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 belated
attempts 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.
