à la moyenne de l’OCDE alors qu’il était de 11 % à peine en 2004. Ces chiffres masquent des écarts considérables entre les adolescents (16-19 ans) et les jeunes adultes (20-24 ans). La baisse du taux d’emploi des jeunes entre 1997 et 2007 a été entièrement induite par l’aggravation des perspectives d’emploi des adolescents alors que la situation des jeunes adultes s’est améliorée jusqu’en 2004. Toutefois, ces deux groupes

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24 – RÉSUMÉ ET PRINCIPALES RECOMMANDATIONS d’âges sont touchés par la récente dégradation des performances du marché du travail et cette tendance pourrait bien se poursuivre à court terme dans la mesure où la croissance du PIB projetée pour 2008 et 2009 est révisée à la baisse à la suite des incertitudes qui règnent actuellement sur la situation économique. Deuxièmement, 13 % des jeunes de 16 à 24 ans n’étaient ni en emploi ni en formation en 2005 (l’année la plus récente pour laquelle on dispose de données comparables), et nombre de ces jeunes risquent fort de connaître un avenir professionnel médiocre et l’exclusion sociale. Ce taux dépasse à peine la moyenne de l’OCDE de 12 % et a légèrement progressé au cours de la décennie passée. Les jeunes peu qualifiés risquent deux fois plus de n’être ni en emploi ni en formation que leurs congénères dont le niveau d’instruction est plus élevé, et on constate que certains restent piégés dans cette situation. Troisièmement, s’il est vrai que le principal programme d’activation en faveur des jeunes au Royaume-Uni – le New Deal for Young People – a contribué au retour à l’emploi de nombre d’entre eux, il s’est révélé difficile d’obtenir des résultats en matière d’emploi durable et ce dispositif n’est plus aussi efficace qu’à ses débuts. En 2007, un jeune sur cinq qui a trouvé du travail grâce à ce programme est resté dans l’emploi moins de 13 semaines. De ce fait, les clients les plus difficiles connaissent une alternance de courtes périodes d’emploi et de dépendance à l’égard de l’assistance sociale. Le gouvernement est tout à fait conscient des défis qui viennent d’être décrits et adopte des mesures spécifiques pour les relever. Le système éducatif anglais et le cadre d’activation britannique sont actuellement en pleine mutation et un certain nombre de réformes ambitieuses seront mises en œuvre au cours des années à venir2. Le présent rapport a les finalités suivantes : i) analyser les obstacles à une nouvelle progression de l’emploi des jeunes en particulier parmi les moins qualifiés ; ii) proposer des améliorations et des ajustements dans les projets actuels de réforme ; et iii) proposer des mesures destinées à surmonter les difficultés qui échappent aux réformes actuelles.

2.

À noter que dans le présent résumé, ainsi que dans le chapitre 2, l’examen du système éducatif porte pour l’essentiel sur l’Angleterre, sauf indication contraire, étant donné que les systèmes d’enseignement varient d’une région à l’autre au Royaume-Uni. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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Réformes récentes Au cours des cinq dernières années, on a redoublé d’efforts pour encourager un plus grand nombre de jeunes à poursuivre leur scolarité ou compléter leur formation à l’issue de l’enseignement obligatoire, en particulier en Angleterre. Un certain nombre de mesures ont été adoptées à cet effet, parmi lesquelles une aide financière – l’Education Maintenance Allowance – mise en place à l’échelle nationale en 2004 – et l’assurance d’obtenir une place dans un établissement d’enseignement après l’âge de 16 ans – la September Guarantee, lancée en 2007. Les évaluations faites ont montré que l’aide financière a amélioré l’assiduité scolaire, la poursuite des études et la réussite des formations parmi ses bénéficiaires de plus de 16 ans. La Guarantee vient tout juste d’être instaurée mais elle va probablement faciliter le maintien des jeunes en formation plus longtemps en assurant une place de formation à chaque jeune de 16 ans. Ce dispositif est actuellement étendu aux jeunes de 17 ans en 2008. En 2003, de nouveaux services de conseils et d’aide aux jeunes de 13 à 19 ans – Connexions services – ont été proposés en Angleterre. Connexions a pour double mandat de fournir des conseils et une orientation à tous les jeunes de 13 à 19 ans et d’apporter une aide à ceux d’entre eux qui risquent fort d’être marginalisés. Ces services jouent en particulier un rôle essentiel auprès des jeunes de 16 à 17 ans qui ne sont ni en emploi ni en formation et qui ne peuvent prétendre à l’aide financière ou aux services de réemploi dont disposent leurs aînés grâce à Jobcentre Plus, le service public de l’emploi. En 2006, le rôle joué par Connexions pour les jeunes de 16 à 17 ans en situation précaire a été renforcé par le lancement dans huit régions de programmes expérimentaux relevant de l’Activity Agreement. Ce nouveau dispositif reproduit la méthode des obligations mutuelles appliquée aux jeunes chômeurs plus âgés et, s’il est couronné de succès, il pourrait inspirer la future stratégie d’activation destinée à ce groupe d’âge spécifique. En 2005, l’administration anglaise a également lancé un programme ambitieux, la 14-19 Strategy, qui vise à élargir les possibilités de formation pour que chaque jeune trouve une filière d’études qui lui convienne au-delà de l’enseignement obligatoire. Cette stratégie comprend diverses mesures, notamment un droit à la formation par apprentissage pour les jeunes de 16 à 19 ans, qui ont les compétences requises et souhaitent entreprendre une formation professionnelle pratique, et l’instauration de 17 nouveaux Diplomas – formation

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26 – RÉSUMÉ ET PRINCIPALES RECOMMANDATIONS composite associant des acquis théoriques et pratiques et conçue pour relier les programmes d’enseignement général et professionnel. En plus du soutien financier, de la September Guarantee et des possibilités de formation plus nombreuses, l’Angleterre est en voie d’approuver un texte de loi – l’Education and Skills Bill – qui exige des jeunes de suivre un enseignement ou une formation jusqu’à l’âge de 18 ans ou moins s’ils obtiennent une qualification du 2e cycle du secondaire (A-levels ou équivalent) avant d’atteindre cet âge. Ces changements seront mis en œuvre de façon progressive, et la scolarisation des jeunes deviendra obligatoire jusqu’à leur 17e anniversaire à partir de 2013 et jusqu’à leur 18e anniversaire à partir de 2015. Malgré son caractère contraignant, cette réforme est conçue pour ménager une formule plus souple que celle qui consiste à simplement scolariser les jeunes à plein temps jusqu’à leur 18e anniversaire : i) les possibilités de formation disponibles seront élargies grâce à la 14-19 Strategy ; ii) ces jeunes participeront dans un établissement scolaire, un établissement supérieur ou auprès d’un prestataire privé à des formations professionnelles pratiques ou à des formations agréées assurées par un employeur ; et iii) les jeunes travaillant plus de 20 heures par semaine seront autorisés à participer à des activités de formation à temps partiel. Dans le cadre des dispositifs d’activation, à partir d’octobre 2009 les jeunes chômeurs de longue durée seront orientés vers un nouveau programme plus souple appelé Flexible New Deal. Avec ce nouveau programme, le gouvernement espère augmenter le placement dans des emplois stables et accroître le rapport coût-efficacité. Les changements apportés tiendront compte des enseignements tirés des programmes New Deal existants et des deux projets expérimentaux lancés au début des années 2000 – les Employment Zones qui existent depuis 2000 et le dispositif Employment Retention and Advancement en place depuis 2003. Ces programmes expérimentaux ont consisté à mettre à l’essai des partenariats avec des prestataires du secteur privé, à accroître la concurrence entre les prestataires pour obtenir des services à un meilleur rapport qualité-prix, et récompenser à la fois les prestataires et les clients si les bonnes performances s’inscrivent dans la durée. Enfin, pour les salariés sans formation qui ne maîtrisent pas les compétences de base – y compris les jeunes – le programme Train to Gain a été instauré en Angleterre en avril 2006. Ce dispositif aide les entreprises à obtenir les formations dont leurs salariés ont besoin grâce à des conseils impartiaux, des orientations vers des prestataires adaptés et des conseils en matière de financement. En outre, JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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pour les jeunes de 16 à 17 ans qui sont pourvus d’un emploi mais n’ont pas suivi de formation agréée, des projets expérimentaux ont été lancés en 2006 dans le cadre des Learning Agreements dans huit régions. Ces programmes expérimentent l’association d’accords de formation personnalisés et d’incitations financières pour encourager les jeunes de 16 à 17 ans concernés et leurs employeurs à s’investir dans la formation.

Proposition de recommandations visant à surmonter les difficultés qui subsistent Les efforts récemment déployés pour accroître la proportion des jeunes qui participent à des activités d’enseignement et de formation post-obligatoires et pour améliorer les services d’activation vont dans la bonne direction. Toutefois, il faudra peut-être ajuster certaines des réformes pour s’assurer que leurs objectifs sont atteints. En outre, il faudra en particulier faire en sorte que les nouvelles initiatives améliorent sensiblement les résultats sur le marché du travail du groupe des jeunes qui ne sont ni en emploi ni en formation. D’autres mesures sont nécessaires pour élaborer une stratégie plus efficace et plus cohérente. L’idéal serait que ces mesures aident à atteindre trois grands objectifs : améliorer le taux de poursuite dans la formation post-obligatoire ; s’assurer de l’efficacité de la 14-19 Strategy; et améliorer la conception et la cohérence de la nouvelle stratégie d’activation en faveur des jeunes défavorisés.

Améliorer le taux post-obligatoire

de

poursuite

dans

la

formation

S’agissant du système éducatif, l’objectif est en priorité de limiter les abandons précoces de scolarité. En 2005, l’année la plus récente pour laquelle on dispose de données comparables, 16 % des jeunes ont quitté le système éducatif sans diplôme de fin d’études secondaires ou en ayant simplement obtenu un certificat de base de fin de scolarité3. Ce pourcentage est à comparer à une moyenne de 14 % pour la zone de l’OCDE. Les performances de ces jeunes peu qualifiés sur le marché du travail sont assez médiocres. En 2005, parmi ces jeunes, un sur cinq n’était ni en emploi ni en formation, et le rapport des taux de chômage des jeunes peu qualifiés à ceux des jeunes très qualifiés – de cinq pour un –, était le plus élevé de la zone OCDE après celui de la 3.

Le chapitre 2 donne une définition du « 2e cycle de l’enseignement secondaire » et du « certificat de base de fin de scolarité » et indique comment ces notions sont mesurées pour le Royaume-Uni et les autres pays de l’OCDE.

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28 – RÉSUMÉ ET PRINCIPALES RECOMMANDATIONS Finlande. Globalement, les performances des jeunes peu qualifiés sur le marché du travail au Royaume-Uni sont inférieures à la moyenne de l’OCDE alors que les jeunes plus qualifiés devancent en général leurs homologues dans la zone de l’OCDE. Les services gratuits d’éducation de la petite enfance, qui aident à réduire le risque de sortie précoce du système scolaire, en particulier lorsque les interventions sont maintenues au-delà de la période préscolaire, sont moins développés en Angleterre que dans beaucoup de pays de l’OCDE. Actuellement, les enfants de 3 à 4 ans ont droit à 12 heures et demie par semaine de garde gratuite, durée qui devrait passer à 20 heures par semaine d’ici à 2010. S’il s’agit d’une initiative importante dans la bonne direction, elle est encore insuffisante au regard des bonnes pratiques actuelles dans d’autres pays où la préscolarisation est assurée à temps plein, toute l’année, et financée par l’État. Les enfants de 0 à 3 ans, quant à eux, n’ont droit à aucun service de garde et d’éducation préscolaires et, en 2004, 25 % seulement d’entre eux étaient accueillis dans des structures agréées. Pour qu’un plus grand nombre des ces enfants bénéficient de services d’accueil et d’éducation de la petite enfance, des centres d’accueil, les Sure Start Children’s Centres, devraient ouvrir dans chaque municipalité en Angleterre d’ici à 2010. Cette mesure a été introduite dans 30 % des zones les plus défavorisées en 2006. Dans les localités défavorisées, ces centres assurent des services d’accueil et dans les plus nanties, ils se focalisent sur le conseil aux familles. On a constaté récemment des effets bénéfiques pour tous les enfants et leurs familles vivant dans des zones desservies par les centres, y compris les zones les plus démunies. Il semblerait par ailleurs que si les effets des centres sur les enfants défavorisés sont plus importants que ceux constatés au cours des premières évaluations, cela tienne peut-être au fait que les familles en difficulté sont mieux ciblées qu’auparavant. En prolongeant l’obligation de poursuivre des études ou une formation jusqu’à l’âge de 18 ans d’ici à 2015, on pourra s’assurer que les jeunes accèdent au marché du travail en étant mieux préparés pour la vie active. Toutefois, la possibilité de participer à temps partiel à des activités de formation pourrait engendrer quelques problèmes de mise en œuvre en cas de cessation d’emploi. Dans le projet de réforme actuel, les jeunes qui participent à des activités de formation à temps partiel ne sont pas nécessairement tenus d’y participer à temps plein lorsqu’ils sont licenciés par leur employeur ou démissionnent. Connexions services les aident à satisfaire l’obligation de participer à des activités de formation – à temps plein ou à temps partiel – parallèlement à un emploi. Dans ces conditions, les jeunes chômeurs qui sont autorisés à continuer d’associer JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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une formation à temps partiel et la recherche d’un emploi risquent de consacrer une grande partie de leur temps à chercher du travail. Cette éventualité soulève d’importantes questions de mise en œuvre notamment : i) pendant combien de temps convient-il de laisser ces jeunes chercher un emploi avant de les obliger à participer à des activités de formation à temps plein ; et ii) quels mécanismes peut-on utiliser pour garantir une recherche active d’emploi. Par contre, les jeunes qui sont soumis à une obligation de formation à temps plein peuvent avoir du mal à trouver une formation de qualité qui commence peu de temps après leur cessation d’emploi, même s’il faut reconnaître que les offres de formation présentent une plus grande souplesse depuis quelques temps. Pour améliorer le taux de poursuite des études dans le secondaire et s’assurer que les jeunes sont dotés des compétences de base nécessaires pour accéder au marché du travail et y progresser, les mesures suivantes pourraient être envisagées :

•

Accroître la participation de la petite enfance à des activités d’accueil et d’éducation de qualité et veiller à des interventions soutenues. Les 20 heures d’éducation préscolaire, financées par l’État, auxquelles ont droit les enfants de 3 à 4 ans pourraient être encore augmentées, en particulier en faveur des familles défavorisées, afin d’aligner la pratique en Angleterre sur celle de nombreux pays de l’OCDE. Le passage à l’enseignement primaire devrait également faire l’objet d’une attention particulière. Les enfants et leurs parents devraient bénéficier d’un soutien durant cette phase afin d’assurer la pérennité des avantages retirés des interventions préscolaires. En outre, les services d’accueil proposés aux enfants de 0 à 3 ans par les Sure Start Children’s Centres devraient cibler les familles défavorisées.

•

Envisager une participation à temps plein à des activités de formation pour les jeunes chômeurs qui n’ont pas trouvé d’emploi au bout de trois mois de recherche active et s’assurer que des formations de qualité peuvent être entamées au moins une fois par trimestre. On atténuerait ainsi les problèmes de mise en œuvre relatifs à l’association possible du chômage et d’une participation à temps partiel à des activités de formation, en établissant clairement que les jeunes de 16 à 17 ans n’ont plus la possibilité de rester au chômage ou inactifs pendant longtemps en cas de cessation d’emploi, et qu’ils disposent dans un délai assez court d’une offre adéquate de formations de qualité, à temps plein.

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30 – RÉSUMÉ ET PRINCIPALES RECOMMANDATIONS

Veiller à l’efficacité de la 14-19 Strategy Pour accroître la poursuite d’études post-obligatoires, l’Angleterre a entrepris d’élargir les possibilités de formation proposées aux jeunes dans le cadre de la 14-19 Strategy. Cette multiplication des filières possibles facilitera la mise en place de l’allongement de la durée de l’obligation de formation. En parallèle avec les certificats existants de l’enseignement secondaire (GCSEs and A-levels), la 14-19 Strategy prévoit des Diplomas et des certificats d’apprentissage. Par ailleurs, ces possibilités de formation des jeunes de 14 à 19 ans s’appuieront sur le Foundation Learning Tier (niveau des apprentissages fondamentaux) qui sera mis en place à partir de 2010 ; ce dispositif rationalisera et simplifiera l’ensemble des diplômes accessibles à l’entrée et au niveau 1, et prévoira une progression nette permettant d’accéder aux diplômes de niveau 2. Dix-sept 14-19 Diplomas seront mis en place entre 2008 et 2013 et ils seront délivrés à partir de 2013. Ces diplômes pourront être obtenus à trois niveaux allant des apprentissages fondamentaux au niveau supérieur. Des diplômes avancés ont aussi été récemment annoncés et donneront aux jeunes la possibilité d’élargir leurs études à chaque niveau, l’accent étant mis plus particulièrement sur le renforcement des apprentissages de l’anglais, des mathématiques et des sciences. Ces diplômes valideront un enseignement général et professionnel, y compris une formation professionnelle pratique d’au moins dix jours, ce qui sera l’une de leurs caractéristiques essentielles. À moyen terme, le gouvernement pense que ces diplômes permettront de simplifier le système des qualifications en se fondant sur les meilleures certifications professionnelles existantes. En outre, le gouvernement prévoit de passer en revue les A-levels à la lumière des résultats obtenus par les 14-19 Diplomas en 2013. À compter de 2013, tous les jeunes de 16 à 19 ans ayant les diplômes requis, qui souhaitent accéder à une formation par apprentissage pourront prétendre à un stage. Début 2008, le gouvernement a également lancé une phase de consultation de deux mois sur une nouvelle législation visant à élargir le recours à la formation par apprentissage au Royaume-Uni. Les propositions prévoient : i) la création d’un service national de formation par apprentissage afin de développer cette pratique ; ii) la fixation d’objectifs en vue d’accroître la formation par apprentissage dans le secteur public ; et iii) un programme expérimental de subventions salariales pour que les petites entreprises trouvent plus intéressant de proposer des formations par apprentissage.

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RÉSUMÉ ET PRINCIPALES RECOMMANDATIONS – 31

Dans la mesure où le rôle de la formation par apprentissage va gagner en importance au stade de la transition, il va falloir résoudre les problèmes que pose actuellement le système de certification avant que l’admission au droit à une formation n’entre en vigueur. Premièrement, la formation par apprentissage pose un problème de ségrégation hommes-femmes et, en dépit d’améliorations récentes, les minorités ethniques continuent d’être sous-représentées. Deuxièmement, les places de formation par apprentissage ne suffisent pas pour répondre à la demande et la situation va vraisemblablement s’aggraver lorsque la participation à des activités d’enseignement et de formation sera obligatoire jusqu’à l’âge de 18 ans. Troisièmement, des variations considérables existent entre les secteurs d’activité du point de vue de la qualité des formations par apprentissage. Dans les métiers traditionnels – en particulier dans le secteur manufacturier – ces formations sont plus nombreuses et de meilleure qualité, affichent des taux de réussite plus élevés et garantissent un meilleur rendement une fois la formation terminée. Dans le secteur manufacturier, elles enregistrent également la part la plus importante d’apprentis recrutés à l’extérieur – par opposition aux salariés de l’entreprise qui entament une formation – ce qui tend à favoriser l’accès de nouveaux arrivants sur le marché du travail. En revanche, les formations par apprentissage dans le secteur des services posent des problèmes à tous ces égards. Globalement, la participation active des employeurs à la mise en œuvre de la 14-19 Strategy, en particulier grâce à l’offre suffisante de stages professionnels pour les formations par apprentissage, sera essentielle pour assurer la réussite de toutes les dispositions prises. Le coût de l’embauche d’un apprenti peut poser un problème dans certains secteurs d’activité de même qu’aux petites et moyennes entreprises. En revanche, les 10 % d’employeurs qui proposent actuellement des places de formation par apprentissage versent souvent des salaires bien supérieurs au minimum recommandé, ce qui tend à montrer que le nombre insuffisant de stages ne tient peut-être pas uniquement qu’au niveau trop élevé des salaires versés aux apprentis. Certaines études donnent à penser que d’autres aspects des formations par apprentissage peuvent entraîner un coût d’opportunité élevé pour les employeurs. Dans la mesure par exemple où la formation par apprentissage ne rapporte à l’employeur que lorsqu’elle est presque terminée alors que son coût doit être supporté au stade initial, les taux élevés d’abandons se révèlent extrêmement coûteux. Par ailleurs, les petites entreprises peuvent avoir du mal à assurer une formation en interne ou, dans les localités excentrées, à repérer les prestataires adéquats ce qui les empêche de proposer des stages.

JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

32 – RÉSUMÉ ET PRINCIPALES RECOMMANDATIONS Pour que soit mis en place les dispositifs prévus dans la 14-19 Strategy et qu’ils soient de grande qualité, les mesures suivantes devraient être envisagées :

•

Envisager d’utiliser les 14-19 Diplomas pour simplifier le système de certification dans le secteur de l’enseignement général et professionnel. Les 14-19 Diplomas devraient être considérés comme une première étape vers la mise en œuvre, à moyen terme, de l’ensemble des propositions présentées dans le rapport Tomlinson. Ce rapport recommandait la création d’un système unifié de Diplomas en vertu duquel les jeunes acquerraient les compétences de base en littératie, calcul et d’autres disciplines essentielles, et seraient en mesure de choisir un certain nombre d’options parmi lesquelles des filières professionnelles. Cette recommandation sera particulièrement pertinente lorsque l’administration passera en revue les A-levels au regard des 14-19 Diplomas en 2013.

•

Lutter contre la ségrégation hommes-femmes dans les formations par apprentissage et améliorer la participation des jeunes issus des minorités ethniques. Dans le recrutement des nouveaux apprentis, il faudrait s’employer à améliorer l’équilibre hommes-femmes et ethnique en recourant à des études de cas et en informant les étudiants des taux de rémunération et des conditions de travail dans les différents secteurs d’activité. Les projets expérimentaux dits « de masse critique », étayés par des règles de discrimination positive dans des zones ciblées, tels que le gouvernement les propose actuellement, pourraient aussi avoir l’effet souhaité, à savoir fournir de solides études de cas et modifier les attentes parmi les groupes sous-représentés.

•

Établir des lignes directrices concernant le nombre d’heures minimum de formation pratique à assurer dans le cadre d’un apprentissage. Il est essentiel dans la formation par apprentissage de prévoir un volet-formation important – qu’il soit sur poste ou hors poste. Malheureusement, le nombre total d’heures de formation pratique dispensé actuellement par semaine – à la fois sur poste et hors poste – varie considérablement selon le secteur d’activité, allant de 5 heures dans le service à la clientèle à 29 heures dans l’électrotechnique.

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RÉSUMÉ ET PRINCIPALES RECOMMANDATIONS – 33

•

Favoriser la formation hors poste assurée par l’employeur et la participation d’associations de groupe aux dispositifs de formation par apprentissage. Il est établi que la meilleure formation est assurée par les employeurs eux-mêmes. Les formations au sein de l’entreprise tendent aussi à avoir pour effet de favoriser l’instauration d’une culture de la formation au sein des entreprises ayant peu d’expérience de cette pratique. Toutefois, cette option ne s’offre souvent qu’aux grandes entreprises. Pour les petites entreprises installées dans des localités excentrées, les Group Training Associations – organismes rassemblant un certain nombre de petites entreprises dans le but d’assurer des formations – se sont révélés être un moyen efficace de proposer des places de formation par apprentissage de qualité ; aussi convient-il de développer ces associations. L’une des tâches du service national de formation par apprentissage envisagé devrait être d’aider expressément à créer des associations de ce genre.

•

Fixer des objectifs de recrutement d’apprentis, qui favorisent les candidats sans emploi. A l’heure actuelle, 55 % en moyenne seulement des apprentis sont inconnus de leurs employeurs, allant de 70 % dans les industries manufacturières à 21 % à peine dans les services de l’accueil et du tourisme. Les autres étaient déjà salariés de l’entreprise avant le début de la formation. Cette situation tient en partie au fait que les responsables du recrutement des apprentis pour atteindre leurs objectifs se polarisent en général sur les candidats qui ont déjà un emploi ne faisant guère d’efforts pour en attirer ou en placer de nouveaux. Les dispositifs de rémunération pourraient viser à compenser cette distorsion de recrutement en prévoyant des objectifs pour le placement de nouveaux candidats, en particulier dans les secteurs d’activité où ces derniers sont sous-représentés.

•

Prendre des mesures pour accroître le taux de réussite des formations par apprentissage. Plusieurs actions pourraient aider à accroître ce taux de réussite : i) améliorer la sélection des apprentis ; ii) relever le niveau de qualité de la formation hors poste ; iii) renforcer le suivi pendant l’apprentissage afin de repérer les stagiaires en difficulté ; et iv) accroître les efforts pour réorienter les décrocheurs vers une autre formation par apprentissage plus adaptée, comme cela est fait en Allemagne et au Danemark où les taux de réussite sont plus élevés. La mise en place d’une période d’essai pourrait

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34 – RÉSUMÉ ET PRINCIPALES RECOMMANDATIONS également aider à écarter rapidement ceux qui ont fait un mauvais choix. Enfin, le mentorat des apprentis de même que leur supervision pourraient contribuer à accroître le taux de réussite, et c’est là un domaine dans lequel les Union Learning Representatives pourraient se révéler utiles.

•

S’assurer d’une plus grande participation des syndicats dans la conception des nouvelles formations qualifiantes comprenant un volet pratique. Dans les pays où la formation par apprentissage existe depuis longtemps, les syndicats jouent un rôle essentiel aux côtés des employeurs et des acteurs institutionnels. En Allemagne, les syndicats ont contribué à obtenir des mesures de la part des employeurs lorsque les places de formation par apprentissage se sont révélées insuffisantes pour répondre à la demande. En Angleterre, les syndicats devraient être impliqués dans la conception des formations par apprentissage et d’autres actions de formation en entreprise aux côtés des Sector Skills Councils – organismes de branches d’industrie qui s’occupent activement avec les pouvoirs publics de développer les compétences dont les entreprises ont besoin. S’il est vrai que certains de ces conseils comptent parmi leurs membres des représentants syndicaux, la présence de ces derniers n’est pas obligatoire et il faudrait sérieusement envisager qu’elle le devienne.

Améliorer la conception et la cohérence de la nouvelle stratégie d’activation en faveur des jeunes défavorisés Le Royaume-Uni est passé il y a une dizaine d’années d’une gestion passive à une gestion active du système d’indemnisation du chômage, et depuis lors, les services publics de l’emploi s’inspirent du principe des obligations mutuelles en ce qui concerne les chômeurs. S’agissant des actions menées en faveur des jeunes chômeurs, le New Deal for Young People (NDYP) a été adopté en 1998 dans le but d’améliorer l’employabilité des jeunes chômeurs de longue durée et de les aider à trouver un travail. Les premières évaluations du NDYP étaient plutôt positives même si elles révélaient déjà la durée limitée des résultats – certains jeunes se sont retrouvés au chômage peu de temps après être sortis du dispositif. Toutefois, les résultats du NDYP se sont dégradés au fil du temps. Immédiatement après l’adoption du programme, le pourcentage des jeunes qui l’ont quitté pour un emploi était très élevé – 64 % en 1998 – mais il a ensuite rapidement fléchi de 55 % en 1999 à 47 % en 2006. Cette dégradation tient en partie au fait

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RÉSUMÉ ET PRINCIPALES RECOMMANDATIONS – 35

que faute de places de stage, les jeunes pouvant bénéficier d’un emploi subventionné – qui, selon les évaluations, est le plus efficace – sont beaucoup moins nombreux qu’ils ne l’étaient lorsque le programme a été lancé. La stabilité des emplois résultants demeure un problème majeur puisque parmi les jeunes qui sortent du programme, un sur cinq occupe un emploi pendant moins de 13 semaines. Compte tenu de ces développements, le gouvernement procède actuellement à la réforme des divers dispositifs relevant du New Deal – y compris le NDYP – en vue de créer un seul nouveau programme. Le nouveau dispositif prévoit une stratégie plus souple et plus personnalisée en faveur des clients les plus défavorisés. En ce qui concerne les jeunes, deux caractéristiques seront essentielles. Premièrement, les jeunes pourront comptabiliser le temps pendant lequel ils ne se trouvent ni en emploi ni en formation avant 18 ans dans les six mois requis pour accéder au nouveau programme. Deuxièmement, le nouveau système permettra d’orienter rapidement les personnes dont l’insertion professionnelle se heurte à des obstacles particulièrement graves. C’est pourquoi les jeunes qui n’ont pas les compétences requises pour trouver un emploi auront plus rapidement accès à la formation adéquate. Le Flexible New Deal aura davantage recours à des partenariats avec des prestataires des secteurs privé, public et associatif et limitera les restrictions applicables à leurs activités. Le gouvernement adoptera également un système de notation, le Star Rating, qui éclairera la gestion des performances et aidera à prendre les décisions concernant l’octroi de contrats futurs aux fournisseurs. De cette façon, les pouvoirs publics espèrent améliorer les performances, accroître la concurrence et obtenir une meilleure rentabilité. Les leçons tirées des projets expérimentaux réalisés dans les Employment Zones montrent qu’en donnant plus de liberté pour concevoir des interventions sur mesure et avec des incitations financières qui récompensent une insertion professionnelle précoce et durable, on obtient des résultats sensiblement meilleurs en matière d’emploi que par le New Deal actuel. Malheureusement, ces projets expérimentaux n’ont pas fait l’objet d’appels d’offres à la concurrence de sorte qu’il est difficile de dégager des conclusions concernant la stratégie de passation de marchés que les autorités prévoient pour le Flexible New Deal. Toutefois, depuis 2007, les Employment Zones permettent aux demandeurs d’emploi de choisir leurs prestataires de formations, ce qui pourrait améliorer la rentabilité si ces demandeurs étaient informés des performances de ces prestataires et faisaient leur choix en conséquence.

JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

36 – RÉSUMÉ ET PRINCIPALES RECOMMANDATIONS À quelques exceptions près, les programmes mentionnés ci-dessus sont accessibles à partir de l’âge de 18 ans, laissant de côté un noyau dur de jeunes dont les risques d’exclusion sociale et du marché du travail sont élevés. Il s’agit, entre autres, de nombreux jeunes qui sont sortis du système éducatif en fin de scolarité obligatoire et se sont retrouvés plusieurs mois ni en emploi ni en formation avant de pouvoir prétendre à des indemnités de chômage et à un soutien au titre du réemploi. Dans le cas de ces jeunes, il est capital d’intervenir plus tôt. À l’heure actuelle, au Royaume-Uni, ces jeunes de 16 à 17 ans en grande difficulté sont orientés vers Connexions qui a pour double mandat d’assurer à tous les jeunes âgés de 13 à 19 ans des conseils et une orientation sur les possibilités de formation et d’emploi, et de fournir un soutien plus intense et personnalisé à ceux parmi eux qui sont à risque. S’il est vrai que les utilisateurs de Connexions se sont dits dans l’ensemble satisfaits de ce service, les diverses parties prenantes ont recensé des lacunes, en particulier en ce qui concerne l’aide proposée aux jeunes dont le risque de marginalisation est élevé, et ont signalé qu’il fallait plus de ressources financières et de disponibilité de la part du personnel. Grâce au projet expérimental entrepris au titre de l’Activity Agreement, Connexions pourrait plus facilement atteindre et aider les jeunes à risque. Ce dispositif prévoit le versement d’une indemnité de faible montant à ces jeunes si en contrepartie ils acceptent de mener une série d’actions pour reprendre des études, suivre une formation ou trouver un emploi associé à une formation. De fait, en l’absence de prestations/de services en échange desquels il est possible d’exiger un engagement de la part des jeunes, Connexions a du mal à apporter un soutien durable. En 2008, la responsabilité et le financement de Connexions seront délégués aux autorités locales qui disposeront ainsi d’une souplesse considérable pour configurer les services d’aide aux jeunes. Cette mesure donnera l’occasion de mieux adapter les services aux besoins locaux et de renforcer le soutien en faveur des jeunes à risque. L’Education and Skills Bill, actuellement soumis au Parlement, prévoit, entre autres propositions, d’ordonner aux autorités locales de maintenir certaines fonctions opérationnelles et normes jugées essentielles pour assurer le succès de Connexions. Ces autorités devront notamment permettre l’accès à des conseillers personnels ayant les compétences minima requises, retenir la marque Connexions et maintenir le système d’information existant et indispensable au suivi des clients. Pour aider les jeunes les plus défavorisés, le Royaume-Uni pourrait aussi envisager de mettre en place à leur intention un

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RÉSUMÉ ET PRINCIPALES RECOMMANDATIONS – 37

programme de formation en internat, qui serait fortement axé sur la remise à niveau et l’aide à la recherche d’un emploi. Le programme Job Corps adopté depuis longtemps aux États-Unis pourrait être un bon modèle à cet égard. Un projet de ce genre serait toutefois coûteux : dans Job Corps, le coût de chaque place dépasse largement 22 000 USD. Cela dit, les avantages pour la société peuvent être considérables : certaines évaluations rigoureuses (mais pas toutes) de ce dispositif ont mis en évidence un rapport coûts-avantages positif pour les jeunes très défavorisés. Les actions suivantes sont recommandées : •

Inciter davantage les employeurs à prendre de jeunes chômeurs de longue durée en stage professionnel. Dans le flexible New Deal, les chômeurs de longue durée qui ne trouvent pas d’emploi pendant leur prise en charge par un prestataire seront tenus de participer à temps plein et pendant quatre semaines au moins à une activité centrée sur l’emploi. Pour que les employeurs offrent un nombre suffisant de places pour ces activités, il est important d’accroître les incitations qui leur sont proposées par : i) la création d’un poste de conseiller New Deal dédié aux employeurs afin de s’assurer que l’on répond à leurs besoins ; ii) un suivi plus systématique pour veiller à l’employabilité des clients avant de les orienter vers un emploi ; et iii) des subventions de formation et des durées de stage plus adéquates pour que le stage professionnel débouche, comme il se doit, sur une certification reconnue à l’échelle nationale.

•

Modifier la définition d’un emploi durable. Une modification de la définition d’un emploi durable, de 13 semaines dans le NDYP à 26 semaines dans le Flexible New Deal – à l’instar de ce que propose actuellement le gouvernement britannique – correspond aux recommandations de l’OCDE dans ce domaine et aiderait à réduire l’alternance d’emplois de courte durée et d’indemnisations. Toutefois, les pouvoirs publics devraient aller plus loin et subordonner une partie de la rémunération des prestataires à une durée d’emploi de deux ans au moins, voire davantage, conformément aux recommandations de l’OCDE en la matière.

•

Ménager une plus grande concurrence entre les prestataires dans le Flexible New Deal. On pourrait à cette fin modifier la part de marché des prestataires en fonction des performances

JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

38 – RÉSUMÉ ET PRINCIPALES RECOMMANDATIONS de chacun – telles qu’elles sont mesurées par le système de notation Star Rating. On pourrait également envisager de laisser les demandeurs d’emploi choisir leurs prestataires si les évaluations des Employment Zones révèlent que cette solution améliore la rentabilité. •

S’assurer que les services essentiels de Connexions continuent d’être fournis alors que les pouvoirs décisionnels et financiers sont transférés aux autorités locales. Cette délégation de pouvoirs donnera une occasion d’adapter les services aux besoins locaux. Parallèlement, il est important d’intensifier les efforts actuellement déployés pour améliorer les services en faveur des jeunes à risque, d’accroître l’effectif de conseillers personnels diplômés dans les centres Connexions, où on a constaté que la pénurie de personnel est un obstacle à la fourniture de services, et de préserver le système d’information existant pour garantir le suivi des clients.

•

Envisager la mise en place d’un programme d’accueil en internat afin d’apporter un accompagnement intensif aux jeunes les plus difficiles à insérer. Ce noyau dur compte vraisemblablement des jeunes dont les besoins sont complexes, qui sont très difficilement mobilisables et qui cumulent un certain nombre de problèmes aussi divers que les troubles du comportement, l’alcoolisme ou la toxicomanie. Pour cette population, l’accueil en internat, fortement axé sur la remise à niveau, l’expérience professionnelle pratique et le mentorat par des adultes, pourrait bien représenter un nouveau départ dans un environnement constructif.

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INTRODUCTION – 39

INTRODUCTION Improving the performance of youth in the labour market is a crucial challenge in OECD countries. Population ageing is looming but this is not a magic pill to solve young people’s problems. While smaller youth cohorts are likely to create more opportunities for youth, it is crucial that young people possess the skills required in today’s and tomorrow’s labour market. In the United Kingdom, the government is particularly concerned about the share of youth who leave education and training too early and find it difficult to enter stable employment and progress on the labour market. In addition, youth employment and unemployment rates have recently worsened. To address these challenges, the United Kingdom government has recently launched a number of ambitious reforms ranging from key changes to secondary education to an overhaul of existing active labour market programmes. The former aim to reduce early leaving of education and training, the latter to improve the sustainability of activation outcomes and to raise programmes’ cost-effectiveness. The purpose of this report is to point to areas where improvement is necessary and possible and to suggest additional actions needed to make sure that the current ambitious reform strategy attains its objectives. Chapter 1 presents basic facts on the situation of youth in the United Kingdom labour market. The role of education and training in shaping the transition from initial learning to the labour market is analysed in Chapter 2. The demand-side barriers to youth employment are explored in Chapter 3. Finally, Chapter 4 analyses the role of welfare benefits and activation services in helping non-employed youth get a job.

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CHAPTER 1. THE CHALLENGE AHEAD – 41

CHAPTER 1 THE CHALLENGE AHEAD

Over much of the past decade, sustained economic growth in the United Kingdom has contributed to falling unemployment and increased labour market participation. Youth benefited considerably from this improved labour market performance until the mid-2000s but their labour market position has deteriorated thereafter. In addition, average performance often hides considerable variation in the early labour market experience of youth. The purpose of this chapter is to describe the labour market performance of youth over the past decade (Sections 1 and 2). The chapter also examines the process of transition from education to employment (Section 3) and documents the nature of entry jobs for youth, focusing on whether entry-level jobs represent stepping stones into the labour market or dead ends (Section 4).

1. Demographics and labour market outcomes A. The share of youth in the working-age population is likely to decline to just 18% in 2025 Similarly to most other OECD countries, the United Kingdom experienced a decline in the share of youth in the working age population between the mid-1970s and 2005. The decline was more modest than in most OECD countries, thus while the share of youth in the working-age population in the United Kingdom was among the smallest in the OECD in 1975 – at about 22% – the country ranked much better according to this indicator in 2005. However, the size of younger cohorts relative to that of their older counterparts is projected to decline further to reach about 18% in 2025 (Figure 1.1).

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42 – CHAPTER 1. THE CHALLENGE AHEAD Figure 1.1.

Share of youth in the working-age population in OECD countries, 1975-2025a Percentages

40 Mexico

Korea 35

30

Mexico

United States

OECD 25 EU-19 United Kingdom

Germany Italy Sweden

20

United Kingdom

Sweden EU-19 Germany

Mexico United States OECD United States Korea OECD Sweden

United Kingdom

EU-19 Italy Germany

Italy 15

Korea

10 1950

1975

2000 2005

2025

a) Ratio of the population aged 15-24 to the population aged 15-64. Source: National Projections and United Nations projections for 2006 for Australia, Denmark, New Zealand and Spain; 2004 for Luxembourg; 2005 for all the other countries.

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CHAPTER 1. THE CHALLENGE AHEAD – 43

B. The labour market prospects of youth have worsened recently Between the mid-1990s and 2004, the youth unemployment rate declined from over 17% to just 11%, almost 5 percentage points below the OECD average. However, the following three years partly reversed the gain of the previous decade and, in 2007, the youth unemployment rate in the United Kingdom was slightly higher than the OECD average at 13% (Figure 1.2, Panel A). Figure 1.2.

Youtha unemployment and employment indicators, OECD, United Kingdom and Europe, 1984-2007 b

OECD 23 21

EU-19 b

United Kingdom c

A. Unemployment rate

Percentages 75

d

B. Employment rate

70 65

19

60

17

55

15

50

13

45

11

40

9

35

4.0

C. Relative unemployment ratio

e

3.5 3.0 2.5 2.0 1.5

a)

Youth aged 16-24 for Iceland, Norway, Spain, Sweden, the United Kingdom and the United States; youth aged 15-24 for all other countries in the OECD average. b) Unweighted averages; values for 2007 are preliminary. c) Unemployed as a percentage of the labour force in the age group. d) Employed as a percentage of the population in the age group. e) Unemployment rate of youth (15/16-24)/unemployment rate of adults (25-54). Source: National labour force surveys.

Youth unemployment rates being strongly affected by the business cycle, the ratio of youth to prime-age adult unemployment rates is perhaps a more relevant indicator of how youth unemployment has evolved over the past decade. This measure shows that, in the United Kingdom, the improvement in youth unemployment has been considerably smaller than JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

44 – CHAPTER 1. THE CHALLENGE AHEAD that of adults. While the youth unemployment rate was less than twice that of adults in the early 1990s, the ratio had risen to 3.9 in 2007 (Figure 1.2, Panel C). This rising trend is not unique to the United Kingdom. In fact, over the past decade, the relative position of youth has worsened in more than two thirds of OECD countries (see Quintini and Martin, 2006). The youth employment rate, another indicator of youth labour market performance – at 56% in 2007 – stood significantly above the OECD and EU-19 averages (Figure 1.2, Panel B). Its reduction, since the peak level of 70% in the late 1980s, should not be interpreted as an indication of poor performance since it partly reflects the longer time spent in education on average by youth over the past two decades which, in turn, contributes positively to future human capital. In many OECD countries, young women are more likely to be unemployed than young men. This is not the case in the United Kingdom where the unemployment rate of young women is 4 percentage points lower than that of their male counterparts. However, at very similar employment rates across gender, a lower female unemployment to population ratio suggests that young women spend more time in education or out of the labour force more generally (Figure 1.3). For the United Kingdom, the difference in ranking across OECD countries between the unemployment rate and the unemployment to population ratio is also noteworthy. It suggests that more young people are in the labour force than in other OECD countries. Major differences in unemployment rates occur across skill levels and they have only slightly decreased over time. Low-skilled youth in the United Kingdom are five times more likely to be unemployed than high-skilled youth. This is more than twice the ratio in the OECD on average, and is the second highest ratio observed in the OECD after Finland (Figure 1.4). Youth aged 16-24 are also an heterogeneous group as far as age is concerned. A large share of the youngest in this group – 16-17-year olds – are still enrolled in school, very few combine work and study and very few can count on welfare benefits if they become unemployed. When trends in key labour market indicators are examined separately for 16-17- and 18-24-year olds (Table 1.1), they show that over the past decade the position of the very young has changed significantly while that of youth aged 18-24 has remained stable. It should be noted that while the labour market position of 16-17-year olds has deteriorated since 1997, this has been accompanied by a significant rise in full-time educational enrolment. This is reflected in a much flatter unemployment to population ratio for this group over the past decade. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

CHAPTER 1. THE CHALLENGE AHEAD – 45

Youtha unemployment and employment indicators, by gender, OECD countries, 2007b

Figure 1.3.

Percentages A. Unemployed to populationc United Kingdom Turkey Sweden Finland Spain Canada Slovak Republic France Poland New Zealand United States Germany Australia Italy Iceland Belgium Portugal Denmark Greece Austria Ireland Hungary Switzerland Luxembourg Norway Netherlands Czech Republic Mexico Japan Korea

B. Unemployment rated Slovak Republic Poland Turkey Sweden Italy France Hungary Belgium Finland United Kingdom Greece Spain Luxembourg Portugal Germany Canada United States Korea New Zealand Czech Republic Australia Ireland Japan Austria Denmark Iceland Norway Switzerland Netherlands Mexico

10.9 Men

OECDf = 6.4

0

5

Spain Sweden Finland Greece United Kingdom Portugal New Zealand Poland France Canada Belgium Australia Slovak Republic Italy Netherlands Germany United States Denmark Austria Iceland Turkey Switzerland Hungary Norway Ireland Japan Czech Republic Mexico Korea Luxembourg

10

15

Women

OECDf = 5.8

0

5

10

Men

16.0

OECDf = 13.0

0

10

Greece Poland Italy Spain Belgium Portugal Turkey Slovak Republic Sweden France Hungary Finland United Kingdom New Zealand Germany Czech Republic Luxembourg Canada United States Australia Austria Netherlands Ireland Mexico Denmark Switzerland Korea Japan Norway Iceland

7.9

15

C. Employment ratee Korea Hungary Luxembourg Greece Poland Italy Belgium Slovak Republic Czech Republic France Portugal Japan Sweden Turkey Germany Finland Spain Ireland Norway United States United Kingdom Mexico Canada Austria New Zealand Australia Switzerland Denmark Netherlands Iceland

20

30

40

Women

12.7

OECDf = 13.9

0

10

20

a)

30

40

Men OECDf = 46.2

57.3

0 Hungary Luxembourg Greece Italy Turkey Poland Czech Republic Slovak Republic Belgium France Korea Portugal Mexico Spain Japan Sweden Germany Finland Ireland Austria United States New Zealand United Kingdom Norway Switzerland Canada Australia Denmark Netherlands Iceland

10 20 30 40 50 60 70 80

Women

OECDf = 40.7

54.6

0

10 20 30 40 50 60 70 80

Youth aged 16-24 for Iceland, Norway, Spain, Sweden, the United Kingdom and the United States; youth aged 15-24 for all other countries. b) Data for Belgium, Denmark, France, Germany and Luxembourg are preliminary 2007 estimates based on Eurostat, European Union Labour Force Survey. c) Unemployed as a percentage of the population in the age group d) Unemployed as a percentage of the labour force in the age group. e) Employed as a percentage of the population in the age group. f) Unweighted average; values for 2007 are preliminary. Source: National labour force surveys.

JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

46 – CHAPTER 1. THE CHALLENGE AHEAD Low- to high-skilled youtha unemployment ratio,b OECD countries, 1997 and 2005c

Figure 1.4.

Ratio of low- to high-skilled youth unemployment rates 12

2005 1997

10 8 6 4

OECDd 1997 = 2.7 d

OECD 2005 = 2.2

2 0

a)

Youth aged 16-24 for Iceland, Norway, Spain, Sweden, the United Kingdom and the United States; youth aged 15-24 for all other countries in the OECD average. b) Data refer to the ratio of unemployment rates of low-skilled youth (15/16-24, ISCED4); ISCED: International standard classification of education. c) Data for Japan refer to 2003 instead of 2005. d) Unweighted average. Source: OECD Education database.

Table 1.1.

Youth labour market indicators by age group, United Kingdom, 1987, 1997 and 2007a Percentages 16-17-year olds

18-24-year olds

1987

1997

2007

1987

1997

2007

Em ployment rate Unemployment rate Em ployment rate for youth not in full-tim e education Unemployment rate for youth not in full-tim e education Unemployment to population ratio

50.0 19.3

45.9 17.7

31.7 23.4

69.8 15.0

65.3 12.5

63.0 12.4

75.6

64.3

48.6

75.2

75.5

73.8

18.6

21.2

31.1

15.0

12.8

12.5

12.0

9.8

9.7

12.3

9.3

8.9

Workless rate b

10.7

9.7

10.9

22.2

18.1

18.3

Enrolm ent rate

56.3

72.9

78.8

10.4

26.0

30.1

a) b)

Data refer to the March-May quarter of the reference year. Data refer to young people not enrolled in full-time education and not employed as a percentage of the reference population. Source: Office for National Statistics (ONS), Labour Force Survey (LFS).

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CHAPTER 1. THE CHALLENGE AHEAD – 47

Figure 1.5 explores differences between age groups further and presents three main labour market indicators for teenagers (15/16-19-year olds) and young adults (18-24-year olds). For these two age groups, it is possible to compare the United Kingdom with the OECD average. This disaggregation shows how the decline in the youth employment rate between 1997 and 2007 was entirely driven by the worsening employment prospects of teenagers while the position of young adults improved slightly up until 2004. The fall in the unemployment rate between the mid-1990s and 2004 was also mostly driven by the fall in this indicator for young adults. However, both age groups have been affected by the recent rise in unemployment rates. This recent rise in youth unemployment – also reflected in higher unemployment to population ratios – was at odds with the improvement observed in the OECD on average over the same period. Figure 1.5.

Youtha unemployment and employment indicators for teenagers and young adults, United Kingdom and OECD, 1984-2007 United Kingdom 16-19

25 23 21 19 17 15 13 11 9 7 5

A. Unemployment rate

United Kingdom 20-24 c

OECD 16-19

Percentages 80

b

OECD 20-24

b

d

B. Employment rate 70 60 50 40 30 20

16

e

Unemployment/population ratio 14 12 10 8 6 4

a)

Youth aged 16-24 for Iceland, Norway, Spain, Sweden, the United Kingdom and the United States; youth aged 15-24 for all other countries in the OECD average. b) Unweighted averages; values for 2007 are preliminary. c) Unemployed as a percentage of the labour force in the age group. d) Employed as a percentage of the population in the age group. e) Unemployed as a percentage of the population in the age group. Source: National labour force surveys.

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48 – CHAPTER 1. THE CHALLENGE AHEAD

C. The incidence of long-term unemployment has fallen considerably According to the ILO definition of unemployment, the incidence of long-term unemployment among youth in the United Kingdom has decreased significantly over the past decade. In 1997, one in four unemployed youth were unemployed for over a year compared with only one in six in 2007 (Figure 1.6). Among unemployment benefit claimants, the incidence of long-term unemployed has fallen considerably by design (6% in 2006) with the introduction of the New Deal for Young People (NDYP), a compulsory active labour market programme which allocates youth to employment or training options after 10 months into the unemployment spell. Incidence of long-term unemploymenta among youth,b OECD countries, 1997 and 2007c

Figure 1.6.

Percentage of unemployed youth 70 2007

1997

60 50 40 d

30 20

OECD 1997 = 24.9 d

OECD 2007 = 19.6 10 0

a) b)

Twelve months and over. Youth aged 16-24 for Norway, Spain, Sweden, the United Kingdom and the United States; youth aged 15-24 for all other countries. c) Data for France refer to 2006. d) Data for Iceland and Luxembourg are not statistically reliable; for Switzerland, they are not available. Unweighted average of countries shown. Source: National labour force surveys.

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CHAPTER 1. THE CHALLENGE AHEAD – 49

2. Incidence and dynamics of youth non-employment A. One in eight young people were neither in employment nor in education or training in 2005 The proportion of young people neither in employment nor in education or training (NEET) provides another key indicator of labour market performance for youth. Indeed, this is a group at high risk of labour market marginalisation and social exclusion. In the United Kingdom, in 2005, 9.3% of teenagers were NEET, the fifth highest rate in the OECD after Turkey, Mexico, Italy and Greece. The share of youth in NEET was larger among young adults – 17% – although the United Kingdom was doing better in terms of this age group relative to its OECD counterparts and to the OECD average (Figure 1.7). The average NEET rate for youth aged 16-24 in the United Kingdom stood at 13% in 2005. In 2004, the UK government set the target of reducing the share of 16-18-year-old youth who are NEET by 2 percentage points by 2010. However, since then, the share of 16-18 NEET has actually increased slightly – from 9.7% in 2004 to 10.9% in 2005 and back down slightly to 10.3% in 2006 – making it more difficult to attain this target.

B. Exiting NEET has become easier but repeated spells are more frequent Figure 1.8 explores NEET dynamics using longitudinal data from the British Household Panel Survey (BHPS). Youth who were NEET at some point during 1991 spent over two of the following five years in this status, about six months longer than those who were NEET at some point in 2000. The total time spent in NEET is not necessarily the result of a single long NEET spell. Between 2000 and 2005, about one third of youth who were NEET in 2000 returned to employment or learning but became NEET again later on. This compared with just over one in four between 1991 and 1996. Low-skilled youth find it more difficult to exit NEET than 16-24-year olds on average, although according to some indicators their position has improved over time. Just about half of low-skilled youth who were NEET in 2000 had exited in 2001 – 25 percentage points less than 16-24-year-old youth on average. This resulted in longer time spent in NEET between 2001 and 2005 – 2.7 years versus 1.7 years on average for all 16-24-year olds who were NEET in 2000. Research conducted in the United Kingdom on 16-18-year olds confirms that low-skilled youth find it more difficult to exit non-employment. Rennison et al. (2005) find that, JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

50 – CHAPTER 1. THE CHALLENGE AHEAD among young people who were NEET at age 16, 65% of those without qualifications remained NEET at age 17 compared with 29% of their more educated counterparts. Figure 1.7.

Share of NEET teenagers and young adults,a OECD countries, 1996 and 2005b Percentage of the population in the age group 2005

50 45 40 35 30 25 20 15 10 5 0

50 45 40 35 30 25 20 15 10 5 0

1996

Teenagers (15/16-19)

c

OECD 2005 = 7.5

Young adults (20-24)

c

OECD 2005 = 16.4

a)

Youth aged 16-24 for Iceland, Norway, Spain, Sweden, the United Kingdom and the United States; youth aged 15-24 for all other countries. b) For Mexico, data refer to 2004 instead of 2005; for Korea and New Zealand, to 1995 instead of 1996; for Germany, Finland and the Netherlands, to 1997 instead of 1996; and for Italy, they refer to 1998 instead of 1996. c) Data for Japan are not available. Unweighted average of countries shown. Source: OECD Education database.

JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

CHAPTER 1. THE CHALLENGE AHEAD – 51

Figure 1.8.

NEET dynamics, United Kingdom, 1991-96 and 2000-05

Percentage of the population in the indicated age group who was NEET in the first year NEET years a (left-hand scale) (left-hand scale)

Exit rate b (right-hand scale) (right-hand scale)

Recurrence rate c (right-hand scale) (right-hand scale)

4.0

0.8

3.5

0.7

3.0

0.6

2.5

0.5

2.0

0.4

1.5

0.3

1.0

0.2

0.5

0.1

0.0

0.0 1991-96

2000-05

1991-96

2000-05

1991-96

2000-05 d

16-24 16-24ever ever NEET NEET

25-54 NEET 25-54 ever ever NEET

16-24 low-skilled ever 16-24 low-skilled NEET ever NEET

a)

Situation between 1992 and 1996 (between 2001 and 2005) of youth/adults who experienced at least one spell of NEET in 1991 (2000). b) Share of youth/adults who were NEET in 1991 (2000) and exited in 1992 (2001). c) Share of youth/adults who were NEET in 1991 (2000), exited in 1992 (2001) and experienced a repeated spell of NEET at some point between 1992 and 1996 (2001 and 2005). d) Less than ISCED 3; ISCED: International standard classification of education. Source: OECD Secretariat calculations based on the British Household Panel Survey, waves from 1 to 15.

C. Persistence of non-employment among youth who have left education has increased for the least skilled Using BHPS, it is possible to obtain a measure of persistence of non-employment for youth aged 16-24 who have left education4 and study its changes over time.5 About 6% of 16-24-year olds not in education were 4.

For some young people who have exited education non-employment may be a choice – notably, this is the case for youth who take gap years. Therefore, for some young people, a protracted period in non-employment may reflect a choice rather than an at-risk situation.

5.

Note that this persistence measure is obtained by diving the number of 16-24-year olds who are NEET throughout a given five-year period (using monthly data from the BHPS calendar section) by the number of 16-24-year olds who are not in education over the same period of time. Excluding youth who are still in education makes it possible to isolate the low-skilled – an interesting group given findings presented in Figure 1.8. The share of 16-24-year olds who were NEET throughout the five-year period – i.e. persistence calculated using the whole 16-24-year-old cohort at

JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

52 – CHAPTER 1. THE CHALLENGE AHEAD always non-employed between 2001 and 2005, about the same share as between 1991 and 1995 (Figure 1.9). Between 2001 and 2005, low-skilled youth not in education were twice more likely to experience persistence in non-employment status than 16-24-year-old youth not in education on average and the extent of persistence in non-employment had risen for this group relative to the early 1990s. Figure 1.9.

Persistence of non-employment status in the United Kingdom, 1991-95 and 2001-05 Percentage of individuals not in education who are non-employed throughout each five-year period

15

1991-95

2001-05

12 9 6 3 0 16-24

25-54

16-24 low-skilled

a

a) Less than ISCED 3; ISCED: International standard classification of education. Source: OECD Secretariat calculations based on the British Household Panel Survey, waves from 1 to 15.

3. The transition from education to employment A.

Youth leave education at a relatively young age

Figure 1.10 shows the activity status of youth per single year of age in 2005 for the United Kingdom and in the most recent year available for other selected OECD countries. In 2005, in the United Kingdom, the share of youth in education decreased steeply with age and, by the age of 18, about half of youth had left education, quite early compared with other OECD countries for which this statistic is available with the exception of the denominator – was 4% in both 1991-95 and 2001-05. Using another longitudinal study – the Youth Cohort Study – the Department for Education and Skills found that only 1% of 16-18-year olds were NEET for three years in a row. The difference between this figure and the corresponding 4% obtained from BHPS using the same definition could be explained by differences in the age group. It is plausible that persistence of NEET may be more of an issue among 18-24-year olds than among 1618 – the former group is more likely to receive benefits and less likely to return to education and training. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

CHAPTER 1. THE CHALLENGE AHEAD – 53

Australia and New Zealand. The figure also highlights labour market inactivity among youth who have left education. The share of youth in this category in 2005 tended to increase with age until it settled at around 16% in the early twenties. Figure 1.10. Activity status of youth aged 15-27, United Kingdom and selected OECD countries, 2002/2005a Percentages Not in education and unemployed Not in education and not in the labour force

In education Not in education and employed

Age at which 50% of youth aged 15-27 are out-of-school Age at which 50% of youth aged 15-27 are in employment

United Kingdom

100

Spain 100

90

90

80

80

70

70

60

60

50

50

40

40

30

30

20

20

10

10

0

0 15

16

17

18

19

20

21

22

23

24

25

26

27

France

100

15

16

17

18

90

90

80

80

70

70

60

60

50

50

40

40

30

30

20

20

10

19

20

21

22

23

24

25

26

27

22

23

24

25

26

27

22

23

New Zealand

100

10

0

0 15

16

17

18

19

20

21

22

23

24

25

26

27

United States

100

15

16

17

18

19

100

90

90

80

80

70

70

60

60

50

50

40

40

30

30

20

20

10

10

20

21

Australia

0

0 15

16

17

18

19

20

21

22

23

24

25

26

27

15

16

17

18

19

20

21

24

a) Data for France and Spain refer to 2002. Source: Office for National Statistics, Labour Force Survey, 2005 winter quarter for the United Kingdom; Australian Bureau of Statistics, Labour Force Survey for Australia; Eurostat, European Union Labour Force Survey for France and Spain; Statistics New Zealand, Household Labour Force Survey for New Zealand; and US Department of Labor, Bureau of Labor Statistics, October Supplement of the Current Population Survey for the United States. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

54 – CHAPTER 1. THE CHALLENGE AHEAD

B. Transitions from education to employment have become more complex Over the past decade, two different pathways from education to employment have emerged in the United Kingdom. Longitudinal data suggest a median transition length of roughly six months in the United Kingdom in the early 2000s coexisting with a significant and increasing number of youth who take over two years to enter the labour market after leaving education (Box 1.1). It is not possible to explore the reasons why this latter group takes so long to enter work but its composition suggests that there may be more than one explanation: some may spend a long time looking for work because they lack the skills required by employers; early family formation is a reason for some to postpone entry; and some may just decide to take time off to travel before starting tertiary education or after finishing it. The average time needed to find a first job after leaving education compares relatively well with other European countries for which data are available. Quintini et al. (2007) estimate the average transition lengths for youth leaving education in 1994 in selected European countries. These estimates suggest transitions of up to two years in France, Greece, Italy and Portugal and longer than two years for Spain. Only in countries with a strong vocational education system – Austria, Denmark, Germany and Ireland – is the time needed to find a first job comparable to the estimates presented here for the United Kingdom. Unfortunately, it is not possible to derive the average length of transitions from school to work by socio-demographic characteristics. However, using the BHPS, it is possible to look at a snapshot of what youth aged 16-24 are doing twelve months after leaving education and training by qualification and gender. On average, about 62.5% of youth aged 16-24 were employed one year after leaving education in 2005, down from 65% in 1995. There was little difference between young men and young women but the data showed significant variation by educational attainment. Only 45% of low-skilled youth were employed one year after leaving education compared with 67% of higher-skilled youth.

