Return on investment - benefits to employers, apprentices, and society

Apprenticeships provide a broad range of benefits for employers, apprentices and society. The real costs and benefits of apprenticeships demonstrates how businesses and individuals benefit from apprenticeships in the UK. Based on survey data from 1,000 human resource decision makers, the top benefits for businesses employing apprentices were found to include: addressing skills shortages in businesses, providing value for money, offering a cost-effective labour source, and improving diversity within businesses. Further benefits cited in the survey include: contributing to succession planning, providing existing staff with the opportunity to mentor and share knowledge, and bringing new people into an industry. The report found that apprentices' output surpassed their associated costs, delivering a net benefit to employers during their training, which is likely to increase further upon completion of training and remaining with an employer as apprentice costs and expenses are removed, and productivity increases. Apprentices also accrue benefits to the wider economy, including the potential for productivity spill over, increased government tax revenue and less government spending on social security.

Very little research regarding cost-benefit analysis or return on investment (ROI) for sponsors of apprenticeship has been conducted in the United States. The next-gen IMT apprenticeship: a return on investment study performs an ROI and cost-benefit analysis using a mixed methodology, collecting quantitative benefit and cost data and qualitative data pertaining to non-monetized benefits, for three sponsors in this case study. The methodology is included in the report for other researchers to use. The sponsors' ROI ranged from 26-72%, with an average of 48%, meaning that, on average, every $1.00 invested in apprenticeship returned $1.48, with a range of returns from $1.26 to $1.72. Non-monetized benefits identified include: upskilling of the incumbent workforce, retention of apprentices after the completion of their apprenticeships, and apprenticeships as a recruitment tool to attract new talent to their organisations and get them into a talent pipeline. Sponsors also stated that their employees were more productive and that the products they produced were of higher quality as a result of sponsoring an apprenticeship.

Uptake of apprenticeships has been at the heart of a massive policy effort across Europe in the past decade that has resulted in a proliferation of apprenticeship schemes with different purposes: vocational training fully preparing learners for an occupation, short-term skills development, social inclusion, and offering second-chance pathways for vocational education and training (VET) dropouts and other vulnerable groups. Apprenticeship: a pill for every ill? highlights that many of the countries that conceive apprenticeship as a distinct mode of VET delivery, have introduced an array of policies broadening its purpose including opening up apprenticeship, traditionally anchored in initial vocational education and training (IVET), to adult learners, reacting to societal, demographic and economic changes and strengthening the social inclusion function of apprenticeships, such as to integrate migrants and refugees in the labour market.

More on this...

• Apprenticeship at vocational high schools in the Republic of Korea
• Apprenticeships for growth: how skills investment can drive Australia's economic recovery
• Dual TEVT education in Chile: why do companies train students?
• Projection of net benefits for companies in the Dual VET-Apprenticeship programme in Nepal
• The collaboration between Swiss initial vocational education and training partners: perceptions of apprentices, teachers, and in-company trainers
• The next steps for apprenticeship [Europe and Australia]

Completions

Apprenticeship and traineeship completions are seen as essential for ensuring economic growth and productivity through the development of a skilled workforce. Non-completions can therefore be a significant concern for governments, given their investment in this type of training. Released in July 2021, NCVER's statistical report Completion and attrition rates for apprentices and trainees 2020, provides an examination of the 2020 completion rates for Australian apprentices and trainees who commenced training in 2016. It reports that individual completion rates for apprentices and trainees commencing in 2016 were down compared to the previous year:

• 55.1% for trade occupations, down 2.5 percentage points from those commencing in 2015;
• 56.5% for non-trade occupations, down 1.2 percentage points from those commencing in 2015.

Previous reports in this series are available in VOCEDplus.

Issues in apprenticeships and traineeships - a research synthesis, a recent NCVER paper examining post-school apprenticeships in Australia that involve a contract of training, discusses factors that impact completion. These factors include demographics, government expenditure and incentives, perceptions of apprenticeships, engagement by the community, and working conditions, including workplace bullying. The report also identifies key elements directly linked to successful completions, including having a positive relationship with work supervisors and colleagues, access to on-the-job training experiences, feeling happy with the quality of training, and experiencing a range of work tasks. Attrition, the report finds, can be reduced through the supervising tradesperson providing strong guidance and mentoring to the apprentice, especially in the early stages of the apprenticeship.

Apprenticeship non‑completion in Germany: a money matter? explores how income prospects, both during and post-apprenticeship, have an impact on apprentice completions. This article discusses the adverse effects of non-completion on German businesses and apprentices, and, using data analysis, finds a correlation between a low apprenticeship wage and wages after completion with non-completion. The DfE Learners and Apprentices Study: reasons for non-completion report presents findings from a qualitative study of further education (FE) learners and apprentices in the UK who did not complete their course or apprenticeship. The research aims to understand reasons for non-completion, the support that learners and apprentices had received, and uncover if there was further support they thought they would have benefitted from. The main reasons for non-completion are core personal issues that took priority; learners did not see the value of the course; and the course or apprenticeship delivery failed to meet their expectations of quality.

More on this...

