The UK budget included the creation of an employer levy to help finance a large increase in apprenticeships. It is a key part of this government’s belatedattempts to deal with poor productivity growth, although lack of workforce skills has been a UK problem for as long as I can remember. I hope the goals are achieved, but this is not my area so I cannot comment on whether they will be. Instead let me tell an anecdote, and reference two good sources.
After I left H.M.Treasury, I found myself in a forum discussing Mrs. Thatcher’s economic policies. The person defending the government was a Treasury economist that I had worked for, and who was no fool. Most of the questions raised were macro, so I had no problem making critical comments. But then a question on apprenticeships came up. In the 1970s there was an apprenticeship levy covering most of British industry, administered by tripartite bodies. The Thatcher government had just begun dismantling that levy.
As this was hardly my field, I feared I would have nothing to contribute. But all my former colleague could say to defend the government’s dismantling of the levy system was that the government believed that individual employers were far better placed to do their own training. I could not believe what I was hearing. Even with the little microeconomics I had, I could see the flaw in that argument. Training employees with non-firm specific skills involved an obvious problem for the employer - the employee can be tempted to move to another firm, and the original firm gets nothing back from their investment. Firms that did pay for apprenticeships would always be vulnerable to others that attempted to free ride and poach their skilled labour.
Yet this ‘why should governments interfere’ mantra was the only justification the government could find for getting rid of the levy. Mrs Thatcher’s policies might have improved UK productivity growth for some reasons, but this was not one of them. As I often say, a neoliberal agenda (or whatever else you want to call it) is anathema to economics, a large part of which is about market imperfections, and how governments can sometimes be instrumental in fixing them. (Not always, as perhaps the German approach to apprenticeships illustrates.)
Two good recent pieces on apprenticeships are this short piece from Hilary Steedman, and something more detailed from Alison Wolf.
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