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CHAPTER 1. THE CHALLENGE AHEAD – 55

Box 1.1. Measuring the time needed to find a first job after leaving education Several methods can be employed to obtain an estimate of the time needed to find a first job after leaving education. The difference between the age at which 50% of youth are employed and the age at which 50% have left education gives an estimate of around 24 months in 2006 in the United Kingdom. This is the distance between the two vertical bars presented in Figure 1.10. However, this cross-sectional measure tends to bias results for countries where there have been considerable changes in labour market and education participation over time. The estimate for the United Kingdom – quite long given the relatively good labour market performance of youth on average – may suffer from such bias. Improving on this rough statistical measure requires a sufficiently long longitudinal database with information on the labour force status of young people over time. For the United Kingdom, the BHPS includes retrospective information on all spells of employment during a given survey year, hence it allows a relatively precise calculation of the length of time it took each young person in the survey to find a job after leaving education. For the cohort of youth leaving education in 2000, this measure produces an average transition time of approximately 13 months while for the 1991 cohort it gives an estimate of 9 months. The median length of transition, on the other hand, has hardly changed over the past decade – it was 6 months in the early 2000s up from 5 months in the early 1990s.* This suggests changes in the distribution of transition lengths, thus more varied transition pathways. The figure below shows the distribution of the length of transition for the two cohorts of youth. The share of youth who find a job directly after leaving education has remained stable at about 36% and the median has also increased only slightly over time. On the other hand, among youth leaving education in 2000, a much larger share took over two years to enter employment for the first time after finishing education. This may reflect difficulties in integrating the labour market or other complex pathways between school and work. Although the sample size is rather small, only 20% of youth taking longer than 30 months to find their first job are low-skilled, about 60% have an upper secondary education qualification and the remaining 20% have a tertiary qualification. The gender composition of this group – 53% are male – rules out that the 30-months spike is made up mostly of young women delaying labour market entry for family formation. This suggests that long transition times for some youth may reflect both difficulties in finding work and life choices. * Note that the measures derived from individual data use information on employment spells throughout the year and are thus considerably more precise than the measure derived from annual data used to calculate the difference between the median age of leaving education and the median age of entering employment.

JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

56 – CHAPTER 1. THE CHALLENGE AHEAD Distribution of the time needed to find a first job after leaving education in the United Kingdom Percentage in each duration interval 40

2000-2006 35 30 25 20 15 10 5 0 Less than 1 month

1-6 months

7-12 months

13-18 months

19-24 months

25-30 months

More than 30 months

19-24 months

25-30 months

More than 30 months

40

1991-1997 35 30 25 20 15 10 5 0 Less than 1 month

1-6 months

7-12 months

13-18 months

Source: OECD Secretariat calculations based on the British Household Panel Survey, waves from 1 to 15.

C. The first few years in the labour market are characterised by considerable voluntary mobility In many OECD countries, high job mobility is a defining feature of youth’s initial steps in the labour market. While frequent job changes among young people – the so-called job-shopping phenomenon – serve the purpose of looking for a job that more accurately matches qualifications, aspirations and preferences of young people with those of potential employers, toofrequent changes may compromise participation in job-related training, hence leading to less human capital accumulation. In the United Kingdom, youth aged 16-24 held on average 3.3 jobs between 2000 and 2005, up from 2.9 between 1991 and 1996. On the other hand, 25-54-year-old adults held just over 2 jobs in both time periods. In 2005, average uncompleted job tenure6 stood at one year and two months for youth compared with four years and two months for adults. 6.

These data are the result of OECD Secretariat calculations based on the BHPS. Tenure is defined here as the time the employee has spent in the current job as JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

CHAPTER 1. THE CHALLENGE AHEAD – 57

4. Characteristics of jobs performed by youth: stepping stones or traps? In most OECD countries, youth tend to enter the labour market via low-quality jobs, notably jobs that afford little job security – such as some fixed-term jobs – jobs that do not provide training opportunities, low-paid jobs or jobs that do not match their skill level. This need not be a problem if these entry jobs serve as stepping stones towards more stable employment with opportunities for career advancement. On the other hand, it is important to avoid that they become traps that young people find difficult to exit.

A. Temporary work is not common among labour market entrants and is mostly a choice Temporary and fixed-term employment is less of a problem in the United Kingdom than in other OECD countries. In 2005, only about 15% of 16-24-year-old youth entered the labour market on a temporary job, compared with 40% in OECD Europe on average (Figure 1.11). Figure 1.11.

Incidence of temporary work one year after leaving education, selected European countries, 2005a Percentage of employed youth

90 80 70 60 50 40 30 20 10 0

Involuntary

b

Voluntary

c

Other temporary

d

a) b)

Data refer to 2003 for Austria, and 2004 for Spain. Involuntary temporary work refers to the share of youth who say they have a temporary contract of limited duration because they “could not find a permanent job”. c) Voluntary temporary work refers to the share of youth who say they have a temporary contract of limited duration because they “did not want a permanent job”. d) Other temporary refers to the share of youth who: i) are on a training contract (apprenticeships, trainees, research assistants, etc.); ii) are on a probationary period; or iii) do not give a reason for their temporary contract. Source: OECD Secretariat calculations based on Eurostat, European Union Labour Force Survey.

opposed to the total time spent with the current employer. Unfortunately, the latter cannot be calculated using BHPS. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

58 – CHAPTER 1. THE CHALLENGE AHEAD Besides, about a third of youth who enter the labour market on a temporary contract do so voluntarily. The United Kingdom also compares well with Canada, Japan and Mexico in terms of the incidence of temporary work among all 16-24-year olds (see Quintini et al., 2007). Only the United States and Australia had a lower incidence of temporary work among youth in 2005.7 For those youth who are hired on temporary jobs, transitions to permanent work are relatively smooth. Among youth on temporary contracts in 2004, 40% had a permanent contract in 2005. This transition rate has been rather stable over the past decade and compares well with the European countries for which this information is available, albeit for earlier years (Figure 1.12). Figure 1.12.

Transitiona rates from temporary to permanent employment in Europe, 1996 and 2001 Percentages

45 40

1996

2001

35 30 25 20 15 10 5 0

a)

Share of 15/16-28-year olds with a temporary contract in 1995 (2000) who had a permanent contract in 1996 (2001). Source: OECD Secretariat calculations based on Eurostat, European Community Household Panel (ECHP), waves 2 to 8 (1995-2001).

7.

Outside OECD Europe, the incidence of temporary work among school leavers cannot be calculated so comparisons are based on the incidence among all 16-24-year olds. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

CHAPTER 1. THE CHALLENGE AHEAD – 59

B. Jobs for youth tend to provide limited opportunities for employer-provided training In 2005, 60% of employed youth were in jobs without employer-funded training,8 about the same share as in 1998 (Figure 1.13). Also, low-skilled youth – the group that would benefit most from receiving on-the-job training – were more likely to be in jobs without training than their more skilled counterparts, although the gap was not very high. Figure 1.13.

Incidence of work-based training among employees, United Kingdom, 1998 and 2005 Percentage of employees Employed without training Employed with employer-funded training Employed with government-funded training

100 90 80 70 60 50 40 30 20 10 0 16-24

25-54

1998

16-24

25-54

Men

2005

Women

Low- a skilled

Higherb skilled

2005 (16-24)

a) Less than ISCED 3; ISCED: International standard classification of education. b) Greater than or equal to ISCED 3. Source: OECD Secretariat calculations based on the British Household Panel Survey, waves from 1 to 15.

Among youth in jobs without training in 2004, only about 25% had moved to some form of training – government-funded or employer-funded – the following year, slightly fewer than in 1998-1999 (Figure 1.14). Persistence in jobs without training was less frequent among youth than adults and young men were about 10 percentage points more likely than young women to persist in a job without training in 2005. On the other hand, only small differences in persistence were found across educational attainment.

8.

Jobs without training are those that offered no employer-funded training and no government-funded training over the year preceding the survey date.

JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

60 – CHAPTER 1. THE CHALLENGE AHEAD Destination of youth and adultsa in jobs without training, United Kingdom, 1999 and 2005

Figure 1.14.

Percentage of employees in jobs without training the previous year Employed without training Employed with government-funded training

Employed with employer-funded training NEET

100 90 80 70 60 50 40 30 20 10 0 16-24

25-54

1999

16-24

25-54

2005

Men

Women

Low- b skilled

Higher-c skilled

2005 (16-24)

a) Youth refers to persons aged 16-24, and adults to those aged 25-64. b) Less than ISCED 3; ISCED: International standard classification of education. c) Greater than or equal to ISCED 3. Source: OECD Secretariat calculations based on the British Household Panel Survey, waves from 1 to 15.

C. One in three youth work in a low-paid job but upward mobility has improved Over 35% of youth were working in a low-paid job – defined as paying a gross hourly wage lower than two thirds of median adult wages – in 2005, about the same proportion as in 1995 (Figure 1.15).9 The incidence of low pay measured this way is about 15 percentage points higher for youth than for adults. For many youth not in education, low pay is an alternative to no pay at all – NEET status. For instance, the incidence of low pay among low-skilled youth is about the same as for better educated youth but this is the result of twice as many drop-outs being unemployed or inactive. 9.

Although data for 2005 are not available for other OECD countries, Quintini and Martin (2006) calculate the overall incidence of low pay among youth in 2001 for some European countries. They show that the share of 16-24-year olds in low pay in the United Kingdom was smaller than in Germany and the Netherlands – where the incidence of low pay was the highest in Europe and exceeded 40%. The United Kingdom stood close to the EU average and to countries such as France and Denmark in terms of this indicator. The incidence of low pay among United Kingdom youth was also lower than in Australia where 42% of 15-24-year olds were affected in 2006 (Australian Bureau of Statistics, 2007). JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

CHAPTER 1. THE CHALLENGE AHEAD – 61

Incidence of low paya and no pay, United Kingdom, 1995 and 2005

Figure 1.15.

Percentage of the population not in education 80 70

Low pay

No pay

60 50 40 30 20 10 0 16-24

25-54

1995

16-24

25-54

Men

2005

Women

Lowb skilled

Higherc skilled

2005 (16-24)

a)

Workers are considered to be in low-paid employment if they work at least 15 hours per week and receive an hourly wage of less than two-thirds the median adult value. There is hardly any variation in the share of workers employed for less than 15 hours across groups – approximately 15%. b) Less than ISCED 3; ISCED: International standard classification of education. c) Greater than or equal to ISCED 3. Source: OECD Secretariat calculations based on the British Household Panel Survey, waves from 1 to 15.

Upward wage mobility has increased over time although some youth still find it hard to exit low pay for better paid employment. Figure 1.16 shows that the share of youth experiencing persistent low pay over a five-year period halved between the early 1990s and the early 2000s. Low pay is more persistent among low-skilled youth, but the position of this group relative to this indicator has improved greatly over time. Figure 1.16 also shows that it was easier to exit low pay for those youth who had spent two years (1991-1992 and 2001-2002, respectively) in a job that provided training. This suggests that jobs with employer-provided training are a good stepping stone to better paid employment. International comparisons are not available for the same time period, but Quintini and Martin (2007) calculate the share of youth always in low pay over the period 1997-2001 in a number of European countries and in the United States. The share of youth always in low-paid employment over the five-year period in the United Kingdom was the third highest after Greece and the United States.

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62 – CHAPTER 1. THE CHALLENGE AHEAD Figure 1.16.

Persistence of low pay,a United Kingdom, 1991-95 and 2001-05

Percentage of employees in each age group who are low-paid throughout each five-year period 40 35

1991-95

2001-05

30 25 20 15 10 5 0 16-24

25-54

16-24 low-skilled b

16-24 in jobs with training for the first two years

16-24 in jobs without training for the first two years

a)

Workers are considered to be in low-paid employment if they work at least 15 hours per week and receive an hourly wage of less than two-thirds the median adult value. b) Less than ISCED 3; ISCED: International standard classification of education. Source: OECD Secretariat calculations based on the British Household Panel Survey, waves from 1 to 15.

5. Key points In the United Kingdom, indicators of youth performance on the labour market paint a mixed picture (Table 1.2). On the one hand, the youth employment rate is 12 percentage points higher than in the OECD on average and long-term unemployment has decreased by over 7 percentage points over the past decade. Low-paid employment is still common among youth but its persistence has halved since the early 1990s. On the other hand, a number of issues related to the labour market performance of youth have emerged recently. First, the youth unemployment rate has risen over the past three years. The gains over the previous decade had brought the youth unemployment rate 5 percentage points below the OECD average but this recent worsening, affecting both teenagers and young adults, partly reversed those gains and in 2007 the youth unemployment rate was slightly higher than the OECD average. Also, the incidence of NEET has increased over the past five years and there is evidence that NEET youth find it more difficult to exit this status permanently. About one in three youth who were NEET in 2000 returned to be NEET after exiting between 2001 and 2005 versus just over one in four in the early 1990s.

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CHAPTER 1. THE CHALLENGE AHEAD – 63

Table 1.2.

Scoreboard for youth aged 16-24,a United Kingdom, 1997, 2002 and 2007 1997 2002 2007 United United United b b OECD OECD OECDb Kingdom Kingdom Kingdom

Employment rate (% of the age group) Unemployment rate – UR (% of the labour force) Relative UR youth/adult (25-54) Ratio unemployed to population (% of the age group) Incidence of LTU (% of unemployment) Incidence of temporary work (% of employment)c Incidence of part-time work (% of employment) NEET rate (% of the age group)d School drop-outs (% of the age group)e Relative UR low skills/high skills(ISCED3)f

60.8 13.4 2.3 9.4 23.3 14.0 30.7 11.6 5.3 5.2

43.7 15.7 2.5 7.5 24.9 28.8 19.5 12.9 15.5 2.5

60.9 11.0 2.7 7.5 11.1 12.0 32.4 11.9 5.9 4.3

43.6 14.6 2.5 6.8 19.4 31.6 22.1 12.1 14.6 2.2

55.9 14.4 3.9 9.4 16.0 11.1 34.9 13.0 6.0 4.7

43.5 13.4 2.9 6.1 19.6 34.7 24.5 12.0 12.9 2.2

ISCED: International standard classification of education; UR: unemployment rate; LTU: long-term (more than one year) unemployment; NEET: neither in education nor in employment or training. a) Youth aged 16-24 for Iceland, Norway, Spain, Sweden, the United Kingdom, and the United States; and 15-24 for all other countries. b) Unweighted averages for the 30 OECD countries; values for 2007 are preliminary. c) 1997, 2002 and 2006. d) 2000, 2002 and 2005. e) Share of youth not in education and without an upper secondary qualification; 2000, 2002 and 2005. f) 1997, 2002 and 2005. Source: Office for National Statistics (ONS), Labour Force Survey (LFS); and OECD Education database.

Second, the analysis identifies a group of youth at risk of making poor labour market transitions. Low-skilled youth are more than five times more likely to be unemployed than their more skilled counterparts, a situation that has worsened over the past decade. Low-skilled youth who become NEET also find it more difficult to re-engage in employment and learning than 16-24-year olds on average and there is evidence that they may become trapped in NEET. On the other hand, among low-skilled youth who manage to get a job, wage progression has increased – the likelihood of persistence in a low-paid job over a five-year period has halved since the early 1990s. Third, between 1998 and 2005, no improvement was observed in the share of jobs offering no training opportunities, a phenomenon which affects about 60% of employed 16-24-year olds. Improvement on this front is important as jobs with training are found to be a good stepping stone to better-paid employment. Youth starting in low-paid jobs offering no training find it more difficult to exit low pay than youth who obtain training from their employer. The latter are half as likely as the average to remain in low pay for five years in a row. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB – 65

CHAPTER 2 INITIAL EDUCATION AND LEARNING ON THE JOB

The quality of initial education is a key factor in facilitating the transition from education to employment and putting youth on a promising career track. Also, training on the job at the beginning of active life allows youth to fill the gaps of initial education and acquire the skills required by firms. The education system in the United Kingdom is currently undergoing considerable change with major new reforms being planned to ensure that youth stay in education and training longer. In England, a recently issued Green Paper proposes to make participation in education and training compulsory to age 18 and the so-called “14-19 Strategy” aims at ensuring that youth are faced with more learning options during their prolonged time in education and training. As a result of these new initiatives, in five years time English secondary education is likely to look radically different from today. The purpose of this chapter is to assess whether the current education system gives youth a good start in the labour market. Because education in the United Kingdom is devolved, as far as policy issues are concerned, the focus is put on England.10 Section 1 enumerates the challenges facing the system; Sections 2 to 4 focus on strategies to combat failure in education; Section 5 assesses current plans to raise the age of compulsory participation in education and training to 18; Section 6 addresses the main problems faced by tertiary education; and the final section reviews young people’s participation in on-the-job training.

10.

Unfortunately, it is not possible to provide internationally comparable data for England thus where international comparisons are made, data refer to the United Kingdom. In most cases, UK-based comparisons are indicative of the position of England because of its numerical predominance.

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66 – CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB

1. Performance of the education system A. Expected length of education in the United Kingdom is the highest in the OECD In 2006, the United Kingdom topped the OECD ranking in terms of expected years spent in education. In OECD countries, a 5-year old can expect on average to spend 17.4 years in education, while the United Kingdom has an educational expectancy of almost 21 years (see OECD, 2006a).11 This is the result of a rapid increase in educational expectancy since 1995 both at the secondary level (20%) and at the tertiary level (25%). It compares with a rise of just 13% on average in the OECD resulting mostly from increased expectancy in tertiary education.

B. The performance of 15-year olds in school is close to the OECD average and dispersion is very high According to the 2006 survey of the OECD Programme for International Student Assessment (PISA), 15-year olds in the United Kingdom perform close to the OECD average in reading and mathematics and do better than average in science (Figure 2.1). Under all three areas of knowledge, the United Kingdom is far behind the best performing countries in the OECD according to PISA. Dispersion in performance is more marked than in other OECD countries (Figure 2.2). The United Kingdom does rather badly at the bottom of the competency scale – i.e. among the worst students – while it stands close to the best-performing countries in the OECD when the best students are compared.12 The United Kingdom is also the country with the largest difference in scores between public and private education establishments.

11.

School expectancy is estimated by taking the sum of enrolment rates for each single year of age, starting at age five. The numerator and denominator for each year’s enrolment rates are as follows. Numerator: total number of people enrolled in education at age X in a given year. Denominator: estimated population aged X in a given year.

12.

According to the PISA 2006 science scale, students in the top decile in the United Kingdom are third best after Finnish and New Zealand students. However, for bottom-decile students, the United Kingdom ranks only 18th across OECD countries. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB – 67

Figure 2.1.

United Kingdom students’ performance, based on PISA 2006 Total

570 560 550 540 530 520 510 500 490 480 470

Reading scale

570 560 550 540 530 520 510 500 490 480 470

Mathematics scale

Low levels of competence 25

a

570 560 550 540 530 520 510 500 490 480 470

(percentage of all students) 25

25

Science scale

Mathematics scale

Reading scale

Science scale

20

20

20

15

15

15

10

10

10

5

5

5

0

0

0

a)

Data refer to the percentage of students scoring up to Level 1 in the proficiency scales. For the reading, mathematics and science scales they refer to students scoring below 407, 420 and 410 points respectively. Source: OECD PISA 2006 database.

Figure 2.2.

Score dispersion on the PISA 2006 science scale, OECD countries Ratio of the 90th percentile to the 10th percentile PISA science scores

1.85 1.80 1.75 1.70

a

OECD = 1.66

1.65 1.60 1.55 1.50 1.45 1.40

a) Unweighted average. Source: OECD PISA 2006 database. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

68 – CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB

C. Many 16-24-year olds not in education do not hold an upper secondary qualification On average across OECD countries in 2005, the school drop-out rate – defined as the share of 16-24-year olds not in education who do not hold an upper secondary qualification or just hold a basic school-leaving certificate – stood at 14%.13 In the same year, in the United Kingdom, this rate was over 16% (Figure 2.3). Of these youth, 10% had a basic school-leaving certificate and 6% had no certificate at all.14 Besides, upper secondary attainment rates have worsened slightly over the past five years in the United Kingdom, while they have improved in several OECD countries.

D. Less qualified youth face significant penalties in the labour market, more so than in the OECD on average Less qualified youth face a much higher probability of being NEET than their more educated counterparts. In the United Kingdom, the difference in NEET rates between youth holding an upper secondary qualification and youth without one is more marked than in the OECD on average (Figure 2.4).

13.

“School” does not refer strictly to secondary education but more largely to education and training. “Upper secondary education” identifies a level of attainment, not necessarily reached while the individual was actually participating in secondary education. An upper secondary education qualification is equivalent to Level 3 of the International Standard Classification of Education (ISCED) – for the United Kingdom this is either a minimum of five GCSEs/SCSEs at grades A*-C, or an equivalent vocational qualification such as NVQ2/SVQ2. In addition, the international “upper secondary” band also includes A-levels or NVQ3/SVQ3. A basic school-leaving certificate is equivalent to ISCED Level 3C – for the United Kingdom, this is either fewer than 5 GCSEs at grades A*-C, or GCSEs at grades D-G, or a vocational qualification at Level 1.

14.

Note that only the 6% are included in the statistic reported in Table 1.2. The United Kingdom is not the only country where the inclusion of short upper-secondary courses makes a significant difference to the drop-out rate. Switzerland and Poland are also affected. However, the OECD average calculated excluding these courses – at 14% – is only slightly higher than the one shown in Table 1.2. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB – 69

Figure 2.3.

School drop-outsa in OECD countries, 2005b Percentages

60

2005 2000

50 40 30

c

OECD 2000 = 17.3

c

OECD 2005 = 13.9

20 10 0

a)

This definition of school drop-outs differs from that presented in Table 1.2 because youth holding a basic school-leaving certificate are counted as drop-outs. Youth are those aged 16-24 for Iceland, Norway, Spain, Sweden, the United Kingdom and the United States; and those aged 15-24 for all other countries. b) Data refer to 2003 for Japan; and 2004 for Mexico and Norway. c) Unweighted average. Source: OECD Education database.

Figure 2.4.

Share of youth neither in employment nor in education or training by educational attainment,a OECD countries, 2005b Percentages

55 50 45 40 35 30 25 20 15 10 5 0

a)

Less than upper secondary Upper secondary OECD Less than upper secondary

Youth are those aged 16-24 for Iceland, Norway, Spain, Sweden, the United Kingdom and the United States; and those aged 15-24 for all other countries. b) Data refer to 2003 for Belgium and Italy; and to 2004 for Mexico. Data for Korea and New Zealand are not available. Source: OECD Education database. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

70 – CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB As adults, those who leave education without an upper secondary qualification are significantly less likely to be employed than their better educated counterparts. In 2005, while employment rates of upper secondary graduates in the United Kingdom were above the OECD average for this education level, employment rates of those without an upper secondary qualification were, at 52%, below the corresponding OECD average of 57% (Figure 2.5). In addition, differences in employment probabilities by educational attainment grew over the past decade. For individuals without upper secondary education, the employment rate decreased from 61% in 1991 to 52% in 2005 while it increased for upper secondary graduates over the same period (OECD, 2007a). Figure 2.5.

Employment rates by educational attainment in OECD countries, 2005a Percentages Less than upper secondary OECD Less than upper secondary

Upper secondary or higher OECD Upper secondary or higher

90 80 70 60 50 40 30 20 10 0

a) Data for Japan are not available. Source: OECD (2007a).

The penalties from not completing upper secondary education are also visible in the distribution of earnings of adults. For the United Kingdom, the share of 25-64-year olds without an upper secondary qualification with low incomes (defined here as half of the country median or less) is the third highest behind Canada and the United States and is significantly higher than the OECD average (Figure 2.6).

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CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB – 71

Figure 2.6. Earnings distribution of adults without an upper secondary qualification, OECD countries,a 2005b Percentages At or below half the median From half the median up to two times the median More than two times the median 100 90 80 70 60 50 40 30 20 10 0

a)

Earnings data for the Czech Republic, Hungary, Luxembourg, Poland and Portugal exclude part-time work. Moreover earnings data for Hungary, Luxembourg, Poland and Portugal exclude part-year or seasonal employment. b) Data refer to 2002 for Luxembourg and the Netherlands; to 2003 for Korea; and they refer to 2004 for Belgium, Canada, Denmark, Finland, Ireland, Italy, Norway, Poland, Portugal, Spain, Sweden and Turkey. Source: OECD (2007a).

Overall, this confirms that difficulties on the labour market experienced by the many youth who leave education without an upper secondary qualification – as documented in Chapter 1 – are hard to compensate later with labour market experience. As adults, these young people, still face considerable employment and earnings penalties vis-à-vis their more educated counterparts.

E. Vocational education attendance in the United Kingdom is well above the OECD average In 2005, over 70% of all upper secondary enrolments in the United Kingdom were in vocational programmes, about 20 percentage points more than the OECD average (see Figure 2.7). This is the fourth highest enrolment rate in vocational education in the OECD, after the Czech Republic, Austria and the Slovak Republic. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

72 – CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB Figure 2.7. Enrolment in vocational versus general education in upper secondary education in OECD countries,a 2005 Percentages Vocational

General

100 90 80 70 60 50 40 30 20 10 0

a) Data for New Zealand are not available. Unweighted averages for EU-19 and OECD. Source: OECD (2007a).

In 2005, the United Kingdom also had one of the highest entry rates in vocational tertiary education. Nearly 30% of young people entered tertiary vocational education in 2005 compared with just 15% in the OECD on average (OECD, 2007a).

F. The share of youth holding tertiary qualifications is high but is now growing less rapidly than the OECD average. In most OECD countries, the share of young people holding a tertiary education qualification is significantly higher than among their older counterparts (see Figure 2.8). The United Kingdom, too, has seen impressive growth in tertiary qualifications over past generations but the country has not caught up as fast as others in the OECD – the difference in graduation rates between 25-34- and 55-64-year olds, of about 11 percentage points, is more modest than in the OECD on average. As a result, while the United Kingdom is quite well placed in international comparisons for the older generation, it ranks lower as far as youth are concerned. In addition, rates of current participation suggest that more countries are likely to surpass UK graduation rates. The increase in tertiary enrolment between 1995 and 2004, which will influence future graduation rates, was, at 30%, considerably below the OECD average level of 41% (OECD, 2007a).

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CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB – 73

Figure 2.8.

Population that has attained tertiary education in OECD countries, 2005 Percentages

55 50 45 40 35 30 25 20 15 10 5 0

25-34 55-64 a

OECD 25-34 = 32.2 a

OECD 55-64 = 18.7

a) Unweighted average. Source: OECD (2007a).

G. Returns to university education are high by international standards In the United Kingdom, returns to university education are among the highest in the OECD irrespective of the methodology used to measure them (Figure 2.9; Oliveira Martins et al., 2007; Blundell et al., 2004; and DfES, 1999). Figure 2.9.

Returns to vocational and academic tertiary qualifications, selected OECD countries, 2004a

Percentage of graduates earning more than one-and-a-half times the median wage in each country 70 Tertiary vocational

Tertiary academic

60 50 40 30 20 10 0

a)

Data refer to 2001 for Australia; to 2002 for Ireland and Luxembourg; and they refer to 2003 for Belgium, Canada, Denmark, Finland, Korea, Norway and Sweden. Source: OECD (2006a). JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

74 – CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB

2. Improving education outcomes through quality early childhood education and care Several studies have shown that high-quality early childhood education and care (ECEC) programmes have positive effects on participants’ school achievement and grade repetition, particularly for children from immigrant or disadvantaged backgrounds (see Box 2.1). Box 2.1.The role of early childhood and pre-school programmes in reducing school difficulties of children from disadvantaged families There is growing recognition that quality ECEC services provide young children, particularly from low-income and immigrant-background groups, with a good start in life. In particular, there is evidence that ECEC programmes can help reduce school failure and improve school performance (see OECD, 2001 and 2006b). In the United States, the Federal Head Start and Early Head Start projects, introduced in 1965 and 1995 respectively, provide centre-based childcare and other counselling/guidance services to families. Head Start focuses on children aged three or older while Early Head Start focuses on 0-3-year olds. Rigorous evaluations of both Head Start and Early Start (see Melhuish, 2004, for a review of available evidence) have produced a consistent pattern of results: the programmes had a clear benefit for disadvantaged children. However, the smaller, closely targeted interventions within Head Start showed larger effects, while less-targeted large-scale interventions such as Early Head Start had little impact on the very highest risk families. Inspired by the good outcomes of Head Start, state-run pre-school programmes have proliferated over the past two decades in the United States giving rise to a large literature evaluating the performance of these programmes. Barnett (1995) and Gilliam and Zigler (2001) review evaluation studies of the long-term effects of pre-school programmes on children from low-income families. Both studies find evidence of sizeable long-term effects on school achievement and grade repetition, particularly when efforts are sustained beyond the pre-school period. The High/Scope Perry Preschool Study (Schweinhart et al., 2004) in the United States evaluated the effect of high-quality early care and education on low-income 3- and 4-year olds. The study followed the individuals until age 40 and compared their socio-economic outcomes to those of a group who was randomly denied treatment. The major conclusion of the study was that the high-quality pre-school programme significantly improved the likelihood of graduating from high-school (65% versus 45% in the control group), as well as the likelihood of being employed at age 40 (76% versus 62%) and having higher median earnings (USD 20 800 versus USD 15 300). The study also highlighted a number of positive social outcomes in the treatment group such as lower crime involvement. For Europe, positive effects of pre-school education on school failure and grade repetition have been found in France, where pre-school is almost universal among 3- to 5-year olds (see Caille and Rosenwald, 2006). Finally, Boocock (1995) reviews childcare in Sweden and concludes that participation in pre-school has benefits in terms of cognitive development and school success, and that these are more significant for children of low-income families. However, disappointing results in some other countries (see Lapointe et al., 2005 for Canada; and Boocok, 1995, for a survey of several international programmes) point to the importance of programme quality. The most effective programmes require considerable financing, well-trained ECEC personnel and diversified intervention actions (see OECD, 2006b on design issues).