• Dropout from initial vocational training: a meta-synthesis of reasons from the apprentice's point of view [international]
• Factors associated with the completion of apprenticeship training in Canada
• Methodological approaches for projecting completion rates for apprentices and trainees [Australia]
• Understanding the relationships between psychological and contextual determinants, motivation and achievement outcomes for students in vocational training or technical training programs [Canada]
• Understanding why apprentices consider dropping out: longitudinal prediction of apprentices' workplace interest and anxiety [Australia]

The impact of COVID-19 on completions

The COVID-19 pandemic has greatly affected the delivery of vocational education globally. 'Lockdowns' and distancing measures have changed the way courses and apprenticeships are delivered, adding a further impact on completions. While it may be too early to get a full picture of the  impact of the pandemic on completions, NCVER's statistical report Apprentice and trainee outcomes 2021 reveals that for training undertaken in Australia in 2020:

• 20.2% of trade completers and 23.1% of non-trade completers had their on-the-job training delayed because of the COVID-19 pandemic
• 30.1% of trade completers and 39.2% of non-trade completers had some of their off-the-job training move online.

The NCVER report Apprentices and trainees 2020: impacts of COVID-19 on training activity examines data trends in the number of apprentice and trainee commencements, suspensions, cancellations and withdrawals, and completions in Australia over the course of 2020, providing insights into the results of the impact of the pandemic on this sector. The report finds that while the dynamics of the pandemic showed a marked decline in new contract commencements, the impact on withdrawals, cancellations and completions was steady and less pronounced. The report suggests this could be due to government support measures and a reluctance of apprentices and trainees to exit contracts and training because of the poor employment outlook during most of 2020. It suggests that the recent decline in completions is less to do with the pandemic, although restrictions have contributed to delays in completion; rather it is a flow-on effect from the decline in the number of commencements in recent years.

More on this...

• Effects of the COVID-19 pandemic on vocational education and training: international perspectives of policy makers and practitioners [international]
• Impact of coronavirus on apprentices and trainees [Australia]
• Restoring and reinvigorating the apprenticeship sector [Australia]
• Skilling, upskilling and reskilling of employees, apprentices and interns during the COVID-19 pandemic: findings from a global survey of enterprises [international]

Policy overview - Australia and UK

In times of crisis, such as the Global Financial Crisis (2007-2011) and the current COVID-19 pandemic, associated policy responses determine how countries navigate and emerge from the crisis. Early on in the pandemic, OECD's policy brief, VET in a time of crisis: building foundations for resilient vocational education and training systems, examined the impact of this crisis on VET systems, including apprenticeships, in OECD countries and the steps governments could take to build foundations for tomorrow's strong and resilient VET systems.

Harmonising and modernising apprenticeships to boost completion rates, support businesses and improve labour mobility is a joint initiative of the Australian, state and territory governments under the Skills reform agenda to create a more modern and consistent approach to the Australian Apprenticeships system. It has seen the introduction of Boosting Apprenticeship Commencements (BAC) and Completing Apprenticeship Commencements (CAC) to try and mitigate and recover from the impacts of the COVID-19 pandemic. For a more comprehensive list of policy initiatives that impact participation in apprenticeships and traineeships, see the Timeline of Australian VET policy initiatives in the VET Knowledge Bank (Tip: Filter using the Apprentices & trainees category icon).

A historical examination of Australian policy initiatives is provided in The expansion and contraction of the apprenticeship system in Australia, 1985-2020. It uses key government documents and NCVER's national apprentices and trainees data to answer the research questions 'How did the numbers of participants in, and gender composition of, apprenticeships and traineeships change during the years 1985 to 2020?' And 'What were the main influences on those changes?'

In the UK, the Apprenticeship system has been subject to a number of major changes in recent years. These include the introduction of the Apprenticeship Levy - a change in funding rules for all employers, and the transition from Apprenticeship Frameworks to Apprenticeship Standards. Employers' behavioural responses to the introduction of an apprenticeship levy in England: an ex ante assessment considers whether, ex ante, the levy was expected to result in: more apprentices being trained; reconfiguration of existing training structures into apprenticeships; employers 'gaming' the system, with levy funds being used but not producing real gains in training; or employers writing off the levy.

More on this...

• Apprenticeships and skills policy in England
• Fragmentation and photo-ops: the failures of Australian skills policy through COVID
• Future of Manufacturing in Europe (FOME) project: policy developments on apprenticeship [country reports]
• Options paper: incentivising tradeswork and shiftwork post COVID-19 [Australia]
• Putting apprenticeships to work for young people: an analysis of the impact of policy reforms and the pandemic on apprenticeship starts [UK]
• The impact of the Apprenticeship Levy on apprenticeships and other training outcomes [UK]
• The next steps for apprenticeship [Europe and Australia]

News items and opinion pieces

• How can apprenticeships future-proof the region's small businesses? [UK]
  (Source: Eastern Daily Press, April 2022)
• New apprentice incentives leave the job undone [Australia]
  (Source: The Sydney Morning Herald, April 2022)
• New Florida milestone highlights the value of apprenticeships for the solar industry [US]
  (Source: Solar Power World, April 2022)
• Springfield employers invest in paid apprenticeship programs as labor shortage continues [US]
  (Source: Springfield News-Leader, April 2022)
• The apprenticeship levy's 5-year legacy [UK]
  (Source: FE News, April 2022)
• Why the middle-class capture of apprenticeship matters [UK]
  (Source: Financial Times, April 2022)
• Apprenticeships: narrowing the technical skills gap [UK]
  (Source: HRnews, March 2022)
• Apprenticeships work as a future investment in Scotland
  (Source: The Herald, March 2022)
• Why are apprenticeships so important? [UK]
  (Source: IFSEC Global, March 2022)
• Youth unemployment in Scotland could be tackled by shift to apprenticeships
  (Source: The Scotsman, March 2022)
• Apprenticeships can help fix labor shortages, says U.S. Labor Secretary during Denver visit
  (Source: CPR News, February 2022)
• Looking to the future [UK]
  (Source: Training Journal, February 2022)

Published: May 2022