Tuesday, 15 January 2013

Living off ‘Traineeships’

by Mark Corney

As the ‘education and skills’ world joins the Coalition in a discussion over the development of Traineeships* there a real danger it will miss the key issue which has to be decided upon.

The single sentence paragraph, number nine, states ‘we want to consider a range of options for supporting young people on Traineeships financially, such as wages or allowances, and the fit with the benefit system’.

It is the answer to the question ‘what will trainees live off?’ which will shape the response to the formal questions in the discussion paper regarding the activities, curriculum content, the funding of provision and even the age range of traineeships.

And whilst the ‘education and skills’ world will take comfort from the fact that the discussion paper is jointly signed by DfE and BIS, for 16 and 17 year olds the Treasury and HMRC are arguably more important than the education department and for 18 to 24 year olds DWP is more important than the business department in answering the question what will trainees live off?

The starting point for the discussion on Traineeships is that eligibility for Jobseekers’ Allowance starts and the statutory participation age ceases, from the 18th birthday. The next issue is whether young people on Traineeships will have employed status – where wages will be paid – and/or non-employed status – where training allowances or JSA will be paid.

16-17 year olds

Under the raising of the participation age (RPA), 16 and 17 year olds will be required to be in full-time further education, a job of 30 hours or more supporting an apprenticeship of 280 guided learning hours or more, a job of 20 hours or more with part-time education of a similar number of guided learning hours, and participation on the 16-17 NEET programme as part of the Youth Contract for the most disaffected and those with the lowest attainment.

The discussion paper positions Traineeships for 16 and 17 year olds between the current NEET programme and entry into (i) jobs with apprenticeships, (ii) jobs with part-time training and (iii) full-time further education.

At present, only 19,000 16 and 17 year olds are in jobs without training compared to 62,000 who are unemployed or inactive and studying part-time although both will be outlawed under the RPA. In addition, there are 60,000 of this age group who are currently NEET although there is significant churn and so Traineeships would be suitable for a significant proportion of them.

Under the RPA, therefore, potentially 100,000 16 and 17 year olds might find Traineeships an attractive option. A 16-17 Traineeship programme of this size would be greater than the current 16-17 apprenticeship programme irrespective of any redefinition of current apprenticeships into traineeships. But the key point is that most 16-17 year olds wanting a Traineeship will not be employed.

Employed 16-17 year olds on Traineeships will receive a wage. For non-employed trainees who by definition will not receive a wage, the Coalition must decide whether: (i) non-employed trainees and their parents are treated the same way as students and their parents in full-time further education, namely access to 16-19 Bursary Grants which replaced the less restrictive and more generous EMAs, and means tested child benefit and child tax credit, or (ii) non-employed trainees receive an allowance which would make Traineeships financially more attractive to 16 and 17 year olds than full-time further education.

Restricting the Traineeship Programme to employed status 16 and 17 year olds with wage subsidies to encourage employers to take-on the unemployed in this age group implies the Coalition would need to introduce another scheme for those without a subsidised job. Extending the Traineeship Programme to non-employed 16-17 year olds with the same financial arrangements as full-time further education could lead to young people ‘voting with their feet’ despite being obliged to participate and wait until they reach 18 when they can get JSA. Or, the Coalition could offer an allowance although this opens up the political ghost of EMAs.

If the 16-17 Traineeship Programme were available to non-employed young people, it would need be available within a week or so of being NEET. And sixth months, of course, could be too short for a 16 year old having to participate until their 18th birthday.

18-24 year olds

Yet, the question remains whether with respect to 16-17 year olds the Traineeship Programme is a participation measure – to widen access to full-time education and training under the RPA – or a skills measure – to boost the capabilities of employed young people.

At age 18 the world changes. Young adults aged 18-24 are entitled to JSA. The system of means-tested benefits paid to parents to support participation in full-time further education and unwaged training ceases at 19 and unlike full-time higher education there is no comprehensive system of financial support for full-time FE students aged 18-24.