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The United Kingdom is lagging behind other OECD countries in terms of public provision of ECEC services. A universal entitlement to free ECEC exists for children aged 3 and 4 but only on a part-time basis. Provision covers a two-and-a-half-hour session per day in England and four-and-a-half hours in Scotland, for 38 weeks per year. In contrast, the norm in most European countries is of full-time, year-round, publicly-funded ECEC services prior to beginning of compulsory education (OECD, 2006b). Even the planned increase in ECEC entitlement to 20 hours per week by 2010 will fall short of current international practice. Part-time provision has serious implications for children and their families. First, it is seen as practical and cost-effective to fulfil the nursery entitlement through provision in primary schools. As a result, all four-year olds are in schools in England, raising concerns about the quality of children’s early learning environments. Second, the part-time entitlement does little to support working parents, even those in part-time work. Insufficient public provision of ECEC places is also an issue in the United Kingdom. The government has recently committed to ensuring that, by 2010, there will be a childcare place for all children aged 3-14, between 8 am and 6 pm each weekday. For children aged 0-3, there is no entitlement to ECEC services at all, which results in few children attending licensed childcare arrangements. In 2004, only one in four children in the United Kingdom used licensed childcare facilities versus over 80% in Denmark and almost 70% in Sweden (see Figure 2.10). Figure 2.10.

Access to licensed ECEC services for children under three, selected OECD countries, 2004 Percentage of children aged 0-3

90 80 70 60 50 40 30 20 10 0

Source: OECD (2006b).

JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

76 – CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB To extend participation in licensed ECEC of children aged 0-3, so-called Sure Start Children’s Centres (SSCCs) were launched in England in 2006. SSCCs are due to open in each local community in England by 2010, starting with the 30% most disadvantaged areas in the country.15 The government is building on its earlier experience with Sure Start Local Programmes (SSLPs) opened in 1999 with the aim of enhancing health and well-being during the early years and increasing the chances that children enter school ready to learn, are academically successful and move on to become successful on the labour market as adults. The 500 original SSLPs became SSCCs by March 2006 and, together with additional centres in disadvantaged areas, continue to provide their original services, including full day-care provision for a minimum of 10 hours a day, 5 days a week, and 48 weeks per year. In less disadvantaged areas, SSCCs will only provide a minimum range of services, mostly involving information and advice on childcare solutions. Compared with SSLPs, guidelines for SSCCs are more specific about the services to be offered, placing a clear focus on child outcomes and on adjusting provision in relation to the level of disadvantage of the area. However, a large degree of variation remains in the way the new children’s centres are implemented. Like their SSLPs predecessors, the SSCCs have a duty to improve the life chances of all children but are required, in particular, to reduce inequalities between the poorest children and the rest. A report published in 2006 (National Audit Office, 2006) highlighted the importance of outreach activities to accomplish the latter objective as most parents living in disadvantaged areas and not using the centres’ services claimed to be unaware that the services were available. Among outreach activities, the report found that the SSCCs that did well in reaching disadvantaged families in their area were pro-active in identifying and targeting families, had a strategy/action plan in place, and had developed strong links with existing community groups and health organisations to maximise outreach potential. Unfortunately, the report found that only about a third of the SSCCs visited – 30 in total – were pro-actively targeting hard-to-reach groups. A recent evaluation comparing children and families living in SSLP areas with those living in similar areas not receiving SSLPs (NESS, 2008) revealed a variety of beneficial effects for children and families living in 15.

The roll-out across England is planned in three phases. The first phase (to March 2006) focused on establishing centres in the 30% most disadvantaged areas in the country. For phase two, the target is to establish a minimum of 2 500 centres by March 2008, including sufficient centres to cover the remaining disadvantaged areas. By 2010 (phase three), universal coverage through 3 500 centres should be guaranteed. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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SSLP areas when children were 3-years old, including for the most disadvantaged. SSLP children showed better social development, exhibiting more positive social behaviour and greater independence/self-regulation than their non-SSLP counterparts. Families in SSLP areas showed less negative parenting while providing their children with a better home learning environment. These beneficial parenting effects appeared to be responsible for the higher level of positive social behaviour in children in SSLP areas. Also, families in SSLP areas reported using more services designed to support child and family development than did families not in SSLP areas. The results of the 2008 evaluation differ markedly from those of an early evaluation of the effect of SSLPs on children and parents by the same institution (NESS, 2005). The earlier study showed disappointing results. Positive effects were only found for relatively less disadvantaged families/children. For relatively more disadvantaged families/children (i.e. teen parents, lone parents, workless households) in SSLP areas, adverse effects emerged. While it is not possible to exclude that methodological differences explain the diverging findings, it is also plausible to assume that 3-year-old children and their families participating in the second phase were exposed to more mature and better developed programmes. Also, these latter children and families were exposed to programmes that had the opportunity to learn from earlier studies, especially with respect to the need for greater effort to be made to reach the most vulnerable households.

3. Combating failure in education through financial support, guidance and remedial programmes A number of initiatives targeted on youth at high risk of dropping out of education are already in place in the United Kingdom. Together with the planned broadening of learning options, they aim to tackle disengagement from education. They include: financial support to stay in education beyond the current compulsory schooling age (the Education Maintenance Allowance); guidance, advice and support at the crucial cross-roads between compulsory education and upper secondary education (the September Guarantee); and remedial programmes for youth who have become disaffected with mainstream education (the Entry to Employment programme).

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A. The Education Maintenance Allowance has improved participation, retention and achievement Financial difficulties partly explain the high school drop-out rate in the United Kingdom (Newburn, 1999). To help overcome financial barriers to staying in education longer, in 1999 the United Kingdom started piloting an Education Maintenance Allowance (EMA) for young people aged 16-19 in both England and Scotland. Following positive evaluations of the pilots (see Box 2.2), the EMA was rolled out across the United Kingdom from September 2004 and is available to youth aged 16-19 who have completed their GCSEs and engage in education for any academic or vocational course.16 EMA depends on the student’s household income. In England, it can reach a maximum of GBP 30 per week provided the student meets weekly attendance requirements and, since 2008, progress and behaviour requirements. EMA payments are subject to fulfilling the so-called learning agreement – in effect a contract between the young person and the school/college – in which payment is made in return for improvements in attendance, and in which targets for attainment should be agreed. Bonus payments for retention and achievement – worth up to GBP 500 in 2007/08 for learning programmes lasting more than two years – are also available. To get these, the student needs to meet specific goals agreed between them and their institution, demonstrating real progress and commitment to their learning programme. Slightly different conditions and/or amounts apply to EMA in Northern Ireland, Scotland and Wales.17 While pilots differed in terms of payment methods – notably whether the allowance was paid to students or their parents – all regions opted for a direct payment into the student’s account. EMA does not affect the entitlement to other benefits received in the household. It is also noteworthy that earnings from the student’s part-time work while in education do not affect EMA entitlement.

16.

EMA is paid for all types of learning programmes (including remedial education). Only learning programmes giving right to the payment of a wage or a training allowance are excluded.

17.

While the basic allowance amount is the same across regions, attendance and retention bonuses are smaller in Northern Ireland, Scotland and Wales – around GBP 100 per year. The number of learning hours needed to qualify also varies across regions. In Wales, entitlement requires 12 learning hours per week while in Northern Ireland and Scotland 15 and 21 hours, respectively, are needed. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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In the school year 2006/07, approximately 525 000 young people aged 16-18 enrolled in education in the United Kingdom benefited from EMA,18 compared with approximately 300 000 in 2004/05. Several rigorous evaluations of the effect of EMA on participation, retention and achievement have been carried out since its introduction in 1999 covering both the pilots and the roll-out periods. All studies have found positive effects on participation and retention in education after compulsory schooling, and recent research (Chowdry et al., 2008 and LSC, 2008), exploiting more complete information on educational attainment, suggests more positive effects on achievement than originally found (see Box 2.2.). Although the programme is expensive – the retention bonus component alone costs approximately GBP 20 million per year in England – Dearden et al. (2005) find that it is cost-effective. Box 2.2. Evaluations of EMA pilots and national roll-out in England Positive outcomes of the EMA pilots in terms of improved post-16 participation and retention in education informed the decision to roll EMA out nationally in 2004. A rigorous evaluation of the English EMA pilots (Middleton et al., 2004) indicated they had a significant positive effect on the participation and retention of young people in secondary education. The programme raised the participation rate in full-time education by 4.3 percentage points in the first year after compulsory education and by 6.3 percentage points in the second year. For men, the report also found an increase in retention – participation in education for two years after compulsory schooling – by 4.9 percentage points, mostly drawn from the group who otherwise would not have participated in any education in either the first or second year, i.e. young people coming from workless households. The report also found that EMA had its largest impact on the participation and retention decisions of low and middle achievers in terms of GCSE results. For those falling into the lowest achieving group, EMA increased the proportion staying in full-time education in the first and the second year after compulsory schooling by 8.8 percentage points. The effect was even larger for middle achievers. At the time of the pilots evaluation, rigorous assessment of the effect of EMA on achievement was hampered by incomplete data for the latest cohort. Middleton et al. provided some qualitative evidence that young women in the English EMA pilots were slightly more likely to achieve upper secondary level qualifications but no effect was observed for young men. The evaluation of the Scottish EMA pilots (Lannelli et al., 2002) was even less encouraging on this front. The authors found no effect of EMA payments on attainment, which they attributed only partly to incomplete data. According to the paper, learning agreements focused too much on attendance rather than being used to drive up efforts and youth were often unaware of the bonus payment they could qualify for if they met their achievement targets.

18.

This is the number of young people who have received one or more EMA payments during a year. In 2006/07, 30% of youth aged 16-18 enrolled in education in the United Kingdom in 2006/07 benefited from at least one EMA payment, twice the share in 2004/05.

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80 – CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB More recent evaluations confirmed the positive effects of EMA on participation and retention estimated during the pilots and found encouraging evidence of strong and positive effects on achievement. Chowdry et al. (2008) used administrative rather than survey data and exploit the longer follow-up period to estimate the effect on achievement more precisely. Because of the larger sample size, the study also estimated the effects by sociodemographic characteristics. Young women were found to be 2.5 percentage points more likely to reach Level 2 and Level 3 qualifications – corresponding to lower and upper secondary qualifications respectively – while young men were about 2 percentage points more likely to do so. Also, both males and females experienced improvements in average A-level scores of about 4.5% on the base level. In addition, ethnic minorities experienced the strongest increases in attainment – on every indicator used in the study – and these increases were statistically significant. Another recent study (LSC, 2008) focused on the outcomes of the national roll-out in England. Although the evidence is only qualitative, the study confirmed the pilots finding that EMA improved participation and retention and provided evidence of positive effects on attainment.

B. The September Guarantee will help identify learning opportunities for youth at risk In September 2007, the government introduced, throughout England, the so-called September Guarantee. Under the Guarantee, all youth finishing compulsory education are guaranteed an offer of learning by the end of September. The Guarantee has three key elements: i) every young person in their last year of compulsory schooling is identified and receives the information, advice and guidance needed to apply for appropriate post-16 provision; ii) offers made to young people are recorded so that those who have not received an offer can be identified and given additional support to file applications; and iii) by the end of September, each young person must receive a suitable offer of a place in learning (offers must meet the young person’s needs in terms of the level of provision, their learning method, occupational sector and geographical location). In each local authority, schools, Connexions Services – a guidance and support service established in England in 2003 – and the Learning and Skills Council (LSC) – the body responsible for post-16 education and training in England, outside universities – must work together. Their cooperation is aimed at ensuring that the appropriate processes are in place – notably, referrals and recording of offers – and that each has a clear understanding of its responsibilities. Schools need to let their Connexions advisor know of young people who have received an offer to stay on with them while the LSC must ensure that Further Education (FE) colleges and training providers inform Connexions as soon as offers are made to young people. Offers are recorded until the end of August after which Connexions takes responsibility for those youth who have not received an offer yet. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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This policy initiative is likely to have several benefits, some of which may go beyond its immediate objective. First, support through the application process and help with identifying local learning opportunities may encourage more youth to stay on in learning beyond compulsory education. Second, it will help setup a system of tracking youth who complete the current compulsory education requirement and it will make it possible to follow their destination. Third, the Guarantee will create close cooperation between several bodies at the local level – Connexions, LSC and schools – with a focus on youth, their needs and experiences. Fourth, the Guarantee may also improve the match between learning opportunities available locally and the demand from youth in the area. However, some challenges may arise in the implementation of the Guarantee. First, key to the success of the initiative is that the processes of referral and recording of offers as well as the cooperation between local actors work well. Second, where an initial mismatch has occurred between available learning options and young people’s demand, Connexions advisors may have to redirect youth whose demand cannot be satisfied to qualifications that come only close to their preference. A rigorous assessment of the impact of the Guarantee on numbers in learning is not available yet but data on the incidence of NEET at the end of 2007 painted a mixed picture: the share of 16-year olds in NEET had fallen by 1.6 percentage points relative to a year earlier but the share of 17-year olds in NEET had risen over the same period. As a result, starting 2008, 17-year olds will also be covered by the Guarantee to ensure that youth who enrol on one year or short courses, or who leave the activity they chose after compulsory schooling, are given further opportunities to engage in learning.

C. Remedial education moving towards individualised pathways Remedial education programmes are key for youth who are at high risk of disengaging from learning or have already done so. In England, two remedial programmes currently exist, one focusing on 16-18-year olds – the Entry to Employment (E2E) programme – and the other for 14-16 youth – the Key Stage 4 Engagement. E2E is a work-based learning programme for youth (aged 16-18) who lack the basic skills needed to enter an apprenticeship, employment or structured learning at the post-compulsory level. The programme attracts young people with significant learning difficulties and/or disabilities, as well as young people who are neither in employment nor in education or training.

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82 – CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB It is managed and funded by the LSC and is implemented keeping local needs into consideration.19 After a pilot phase in 2002/2003, the scheme was launched nationwide in August 2003. Students must undertake learning in three core strands of the national curriculum: basic skills, vocational skills and development (with work placements in some cases), and personal and social development. A distinctive feature of the programme is its flexibility in meeting the needs of individual learners. The programme is not time bound20 or specified in terms of learning hours or attendance, other than meeting the minimum requirements of 16 hours per week. Besides, E2E is not qualification driven, although the programmes must provide learners with an entitlement to work towards external qualifications and awards, appropriate to their ability. Learning programmes are developed from a range of options to suit the needs of the individual learner. Initial assessment feeds into Individualised Learning Plans which are then reviewed on a regular basis and against which progress towards individual targets is measured. Appropriate awards and qualifications are selected according to how they might benefit individual learners. Learners are recruited through referral from Connexions Services or directly from the provider or support agencies, notably social services and youth offending teams. During the programme, youth receive a training allowance of GBP 40 per week. Most take between one and two years to complete the programme. A rigorous evaluation has not been carried out yet and qualitative studies provide inconclusive evidence on the effectiveness of E2E. E2E performance data for 2003/2004 indicate that at the end of the programme 21% of learners entered employment, 5% returned to full-time education, 13% became unemployed but over half pursued unidentified destinations (GHK, 2004). Interviews with providers also suggest that in

19.

The LSC works in partnership with the Learning and Skills Network – a not-forprofit organisation in charge of managing and providing E2E among other vocational education programmes – and Sector Skills Councils (SSC) – industryspecific bodies that bring together employers, professional bodies and occasionally trade unions working with government to develop the skills that business needs. The LSC also works in close cooperation with local providers including voluntary organisations and awarding bodies on this programme in the context of local needs.

20.

In 2003/2004, learners spent on average 41 weeks on the programme (GHK, 2004). JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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about 5% of the cases the referral system does not work, i.e. youth referred to E2E do not belong to the target group. The currently piloted Key Stage 4 Engagement programme is designed to offer a comparable experience to E2E at the 14-16 level. The programme was launched in 2005 and is aimed at young people who find it difficult to achieve progress within the mainstream curriculum. It is intended to have a significant work focus of up to two days per week, offer intensive advice and support for participants, encourage learners to develop general skills, attitudes and behaviours, and is tailored to the needs of the individual participant. An evaluation report will be available in July 2008. Both programmes may soon be replaced or incorporated into a new programme – the so-called Foundation Learning Tier (FLT) – being developed by the government in cooperation with the LSC and the Qualification and Curriculum Authority (QCA). FLT is going to be a framework for provision of personalised learning pathways for 14-19-year olds unlikely to achieve their potential via GCSEs, adults with basic skills gaps and adults or young people with learning difficulties. The key idea behind FLT is that of individualised pathways for learners. Some trials were run between August 2006 and July 2007 where personalised learning pathways were developed in a similar way as within the E2E framework, starting with the development of an Individualised learning Plan. When implementation of FLT is complete in 2010, this will encompass all LSC provision at the low-end of the skill spectrum, including E2E (Stott and Lillis, 2006). However, qualitative evaluation (GHK, 2007) highlighted a number of difficulties such as: identifying true needs and personalising work placements within individual pathways; confusion about how FLT relates to other forthcoming key developments in the vocational education area and to existing programmes such as E2E. The introduction of a new programme – Entry to Learning – designed to re-engage those who are not engaged in learning post-16 has recently been announced (DCSF, 2007a). The programme is inspired by a number of innovative voluntary sector and local authority funded schemes that have succeeded in restoring young people’s confidence and self-esteem. The new Entry to Learning programme is designed to bridge the gap between these kind of initiatives and more formal learning by ensuring that re-engagement is accompanied by clear and personalised progression routes which will take youth step by step back into formal learning. Young people will be supported through mentoring to move from good quality re-engagement activities – such as semi-formal personal development – back into more formal learning, in steps they can manage. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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4. Engaging 14-19-year olds in England through a broader spectrum of learning options To increase retention in education and training, England has undertaken to broaden the learning options available to youth aged 14-19. Several programmes have been launched over the past five years and the 14-19 Education and Skills White Paper and Implementation Plan (DfES, 2005a and 2005b) lay out several new options that will become available shortly. For the time being, these initiatives concern England only. However, Wales has launched its own 14-19 strategy (National Assembly for Wales, 2004).21

A. Diversification and flexibility for 14-16-year olds have resulted in a complex system of learning provision To ensure participation beyond compulsory education, it is important to strengthen engagement of 14-16-year old youth. For this age group, the main recent policy initiatives to strengthen vocational education include: i) the introduction of vocational GCSEs in 2002; ii) the Young Apprenticeships initiative launched in 2004; and iii) the Increased Flexibility programme. GCSEs in vocational subjects were introduced in England and Wales 2002 to promote the parity of esteem between vocational and more traditional academic subjects. Vocational GCSEs are currently available in eight subjects and give young people the opportunity to explore a particular vocational area as part of a balanced learning programme. A vocational GCSE is equivalent to two academic (general) GCSEs and enables

21.

The action plan for 14-19 learning in Wales involves two major changes to the secondary education system. First, the government has introduced the Welsh Baccalaureate Qualification (WBQ) – piloted in several schools since 2003 and now starting to be rolled out nationally for completion by 2010. The WBQ is an overarching diploma at intermediate and advanced levels for 16-19-year olds, which incorporates existing qualifications together with a common core curriculum. In practical terms, the WBQ does not replace A-Levels or GCSEs or other vocational qualifications but includes them within the learning options. Second, the Welsh administration has introduced so-called flexible Learning Pathways. The idea behind Learning Pathways is to allow each 14-19-year old to design his/her personal learning experience thanks to a wider choice of learning options – vocational and academic – and greater flexibility to vary the speed and direction of their pathway. The two main strengths of the reform are the individualisation of learning routes and the accent put on support and guidance. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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progression to further education, training or employment. Entries22 for vocational GCSEs have grown over time but in 2006 they accounted for only 6% of the total. The programme has not been the object of a rigorous evaluation but a qualitative report by the Office for Standards in Education, Children’s Services and Skills (Ofsted, 2004) showed disappointing outcomes. Vocational GCSEs were found to provide only a second-class route compared with academic learning and were mostly attended by lowerattaining pupils.23 Young Apprenticeships (YAs) – launched as a pilot scheme in England in 2004 and not yet rolled out – are intended for 14-year-old motivated youth of average and above-average ability who wish to start an apprenticeship at the age of 16.24 Pupils are based in school and follow the core national curriculum subjects. In addition, for two days a week (or equivalent) they work towards nationally recognised vocational qualifications at a FE college or with a training provider. The learning experience includes 50 days’ experience of work over the two years of the programme. The programme is delivered by partnerships – including local schools, the local LSC, local education authorities – and is supported by the relevant SSC. Ferguson and Mattick (2006) studied outcomes of cohort one of the programme (2004-2005 cohort). The authors found that 92% of cohort one students completed the programme and, of these, 74% gained a Level 2 vocational qualification. Evidence on achievement was less satisfactory as cohort one students performed close to the national average when GCSE scores were considered25 but significantly below the national average if English and Maths were included. It is also noteworthy that among those who 22.

Entries are the number of exams sat and not the number of pupils sitting GCSEs exams in the corresponding year. In addition, because vocational GCSEs are worth two awards each, each entry is counted as two to determine the proportion of vocational GCSEs entries over the total.

23.

In 2004, pupil’s achievement in vocational GCSEs was rated as unsatisfactory for over 25% of students – comparing unfavourably with the average for all GCSE subjects where it was just 3%.

24.

The pilot involved 1 000 14-year olds in 2004 who completed the programme in 2006. Another 2 000 started in 2005, 3 500 in 2006 and 9 000 in 2007. The programme is currently offered in the following areas: automotive industries, business administration, construction, creative industries and arts, energy, engineering, food manufacturing, hairdressing, health and social care, hospitality, retail, sports management and science.

25.

The measure used was the share achieving more than five A*-C GCSEs.

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86 – CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB completed the programme only 27% entered full-time apprenticeships.26 A qualitative report by Ofsted (2007) found improvements on several grounds when comparing the first three cohorts of YAs. Most notably, a greater proportion of the partnerships inspected provided good work experience in 2006-2007 than in previous years. Of the 14 partnerships inspected, only three had not put in place the arrangements for 50 days’ work experience. In addition, the employers interviewed identified benefits in the programme for their own organisation because it attracted young people to trades that they would not have otherwise considered and because it allowed them to assess and recruit potential employees. The Increased Flexibility Programme (IFP) for 14-16-year olds was introduced in England in 2002 as a different route through which students can access a number of existing vocational options. IFP provides schools with funding needed to give youth more learning options – i.e. to enhance vocational and work-related learning opportunities for 14-16-year olds including vocational GCSEs and other vocational qualifications available in partnership with FE colleges. The last IFP for which funding was available separately started in 2006 and will finish in 2008. Since 2008, schools may receive grants to continue provision of IFP courses but this will no longer be under the IFP heading. Golden et al., (2005 and 2006) studied outcomes achieved by the first and second cohort participants of IFP and painted a mixed picture of the success of the programme. IFP exceeded its target in so far as the majority of participants (87% in the second cohort and 80% in the first cohort) progressed to further education or training. IFP was also positively associated with the attainment of participants – particularly female and students whose educational attainment was lowest prior to engagement in IFP – although this was not consistent across all types of qualifications studied. However, the educational attainment of students pursuing vocational GCSEs and National Vocational Qualifications outside IFP was higher than those who did so through the IFP framework.

B. Simplification proposals by the Tomlinson report have only been partially implemented Some of the changes that the English education system is currently undergoing are the result of partial implementation of the so-called Tomlinson report, a government-commissioned review of the curriculum for 26.

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14-19-year olds led by Mike Tomlinson which was completed towards the end of 2004. Its central recommendation was to replace A-levels, GCSEs and the plethora of existing vocational qualifications with a single diploma, leading to a considerable simplification of the English qualification system (see Table 2.1). Table 2.1.

Tomlinson’s Diploma Framework proposal

Diplomas

Current qualifications

Advanced

Core

Main learning

Level 3

Advanced Extension Award; GCE and VCE AS and A level; level 3 NVQ; equivalent qualifications

Intermediate

Core

Main learning

Level 2

GCSE grades at A-C; intermediate GNVQ; level 2 NVQ; equivalent qualifications

Foundation

Core

Main learning

Level 1

GCSE grades at D-G; foundation GNVQ; level 1 NVQ; equivalent qualifications

Entry

Core

Main learning

Entry

Entry-level certificates and other work below level 1

Source: Department for Education and Skills – DfES (2004).

The Tomlinson report also called for improved vocational programmes and took the view that parity of esteem between academic and vocational qualifications would be achieved thanks to the single diploma framework.27 The Diplomas proposed by Tomlinson would be made up of modules adapted from the existing A-level and GCSE modules. Students would be able to pick their own combination (open diploma) or opt for one of the 20 pre-designed combinations (specialised diploma), giving stronger and more respected vocational qualifications. A single diploma framework would also avoid the risks of tracking young people too early into qualifications with a significant vocational content. There is some evidence that early tracking of pupils – before age 16 – may increase educational inequality and reduce average performance (Hanushek and Wößmann 2006 and OECD 2007b), thus needs to be justified on the basis of proven benefits.

27.

Note that this radical overhaul of the qualification system had the backing of teacher and head teacher associations, most university leaders and many employers. These stakeholders agreed that a radical change was needed – as both GCSEs and A-levels were considered dated and not sufficiently challenging for bright students – and that the only way to achieve parity of esteem between academic and vocational learning was for both routes to be part of a single qualification framework.

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88 – CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB While the idea of a joint diploma framework for academic and vocational learning put forward by Tomlinson was rejected,28 the English administration is about to introduce 17 new Diplomas that for the time being will add to, rather than replace, A-levels and the current framework of over 3 500 vocational qualifications. In the longer run, however, the government envisages that Diplomas will simplify the qualification framework by building on the best of existing vocational qualifications. Besides, in 2013, the success of the Diplomas will be assessed and the future of A-levels reconsidered.

C.

A total of 17 new Diplomas will be available in 2013

Diplomas are new qualifications designed to help 14-19-year olds in England develop practical skills as well as basic knowledge. They are currently being designed in cooperation with employers through SSCs. The first five will be available in 2008 and another five will be added in 2009 with the aim of having the full set of 17 Diplomas available at the national level by 2013.29 Diplomas will be available at three levels: foundation level, higher level (lower secondary education) and advanced (upper secondary education level). To achieve a diploma, young people will have to achieve appropriate standards in English and Maths (the core) and the specialised content relevant to the Diploma, to pass relevant GCSEs and A-levels, and to fulfil work experience requirements (main vocational learning). In March 2008, the English administration announced the introduction of Extended Diplomas, available from 2011. Extended Diplomas will offer young people opportunities to broaden their studies at each level with particular attention paid to additional English, maths and science learning. Students completing an Advanced Diploma will be eligible to apply to universities. However, acceptance will depend on the admission policies for each university.

28.

The proposal was rejected because of strong political support for keeping the A-level route unchanged.

29.

The first five Diplomas will be available in: Construction and the Built Environment, Creative and Media, Engineering, Information Technology and Society, Health and Development. The remaining 11 Diplomas include: Environmental and Land-based Studies; Business, Administration and Finance; Manufacturing and Product Design; Hospitality; Hair and Beauty Studies; Travel and Tourism; Public Services; Sport and Leisure; Retail; Science; Languages; and Humanities. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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Although it has been announced that there will be clear progression routes from Diplomas into Apprenticeships and vice versa, Apprenticeships will remain distinct and will not be required to fit within the Diploma framework. Considerable stress has been put on the involvement of employers in the design of Diplomas and in the implementation phase. The design of each Diploma is led by a consortium of employers30 and employers are involved in each of the 144 consortia delivering the first five Diplomas in September 2008. However, the extent of employers’ engagement in the delivery and teaching of Diplomas and in the provision of work placement is difficult to anticipate and there is likely to be considerable variation. A minimum of 10 days work experience has been set as part of the delivery requirements for Diplomas (DCSF, 2007b). The government has also announced that it may not be feasible initially for work experience to be specific to the Diploma being studied, although this should be encouraged. Unions are only marginally involved in the design of Diplomas. In fact, it is not compulsory for a SSC – the main counterpart of government in the design of Diplomas – to have a union representative in their governing board. More involvement of unions has proved beneficial in countries with long-standing systems of vocational education – such as Austria, Denmark and Germany – to ensure employers’ engagement and sufficient work placements. In this respect, the Trade Union Council (TUC, 2006) has called for more reciprocal obligations of employers. TUC has argued that, in exchange for a bigger say in the design of Diplomas, the government should press all employer bodies to make a clear commitment that they will be urging their constituents to give Diplomas due recognition in the recruitment processes and provide a sufficient number of work-experience placements. Finally, a number of funding concerns have been expressed in relation to the Diplomas and other initiatives increasing cooperation between schools and FE colleges. At present, schools receive more funding than FE colleges although the government has committed to reducing this disparity.31

30.

In total, 5 000 employers were involved in the design of the first five Diplomas. They helped with the design of personal learning and thinking and employability skills. In addition, the Confederation of British Industries – the largest employers’ organisation in the United Kingdom – helped with the design of function skills in English, Maths and ICT.

31.

Despite some extra funding allocated to FE colleges, this disparity will still amount to 5% in 2008 (UCU, 2006).

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D. In 2013 all 16-19-year olds will be entitled to an apprenticeship placement One of the key measures included in the 14-19 Education and Skills Implementation Plan to broaden learning options in secondary education is the so-called “apprenticeship entitlement”. By 2013, every suitably qualified young person in England aged 16-19 wishing to pursue apprenticeship training should be guaranteed a work placement to do so. In early 2008, the government also launched a two-month consultation phase on new legislation to expand the use of apprenticeships in the United Kingdom. Proposals include the creation of a national apprenticeship service to lead the expansion, targets for increasing apprenticeships in the public sector, and a pilot wage subsidy programme to make it more attractive for small business to offer apprenticeships.

About 7% of 16-18-year olds were apprentices in 2007 In the academic year 2006/2007, 6.5% of 16-18-year olds participated in an apprenticeship. At present, a total of 200 apprenticeships (leading to qualifications at the lower secondary education level) and advanced apprenticeships (leading to upper secondary education qualifications) are available in over 80 different industries.32 In 2007, Business Administration, Electro Technology and Hospitality and Catering were the main sectors for starting an apprenticeship (Figure 2.11). Employers have been involved in designing each apprenticeship through the relevant SSC. However, while many large employers have participated in this process, it has proved difficult to involve SMEs. Off-the-job training and assessment are fully funded by LSC that contract with “learning providers” who organise and/or deliver training and assessment services to employers. Providers are usually private training companies but might also be FE colleges, voluntary sector organisations, Chambers of Commerce, individual employers or “Group Training Associations” – groups of employers joining forces to organise off-the-job training. Only about 5% of apprenticeships are directly contracted with

32.

In their current format, apprenticeships were introduced in 1994. The programme was initially called Modern Apprenticeships and was designed to provide workbased training in a broad range of sectors of industry to youth aged 16-25 who would gain a recognised qualification while working. The name was changed to Apprenticeships in 2004 and, in the same year, the upper age limit was abolished and the minimum age to be an apprentice was lowered to 14. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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single employers participating in the scheme. LSCs also provide support to employers for the management of apprenticeships.33 Figure 2.11.

Distribution of apprentices across industry,a 2007 Percentages

Health and Social Care

16-18

Early Years

19 and over

Retail Automotive Industry Customer Service Construction Engineering Hairdressing Hospitality and Catering Electrotechnical Business Administration 0

2

4

6

8

10

12

a)

The selected industries correspond to the 11 largest apprenticeship sectors covering 70% of all apprenticeships in 2007. Source: Learning and Skills Council – LSC (2007).

Local learning providers help businesses recruit a suitable apprentice, write individual learning plans that apprentices sign when training starts and handle assessment and quality control. Selection takes account of school qualifications – especially for more technical occupations – and of motivation. Youth who want to enter can apply directly but all young people should be given appropriate advice from the schools.34 Youth who would like to start an apprenticeship but do not qualify for one can attend a so-called Programmeled Apprenticeship – a classroom-based preparation course. 33.

Relationships between LSC and employers are managed differently depending on size. Larger business, particularly those with branches all over England, can take advantage of the LSC National Employer Service. This service provides a dedicated account manager acting as a single point of contact to take care of all needs, including queries about qualifications and funding. On the other hand, SMEs are directed to local LSC for support.

34.

Unfortunately, schools have incentives in keeping the best students, often resulting in biased advice.

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92 – CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB There is no set time to complete an apprenticeship. In 2006, apprentices who successfully completed the programme took on average 13 months for apprenticeships and 22 months for advanced apprenticeships (LSC, 2006a). If completed successfully, apprenticeships allow entry to higher education.

Gender segregation is an issue in the current apprenticeship framework As Figure 2.12 shows, there is considerable gender segregation in many of the sectors, with men dominating the traditional manufacturing sectors and women over-represented in service sector apprenticeships. On the other hand, participation of ethnic minorities in all apprenticeships has improved considerably over time, from a share of just 4.5% in 2002/03 to 8% in 2005/06 – compared with a share in the 15-24-year-old population of about 9%. However, ethnic minorities continue to be under-represented in advanced apprenticeships where they account for only 6% of entrants.35 In its 2008 reform proposals, the government is suggesting the introduction in targeted areas of so-called “critical mass” pilots informed by positive discrimination rules. The pilots are intended to provide strong case studies and to help change expectations among underrepresented groups. Gender distribution of apprenticeships in selected industries,a 2007

Figure 2.12.

Percentages Women

Men

100 90 80 70 60 50 40 30 20 10 0

a)

The selected industries correspond to the 11 largest apprenticeship sectors covering 70% of all apprenticeships in 2007. Source: Learning and Skills Council – LSC (2007).

35.

Perez-del-Aguila et al. (2006) also show that in 2003 participants from ethnic minorities had lower completion rates than those in the White-British group. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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Apprenticeship pay varies considerably by sector Apprentices have the status of employees and receive pay. Pay rates vary and depend on age and on experience. Minimum wages do not apply to all stages of an apprenticeship and their relevance varies with age and experience in the programme: 16-18-year-old apprentices and apprentices aged 19 or older who are in their first 12 months of apprenticeship are not entitled to the minimum wage. Aside from these rules, the LSC has provided guidance to encourage employers to pay apprentices a minimum of GBP 80 per week for a 35-hour week (about two thirds of the minimum wage rate for 16-17-year olds). A study conducted by Ullman and Deakin (2005) based on an ad-hoc survey on apprenticeship pay conducted in 2004 found that apprentices were paid an average net pay per week of GBP 137 (15% more than the minimum wage for 16-17-year olds). However, this varied greatly by sector. The average weekly pay of apprentices in Hairdressing and Early Years was GBP 90 and their median weekly pay was just GBP 80.36 At the other end of the scale, apprentices in the Electro Technical sector received an average net pay of GBP 183 (see Figure 2.13). The authors also found considerable differences across apprenticeship levels and gender (see Figure 2.14). Employers are entitled to claim some on-the-job training expenses back from their local LSC. Two levels of funding are available through the LSC for young people on work-based learning in England. Apprentices older than 19 attract a lower level of funding than 16-18-year olds on the assumption that they learn more quickly and complete the programme more quickly than those coming straight from school at 16.37 Funding is allocated based on a national formula which distinguishes between a core component and an assigned weight as follows: i) core funding, related to the length of the programme, training costs and overheads; ii) weighting, calculated on factors such as the need for costly equipment.

36.

In its 2008 reform proposals, the government is suggesting to intensify controls to ensure enforcement of the GBP 80 minimum.

37.

In its 2008 reform proposals, the government suggests the introduction of a pilot to test the relaxation of the current age rules in sectors where it is difficult or impossible to achieve an apprenticeship before the age of 19 and study its effect on employer’s willingness to offer Apprenticeship places.

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94 – CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB Figure 2.13.

Average net weekly pay of apprentices in selected industries,a United Kingdom, 2004 Pounds (GBP)

200 180 160 140 120 100 80 60 40 20 0

a)

The selected industries correspond to the 11 largest apprenticeship sectors covering 75% of all apprenticeships in 2004. Figures are an average of apprenticeships and advanced apprenticeships. Source: Ullman and Deakin (2005).

Figure 2.14.

Average net pay by gender, age and apprenticeship level,a United Kingdom, 2004 Pounds (GBP)

200 180 160 140 120 100 80 60 40 20 0

a)

Average of the following industries: Business Administration, Early Years, Electro Technical, Engineering Manufacturing, Retailing, Construction, Hairdressing, Hospitality, Motor Industry, Health and Social Care and Costumer Service. Source: Ullman and Deakin (2005).

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Apprenticeships completion rates have improved but remain disappointing Completion rates of apprenticeships were, until very recently, extremely low, standing at less than one in three in the academic year 2003/04 (West, 2004).38 This completion rate compared rather badly internationally. West (2004) estimated completion rates of 70% in Denmark, 75-80% in France, 75% in Germany and 65-70% in the Netherlands. The author ruled out labour market situation, industry-specific factors and competition with full-time education as sole factors behind low completion rates in England and suggested that broader management actions may play a role. He identified the following management actions to improve completion rates: better selection of apprentices, better quality of off-the-job training, more monitoring and follow-up during the apprenticeship to identify trainees at risk, and greater efforts to re-direct drop-outs into other apprenticeships as is done in Denmark and Germany.39 The author also suggested the introduction of a probation period before the apprenticeship contract starts. This would help eliminate, within a short time frame, those who have made the wrong choice of occupation or of individual employer.40 To boost completion rates, the LSC introduced in 2004 changes to providers’ remuneration. Providers are now only paid 75% of apprenticeship funding upfront while the remaining 25% is paid only if the apprentice completes the course. Thanks to this measure, completion rates have improved significantly since 2004 although they are still low by international standards and vary by type of apprenticeship and industry. In 2006, completion rates stood at 50% for apprenticeships compared with just 44% for advanced apprenticeships and tended to be higher in more traditional sectors than in services (Figure 2.15). 38.

Note that non-completion does not always lead to disappointing labour market outcomes. Thornhill (2001) shows that 44% of drop-outs were in another job after leaving training.

39.

In Denmark, providers must inform the counselling service – the equivalent of Connexions in England – of anyone who has dropped out of an apprenticeship and the counselling service must conduct an interview with that person. In Germany, a similar counselling service is in place and the lastest figures (Bundesinstitut für Berufsbildung, 2007) show that 50% of those who drop-out of an apprenticeship contract are “re-inserted” into another one (another 13% moved on to school-based study and 17% went into jobs outside apprenticeship). It is not known whether re-inserted leavers complete their “replacement” apprenticeships but high overall completion rates suggest that many do.

40.

About 30% of drop-outs give a “wrong choice of occupation or employer” as the main reason for not completing their apprenticeship.

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96 – CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB Hogarth and Hasluck (2003)41 showed that non-completion has a cost for employers. This is because net costs tend to become net benefits only as apprentices progress towards completion – mostly because the apprentices’ marginal productivity rises faster than their wages. Figure 2.15.

Apprenticeship completion rates in selected industries,a United Kingdom, 2006 Percentages

70

Apprenticeship

Advanced Apprenticeship

60 50 40 30 20 10 0

a)

The selected industries correspond to the 11 largest apprenticeship sectors covering 74% of all apprenticeships in 2006. Source: Learning and Skills Council – LSC (2006a).

While completion is important, gaining a qualification has been shown to improve returns to apprenticeship training. Unfortunately, completion is rarely accompanied by a qualification. Of the 50% of apprentices who successfully completed the programme in 2006, only 6% gained a National Vocational Qualification (NVQ). McIntosh (2004) showed that holding an apprenticeship certificate as well as an NVQ yielded twice the wage returns as holding just the former. 41.

The study covers advanced apprenticeships in Engineering, Construction and Business Administration and apprenticeships in Retail, Business Administration and Hospitality. The net costs/benefits estimates accounted for wages paid, the value of apprentices’ product while working, supervisory costs and funding received from LSC where applicable. Overall, the study suggested that there were net costs of running apprenticeships in some manufacturing industries. The authors also found that net costs were higher in advanced apprenticeships where placements were more difficult to find. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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Manufacturing apprenticeships yield the highest returns Wage returns are a good proxy indicator of quality or, more specifically, of the value attached to apprenticeships by the labour market. While there is considerable disagreement on the rates of return to apprenticeship training,42 there is general agreement that, when returns are positive, they vary considerably by industry. Apprenticeships are more likely to increase the earnings of trainees in manufacturing industries than in the service sector. This may partly be due to the much longer apprenticeship tradition in manufacturing industries vis-à-vis the service sector. It may also be due to the limited on-thejob and off-the-job training components in service sector apprenticeships. Ullman and Deakin (2005) found that apprentices worked on average 33 hours per week for their employers including on-the-job training but excluding off-the-job training. This level was fairly consistent across sectors although the proportion of work and on-the-job training varied a lot by sector (Figure 2.16). Off-the-job training took typically one day per week in the manufacturing sector but as little as one to three hours in some service sector apprenticeship schemes. Figure 2.16.

45 40 35 30 25 20 15 10 5 0

Hours of training and working per week in selected industries,a United Kingdom, 2004 Working

On-the-job training

Off-the-job training

a)

The selected industries correspond to the 11 largest apprenticeship sectors covering 75% of all apprenticeships in 2004. Source: Ullman and Deakin (2005).

42.

McIntosh (2004) estimated returns of 5-7% for men and no returns for women. McIntosh (2007) estimated returns of 18-20% for men and of 13% for women in advanced apprenticeships only (high returns are mostly driven by large and significant returns for Construction and Machinery Manufacturing). Dickerson and Vignoles (2007) found no returns to vocational qualifications including apprenticeships.

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98 – CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB

Quality of off-the-job training is highest in manufacturing The quality of off-the-job training provision is a key aspect of apprenticeship training. A study by Hughes and Monteiro (2005), based on inspections of providers conducted yearly by the Adult Learning Inspectorate, found that the quality of off-the-job training was considerably higher in the traditional manufacturing apprenticeships than in the service sector. Also, among external providers, the best were specialists, i.e. they offered a single area of learning. The study found that the best providers were individual employers or Group Training Associations because of better coordination between on-the-job and off-the-job learning. Unfortunately, this provision setup is rare.43 Most off-the-job training is provided externally with limited input of employers. In addition, the current structure means employers do not develop an internal training culture and small employers’ opportunities to participate – particularly in rural areas – are limited by the availability of learning providers in their area. Group Training Associations have proved quite successful in involving employers and, in some instances, in organising group provisions for small employers and employers in rural or isolated areas.

In 2005, the demand for apprenticeship places was five times the supply In April 2005, five times as many young people as employers envisaged entering an apprenticeship contract (Apprenticeship Task Force, 2005).44 To make things more difficult for young people wanting to enter an apprenticeship, Ullman and Deakin (2005) show that only 55% of apprentices are new to their employer – ranging from over 70% in some manufacturing industries to as low as 21% in Hospitality and Catering. This is partly due to the way incentives for learning providers are set. Currently, each has a target of apprenticeships to organise to be filled either by allocating a new applicant to an employer or by setting up an apprenticeship for someone who is already an employee of the firm. As the latter is easier to do, most providers privilege employees. While it can be argued that life-long learning of employees is very important, there are ways through which this can be carried out and financed other than 43.

The Modern Apprenticeship Advisory Committee (2001) found that most employers played a passive role in training provision and this was a key weakness requiring action.

44.

The report provides evidence that this is not because employers do not know of the existence of apprenticeships. Over 90% of employers are aware of the programme. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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apprenticeships. For instance, the Train to Gain programme – launched nationwide in 2006 – provides employers with free skill brokerage services to identify the skill gaps of their workforce and the best provision and funding available to fill them. In many OECD countries, the cost of taking an apprentice is often another deterrent for employers. Evidence that this is the case in England is mixed. On the one hand, the recommended GBP 80 weekly pay may be an issue for non-participating employers, particularly in SMEs, and for employers in some service sectors. On the other hand, the 10% of employers currently offering apprenticeship placements to 16-18-year olds pay them on average over GBP 100 per week (Figure 2.14). The lack of sufficient apprenticeship places is a key issue in light of the introduction of the apprenticeship entitlement in 2013 and of the recommendation emerging from the Leitch Review on Skills (2006) that there should be 500 000 apprentices in England by 2020 (there were fewer than 300 000 in 2007). To fill this significant gap, in its 2008 reform proposals, the government is suggesting a pilot wage subsidy programme for SMEs to make it more attractive for them to offer apprenticeship places. There are also plans to strengthen the existing Programme-led Apprenticeship scheme (LSC, 2006b). The programme is scheduled to change from providing preparation for young people who are not ready for an immediate apprenticeship placement to providing the off-the-job training component of an apprenticeship all in one module when an apprenticeship place is not available. This risks being inefficient as it is precisely the alternating nature of on-the-job experience and off-the-job training that makes apprenticeship training valuable. Finally, it is noteworthy that, in England, the involvement of unions in the design and delivery of apprenticeships has been rather limited contrary to the experience in countries with a long tradition of apprenticeship training. For instance, more support of Union Learning Representatives – union members working with management and employees in their organisation to encourage participation in learning – to apprentices may help improve completion rates.

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100 – CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB

5. Raising compulsory education requirements A. In 2015, youth will have to participate in education and training until age 18 The Education and Skills Bill, currently being discussed in Parliament, introduces a requirement to remain in education or training beyond the current statutory leaving age. If it is successful, in 2013 every young person in England who has not already obtained an upper secondary qualification will be required to participate in education and training until age 17 and in 2015 this requirement will be extended until age 18 (DfES, 2007a). There is a rich economic literature, starting with Angrist and Krueger (1991), studying the effect of compulsory schooling on education attainment. Most papers have exploited month of birth differences to show that students compelled to stay in education a few months longer were likely to achieve better education and labour market outcomes, after controlling for a number of external factors. A recent paper by Del Bono and Galindo-Rueda (2006) is interesting in this respect as it exploits a unique feature of the English education system by which students who turn 16 are only allowed to leave education at two dates during the year: Easter and the end of the school year. The authors find that students compelled to stay in school as little as three months longer than their classmates tend to achieve significantly higher qualifications and experience better labour market outcomes. Despite evidence of positive returns to raising the participation age, keeping young people who would have otherwise left education engaged in learning for an additional two years is not simple. By 2015, when the reform if fully operational, the government judges that learning provision – with the full implementation of Young Apprenticeships, Diplomas, the Apprenticeships Entitlement and FLT – will be sufficiently broad that, for every young person, there will be an appropriate type of course available, whether theoretical, applied or work-based. Although this broader provision is intended to benefit all students, it is going to be crucial to engage those youth who would have dropped out of education at 16. The reform is also designed to allow more flexible participation than keeping young people in full-time education until they are 18:

•

participation will be at school, in a college, with a private training provider, in work-based learning or in accredited training provided by an employer;

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•

participation will be full-time for young people not in employment a significant part of the week, and part-time for those working more than 20 hours per week;

•

in order to count as participating, young people who are in full-time employment will be required to work towards accredited qualifications.

The provision of more choice in learning is expected to boost voluntary participation in education for 16-17-year olds to 90%. As a result, the compulsory nature of the measure, with the enforcement problems that may arise, is only expected to affect the remaining 10%. Modelling conducted by the Department for Education and Skills (DfES, 2007a) suggests that the majority of the additional learners would be based in Further Education colleges – mostly dealing with classroom-based vocational education – although some would be in schools. The government also expects a steady increase in work-based learning over the coming several years, from just 7% in 2007 to 12% in 2016 (Figure 2.17). Figure 2.17.

Projected participation in education and training of 16-17-year olds, United Kingdom, 2007-2017 Percentages Work-based learning Further education and higher education

Part-time education Schools

100 90 80 70 60 50 40 30 20 10 0

Source: Department for Education and Skills – DfES (2007a).

While the new system will require considerable funding, the government’s view is that the returns will outweigh the costs, particularly because of lower NEET rates and thus reduced benefit dependency (DfES, 2007b). Hunt and McIntosh (2007) model the economic benefits of raising the education and training participation age by: i) estimating the number of JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

102 – CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB additional young people participating in learning due to the reform; ii) modelling the attainment among the additional participants; and iii) valuing the economic benefits of the additional attainment. The authors estimate that the main expected benefit from the reform will arise from higher educational attainment,45 hence improved labour market prospects for young people over their lifetime both in terms of earnings and employability. Many assumptions are involved in the modelling but, under the central scenario, economic returns to the reform are found to be substantial.46

B. Ensuring sufficient and high-quality learning provision will be key Young people and union representatives (NYA, 2007 and TUC, 2007) highlighted the lack of apprenticeships places available at present, which they felt already causes difficulties for those unable to find a placement in their chosen field. There was doubt as to whether the provision would increase sufficiently to meet demand after the introduction of the apprenticeship entitlement and the raising of compulsory participation in education and training to age 18.47 Other learning provision may also be difficult to expand. The participation of those who are currently disengaged will require providers who are willing and have the capacity to make appropriate provision for them. There is currently no way of forcing schools or colleges to make 45.

In the central scenario, about 17% of additional participants would attain qualifications at level 2 or level 3 by age 18.

46.

Under the central scenario, the additional benefit to the economy from raising the participation age is estimated to be around GBP 2.4 billions for each cohort of young people. However, this estimate is subject to a large degree of uncertainty as a reflection of the uncertainty surrounding many of the assumptions, including: i) attainment patterns of the group of people who do not currently participate; ii) the precise range of qualifications that will be available in 2015 (given current reforms) and the proportion of students taking each of the qualifications; and iii) the economic returns of the new qualifications currently being developed. On the other hand, the economic benefits model developed by the authors does not capture any wider benefits to society which may accrue from more young people participating in post-16 learning such as improved health, reduced anti-social behaviour or reduced likelihood of crime.

47.

About 39% of respondents to the policy consultation phase thought that planned learning provision would be insufficient to meet demand from students and to provide a good degree of diversification versus just 29% who thought it would (DfES, 2007c). JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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provision and, since the participation of reluctant learners is likely to depress success rates, much provision may end up being supplied by low-status “providers of last resort”. In June 2007 plans were announced to transfer the responsibility for funding 16-19 provision from the LSC to local authorities. If this proposal is successful in Parliament, the changes could be in place from 2010/11. Local authorities would then be under a duty to ensure that there is sufficient provision for all young people in their area (accounting for full participation up to age 17 by 2013 and up to 18 by 2015) and to ensure that youth have access to the new curriculum and qualifications entitlements. They would also be under a duty, when commissioning provision, to promote high standards and ensure that the best quality provision is purchased.48 The option of combining full-time employment with part-time participation in education and training will also require the availability of more flexible provision particularly regarding starting dates.49 In this respect, it has to be acknowledged that learning provision has become more flexible recently.

C. Part-time learning participation may raise enforcement issues when job separation occurs The government is putting the primary responsibility of engagement in education or training with the young person. However, for youth combining full-time employment and part-time participation in learning outside the workplace employers will be responsible for verifying, at the time of hiring, that the young person is enrolled in the required training. Some enforcement problems may arise when youth who combine full-time employment and part-time participation in learning are dismissed by their employers or quit voluntarily. These unemployed young people would not necessarily be required to engage in full-time participation in education or training. Connexion services would support them into meeting the 48.

Note that the proposal does not require that local authorities should work to ensure that all young people attend provision in their area. It requires that the young people in their area have access to the best available provision within reasonable travelling distance, whether situated within or outside their own local area boundaries.

49.

For instance, working 16-17-year olds engaged in part-time participation in education or training who are fired by their employers or who quit may be required by Connexions to attend full-time education/training thereafter. Providers will have to account for young people to join courses in the middle of the school year, which may pose some planning problems

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104 – CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB requirement to participate – be it full-time or part-time alongside employment. Full-time learning would be privileged for youth whose part-time training was provided by the employer – i.e. those who are left without any training when separation occurs. On the other hand, those who were attending training outside the workplace may be allowed to combine part-time learning and job search. This risks jeopardising the policy’s objectives unless there are clear job-search requirements and a time limit after which youth who have found work are required to re-engage in full-time participation in learning.

D.

Effective enforcement routes are key

Many stakeholders have been supportive of the reform proposals50 but some commentators51 have expressed reservations regarding the compulsory nature of the initiative.52 The government is counting on measures that broaden learning provision to raise voluntary participation of 16-17-year olds from 77.5% in 2006 to 90% by the end of 2015. Even in this framework, enforcing participation for 10% of youth aged 16-17 who do not wish to continue studying would be challenging. In addition, Fletcher et al. (2007) considered that achieving voluntary participation of 90% of the targeted age group may be overly-optimistic, especially in light of the experience from other countries that have introduced similar measures. International evidence suggests that, if there are no mechanisms in place to enforce the participation requirement, as it has been the case in some US states and in New Brunswick in Canada, the policy only has a small effect (Oreopoulos, 2005). However, finding appropriate sanctions is not easy as many youth would not have the means to pay fines. In England, the government has set out proposals for an enforcement strategy based, in the early phase of disengagement, on advice and guidance. The system used to track participation post-2013 will be based on the database currently used locally by Connexions to track young people, for which funding is being transferred to local authorities. There will be a duty on providers – schools, FE colleges and other providers – to notify the system as soon as a young person drops out so that Connexions can get in touch with him/her immediately to help find an alternative place and resolve 50.

Among others, the Association of Colleges and the Association of Teachers and Lecturers have endorsed the reform.

51.

See TUC, 2007; National Youth Agency (NYA, 2007); and Fletcher et al., 2007.

52.

Reservations are based on these commentators’ belief that compulsion may further alienate disaffected young people by causing them to associate education with punishment. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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any issues there may be. If the young person still does not engage, he/she will be given a final chance to fulfil the duty voluntarily. After this stage, the government proposes that the local authority will have the power to issue, where appropriate, an Attendance Order specifying the provision they must attend, where and when.53 Penalty for breach of the Attendance Notice will be a fixed penalty notice and if a young person was still not participating, the local authority could ultimately take them to the Youth Court, where the penalty would be a fine. There would be appeal mechanisms built into this to make sure that the local authority’s action was justified.

6. The tertiary education system and its main challenges A.

Graduates continue to do very well on the labour market

The tertiary education system in the United Kingdom has undergone two major changes over the past 15 years: the distinction between vocational and academic institutions was abolished in 199254 and a number of changes to tertiary education funding were introduced starting in 1998.55 In its current setting, the system performs rather well by international standards (OECD, 2006c).

53.

The reform proposal envisages enforcement to be used as a last resort. If there is a good reason why a young person is not participating, and they are taking the right steps to re-engage with learning they would not enter any enforcement system. Local authorities would have the discretion to ensure this does not happen inappropriately.

54.

The 1992 Further and Higher Education Act abolished the distinction between Universities – involved with academic learning – and Polytechnics – focused on vocational learning. Thus, the act enabled polytechnics in England and Wales to acquire the title of university and award their own degrees. Former polytechnics have retained a vocational emphasis in their academic programmes because of their expertise in such programmes and the demand from students.

55.

In 1998, following the National Committee Inquiry into Higher Education (NCIHE, 1997), tuition fees were introduced at a rate of GBP 1 000 per year indexed to inflation. In 2006, universities were allowed to charge a top-up fee for full-time home undergraduates up to a maximum of GBP 3 000 per year. Over the same period, income-contingent students’ loans covering both living costs and tuition fees were progressively introduced. Recent research has shown that the new funding system is fair to students at current tertiary rates of returns (Dearden et al., 2004) and that the top-up fees will provide universities with considerable funding to spend on increased teaching resources.

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106 – CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB Despite the rapid increase in tertiary education participation over the past few decades, there is no evidence that the experience of graduates in the labour market has worsened over time. A study conducted by Purcell et al. (2005) compares the early experience in the labour market – approximately four years – of two cohorts of graduates (1995 and 1999). The authors find that the early career profiles of 1999 graduates are almost identical to those exhibited by the earlier cohort. The experience of unemployment among the 1999 graduates during the two years after graduation was slightly lower than for the 1995 graduates. The distribution of the duration of unemployment among the 1995 and 1999 cohorts was similar, with short spells of unemployment immediately after graduation dominating. The study also showed that working in non-graduate jobs – a proxy for so-called overqualification – was a common experience following labour market entry for both cohorts of graduates. Almost half of the class of 1999 who were employed immediately after graduation worked in such occupations, but the incidence of “non-graduate” employment fell rapidly and by four years after graduation, only 15% of employed respondents remained in non-graduate occupations. During early careers, participation in such employment was generally lower for the 1999 than the 1995 cohort.56 Participation in tertiary education of some socio-economic groups – particularly youth from low-income families – remains an issue. However, fears that the introduction of student loans would reduce participation of disadvantaged youth even further57 have not materialised. Galindo-Rueda et al. (2004) found no evidence that funding changes are behind the less rapid growth in tertiary participation among students from low socio-economic backgrounds relative to those from high socio-economic backgrounds. Since the loans introduction, participation of underrepresented groups has increased.58

56.

Graduates in scientific disciplines, such as medicine, education, engineering, and mathematics and computing, were less likely to have obtained employment in non-graduate occupations following graduation, while graduates in humanities had relatively high levels of employment in these jobs. Female graduates were more likely than males to work in non-graduate jobs in their early careers, as were those of both sexes who had achieved relatively low degree results.

57.

Aversion to take up of debt is considerably higher among youth from a low socioeconomic background than among their richer counterparts, even when it makes economic sense (CHERI, 2005). More guidance and advice at tertiary institutions may help in this regard.

58.

Between 2002 and 2006, the share of Black and Ethnic Minorities students rose from 20.3 to 22.2, that of students with disabilities rose from 6.3% to 7.6% and JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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B. The government is hoping that 50% of 18-30-year olds will participate in tertiary education in 2010 Based on estimates that 80% of future job creation will be in occupations which normally recruit those with tertiary qualifications (Wilson and Green, 2001), the government has set a target of increasing participation of 18-30-year olds to 50% by 2010. According to government plans, the bulk of the expansion should come through new types of two-year work-based qualifications – so-called Foundation Degrees (FDs) – introduced in 2000 and tailored to the needs of students and of the economy. FDs are currently delivered by universities and colleges and sometimes by other training providers. They cover a diverse range of subject areas and include a work-based component. FDs are a tertiary qualification in their own right but, after completing a degree, graduates can go on to study for an honours degree which usually takes one extra year of study. Many courses have flexible teaching arrangements involving part-time or evening attendance at college, distance learning or learning via the internet. While this flexibility is welcome, there is a danger that it may depress survival rates in FDs.59 For instance, there is evidence that about 80% students dropping out of tertiary education each year are part-time students (National Audit Office, 2007). Considerable efforts have been devoted to involving employers in the design of FDs in order to ensure that they focus on the skills required in the labour market. When a new course is created, the provider can use a FD framework prepared by the relevant SSC to ensure that the course responds to employers needs. Providers are also supposed to secure the involvement of local employers in the mentoring of students, the provision of work placements and the final assessment. Unfortunately, the engagement of individual employers has not been easy to secure, particularly for SMEs and this is likely to become more difficult if the programme expands further, as planned by the government. that of students from the four lowest socio-economic groups rose from 29.5 to 30.7 (National Audit Office, 2007). 59.