In addition, employment is the main activity of a significantly greater proportion of 18-24 year olds than 16-17 year olds. About 50% of younger adults aged 18-24 are in employment outside of full-time education - some 2.4m in total - compared to only 10% for 16-17 year olds. Even so, the number of 18-24 year olds in England claiming JSA is about 380,000 at any given point in time, more than six times greater than 16-17 year olds counted as NEET.

Employed 18-24 year olds on Traineeships would receive a wage. Wage subsidies could be targeted on unemployed 18-24 year olds so they too received a wage whilst training. But the critical questions relate to non-employed 18-24 year olds. Unlike unemployed 16-17 year olds, unemployed 18-24 year olds must be paid something!

The first question is whether non-employed 18-24 year olds would receive JSA or an allowance. If they received JSA, there would be no reduction in claimant unemployment. If they received an allowance not linked to a wage, the claimant could fall – and the Coalition could face a charge of fiddling the unemployment figures – unless it keeps to the decision to count those on allowances as unemployed.

Even so, the charge of fiddling the figure also extends to employment. Those on government supported employment and training programmes are included in the total number in employment. Named programmes in the list include the Work Programme. If the Traineeship Programme is added, then the total in employment would be inflated.

The second question is when non-employed 18-24 year olds can enter the Traineeship Programme. Over 1.2 million 18-24 year olds in England claim JSA in a year for at least 1 day but only around 150,000 have been claiming JSA for sixth months or more.

The third question is whether failure to participate on any 18-24 Traineeship Programme by those on JSA for six months or more would lead to the loss of benefit. If so, it would look increasingly like Labour’s Job Guarantee Scheme even though the target group under that scheme is the over 25s out of work for two years or more.

And the final question is whether JSA would be abolished for all 18-24 year olds and participation on a traineeship would be mandatory. In effect, younger adults would face a choice of ‘earn, train or lose benefits’.

As the discussion paper makes clear, traineeships of around sixth months will not meet the needs of all 18-24 year olds. Some younger adults will need more intensive support. Hence, the Coalition is developing a trial of so-called Intensive Traineeships for jobseekers aged 18-24.

On the one hand, the scale of six month plus unemployment amongst 18-24 year olds places a big question mark over the extent to which the Traineeship Programme could be extended in a significant way to employed 18-24 year olds. On the other hand, the closer the 18-24 Traineeship Programme is dragged towards assisting a specific group of unemployed younger adults the greater the danger that it looks like a 21st century version of non-employed YTS introduced by the Thatcher administrations of the 1980s.

Avoiding YTS Mark II

A catch-all 16-24 Traineeship Programme looks like a political train crash waiting to happen. A more targeted approach is needed to avoid the YTS Mark II charge.

Non-employed Traineeships and wage subsidies to create employed status Traineeships are certainly required for a sizeable group of 16 and 17 year olds in the context of the RPA. But the programme must be clearly associated with the RPA policy and cohort of 16-17 year olds.

Even so, further bespoke options building on the present 16-17 NEET programme will also be needed. Furthermore, maintenance support for unwaged trainees aged 16 to 17 under the RPA must be considered in relation to arrangements for those in full-time further education, including child benefit and child tax credit.

A separate traineeship style programme is needed for 18-24 year olds and especially for unemployed younger adults given the scale of consequences of the problem. Non-employed trainees must receive an allowance paid directly to them.

But allowance-based 18-24 Young Adult Traineeships (YATs) will always have a whiff of the YTS about it so long as it is positioned as the only new initiative to reduce youth unemployment. 18-24 Young Adult Traineeships need to be implemented alongside an expansion of post-18 full-time further education with access to maintenance grants, and full-time higher education.

Given that full-time education is a positive choice made by 40% of 18-21 year olds, the Coalition should develop a new entitlement for this age group. Every 18-21 year old should be guaranteed maintenance support to study full-time in further education or higher education or an apprenticeship or traineeship with a job or with an allowance. After all, every one of them will have to work until they are 77 before they can claim their state pension.

Mark Corney is policy adviser to CfL and writes in a personal capacity.

*Traineeships: Supporting young people to develop the skills for Apprenticeships and other sustained jobs – A discussion Paper. DfE/BIS, January 2013

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