Tertiary vocational survival rates in the United Kingdom are already rather low by international standards. Only about half of new entrants in tertiary vocational education complete their courses (OECD, 2006a). This survival rate compares poorly with the OECD average of over 60% and with survival rates in university courses in the United Kingdom – among the highest in the OECD. Across OECD countries, the United Kingdom is one of the worst performers in terms of tertiary vocational survival rates – only Greece, Hungary and New Zealand have lower rates.

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108 – CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB

C. In the United Kingdom, students’ work is common and is often in areas related to the field of study In many OECD countries, the main barrier faced by young people looking for their first job is their lack of labour market experience. This is not the case in the United Kingdom where over 80% of tertiary full-time students work60 at some point during the academic year for an average of 12 hours per week. This experience of the labour market before leaving education has been found to improve post-education labour market outcomes (CHERI, 2002a). A study conducted by the Centre for Higher Education Research and Information (CHERI, 2002b) shed some light on the relationship between students’ jobs and field of study in the United Kingdom.61 The study found that about half of students carrying out paid work did so in jobs related to what they were studying. Work placements related to field of study were shorter than one month in 60% of cases but 30% of them lasted more than six months. Some of the work-related placements reported in the CHERI (2002b) study were part of a programme of study. At the time of the survey, approximately 18% of students were studying on programmes which included organised work experience planned as part of their programme of study, although not always compulsory. Work placements of this kind were more likely in health studies where 75% of students’ working were doing work related to their field of study. More recent work by Little and Harvey (2006) supports the earlier findings that work placements organised as part of coursework are common and increasingly part of tertiary learning programmes in the United Kingdom. The study found that placements varied considerably in their characteristics but 80% were paid – particularly those compulsory and longer than six months –, over two-thirds were in private companies and 90% had a training component.

7. Training on the job A. The incidence of on-the-job training among youth is relatively high but low-skilled youth benefit less Youth in the United Kingdom benefit less than adults from on-the-job training. However, they tend to receive more job-related training than their European counterparts (Figure 2.18). This is an encouraging achievement, 60.

Among 16-17-year olds, work and study is less common (27% were concerned in 2007).

61.

Note that data for this study refer to 1998, thus are relatively out of date. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB – 109

especially since continuous improvements in employability through on-the-job training have been shown to avoid unemployment or make it shorter (see OECD, 2003 and 2004a). In this respect, analysis conducted in Chapter 1 on the persistence of low pay suggests that jobs with training are a better stepping stone than those without. However, as in other countries, training is not well distributed across the workforce and seldom reaches those who need it most – low-skilled workers. In addition, the difference between the United Kingdom and other EU-19 countries is largely accounted for by courses of short duration.

B.

Train to Gain may help raise skills of employed youth

The Train to Gain programme, rolled-out in England starting from April 2006, is aimed at improving training rates further, particularly for low-skilled employees. The programme consists of a new service to help businesses get the training their employees need through impartial advice and referrals to suitable training providers. Incidence of job-related traininga by duration of the training course, United Kingdom and European countries, 2003

Figure 2.18.

Percentages 50 Less than 15 hours

45

15 to 29 hours

More than 29 hours

40 35 30 25 20 15 10 5 0 20-29

30-49

20-29

EU-19

30-49

United Kingdom Total Total

EU-19

United Kingdom

Low-skilled Low-skilled 20-29 20-29

b

a)

EU-19

United Kingdom

Medium-skilled Medium-skilled 20-29 20-29

c

EU-19

United Kingdom d

High-skilled High-skilled 20-29 20-29

Data refer to the share of employees not enrolled in education who have participated in one training course for job-related reasons over the year previous to the survey date. b) Less than ISCED 3; ISCED: International standard classification of education. c) ISCED 3 and ISCED 4. d) ISCED greater than or equal to 5. Source: Secretariat estimations based on Eurostat, European Union Labour Force Survey, Life-long learning module, 2003. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

110 – CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB Train to Gain works through a free skills brokerage service which provides advice and guidance on what each employer needs and the best way to get it. Brokers play an essential role in convincing employers of the benefits of investing in training and making more use of the best colleges and providers. They target “hard-to-reach” employers,62 most likely to be SMEs. The broker can recommend the best way to fund training, explaining all the funding options available. Train to Gain provides some funding itself, including:

•

Free training for employees aged 16 and over who have not attained Level 2 qualifications and free literacy and numeracy qualifications under the Skills for Life banner;

•

Wage compensation for companies with less than 50 employees;

•

Free-funded programmes such as apprenticeships, advanced apprenticeships and vocational qualifications at Level 3 and above.

One year after the start of the roll-out in England, figures showed that the programme had attained set targets. In September 2007, about 52 000 employers and 230 000 employees had signed up and 96 000 had already acquired Level 2 qualifications thanks to the programme. Youth aged 16-24 accounted for 13% of Train to Gain participants.

8. Key points The education system in the United Kingdom tops OECD rankings in a number of areas. In 2006, educational expectancy was the highest in the OECD thanks to the rapid increase in enrollments at both the secondary and tertiary level since 1995. Returns to tertiary education are among the highest in the OECD and the recent funding reform provides university with additional resources to invest in research and improve quality further. However, other indicators paint a less rosy picture. According to PISA 2006, the performance of 15-year olds in the United Kingdom was just average by OECD standards. In addition, dispersion in performance is more marked than in other countries. In fact, the United Kingdom does rather badly at the bottom of the competency scale while it stands close to the best-performing OECD countries when the best students are compared. 62.

The service is aimed at employers that are not already engaged with training providers for their employees to achieve vocational qualifications. When the programme was launched, the government estimated that there were over three million employers in the United Kingdom in this category. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB – 111

These disappointing outcomes at the low end of the school performance scale may partly explain the large share of school drop-outs63 in the United Kingdom and their poor labour market performance. About 16% of youth leave education without an upper secondary qualification or with just a basic school-leaving certificate, above the OECD average of 14%. One in five youth belonging to this group were neither in employment nor in education or training in 2005. In England, a number of measures are already in place to encourage young people to stay in education longer including financial support through the Education Maintenance Allowance (EMA) and the so-called September Guarantee of a place with an educational institution after 16. EMA has improved participation, retention and achievement of beneficiaries in secondary education since its introduction in 1999. The September Guarantee has only just started but is likely to help keep youth in school longer by ensuring that every 16-year old receives an offer from an educational institution to continue studying. It is currently being extended to cover 17-year olds in 2008. The English administration has also launched an ambitious programme – the so-called 14-19 Strategy – aimed at broadening learning options in secondary education in view of raising the age of compulsory participation in education and training to 18 in 2015. In addition to existing qualifications, the strategy introduces an apprenticeship entitlement for 16-19-year olds and 17 new Diplomas – composite qualifications combining theoretical and practical learning. Participation of employers in the planning and delivering of these programmes, particularly through the offer of sufficient apprenticeship placements, will be essential to their success. Given current shortages of apprenticeship places, this component cannot be taken for granted. In addition, as far as raising the age of compulsory education and training is concerned, enforcement issues may arise when young people combining part-time participation in education and training and full-time employment are fired or quit their job.

63.

See footnote 13 for a definition of school drop-outs.

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CHAPTER 3. REMOVING DEMAND-SIDE BARRIERS – 113

CHAPTER 3 REMOVING DEMAND-SIDE BARRIERS

Labour demand conditions are an important determinant of youth labour market performance. Hiring of young workers could be hampered by the limited labour market experience they possess. High legal and/or collectively bargained minimum wages or high non-wage labour costs could also make it too costly for employers to hire and train low-skilled young people. Finally, some aspects of labour legislation may also represent a disincentive for firms to hire inexperienced workers on full-time permanent jobs. This chapter will look at these potential demand-side barriers in the United Kingdom. Section 1 examines the responsiveness of youth employment rates to demand conditions. Section 2 presents the views of United Kingdom employers on school leavers’ and graduates’ preparedness for labour market entry. Sections 3 and 4 discuss whether minimum wages, labour costs and employment protection legislation represent barriers to youth labour market entry.

1. Economic growth and youth employment The overall positive labour market performance of youth in the United Kingdom has certainly been helped by favourable demand conditions over the past decade – GDP growth averaged 3% per year between 1996 and 2006. Indeed, there is evidence that youth employment tends to be more sensitive to changes in the cycle than adult employment (Figure 3.1).64

64.

However, there is some indication that youth employment has tended to become less cyclical over the past decade. The difference between the coefficients for the 1985-1995 and 1996-2006 periods for youth is statistically significant. On the other hand, the different between the adult coefficients is not statistically significant.

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114 – CHAPTER 3. REMOVING DEMAND-SIDE BARRIERS Youth employment rates and GDP,a 1985-1995 and 1996-2006

Figure 3.1.

Percentage deviationb of employment rates and GDP from their respective trendsc 1985-1995

1996-2006 d

A. Youth (15/16-24) Employment rate

Employmetn rate

6

Y= 0.960X + 0.005 R² = 0.445 4

2

6

Y = 0.632X + 0.012 R² = 0.356 4

2

0

0 -8

-6

-4

-2

0

2

-8

4

-6

-4

-2

0

-2

-2

-4

-4

-6

2

-6

GDP

4

GDP

B. Prime-age adults (25-54) 6

Employment rate

Employment rate

6

Y = 0.469X - 0.018 R² = 0.415 4

2

Y = 0.395X + 0.009 R² = 0.551

4

2

0

0 -8

-6

-4

-2

0

2

4

-8

-6

-4

-2

0

-2

-2

-4

-4

-6

GDP

2

4

-6

GDP

a)

The sample includes the following countries: Australia, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Korea, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, the United Kingdom and the United States. b) Each point in the chart represents a country-year observation of the percentage deviation of employment and GDP from their respective trends. c) The trends have been established by the Hodrick-Prescott filter imposing identical smoothing factors for total employment and GDP in all countries. d) Youth aged 16-24 for Iceland, Norway, Spain, Sweden, the United Kingdom and the United States, and 15-24 for all other countries. Source: OECD, National Accounts database for GDP, and Labour Force Statistics database for employment rates.

Figure 3.2 shows deviations of employment rates from their long-term trend in relation to recession episodes in the United Kingdom. The position of youth deteriorates much more than that of adults when adverse economic

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CHAPTER 3. REMOVING DEMAND-SIDE BARRIERS – 115

conditions unfold.65 Besides, among youth, it is the low-skilled that see their position most affected by the cycle. The most recent worsening of youth employment rates, between 2004 and 2005, was entirely due to a fall in the employment rates of low-skilled youth – from 58.2 in winter 2004 to 55.5 in winter 2005 – while the position of youth with an upper secondary qualification remained unchanged and the employment rate of graduates rose by 1 percentage point. These findings suggest that the position of youth on the labour market could continue to deteriorate over the coming quarters as projected GDP growth for 2008 and 2009 is revised downwards in the wake of the current uncertain economic climate. Figure 3.2.

Youth and adult employment rates and economic cycles, United Kingdom, 1985-2006

Percentage deviation of employment rates from their respective trendsa

4

Recession period

16-24

25-54

3 2 1 0 -1 -2 -3

a)

The trends have been established by the Hodrick-Prescott filter imposing identical smoothing factors for total employment. Source: OECD, National Accounts database for recession periods, and Labour Force Statistics database for employment rates.

65.

Although not well captured by the Hodrick-Prescott methodology and thus not highlighted in Figure 3.2, the United Kingdom economy grew at 1.8% in 2005, the slowest pace since 1992. This partly explains worsening labour market conditions for youth in 2005 and 2006.

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116 – CHAPTER 3. REMOVING DEMAND-SIDE BARRIERS

2. Employers’ views of youth labour market readiness A. Employers are dissatisfied with some of the skills of young recruits In a 2006 Survey conducted by the Confederation of British Industry (CBI) almost two thirds of employers reported dissatisfaction with literacy, numeracy skills of school-leavers and with their attitude to work (Figure 3.3). Figure 3.3.

Employers dissatisfied with the key skills of young recruits, United Kingdom, 2006 Percentages

School-leavers

Graduates Business awereness Self-management Foreign language skills General employability skills Knowledge about chosen job/career Positive attitude to work Basic literacy and use of English Basic numeracy skills

80

70

60

50

40

30

20

10

0

0

10

20

30

40

50

60

70

80

Source: Confederation of British Industry, Employment Trends Survey (2006).

Literacy and numeracy were a source of employers’ dissatisfaction with graduate recruits as well, albeit to a lesser extent than for school-leavers. Besides, the survey provided evidence that employers’ dissatisfaction with the skills of graduate recruits rose between 2005 and 2006. On average, across the “employability” skills shown in Figure 3.3, 30% of employers expressed dissatisfaction in 2006 compared with just 20% in 2005. The National Employer Skills Survey for 2005 (LSC, 2006c) showed a more positive picture of employers’ attitudes towards young people’s skills. Among employers’ recruiting 16-year olds, 60% reported they were well or very well prepared for work. This share rose to 69% among employers’ recruiting 17-year olds and to 81% among employers’ recruiting 18-year olds. Dissatisfaction appeared to be driven mostly by the lack of experience or of employability skills.

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CHAPTER 3. REMOVING DEMAND-SIDE BARRIERS – 117

B. Employers think better numeracy and literacy and more vocational education should be prioritised The CBI survey also asked employers which areas should be given priority by government in order to ensure that youth leave education with the skills required to enter and progress on the labour market. Unsurprisingly, given the data shown in Figure 3.3, a large majority of respondents felt that ensuring that more young people leave school literate and numerate should be the government’s top priority (Figure 3.4). Over two thirds ranked improving vocational education as a major object. Employers would also like the government to put more emphasis on the quality of graduates (32%), while few thought that increasing their number should be a policy concern (2%). Finally, over a third of employers thought more help should be available to access government funding to train their workforce.66 Figure 3.4.

Employers’ views of government priorities in improving skills and education, United Kingdom, 2006 Percentages Raise the number of graduates Raise the number of graduates

Improve quality of external training providers Improve quality of external training providers Help fims identify their skills needs and gaps Help f irms identif y their skills needs and gaps Raise the quality of university graduates Raise the quality of university graduates Help in accessing free government funding Help in accessing f ree government f unding Raise intermediate andand technical skills Raise intermediate technical skills Improve vocational education so young Improve vocational education so young people people are equipped are equipped f or work for work Ensure more young people leaveleave school literate Ensure more young people school and numerate literate and numerate 0

20

40

60

80

100

Source: Confederation of British Industry, Employment Trends Survey (2006).

3. Wages and labour costs A. decade

Age-earning profiles have changed little over the past

On average, in 2006, young people aged 16-24 earned 63% of mean gross hourly wages in the United Kingdom, the same as in 1997. This is confirmed by Figure 3.5 which shows that the age-earning curves for young men and young women relative to 30-34-year olds have remained almost unchanged between 1997 and 2006 (Figure 3.5, Panel A). 66.

Note that the Train to Gain programme is designed to do just this.

JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

118 – CHAPTER 3. REMOVING DEMAND-SIDE BARRIERS Figure 3.5.

Wage profiles of full-time workers by gender in the United Kingdom and selected OECD countries, 1997-2006 Average hourly earnings of workers aged 30-34 = 100 A. Time profile 2006

160 140

1997 160

Men

140

120

120

100

100

80

80

60

60

40

40

20

20

0

0

Women

B. International comparison, 2006a United Kingdom 160 140

United States

Japan

Denmark

160

Men

Women

140

120

120

100

100

80

80

60

60

40

40

20

20

0

0

C. Educational attainment, 2006 Less than upper secondary 160 140

Men

Upper secondary 160 140

120

120

100

100

80

80

60

60

40

40

20

20

0

0

Tertiary

Women

a) Data refer to 2005 for the United States. Source: Office for National Statistics (ONS), Labour Force Survey (LFS), 2005 winter quarter for the United Kingdom’s data by educational attainment, and Labour Force Survey 2006 for all other data; Statistics Denmark, quarterly survey from business enterprises in the private sector, 2006 for Denmark; Ministry of Health, Basic Survey on Wage Structure, 2006 for Japan; and US Department of Labor, Bureau of Labor Statistics, Current Population Survey, 2005 for the United States.

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CHAPTER 3. REMOVING DEMAND-SIDE BARRIERS – 119

In 2006, the wage profile for full-time workers was lower in the United Kingdom vis-à-vis other countries (Figure 3.5, Panel B). The average wages of teenagers and young adults relative to 30-34-year olds were lower than in Denmark and close to the United States. Women younger than 29 tended to earn as much as young men relative to the respective 30-34 age groups. However, female relative earnings grew much less with experience. In 2006, tertiary education graduates earned a considerable premium over youth holding an upper secondary qualification – about 40%. However, Figure 3.5 (Panel C) shows that experience plays a smaller role for graduates than for their less educated counterparts. Relative to individuals aged 30-34 with the same respective level of education, graduates earn less than those holding upper secondary qualifications.

B.

The youth sub-minimum wage is closely monitored

In 1999, the United Kingdom government introduced a minimum wage rate for adults aged 22 or older, as well as a sub-minimum wage for youth aged 18-21, the so-called “development rate”. In 2004, an additional lower rate for 16-17-year olds was added. In October 2007, the adult rate stood at GBP 5.52 per hour, the development rate at GBP 4.60 (83% of the adult rate) and the 16-17-year olds rate at GBP 3.40 (62% of the adult wage). Apprentices under 19 are exempted from the minimum wage and apprentices aged 19 or older are exempted for the first 12 months in the apprenticeship. Table 3.1 presents minimum wage rates relative to country-specific median wages for OECD countries where a minimum wage exists. According to this standardized measure, the United Kingdom adult minimum wage rate stood just above the OECD average in 2006. On the other hand, compared with countries where a sub-minimum wage rate for youth exists, the United Kingdom youth rates were relatively low in 2006. This was particularly the case for youth aged 18-20 who, in many other countries, are entitled to the adult rate. The fact that youth sub-minimum wage rates are low relative to median wages has contributed to the fact that their introduction has not had any adverse effect on youth employment (Box 3.1). Dickerson (2007) also found no evidence of negative effects on employer-provided training. On the contrary, several studies – mostly focusing on adults – found that the introduction of the minimum wage has had positive effects on wages and has helped reduce wage inequality (Dickens and Manning, 2006, Fitzner, 2006, Lam et al., 2006, and Metcalf, 2007).

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120 – CHAPTER 3. REMOVING DEMAND-SIDE BARRIERS Table 3.1.

Minimum wages for adults and youth in OECD countries, 2006a Percentages

Numerator Denominator

Adult MW b Median wage

Average youth MW c

MW at 17

MW at 18

MW at 20

Adult MW b

Median wage

Median wage

Median wage

Austaliad

0.57

-

-

-

-

Belgiume Canada

0.53 0.40

0.82 -

0.40 -

0.43 -

0.49 -

Czech Republic f Spain

0.39 0.39

0.85 -

0.31 -

0.31 -

0.35 -

Franceg Greece Hungary

0.63 0.39 0.48

0.85 -

0.57 -

0.57 -

0.63 -

Irelandh Japan

0.48 0.34

0.70 -

0.34 -

0.48 -

0.48 -

Luxembourgi Mexico

0.53 0.19

0.78 -

0.42 -

0.53 -

0.53 -

Netherlands j

0.44

0.53

0.19

0.20

0.27

New Zealandk Polandl

0.57 0.41

0.73 -

0.42 -

0.57 -

0.57 -

Portugalm

0.44

0.75

0.33

0.44

0.44

Slovak Republic n Turkey

0.43 0.36

0.75 -

0.33 -

0.43 -

0.43 -

United Kingdomo United States OECDp

0.48 0.31

0.72 -

0.29 -

0.40 -

0.40 -

0.44 (0.49)

0.75

0.36

0.44

0.46

a) b) c) d) e) f)

Not applicable. For Greece, Mexico, the Netherlands, Poland and Portugal, data refers to 2005. Full minimum wage rate. Unweighted average across sub-MW rates for youth. Youth are entitled to a reduced MW to be set in collective agreements. Youth get an amount ranging from 75% of the adult MW at 16 to 94% at 20 and 21. A reduced MW applies for workers under the age of 19 (80%) and for workers aged 19-21 with less than six months job tenure (90%). g) Youth aged 17 and 18 with less than six months experience receive 90% of the adult MW and youth 16 or younger receive 80% of the adult MW. h) Sub-MW applies to youth younger than 18. i) Youth aged 15 and 16 are entitled to 75% of adult MW and youth aged 17 are entitled to 80% of the adult rate. j) Youth are entitled to a reduced MW, varying from 30% for 15-year olds and 85% for 22-year olds. k) Sub-MW applies to youth between 16 and 18 years of age. Starting 1st April 2008, the youth sub-MW will be abolished and the adult rate will apply to all workers older than 16. l) There is no sub-MW for youth but school leavers are entitled to 80% of the adult MW for the first 12 months in their first job held and 90% over the second year. But no age-limit is set by law. m) Sub-MW applies to youth up to 17. n) Youth between 16 and 18 are entitled to 75% of the adult MW and youth under 16 to 50% (the latter is not used in practice as the minimum school leaving age has been raised to 16, as a result 75% is used in the calculations). o) Sub-MW applies to youth under 22. Two different rates apply: a development rate for youth aged 18-21 and an additional sub-minimum for youth aged 16-17. p) Unweighted average. Average adult/median rate for countries with a sub-minimum for youth in parenthesis. Source: OECD database on minimum wages. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

CHAPTER 3. REMOVING DEMAND-SIDE BARRIERS – 121

Box 3.1.The minimum wage impact on youth employment, school enrolment and on-the-job training: international evidence The impact of minimum-wage legislation on youth employment is theoretically ambiguous. While a high minimum wage may increase the share of youth who drop out of education and therefore labour force participation, it can also drive a wedge between youth labour costs and their expected productivity, thereby raising unemployment and discouraging some youth from entering the labour market. Target-efficiency considerations reinforce these theoretical arguments for establishing a youth sub-minimum (Neumark and Wascher, 2004, Pabilonia, 2002), because the association between holding a minimum-wage job and poverty – the main argument for a minimum wage is to minimise working poverty – is especially weak for the very young (who often live with their parents). On the other hand, Manning (2005) shows that, in a situation where employers have significant market (or monopsony) power over their workers, a well-chosen minimum wage can actually raise youth employment. The balance of international empirical evidence suggests that too-high minimum wages have a negative impact on youth employment, especially if combined with high non-wage labour costs (e.g. Abowd et al., 1997; OECD, 1998; Neumark and Wascher, 1998 and 1999; Kramarz and Philippon, 2001; Pabilonia, 2002).* The “appropriate” level cannot be determined on a priori grounds since it depends on the profile of the earnings/labour costs distribution which, in turn, differs from country to country. Too-high minimum wages may also have an effect on education enrollment. Theoretically, this effect could go either way. For example, if a higher minimum wage reduces the number of jobs available, more teenagers may remain in school because they cannot find jobs. A minimum wage increase may also raise the minimum level of productivity required for employment and some youth may return to education to acquire the necessary skills. On the other hand, higher minimum wages increase the opportunity costs of staying in education, particularly for very low-skilled youth. Furthermore, by increasing the income of drop-outs relative to graduates, higher minimum wages may reduce the relative return to higher levels of education. Empirically, the balance of international evidence suggests that increasing minimum wages has a negative impact on the enrollment of teenagers in education but not of young adults and that the negative effect is particularly strong for youth with very low skills (Neumark and Wascher, 1995; Landon, 1997; Chaplin et al., 2003; Pacheco and Cruickshank, 2007). Empirical evidence on the effect of higher minimum wages on on-the-job training provision is more mixed, with some authors finding statistically significant negative effects (Neumark and Wascher, 1998) and others finding that minimum wages increase training provision (Arulampalam et al., 2002).

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122 – CHAPTER 3. REMOVING DEMAND-SIDE BARRIERS Finally, arguments in favour of a sub-minimum wage for youth and other disadvantaged groups also emerge when minimum-wage policy is seen in the context of other labour market measures. In fact, the introduction of employment-conditional benefits combined with an appropriately-set wage floor would ensure that work is attractive to unemployed youth while avoiding downward pressure on wages. This is in fact the option chosen by the United Kingdom, which introduced a statutory minimum wage just as its tax-credit policy was being extended (European Commission, 2000). Various evaluations consider this to be a sound option, stressing its beneficial impact on low wages with no apparent negative repercussions on employment (Low Pay Commission, 2001). An alternative to avoid a sub-minimum wage would be to offer employers a reduction in non-wage labour costs for those youth employed at or around the minimum wage. * However, it should be added that analysts are not unanimous on this issue and some studies have failed to find significant negative employment effects (e.g. Card and Krueger, 1995; Stewart, 2003; Hyslop and Stillman, 2007).

However, the recent worsening of the labour market position of youth prompted the Low Pay Commission (LPC), a body charged with formulating recommendations on minimum wage changes based on rigorous research findings (see Box 3.2), to recommend a more moderate increase in the sub-minimum wage for 16-17-year olds and the development rate in 2007 (Low Pay Commission, 2007). In its motivations, the LPC noted that the labour market for young people had been weakening over the previous two years, most noticeably for those not in full-time education (see also Chapter 1). Evidence showed that, in 2006, 16-17-year olds not in full-time education had continued to experience a worsening of their labour market prospects and at a somewhat faster rate than over the previous year. The LPC expressed specific concerns about the number of 16-17-year olds who were NEET in 2006. Aside from the contribution of weak economic growth in 2005, the factors behind the worsening of youth labour market performance in 2005 and 2006 have proved difficult to pin down.67 The LPC report suggested that the sub-minimum wage for this age group may be more binding now than it used to be. While many employers choose to pay young people above the minimum wage applicable for their age, the use of age-related pay below the adult rate of the minimum wage has increased slightly since 2004. In 2007, the LPC also recommended that youth aged 21 should be entitled to the adult minimum wage rate, based on their past employment 67.

Some have argued that fairly skilled young immigrant workers may have displaced some low-skilled UK youth in the labour market but the most recent analysis does not support this (Gilpin et al. 2006). Further analysis in this area is warranted. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

CHAPTER 3. REMOVING DEMAND-SIDE BARRIERS – 123

performance, but this recommendation was not retained. The evidence presented by the LPC report showed that 21-year olds fare better in the labour market than 18- and 19-year olds and that the overwhelming majority of them (nine in every ten) were paid at least the adult minimum wage in 2006. Box 3.2. The role of the United Kingdom Low Pay Commission The Low Pay Commission (LPC) is an independent statutory public body set up under the National Minimum Wage Act of 1998 to advise the Government about the National Minimum Wage. Its role is to advise the government on a minimum wage rate that “helps as many low-paid workers as possible without any significant adverse impacts on inflation and employment”. To advise and make recommendations to Government, the LPC undertakes the following activities: •

Carry out extensive research and consultation;

•

Commission research projects;

•

Analyse relevant data and actively encourage the Office of National Statistics to establish better estimates of the incidence of low pay;

•

Carry out surveys of firms in low-paying sectors;

•

Consult with employers, workers and their representatives;

•

Take written and oral evidence from a wide range of organisations; and

•

Engage in fact-finding visits throughout the UK to meet employers, employees and representative organisations.

Since 1999, the LPC has commissioned over 80 research projects to academics and consultants, including rigorous analysis based on statistical survey data. This has proved essential for LPC decision-making and for its credibility with experts and the media. In its 2008 apprenticeship reform plans, the government proposed that the LPC be charged with conducting research on the current wage floor for apprentices.

C. The tax-wedge on low-wage earners is relatively low but has increased recently Although figures by age group are not available, Table 3.2 presents the tax wedge for a worker earning 67% of the average wage in the production sector, an acceptable approximation of the relative wage earned by a young worker. In 2006, the tax wedge on low-wage earners in the United Kingdom – at 30% – was 3 percentage points below the OECD average and 8 percentage points lower than the European average.

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124 – CHAPTER 3. REMOVING DEMAND-SIDE BARRIERS Table 3.2.

Tax wedge including employers’ social security contributions in OECD countries, 2000 and 2006 Percentages Tax w edge on low -w age earner a 2000 2006

Mexico Korea New Zealand Ireland Australia Iceland Japan United States Sw itzerland Canada United Kingdom Portugal Luxembourg Norw ay Slovak Republic Spain Greece Denmark Czech Republic Turkey Poland Finland Netherlands Italy Sw eden Austria France Hungary Germany Belgium EU-19c OECDc

11.0 14.9 18.5 18.1 25.4 19.7 23.4 27.2 27.3 27.8 28.3 33.2 32.5 35.1 40.6 34.7 35.5 41.2 41.4 39.1 42.2 43.0 42.0 43.1 48.6 43.2 47.4 48.5 48.6 51.3 40.2 34.4

10.6 16.0 19.0 16.3 24.4 23.6 27.5 26.4 26.9 27.6 30.4 31.7 30.6 34.3 35.6 35.9 35.4 39.3 40.1 42.0 42.5 38.9 40.6 41.5 46.0 43.5 44.5 42.9 47.4 49.1 38.5 33.7

Tax w edge on average earner b 2006 15.0 18.1 20.9 23.1 28.1 28.6 28.8 28.9 29.7 32.1 33.9 36.3 36.5 37.3 38.5 39.1 41.2 41.3 42.6 42.8 43.7 44.1 44.4 45.2 47.9 48.1 50.2 51.0 52.5 55.4 42.9 37.5

Countries are ranked by ascending tax wedge on average earner. a) Tax wedge including employers’ mandatory social security contributions for a single worker with no children earning 67% of the average wage. b) Tax wedge including employers’ mandatory social security contributions for a single worker with no children earning the average wage. c) Unweighted averages. Source: OECD Taxing Wages database.

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CHAPTER 3. REMOVING DEMAND-SIDE BARRIERS – 125

However, non-wage labour costs increased in 2007 and will increase further in 2008 following rises in the statutory annual leave entitlement in Great Britain from 4 weeks to 4.8 weeks in October 2007 and to 5.6 weeks in October 2008. Because many workers already enjoyed the proposed levels of annual leave – particularly those approved for October 2007 – the majority of employers are not affected by the legislation. However, in early 2007 the LPC estimated that around a third of all workers in low-paying sectors would be affected by the changes in October 2007, adding approximately 0.7% to the wage bill for low-paid employees. This rise was also taken into account in the LPC recommendation to raise the minimum wage rates only moderately in 2007.

4. The strictness of employment protection legislation in the United Kingdom Employment protection legislation in the United Kingdom is among the least strict in the OECD (Figure 3.6). As such, it is unlikely to constitute a high barrier to the hiring of youth on permanent contracts. Figure 3.6. Overall strictness of employment protection legislation and its three main components, OECD countries, 2003 2003 (scale 0-6) 4.0 3.5 3.0

Regulation on temporary forms of employment Specific requirements for collective dismissal Protection of regular workers against (individual) dismissal

2.5 2.0 1.5 1.0 0.5 0.0

Source: OECD (2004a), Employment Outlook, Chapter 2, Chart 2.1, Paris.

Limited regulation on the dismissal of permanent employees is likely to have contributed to the low incidence of temporary work by international standards and to relatively easy transitions from temporary to permanent jobs. In addition, the United Kingdom has the longest trial period across OECD countries –12 months – during which claims under unfair dismissal legislation are not possible. This feature may play a positive role in facilitating the hiring of youth directly on permanent contracts. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

126 – CHAPTER 3. REMOVING DEMAND-SIDE BARRIERS

5. Key points Overall, demand-side barriers to the hiring of young people appear to be limited in the United Kingdom. Healthy economic growth during much of the past decade has certainly contributed to positive performance of youth on the labour market on average and the slight dip in economic growth in 2005 partly explains the recent worsening. However, the high sensitivity of youth employment rates to economic conditions suggests that the worsening in youth labour market performance could continue in the short-term as growth forecasts for 2008 and 2009 are revised downwards in the wake of the current uncertain economic climate. In general, minimum wages and labour costs are moderate and thus do not represent an obstacle for the hiring of youth. However, recent developments suggest that, for 16-17-year olds, the sub-minimum wage rate may be more binding now than when it was first introduced. In addition, recent increases in annual leave entitlements are predicted to add 0.7% to the wage bill for low-paid workers. To prevent these developments from impacting negatively on youth employment rates, the government approved only moderate increases in the minimum wage in 2007. The strictness of employment protection legislation in the United Kingdom is among the lowest in the OECD, thus is unlikely to cause temporary-work traps for youth.

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CHAPTER 4 PASSIVE AND ACTIVE LABOUR MARKET POLICIES TO MOBILISE YOUNG PEOPLE INTO WORK

In many OECD countries, the first steps on the labour market are characterised for youth by the experience, sometimes repeated, of unemployment interspersed with spells of inactivity. Thus, it is important that young people have sufficient incentives and means to return to work. For instance, jobless youth often lack the job-search and interview skills needed for a smooth return to work and, for them, good-quality guidance and support by the public employment services play a crucial role. The provision of these services should ideally follow a “mutual obligations” principle by which youth must actively seek work in exchange for targeted actions to help them find a job. This chapter outlines the passive and active labour market programmes (ALMPs) available for unemployed youth in the United Kingdom and presents current reform plans. It also reviews the initiatives directed at reducing NEET rates among 16-17-year olds who are generally unknown to the public employment service.

1. The role of passive labour market measures for youth A. Youth without work experience are entitled to incomebased Jobseeker’s Allowance In the United Kingdom, anybody aged 18 or older who has paid National Insurance Contributions over two tax years can claim contribution-based Jobseeker’s Allowance (JSA) for 182 days. In addition, the United Kingdom is one of only a few OECD countries where unemployment benefits are available to individuals without any work experience based on their income and savings and those of their family and for an unlimited duration – the so-called income-based JSA. This is particularly relevant to youth who often lack the necessary contributory history to qualify for contribution-based JSA. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

128 – CHAPTER 4. PASSIVE AND ACTIVE LABOUR MARKET POLICIES TO MOBILISE YOUNG PEOPLE INTO WORK To get both types of JSA, a person must be capable of working, immediately68 available to work for at least 40 hours per week69 and actively looking for work. Youth aged 16-17 have no automatic entitlement to income-based JSA. However, they may be able to claim it for a short period under special circumstances, i.e. if they: i) are in a couple with the responsibility of a child; or ii) can prove they would suffer severe hardship if they did not get income-based JSA. A condition for getting income-based JSA is that the young person in question is registered with the Connexions Service (in England) or Careers Service (in Scotland and Wales) for employment and training. In Scotland and Wales, youth aged 16-17 who have worked more than 16 hours a week since leaving full-time education and who are between jobs or training can apply for the so-called Young Person’s Bridging Allowance70 by registering with the local Connexions service and their eligibility will be considered before their eligibility to an award of income-based JSA based on severe hardship.

B.

Jobseeker’s Allowance is not very generous

Contribution-based and income-based JSA pay the same amount. In 2007, an adult – 25 or over – with no children received GBP 59 per week. Youth were entitled to smaller payments that varied by age. A single person aged 18-24 with no children received about GBP 47 a week and a single person aged 16-17 living with parents or other family members received about GBP 36. Both payments were equivalent to about 17% of the average weekly income in paid employment of the respective age group. The Young Person’s Bridging Allowance was much less generous, at GBP 15 per week for a maximum of eight weeks in any 12-month period.

68.

JSA recipients must usually be available to start work immediately, but there are some cases when they can have more time, notably: i) if they have caring responsibilities, they must be available to start work within 48 hours; ii) if they are providing a service, they must be available to start work within 24 hours; and iii) if they are involved in voluntary work, they must be available to start work within 1 week and to go to an interview within 48 hours.

69.

JSA recipients may be able to restrict the number of hours they are available for work if they have caring responsibilities or if they have a physical or mental condition that affects the work they can do.

70.

The Bridging Allowance was available to young people in England until September 2007. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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While these comparisons between gross benefits and gross average weekly earnings are interesting, they do not account for the role that taxation can play in comparing out-of-work with in-work earnings. International comparisons of adult unemployment assistance net replacement rates71 show that the United Kingdom contribution-based JSA is not particularly generous (Figure 4.1). As far as income-based JSA is concerned, while it is rare that youth without any contribution history are entitled to unemployment assistance for an unlimited duration,72 the United Kingdom pays out the least generous benefit (OECD, 2007c). Figure 4.1.

Net unemployment benefit replacement rates, in OECD countries, 2005a Percentage of pre-unemployment wage

100 90 80 70 60

OECDb = 60.3

50 40 30 20 10 0

a)

These data are net replacement rates, i.e. they are adjusted for the effects of taxation. They refer to the average of net replacement rates faced by single persons without children with pre-unemployment earnings of 67% and 100% of the average production wage. They relate to the initial phase of unemployment but following any waiting period. No social assistance “top-ups” are assumed to be available in either the in-work or out-of-work situation. Any income taxes payable on unemployment benefits are determined in relation to annualised benefit values (i.e. monthly values multiplied by 12) even if the maximum benefit duration is shorter than 12 months. b) Data for Mexico are not available. Unweighted average of countries shown. Source: OECD, Tax-Benefit Models (www.oecd.org/els/social/workincentives).

71.

The net replacement rate is an indicator that compares income from work to benefit income and is adjusted for the effects of taxation.

72.

Only Australia, Belgium, Finland, Ireland and New Zealand have a similar regime.

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130 – CHAPTER 4. PASSIVE AND ACTIVE LABOUR MARKET POLICIES TO MOBILISE YOUNG PEOPLE INTO WORK

C. Jobseeker’s Allowance comes with a series of obligations designed to deter benefit dependency In addition to being relatively small, JSA comes with a series of obligations on the jobseeker aimed at reducing the risk of benefit dependency. To claim JSA, the unemployed need to enter into a Jobseeker’s Agreement with their local Jobcentre Plus office – the United Kingdom public employment service. The agreement includes actions that the JSA recipient needs to undertake in order to find work. Usually, jobseekers are expected to take at least three steps to find work every week while getting JSA. This could include drawing up a CV or contacting employers. To ensure that jobseekers are fulfilling their Jobseeker’s Agreement, they are required to attend a Fortnightly Jobsearch Review and to meet periodically with their Jobcentre Plus Personal Adviser. The visits also serve to verify how jobseekers are progressing with the actions listed in their Jobseeker’s Agreement and whether the agreement needs updating. The availability of suitable vacancies, training courses and job-search programmes is also discussed, although jobseekers can be contacted by phone between visits to discuss these opportunities. A jobseeker who fails to attend an interview at Jobcentre Plus when asked to do so may lose their benefit. Benefit payments may also be lost if the jobseeker fails to take up a reasonable opportunity of training or work,73 fails to apply for training or work, fails to accept an offer of training or work, fails to turn up for training when given a training place, gives up a training place or loses his/her training place through misconduct. The imposition of a sanction entails a total loss of benefit for 2 weeks or 4 weeks if the jobseeker has already had a fixed-period sanction within the previous 12 months. However, the sanctioned jobseeker has the opportunity to apply for hardship payments which can result in payment being reduced by up to 40% for the period of the sanction. The share of 18-24-year olds who are JSA recipients in the population of the same age decreased over the past decade (Figure 4.2).

D.

Income support and incapacity benefits

Surprisingly, a relatively large share of young people receives income support although this share has been falling since the late 1990s (Figure 4.2). Everybody with a low income and older than 16 – the sick and disabled without contributory history, lone parents, those unable to work because of 73.

Only first-time jobseekers are allowed to turn down or leave training once without a good reason. After that, however, any time that the jobseeker either turns down or leaves training without a good reason will result in the JSA being reduced. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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caring responsibilities and the registered blind – can apply for Income Support. It is a means-tested benefit and recipients are not obliged to look for work. However, they are required to attend work focused interviews at Jobcentre Plus at certain points during their claim – depending on the reason they are claiming – in order for their claim to be processed and/or retain full entitlement. To be entitled to Income Support, the recipient must have been exonerated from the obligation of looking for work. The weekly benefit amount is equivalent to the one paid under JSA but recipients of income support automatically get Housing Benefit and Council Tax Benefit and other help, for example, with health costs. Figure 4.2.

Trends in benefit recipiency in the United Kingdom, youth aged 18-24, 1999-2007 Percentage of the population in the age group Income support

JSA

Incapacity benefit

2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0

Source: Department for Work and Pensions Online Tabulation Tool; and OECD population estimates using Eurostat, European Union Labour Force Survey.

Young people who cannot work because of illness or disability may be able to get incapacity benefits. Incapacity benefits are subject to weaker work tests than JSA. While the participation in the New Deal for Young People – the main activation programme for unemployed youth – is compulsory after six months of JSA claims, participation in the New Deal for Disabled People is on a voluntary basis only. The national roll-out of a new programme for incapacity benefit recipients – Pathways to Work – will be completed by the end of April 2008. It entails monthly mandatory work-focused interviews over six months starting eight weeks after the benefit claim but action taken in response of this work-focused interviews will still be non-compulsory. In international comparisons, the JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

132 – CHAPTER 4. PASSIVE AND ACTIVE LABOUR MARKET POLICIES TO MOBILISE YOUNG PEOPLE INTO WORK United Kingdom has a much younger recipiency base for sickness and disability benefits than a number of other OECD countries, notably Australia, Luxembourg, and Spain (OECD, 2007d). However, the share of youth receiving incapacity benefits has remained rather flat over time (Figure 4.2).

2. Activation of unemployed youth There is increasing recognition across OECD countries of the importance of activation strategies based on the so-called “mutual obligations” principle for promoting employment prospects of unemployed youth (Box 4.1). Over the past decade, the United Kingdom has devoted considerable resources to putting in place a comprehensive activation strategy for young unemployed people – the New Deal for Young People (NDYP) – relying on a mutual obligations approach. Box 4.1. Active Labour Market Policies for youth Over the past decade, several countries have come to realise that, for those youth who are already out of the education system – particularly youth leaving school without an upper secondary qualification – effective active labour market policies, as opposed to passive ones, constitute the best option. However, while there is general agreement that focusing on activation and mutual obligation policies is the way forward (see OECD, 2006d), many of the programmes targeted to youth, especially those most at-risk, have produced disappointing outcomes. Evaluation of existing programmes is thus fundamental in highlighting what works and what does not and in setting guidelines for future action. Trying to sum up what works and what does not for disadvantaged youth is an arduous task but drawing on the several evaluations of existing programmes, successful programmes appear to share some characteristics (see Martin and Grubb, 2001; Betcherman et al., 2004; and Betcherman et al., 2007):

•

Early action is particularly important for young people as those without work experience are generally not entitled to unemployment benefits or other welfare transfers. A number of OECD countries already have major programmes for youths that come into play early, often before or at six months of unemployment, e.g. Australia, Belgium, Denmark, New Zealand, Norway and the United Kingdom. Sweden uses a shorter period (90 days), and youth activation in Finland, for those without a vocational qualification, starts immediately.

•

In terms of content, job-search assistance programmes are often found to be the most cost-effective for youth, providing positive returns to both earnings and employment. On the other hand, some wage and employment subsidy programmes do yield positive returns, but they generally tend to perform poorly in terms of their net impact on the future employment prospects of participants.

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CHAPTER 4. PASSIVE AND ACTIVE LABOUR MARKET POLICIES TO MOBILISE YOUNG PEOPLE INTO WORK – 133

•

Training programmes should be designed in close connection with local or national labour market needs. In this respect, mobilizing and involving the private sector and communities to assess local or national demands for skills and community needs is most important to project design.

•

Good targeting of the programmes is also crucial. For instance, there is a need to distinguish between teenagers and young adults and to focus on school drop-outs. Specifically, the most desirable solution to the employment problems of teenagers is to help them to remain in school and acquire educational qualifications, whereas for young adults, help to acquire work experience is more important.

•

Tight work-search requirements, backed by the threat of moderate benefit sanctions where applicable, tend to encourage early exit from unemployment, as much for youths as for adults. Indeed, in Australia, when “mutual obligation” requirements were applied to youths who had been unemployed for six months, an increase in the rates of exit from unemployment was observed (see QED, 2003).

•

Programmes that integrate and combine services and offer a comprehensive “package” seem to be more successful.

•

Greater involvement of the social partners, as well as the public authorities at all levels, can help enhance the effectiveness of programmes. A tightly controlled system of certification to ensure the quality and relevance of training programmes may also contribute to the same goal (OECD, 1996; and O’Higgins, 1997).

•

Residential programmes may yield positive returns for disadvantaged youth. Job Corps in the United States is a well-known example of such a programme. It consists in taking disadvantaged youth out of their regular locality, giving them mentoring, work experience and remedial education.

A. About 15% of activation expenditure in the United Kingdom benefits the young unemployed In 2005, the United Kingdom devoted about 15% of the total expenditure on active labour market policies to youth (Table 4.1). Almost two thirds of the total youth activation budget was accounted for by Connexions services and the remaining third was spent on unemployed youth engaging in New Deal programmes or Employment zones. Although statistics for other OECD countries are not available for 2005, the average share of total activation expenditure devoted to actions directed to youth across OECD countries was 10% in 2002.

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134 – CHAPTER 4. PASSIVE AND ACTIVE LABOUR MARKET POLICIES TO MOBILISE YOUNG PEOPLE INTO WORK Table 4.1.

The cost of youth activation schemes in the United Kingdom, 2005 Milions pounds (GBP)

Total expenditure on ALMP New Deal for Young People Gateway Education and training option Employment option options Follow-through a

New Deal for Lone Parents 18-24

a

New Deal for Disabled People 18-24 Employment zones Connexions Service Youth enterprise initiative (YEI) Total expenditure on youth ALMP

Percentage of total expenses

5 963 213 79 53 8 58 6

100.0 3.6 1.3 0.9 0.1 1.0 0.1

6

0.1

4 92 550 6 872

0.1 1.5 9.2 0.1 14.6

a)

Expenditure on 18-24 in New Deal for Lone Parents and New Deal for Disabled People is estimated based on the share of participants in this age group – i.e. thus assuming that the cost per participant does not change with age. Source: Department for Work and Pensions Online Tabulation Tool; and OECD database on Labour Market Programmes.

B.

The NDYP performance has worsened over time

The NDYP is an activation programme focused exclusively on young people. It was introduced in spring 1998 with the declared objective of improving employability of long-term unemployed youth and helping them find a job. Participation is mandatory after six months of claiming JSA. Eligible jobseekers are first put into a four-month programme with a New Deal Personal Adviser called “Gateway” (see Box 4.2). The purpose of this initial phase is to develop an individually tailored plan for improving the jobseeker's employability. At the end of the Gateway period, young jobseekers who have not found unsubsidised work can choose one of four options: subsidised work, full-time education and training, work in the voluntary sector or work with an environmental task-force. All these options continue to be subject to JSA rules, such as the obligation to actively seek work, irrespective of the financial arrangements for the specific option. If a young person completes or leaves an option and still has not obtained a job, they can reclaim JSA and enter the follow-through period. During this period, youth receive further intensive help with job-search in order to find a job.

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Box 4.2. New Deal for Young People: how does it work? The NDYP was introduced in the United Kingdom in 1998 to provide more intense job-search support for young people claiming JSA continuously for 26 weeks. Participation is mandatory. Early entry to NDYP is possible and there are 11 groups who are entitled to enter NDYP before reaching the standard six months entry point, including: people with disabilities, lone parents, ex-offenders, ex-members of the regular armed forces, people with literacy or numeracy problems and those meeting a range of other criteria. At entry, the Jobseeker Agreement – signed at registration with Jobcentre Plus – is reviewed by a Personal Adviser and an individualised action plan is drawn up. To inform the whole process, the young unemployed is put through a fast-track skill assessment and his/her distance from the labour market is evaluated using a standardised costumer assessment tool. In 2007, 11% of participants left NDYP in the pre-Gateway period, the same share as in 1999. After this initial stage, the first phase of NDYP – called Gateway – involves counseling and intensive job-search help and lasts for approximately four months. The Personal Adviser meets the young unemployed every two weeks, for at least 30 minutes each time. Sometimes youth are also assigned to a mentor, particularly if they need guidance on issues beyond their labour maker preparedness. During Gateway, the young person continues to receive the JSA and is counted as unemployed. In 2007, 54% of participants left NDYP during the Gateway period, the same share as in 1999. Young people who have not found a job by the end of the Gateway period are assigned to one of four options in agreement with the jobseeker: full-time education or training, work in the voluntary sector, work in an environmental taskforce or subsidised employment. It is the Adviser who decides which option the young person is more suitable for – subject to the young person’s agreement – although the subsidised employment option depends largely on demand from employers. During options – lasting between six and eight months – youth are not counted as unemployed and receive a wage or a training allowance. In 2007, 12% of participants left NDYP after the options period while in 1999 this share was 19%. After the end of the option period youth who have not found work return to see their advisor and agree on further action – follow-through period. In 2007, 22% of participants left NDYP during the follow-through phase, up from just 17% in 1999. Private providers of NDYP services are paid based on outcomes. Most NDYP providers are paid 70% upfront and 30% if positive outcomes are observed, i.e. the unemployed young person is still in employment after 13 weeks of leaving NDYP. The whole NDYP process is mandatory and sanctions apply. A variable sanction of up to 26 weeks can be imposed if someone fails to accept a job or fails to apply for a suitable job opportunity. A fixed sanction of 2, 4 or 26 weeks can be imposed for behaviour that impacts on an individual’s employability prospects, for example, refusal of mandatory training. Youth are only allowed to restart claiming benefits if they have not found employment after the final follow-through phase. In 2007, over 40% of youth who left the NDYP were on some type of benefit two weeks later, up from about 30% in 1999.

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136 – CHAPTER 4. PASSIVE AND ACTIVE LABOUR MARKET POLICIES TO MOBILISE YOUNG PEOPLE INTO WORK Several rigorous evaluations of the programme were carried out in the early 2000s (see Box 4.3) exploiting comparison with the period immediately before the introduction of the NDYP as well as between pathfinder areas and areas excluded from the pilot. Slightly older jobseekers were also used as a control group in some evaluations. Most of early evaluations showed positive effects on the re-employment probabilities of youth who attended NDYP. Enhanced job search during the gateway was found to have a particularly positive effect and so was subsidised employment relative to other options. Box 4.3. The New Deal for Young People: evaluations Several rigorous evaluations of the NDYP were carried out in the late 1990s and early 2000s to study the effect of NDYP – or its components separately – on reemployment probabilities of youth. A number of studies (Van Reenen, 2001, Blundell et al., 2001, and De Giorgi 2005) looked at the probability of re-employment for Gateway participants. They converged to a positive effect of enhanced job-search during Gateway on the probability of getting a job of about 5%. In addition, Wilkinson (2003) found high pre-programme effects, with 25 000 fewer young people remaining unemployed for six months in the year after the introduction of the NDYP than in the preceding two years. Anderton et al. (1999a) found no evidence that the positive effects on youth came at the expense of some other group – substitution effect – mostly because the only option susceptible of causing substitution, the subsidised employment option, had been used too little to have a marked effect. The authors also estimated deadweight loss – i.e. youth getting jobs that they would have got anyway in the absence of the programme – to be approximately 50%, thus in line with similar programmes in other countries. Dorsett (2005) looked at the four options available to those who have not found unsubsidised employment at the end of the Gateway period and at the outcomes for youth who spend an extended period of time – longer than six months – on Gateway. He found that the subsidised employment option dominated the other three options as well as the prolonged Gateway stay. Interestingly, prolonged Gateway – with continued job-search support – appeared to be the second-best option, with a larger effect on youth reemployment probabilities than education and training, voluntary sector employment (performing similarly) and the environmental task force (the least performing option). The NDYP was also found to have a small but positive macroeconomic impact and to be cost-effective (Anderton et al., 1999b; and Riley and Young, 2000). The programme proved less effective when a longer time period for evaluation was considered. Wilkinson (2003) estimated the impact of the NDYP on the probability of being unemployed six months after reaching the qualifying time for the programme – coinciding with movement from the gateway period into the options – as well as 12 months and 18 months later. The short-term results indicated, for men, a reduction in unemployment of around 30 000 and, for women, a reduction of around 9 000. However, the longer follow-up periods showed a lower reduction in the probability of being unemployed, mostly due to the fact that some NDYP participants had returned to claim unemployment benefits subsequently.

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A number of qualitative evaluations were carried out in the early years of the programme by the National Centre for Social Research (Woodfield et al., 2000; and O’Connor et al., 2001) to assess the opinions of participants. The reports showed that young people saw the relationship between the Personal Adviser and the jobseeker as key to the success of NDYP. The study also noted that the effectiveness of Gateway stemmed from ensuring that people were not forced into accepting any job but were matched to the one that suited them. Other important aspects of NDYP options reported on favourably by young people were: the experience acquired under the subsidised employment option, good work-based training opportunities to develop skills and gain qualifications through the full-time education and training option and continued support once in a job. Views collected among employers (Elam and Snape, 2000) – participating and not in NDYP – showed overall support for the aims of NDYP. Among non-participating employers, obstacles to participation related to: the need for an employer-centred equivalent to the Personal Adviser to ensure that employers’ needs are consistently met; more effective partnerships with employers, particularly between Jobcentre Plus and employers; greater consistency in ensuring the employability of NDYP clients before they are sent to employers; and more flexible implementation of the training requirements. Employers generally accepted the value of the requirement to provide training for NDYP clients and saw this as helping to improve the longer term employability of young people. However, they reported a range of difficulties with the implementation of the requirement, including inadequate time and subsidy to complete qualifications.

However, studies focusing on the longer term have found considerable churning between participation in the programme and short employment spells. Starters and spells data suggest that between 1998 and 2006, each participant has been on the programme 1.43 times on average. In 2007, one in five employment outcomes of NDYP leavers lasted less than 13 weeks (Figure 4.3) despite providers’ remuneration being linked to job sustainability – i.e. a job lasting 13 weeks or longer. Data available on the destinations of NDYP participants since 1998 suggest that the positive effect of the NDYP may have deteriorated since the early evaluations. In 1998, 67% of NDYP leavers entered employment although some combined it with benefits.74 By 1999, the job entry rate had already fallen to 61% and in 2007 it was just 48% (Figure 4.4).75 74.

It has been argued that the programme was particularly successful – including with meeting strong employers’ support – in the year of its introduction because it was the first major employment programme for youth people in the United Kingdom.

75.

These rates are obtained by eliminating unknown destinations from both the numerator and the denominator. If leavers to unknown destinations were included in the denominator, the job entry rate would be 54% in 1998, 49% in 1999 and 34% in 2007.

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138 – CHAPTER 4. PASSIVE AND ACTIVE LABOUR MARKET POLICIES TO MOBILISE YOUNG PEOPLE INTO WORK Figure 4.3.

Sustainability of employment outcomesa for NDYP leavers, 1998-2007 Percentages Sustainable job

Unsustainable Job

100 90 80 70 60 50 40 30 20 10 0 1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

a) A sustainable job is one from which a participant does not return to JSA within 13 weeks. Source: Department for Work and Pensions Online Tabulation Tool.

Figure 4.4.

Immediate destination of young people leaving the NDYP,a 1998-2007 Employment Other benefits schemes

Employment and benefits Other destinations

100 90 80 70 60 50 40 30 20 10 0 1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

a) Unknown destinations are excluded from the calculation. Source: Department for Work and Pensions Online Tabulation Tool.

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In addition, in 2007, only 7% of youth entering options participated in a subsidised employment placement – the option that was found to be most effective in evaluation studies – down from 25% in 1999. The use of all other three options increased in the face of this decline, with direct job creation – voluntary sector employment – increasing the most (Figure 4.5). This reduction in the availability of subsidised employment placements may reflect the reluctance of employers to take on programme participants due to limited financial incentives or a too-high administrative burden. Figure 4.5.

Distribution of youth across NDYP options, 1999-2006a

45 40

Full-time education

35 30 25

Voluntary sector Environment

20 15 10

Subsidised employment

5 0

a) Data refer to 12 months moving averages of monthly figures. Source: Department for Work and Pensions Online Tabulation Tool.

Assistance available to employers providing placements for the NDYP consists of a subsidy of up to GBP 60 a week for six months and an additional lump-sum contribution of up to GBP 750 available for training of a young person. There is a strong emphasis on the obligation of employers to provide training leading to formal qualifications, with a strict requirement for employers to provide a minimum of one-day training a week which must lead to the equivalent of a National Vocational Qualification. This training can take place in the workplace or at a college. The training provided by employers is constantly monitored and reviewed and if an employer is found not to be meeting these requirements, the subsidy is withdrawn. Elam and Snape (2000) found that employers considered these training requirements too stringent and the training subsidy inadequate to meet them (Box 4.3). JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

140 – CHAPTER 4. PASSIVE AND ACTIVE LABOUR MARKET POLICIES TO MOBILISE YOUNG PEOPLE INTO WORK

C.

Other New Deal programmes

In May 2007, the NDYP counted 90 000 participants all aged 18-24. However, many young people participate in other New Deal programmes not focused exclusively on youth. In May 2007, 14 000 youth were enrolled in the New Deal for Lone Parents (NDLP) and 18 000 in the New Deal for Disabled People (NDDP). An additional 9 000 were engaged in Employment Zones – a pilot programme launched in view of reforming the New Deal schemes. Both NDLP and NDDP have produced positive outcomes (see Box 4.4), but participation is voluntary, thus selection bias is high – i.e. participants tend to be closer to the labour market than non-participants. Box 4.4. New Deal for Lone Parents and New Deal for Disabled People The NDLP is a voluntary programme introduced nationally in October 1998 with the aims of helping lone parents to improve their prospects and living standards by increasing hours of paid work or to increase their employment opportunities by improving their job readiness. The design includes a Personal Adviser, help with childcare costs and options such as subsidised jobs with childcare providers, voluntary sector employment and full-time education and training. The evaluation evidence shows that 51% of all leavers from the programme leave income support and enter work of at least 16 hours per week (Evans et al., 2003; and Dolton et al., 2006). Current estimates suggest that participation in NDLP increased exits from benefit to work by 24 percentage points, twice the exit rate before the programme was introduced. Voluntary participation may explain part of this success. Those most likely to participate are: the highest qualified claimants; those with the shortest claim history; those who have worked in the past year or are currently working; those who want to work in the next six months; and those who believe they will be better off in work and are willing to work for the minimum wage. The NDDP is also a voluntary programme introduced in 2001. It is focused around a network of Job Brokers to help people with health conditions and disabilities move into sustained employment. Of those registering between 2001 and 2003, 43% had found jobs and of these 57% achieved sustained employment up to the end of 2003 (Stafford, 2007).

D.

The time is right for reform

The United Kingdom government is currently planning changes to its active labour market policy framework in order to move more people off benefits into work (DWP, 2007a): i) the New Deals will be reformed to improve their effectiveness in placing participants into sustainable jobs; ii) delivery of activation programmes will be centred around partnerships with private, public and third-sector providers; and iii) enhanced cooperation with employers will be at the heart of the reform. Procurement activity for the flexible New Deal will start in Spring 2008 and the first clients will be referred to contracted providers in October 2009. The flexible New Deal, like JSA, will be a Great-Britain-wide programme. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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The New Deals will be reformed to improve their effectiveness in placing participants into sustainable jobs The government is planning to move away from the rigid distinctions between age groups of the current New Deals and introduce a new, flexible, personalised approach for more disadvantaged customers, more focused on employment retention and progression in work. The new approach would include the following elements (see Figure 4.6):

•

After an initial three-month period on benefit, job-search requirements would be widened, based on travel to work, wage and working hours rather than by preferred employment or occupation;

•

After a further three months, customers would enter the Gateway stage starting with a formal review with a Personal Adviser to revisit the needs identified in the earlier Jobseeker’s Agreement and to draw up a back-to-work action plan. The plan would select from a menu of activities and individuals would be expected to agree to and complete a number of actions. Each of the agreed activities would be mandatory and failure to comply would result in an appropriate sanction. This Gateway stage would also offer a further opportunity to refer the customer to a skills health check and, if appropriate, training;

•

After 12 months customers would be referred to a specialist return-to-work provider from the public, private, or voluntary sectors to benefit from the most appropriate intensive, outcome-focused service, funded on the basis of results;

•

Customers still on benefits, having failed to find work through a specialist provider, would be required to undertake a four-week work-focused activity; and

•

Throughout the whole process the offer of increased help would be balanced with the responsibility on individuals to make the best use of that support or face a loss of benefit. This is an important part of the current mandatory New Deals and would continue to be a feature of the flexible New Deal. Jobcentre Plus will remain responsible for applying benefit sanctions where necessary.

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142 – CHAPTER 4. PASSIVE AND ACTIVE LABOUR MARKET POLICIES TO MOBILISE YOUNG PEOPLE INTO WORK Figure 4.6.

The reformed New Deal programme Personalised support from specialist providers

Jobcentre Plus Fast-tracked customers Escalating conditionality

New customer

Job Stage 1 0 months

Customer diagnosis

Stage 2 3 months

"Self-help"

Stage 3 12 months

6 months

"Directed job search"

Stage 4

"The Gateway"

"Flexible New Deal"

Source: Department for Work and Pensions (DWP, 2007a).

The new system will allow fast-tracking of individuals facing particularly severe barriers to work. For instance, customers for whom a

lack of skills is a barrier to work will get faster access to the right training. In addition, conditionality will be more graduated thus those who have a history of long-term reliance on benefits could face tougher responsibilities from the start of the claim, where appropriate. Starting April 2008, 18-year olds with any history of NEET will be able, by agreement with their Personal Adviser, to be fast-tracked to the Gateway stage of New Deal on a voluntary basis. From April 2009, fast-tracking to Gateway will be mandatory for 18-year olds who have already built up a six-month period of NEET. More specifically, this will apply to 18-year olds who spent 26 or more weeks in NEET immediately prior to turning 18 or who are aged 18 and have reached a combined duration of 26 weeks on JSA and NEET. Voluntary participation for 18-year olds with any history of NEET will still be possible.

Delivery of activation programmes will be centred around partnerships with private, public and third-sector providers The new approach to contracting with the private and voluntary sectors is built around high-quality support to all customers, flexibility of provision and strong competition to secure ongoing improvements in cost-effectiveness. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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To deliver the flexible New Deal, the government is looking to set up partnerships with public, private and voluntary sector providers. It is also aiming to increase competition among providers in order to improve service quality. In the United Kingdom, the provision of re-employment services is currently a large and growing market and the government has the opportunity to obtain significantly better value services through the effective exercise of its purchasing power. The government also envisages moving towards output-based contracts with a low level of prescription for providers. Until now, employment programme contracts have often been short-term (typically three years), small, and geared towards process and inputs. In this format, they have not offered appropriate rewards to high-performing providers. To improve performance evaluation – and rewards – the government is planning to set up a provider “Star Ratings” system similar to that currently used in Australia, where high-performing providers are clearly identified and where ratings inform performance management (Australian Department for Employment and Workplace Relations, 2007). This system could drive the process by which jobseekers are allocated between providers. Providers will be given more flexibility in the way that they deliver services but will have to ensure sustainable employment outcomes. In this respect, the government has put forward plans to change the current definition of a sustainable employment outcome – a job lasting at least 13 weeks – to include only jobs lasting at least 6 months initially and 12-18 months in the longer term (DWP, 2007b). Part of providers’ remuneration will be linked to these longer employment outcomes. The government is also trying to design remuneration/evaluation schemes that prevent providers from concentrating on those people that can be moved into work easily, and/or not paying proper attention to individuals who require too much support. These proposals are in line with OECD recommendations in this area (OECD, 2005). To inform the structure of incentive payments to clients, the government has also launched in 2003 a random assignment experiment called Employment Retention and Advancement (ERA) scheme (see Hall et al., 2005). Under this scheme, the programme group received, for nearly three years, individual support from an Advancement Support Adviser. The Adviser assisted them: i) to find suitable work; ii) to remain in work and avoid some of the early problems that sometimes cause new jobs to be short-lived; and iii) to advance in their jobs. A retention bonus (GBP 600) was paid every three months to those who had stayed in full-time work of at least 30 hours a week for the three months and additional funding for training was also available. These characteristics of the flexible New Deal will partly build on the experience with Employment Zones pilots. The pilots have shown that more JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

144 – CHAPTER 4. PASSIVE AND ACTIVE LABOUR MARKET POLICIES TO MOBILISE YOUNG PEOPLE INTO WORK freedom to design tailored interventions and payment schemes aimed at incentivising early entry and sustainable outcomes yield significantly better employment outcomes than the current New Deal programmes (Box 4.5). Unfortunately, the Employment Zones pilots were not tendered for on a competitive basis so it is difficult to draw conclusions on the procurement strategy that the government is planning for the flexible New Deal. However, since 2007, Employment Zones have allowed jobseekers to choose their provider, a mechanism that could improve cost-effective if jobseekers are informed of providers’ performance and exercise their choice on the basis of such performance. Box 4.5. Employment Zones Pilots Employment Zones (EZs) in their current form were introduced in April 2000 to test a new, market-oriented approach to reducing long-term unemployment through a work-first, outcome-related model of delivering employment services. EZs were originally established in 15 of the most deprived areas of the United Kingdom where long-term unemployment persisted in spite of the general decline in unemployment. The number of zones was later reduced to 13 when the 5 London zones merged into 3. EZs originally targeted their services on long-term jobseekers aged 25 and over. In 2003, services were extended to include young people returning to NDYP and lone-parent volunteers. For eligible NDYP return customers, EZ participation is mandatory once they reach six months unemployment while lone-parent participation is voluntary and customers may choose to join or leave the EZ at any time. Since 2000, EZs have recorded 215 000 starters and in July 2007 18-24-year olds accounted for 27% of them. With few restrictions governing their activities, EZs have the freedom to design tailored interventions to help their clients secure and sustain employment. The EZ funding model combines a system of output-related funding with a benefit transfer payment system. Output related funding amounts to GBP 4 700 per participants of which GBP 300 are paid at entry, GBP 400 at job start, GBP 400 after 5 weeks in employment and GBP 3 600 after 13 weeks in employment or 11 weeks out of 13 in employment in multiple jobs without claiming benefits. The payment ratio is therefore 6.5% at entry to the programme, 8.5% at job start and 85% if the job is sustained. For the benefit transfer component, the provider receives funding equivalent to 21 weeks of JSA (GBP 1 200 for youth) but has to pay JSA for a maximum of 26 weeks, based on the expectation that most customers will move into work before the maximum length of stay. If employment is secured in less than 21 weeks, the provider is allowed to retain the funding which remains after JSA payments have been made but he is also required to make up the shortfall for any customers who remain unemployed longer than 26 weeks. Provider competition was extended in 2004 when six of the larger EZ areas became multiple-provider EZs. Mandatory clients in Multiple Provider EZs (MPEZs) originally exercised no choice of provider and were randomly assigned by Jobcentre Plus Advisers using a Random Allocation Tool on the basis of an agreed market share. Choice of provider for mandatory customers was implemented in April 2007. On the other hand, voluntary NDLP participants have long been able to choose their provider.*

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Since their introduction, EZs have been subjected to continuous evaluation, giving rise to a substantial body of research and evidence. In 2007, the Department for Work and Pensions synthesised available evidence on their performance (DWP, 2007c). The report concluded that EZs are more effective than comparative New Deal programmes in terms of their success in placing mandatory customers into work and helping them sustain employment for 13 weeks. EZs significantly outperform comparative New Deals for all mandatory customer groups, including those which have multiple employment barriers and there is no evidence that EZs achieve better results as a result of investing their resources only in job-ready customers to the detriment of those who are harder to help. For NDYP returners, better performance of EZs’ versus NDYP is due to the fact that EZs move youth into work more quickly, provide continuity of support and incentives, and keep youth employed for longer. This reflects EZs’ flexibility, the funding regime and Advisers’ greater discretion to determine the frequency, content and timing of interventions and incentives. However, EZs’ better results appear to come at a price. Under the current funding model, EZs cost significantly more than comparative New Deals, particularly NDYP. This is partly because EZs were not tendered on a competitive basis. Until 2007, these aspects of market delivery were constrained by limited customer choice, by the contractual features of pre-determined market quotas and random allocation in MPEZs, and by the limited scope for comparing and rewarding the differential performance of providers. Finally, in spite of their considerable flexibilities and scope for innovation, EZs have been unable to overcome the barriers of a hardcore of long-term unemployed clients. Although EZs achieve better outcomes than comparative New Deals for mandatory customers who are similarly disadvantaged, almost half of those who attend an EZ leave without securing employment. EZ delivery has thus confirmed the existence of a group of customers experiencing employment barriers that cannot be easily overcome within the timescale and scope of the current EZ structure. * In London EZ areas, NDLP has been withdrawn and lone parents are able to choose from a selection of EZ providers. Outside London, lone parents can still choose to participate in NDLP but from their second Work-Focused Interview they are offered a choice of EZ providers. Providers are encouraged to compete by marketing their services to lone parents and may attract as many lone-parent customers as they want.

Enhanced cooperation with employers will be at the heart of the reform To implement the changes mentioned above, the government is putting more emphasis on the role that employers need to play. Local Employment Partnerships (LEPs) were announced in the 2007 Budget. Through these partnerships major retail employers including Asda, B&Q, Marks and Spencer, Sainsbury’s and Tesco demonstrated their commitment to help long-term benefit claimants into employment by recognising the wider economic advantages of employing a diverse workforce and the gains from reducing worklessness in local communities. Building on these partnerships, the government has included a target of finding work through LEPs for at least 250 000 people at a disadvantage in the labour market by the end of 2010 – the so-called “Jobs Pledge” – in the JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

146 – CHAPTER 4. PASSIVE AND ACTIVE LABOUR MARKET POLICIES TO MOBILISE YOUNG PEOPLE INTO WORK flexible New Deal Green Paper (DWP, 2007a). By the end of March 2008 over 600 employers, from a variety of sectors, had committed to LEPs including both large national and smaller local companies. The government is committing, in return, to ensure that job applicants will have the right attitude to work as well as the right skills. To fulfil this commitment, the cooperation between Jobcentre Plus and the LSC in England has been enhanced in order to ensure that people are job-ready. Notably, Jobcentre Plus has recently worked with the LSC and employers-led Sector Skills Councils in 9 key sectors to develop Sector Employability Toolkits which provide a route back to work for Jobcentre Plus customers which meet the employability requirements of employers in these sectors.

3. Reducing NEET and engaging youth at risk The active and passive labour market measures described above are directed at young people who are unemployed or in receipt of other type of benefit support. As a result, they tend to exclude – with few exceptions – youth under 18. Because NEET status is particularly common and persistent among low-skilled youth, it is key to act earlier. Connexions is the main service currently available to young people disengaging from learning after fulfilling the compulsory education requirement at 16. But the government is piloting new schemes mimicking the mutual obligations principle for unemployed youth in the hope of creating a more effective framework to activate youth aged 16-17 who are not in work or learning.76

A. The performance of Connexions in terms of helping youth at risk needs strengthening Connexions is a guidance and support service for all young people aged 13-19 in England. It was introduced as a Pilot in 2000 with the aim to remove barriers to learning and progression, and ensure young people make a smooth transition to adulthood and working life. By 2003, 47 Connexions Parnerships were active in England. Services are delivered through a network of Connexions Personal Advisers linking with specialist support services. Connexions Personal Advisers are normally drawn from a range of existing 76.

In November 2007, the government issued a strategy to reduce NEET (DCFS, 2007c) based on: i) ensuring that more young people stay in learning post-16, including those with barriers to learning; ii) efficient services for getting back into learning and work those youth who become NEET but have no specific barriers to engagement; and iii) more targeted and intensive support to engage those young people with particular barriers to participation or to re-engagement. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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public, private, voluntary and community sector organizations. These organisations come together to form a so-called Connexions Partnership. Services are mainly provided using a one-stop shop formula. Within this framework, Connexions provides information, advice, guidance and access to personal development opportunities for young people, often in cooperation with other agencies. Youth are classified internally as belonging to four different tiers and services for them are calibrated according to their needs (Table 4.2). Close co-operation with schools has been fruitful, particularly in terms of building a database of young people in each area and their employment/educational outcomes. However, because of the lack of benefit provision, it is difficult to engage youth through a mutual obligation approach as it is done at Jobcentre Plus.77 There are no rigorous quantitative evaluations of the service, partly because of its voluntary nature and its guidance focus, however a number of qualitative studies are available. A customer satisfaction survey carried out in 2003 (Brunwin et al., 2004) found that 93% of young people were either satisfied or very satisfied with the service and 73% of them reported that Connexions had helped them make decisions about their future. Similarly satisfactory views were collected among stakeholders78 by Dickson et al. (2004). In particular, 56% of stakeholders found that services to young people with multiple barriers had improved over time and 40% thought that this was the case for youth who were engaged in learning, i.e. those who did not have a high level of need. However, stakeholders did identify a number of outstanding problems or drawbacks of the Connexions Service for young people in their area, relating to a lack of resources in terms of money and staff and to gaps in service provision. About 20% of respondents thought that a major drawback faced by connexions in their area was the “lack of staff, personal advisors and insufficient time spent with

77.

Both Department for Work and Pensions and the Department for Children, Schools and Families have committed to work jointly (DWP, 2007d) together with Jobcentre Plus, local authorities and Connexions to improve engagement with young people and provide them with advice and support to develop the skills they need to enter and to thrive in education, training or work with training. The two Departments will seek to improve on current joint working between Jobcentre Plus, Connexions and local authorities to improve the service offered to youth seeking their first steps in the labour market and preparing for work. Data sharing will also be improved.

78.

Stakeholders interviewed for the study were involved in the local committees and boards managing Connexions at the local level including: headteachers, social services, youth offending teams, jobcentre plus, drug action teams and young people.

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148 – CHAPTER 4. PASSIVE AND ACTIVE LABOUR MARKET POLICIES TO MOBILISE YOUNG PEOPLE INTO WORK each individual” (see also Watts, 2001). Another 12% mentioned the reduction of services to the majority in favour of those in greatest needs and an additional 12% raised service awareness issues.79 Some tension among stakeholders in terms of priorities emerged from the survey. About 20% of stakeholders thought that resources did not go to the right services but, while local authorities and youth offending teams thought more should be spent on young people at risk, education and career services felt that it was the mainstream services such as advice and guidance that needed strengthening. Finally, 72% of stakeholders identified gaps in provision, mostly in areas related to youth in greatest need.80 Table 4.2.

Connexions Services by level of disadvantage

Tier level

Share of youth

Tier 1

66%

General public with no specific disadvantage.

Career information; local labour market information; direct helpline; electronic tools to apply for post-16 education or training; help with applications for financial support (EMA); access to the website.

Tier 2

20%

Youth: on special education needs register; disabled; with learning difficulties; supervised by youth offending teams; looked after or living in care; on benefits; in need of funding for work-based learning; involved in truancy/bullying; NEET.

Additional support in partnership with other agencies.

Tier 3

13%

Teenage parents; youth with health/drugs/sexual health/mental health difficulties; young offenders; youth leaving care; youth in unsuitable accommodation; youth with refugee status.

Intensive support/advocacy for young people with multiple barriers.

Tier 4

1%

Young people with crisis issues: child protection, abuse and homelessness; pregnancy; drugs overdose; self-harm or at risk of suicide, violent offending and runaways.

Crisis support (generally only temporary during the crisis situation after which the young person moves back to other tiers - most often Tier 3).

Disadvantage

Connexions Services

Source: Connexions, Conventry and Warwickshire.

79.

Nevertheless, there is evidence that awareness of the service has grown very rapidly in the early years of the pilot, from 35% in 2002 to 71% in 2003 (Connexions, 2003).

80.

The main gaps were identified in the following areas: training for those not in education, employment or training (29% of respondents), young people with learning difficulties/disabilities (18%), young people from ethnic minority groups (18%), teenage pregnancies (12%), drugs and alcohol abuse (11%), and housing support/homelessness (11%). JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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Another study conducted by Hoggarth and Smith (2004) found that while universal provision services worked well, Connexions did not effectively impact young people at risk. In addition, the study underlined other weaknesses in Connexions service provision, such as: ineffective assessment of risk and priority; failure to identify risk early enough; failure to deal with urgent and present needs; too rigid a focus on the NEET targets resulting in pressure on young people to take up, sometimes unsuitable, employment, education or training options; and a failure to follow up interventions. Finally, Connexions is a very costly service. In 2005, Connexions accounted for over 9% of the total expenditure on active labour market policies, more than the expenditure on youth in various New Deal programmes (Table 4.1). In 2008, Connexions funding will be transferred to local authorities and it is unclear what components of the service will be pursued,81 although the new services will certainly build on the Connexions experience (DfES, 2006). Local authorities will have a considerable degree of flexibility and this is an opportunity for better tailoring of services to local needs and for strengthening support for youth at-risk. However, the Education and Skills Bill, includes proposals that local authorities be directed to continue to deliver a number of operational processes and standards that are seen as key to a successful Connexions service. These include access to personal advisers with a minimum level of qualifications, retention of the Connexions brand and the maintenance of vital information flows to inform client tracking.

B. Activity and Learning Agreements Pilots may help very young people to train or work In April 2006, the United Kingdom Treasury launched two pilots – the Activity Agreement and Learning Agreement schemes – aimed at increasing the share of 16-17-year olds who receive some form of training. Activity Agreements are meant for 16-17-year olds who have been NEET for 20 weeks, while Learning Agreements target 16-17-year olds in jobs without training. Twelve Connexions partnerships across the country are piloting the schemes for two years.82

81.

There has been a call for advice and guidance to be provided directly by schools. Note, however, that education experts recommend that independent bodies provide career guidance and advice (OECD, 2004b).

82.

Eight partnerships will pilot each scheme with some partnerships piloting both.

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150 – CHAPTER 4. PASSIVE AND ACTIVE LABOUR MARKET POLICIES TO MOBILISE YOUNG PEOPLE INTO WORK

The Activity Agreement Pilot The Activity Agreement pilot includes two components that will be tested for their effectiveness at re-engaging “long-term” NEET:

•

The Activity Agreement: a personally negotiated contract between a Connexions Personal Adviser and the young person. The agreement identifies specific steps which the youth in question should take to move into education, training or employment (preferably with learning) and offers access to financial support in return for compliance.

•

The Activity Allowance: based on extending the mutual obligations principle of JSA to hard-to-help 16-17-year olds. Youth have to demonstrate progress towards fulfilling their Activity Agreement in order to continue to qualify for weekly support.

The Activity Agreement pilot is designed to test the most effective financial-support regime at engaging the target group. The Treasury is also aiming to use the findings from the pilot to inform the long-term direction of reform for financial support for 16-19-year olds, towards a single, coherent system of support. There are three variants of the Activity Allowance designed to test different combinations of support and incentive payments: in variant 1, the young person receives GBP 20 per week presented as an incentive to find education, training or employment opportunities; in variant 2, the young person receives GBP 30 per week presented as support while looking for such opportunities; and variant 3 includes GBP 20 per week paid to the young person and GBP 30 per week paid to the family presented as both an incentive (the young person’s component) and support (the family’s component). Three Connexion partnerships are piloting variant 1, three are piloting variant 2 and two are piloting variant 3. In April 2008, three new variants were added to the existing ones. The first one allows young people to engage in the Activity Agreement from as early as 13 weeks of NEET status and receive an allowance of GBP 30 per week. The second is aimed at reengaging young people who have left education and were previously in receipt of EMA by identifying them as soon as possible after disengagement and paying an allowance equivalent to EMA subject to completion of agreed activities.83 The third one allows particularly vulnerable youth to be fast-tracked into Activity Agreements and receive GBP 30 per week. 83.

The intention through this model is to learn more about re-engaging young people who have previously been motivated to learn in order to inform policy on raising the participation age. JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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The Learning Agreement Pilot The Learning Agreement Pilot builds on the statutory right to time off for 16-17-year olds without a Level 2 qualification and has the core aim of raising participation in education and training. The pilot comprises two elements that will be tested for their effectiveness in achieving this aim:

•

The Learning Agreement: a negotiated, personalised agreement focusing primarily on the learning and support needs of the young person. The agreement also seeks the engagement and support of employers to help re-engage their young employees into learning;

•

Financial Incentives: a range of financial incentives are tested to encourage employees84 to take up the Learning Agreement offer, including completion bonuses.

The Learning Agreement model aims to reach all 16-17-year olds in jobs without accredited training in the pilot areas but priority is given to those who do not hold a lower-secondary qualification and to those who are in full-time employment, i.e. 16 hours a week or more. Where the young person has already achieved a Level 2 qualification, funds will be made available for the next level or for complementary provision if it supports career or employment progression. All of the eight pilot areas have tried to foster links with employers. To improve this, starting April 2008, all the pilots were required to enter into a “good referrals only” contract with Train to Gain. This means that Train to Gain will refer young people to the Learning Agreement pilot but payment for these referrals will be subject to the referrals leading to Learning Agreement starts. The pilots will also maintain a multiple engagement strategy as well as developing contracts with Train to Gain.

C.

More targeted programmes for youth with complex needs

Even the best-performing programmes, when evaluated, often fail to help those youth at very high risk of labour market and social exclusion, notably youth who cumulate a number of problems ranging from behavioural difficulties to alcohol and drug abuse. What has emerged from evaluations of several programmes is that the neediest youth must be identified as early as possible and provided with specific attention and focused – as far as possible, personalised – help. This hard-core group of 84.

Originally, the scheme included wage compensation for employers but this feature was dropped based on evidence that large employers were not interested in wage compensation and small employers found it complex, time consuming and bureaucratic to administer.

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152 – CHAPTER 4. PASSIVE AND ACTIVE LABOUR MARKET POLICIES TO MOBILISE YOUNG PEOPLE INTO WORK at-risk youth is likely to include those youth who are very difficult to mobilise and for whom ad hoc strategies should be devised. Among programmes targeted specifically to very disadvantaged youth, there is some experimental evidence that residential programmes with a strong focus on remedial learning and employment assistance may yield positive private and social returns once allowance is made for impacts on adverse social behaviours (crime, drug-taking, poor parenting), as well as labour market outcomes. An example of these programmes, the Job Corps in the United States, is presented in Box 4.6. Box 4.6. The US Job Corps programme Job Corps has been a central part of the Federal government’s efforts in the United States for several decades to provide employment assistance to disadvantaged youth and help them become “more responsible, employable and productive citizens”. To be eligible, youth must be 16-24, meet low-income criteria and face one or more barriers to employment such as lacking qualifications or being a runaway, a foster child, a teenage parent or a homeless youth. Job Corps services are delivered at 122 centers nationwide in the United States and serve about 60 000 new enrollees annually. Most youth participate in a campus-like residential living component – approximately 85% of students are residential – while the remaining students commute to their centers daily. Participants can start any time during the year and spend an average nine months on the programme. However, in the best performing centres, students tend to stay even longer – up to 24 months. Participation is entirely on a voluntary basis. Programme components include a strong focus on academic education and vocational training to help participants attain an upper secondary qualification. Thanks to close cooperation with unions, some vocational training courses available at Job Corps are recognised as pre-apprenticeship programmes, allowing entry to apprenticehip at a higher-level and salary. At the end of the programme, placement services help participants to secure sustainable employment. Other key services include health education, health care and counselling. During the programme, youth receive a stipend twice a month – increasing with seniority, up to USD 46 – and a lump-sum of USD 100 every three months to purchase necessities. Youth who graduate with a combination of completing vocation training and obtaining an upper secondary qualification are eligible for USD 1 200 to help with the start-up costs of independent life. Outreach activities, centre management, training and placement services are all run by private contractors. Contracts are allocated through a competitive tendering process and can last up to seven years after a series of renewals. All contractors are evaluated based on several criteria each carrying a different weight, with some weights modeled on the characteristics of the population in each Job Corps centre. For instance, outreach contractors are evaluated based on the number of youth recruited, on the gender balance achieved, and on the share of recruited youth who do not drop out within the first three months. On the other hand, contractors who run the centres are evaluated based on criteria such as: the educational achievement of participants while on the programme, notably literacy and numeracy and whether participants obtain an upper secondary qualification and/or complete JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

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vocational training; the initial placement of graduates, their initial wage, and the match between their placement and the training received at Job Corps; the initial placement of participants who do not acquire an upper secondary qualification while on the programme; and the employment status and wage of graduates up to 12 months after completion. Performance based on these criteria influences contractors’ payment in the form of extra bonus payments – i.e. centre contractors are only allowed to bid for costs and a profit margin of 2.8% but can attain profits of up to 6% if they perform well according to the above mentioned criteria. Job Corps is an expensive programme given its design, costing approximately USD 22 000 per slot. As a result, it has been evaluated several times during its history, most recently via experimental (i.e. random-assignment) methods (Schochet et al., 2000 and 2001). The latter found rather positive effects of Job Corps on participants’ employability and earnings and high social rates of return. However, a follow-up analysis based on administrative data on earnings rather than survey-based data (Schochet et al., 2003) found less positive benefits for teenagers but continued to show high social returns for young adults (the 20-24 age group). The residential component of the programme appears to work better than the non-residential option.

4. Key points The United Kingdom moved from passive to active management of unemployment benefits a decade ago and the mutual obligations approach has informed public employment service activities for the unemployed since. In terms of actions for unemployed youth, the United Kingdom New Deal for Young People has been an example of a comprehensive activation programme across OECD countries since its introduction in the late 1990s. However, in 2007, one in five young people who found work through NDYP held a job lasting less than 13 weeks. Also, work placements under the subsidised employment option – the most effective option of the four available – have become much less frequent. In light of these developments, the government is now planning to reform New Deal programmes – including the one focused on youth – with the aim of improving their effectiveness. The new scheme – the so-called flexible New Deal – will put the accent on sustainable outcomes and on competition among service providers to create a quasi-market for employment services with the aim of improving outcomes for participants and yielding greater value for the public funds invested in them. The Employment Zones pilot is currently what comes closer to the flexible New Deal model. The pilots have shown that more freedom to design tailored interventions and payment schemes aimed at incentivising early entry and sustainable outcomes yield significantly better employment outcomes than the current New Deal programmes. Unfortunately, the Employment Zones pilots were not tendered for on a competitive basis so it JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

154 – CHAPTER 4. PASSIVE AND ACTIVE LABOUR MARKET POLICIES TO MOBILISE YOUNG PEOPLE INTO WORK is difficult to draw conclusions on the procurement strategy that the government is planning for the flexible New Deal. Youth aged 16-17 who are NEET are rarely entitled to financial support or re-employment services at Jobcentre Plus. At present, this group of at-risk youth is served by Connexions which has a double mandate of providing advice and guidance on learning and career options to all youth aged 13-19 and of providing more intense and personalised support to at-risk youth in this age group. While users have expressed overall satisfaction with Connexions services, gaps in services remain, particularly in terms of helping youth at high risk of marginalisation. As responsibility and funding for Connexions move to local authorities in 2008, there will be more opportunities to tailor services to local needs and to improve targeting of youth at-risk. At the same time, the government is proposing that local authorities retain the Connexion brand, ensure access to personal advisers with a minimum level of qualifications and maintain vital information flows to inform client tracking. The Activity Agreement pilot – launched in 2006 by the Treasury – could inform the future activation strategy for 16-17-year olds at high risk of exclusion. The scheme includes a small allowance paid in exchange for compliance with an agreement on a series of actions to move into education, training or employment with training.

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JOBS FOR YOUTH – UNITED KINGDOM – ISBN-978-92-64-04646-7 © OECD 2008

OECD PUBLICATIONS, 2, rue André-Pascal, 75775 PARIS CEDEX 16 PRINTED IN FRANCE (81 2008 10 1 P) ISBN 978-92-64-04646-7 – No. 56257 2008

Jobs for Youth

Jobs for Youth

UNITED KINGDOM

UNITED KINGDOM

Improving the performance of youth on the labour market is a crucial challenge in OECD countries facing persistent youth unemployment. As labour markets become more and more selective, a lack of relevant skills brings a higher risk of unemployment. Whatever the level of qualification, first experiences on the labour market have a profound influence on later working life. Getting off to a good start facilitates integration and lays the foundation for a good career, while a failure can be difficult to make up.

Des emplois pour les jeunes

Ensuring a good start will require co-ordinated policies to bring the education system closer to the labour market, to help disadvantaged young people to find a job or participate in a training course and to facilitate the hiring of young people by firms. OECD has launched a series of reports on the school-to-work transition process in sixteen countries including the United Kingdom. Each report contains a survey of the main barriers to employment for young people, an assessment of the adequacy and effectiveness of existing measures to improve the transition from school-to-work, and a set of policy recommendations for further action by the public authorities and social partners. This report is based on the proceedings of a seminar and is published in English only. However, a French translation of the summary and main recommendations has been included in this volume.

Jobs for Youth UNITED KINGDOM

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