Following the announcement today (Weds) that youth unemployment has hit its highest level since ONS records began, the CBI reiterated its five-point plan to tackle youth unemployment, and highlighted the risk of making apprenticeships unaffordable for businesses.
The CBI said that any new minimum wage for apprentices must be set at a cautious level if the training schemes are to help tackle youth unemployment, as the latest unemployment data showed those aged 16-24 and out of work had reached 947,000.
Katja Hall, CBI Director of Employment Policy, said:
“The rising level of youth unemployment is alarming and we cannot afford to lose a generation of young people. Apprenticeships are an excellent path to employment but their availability would be constrained if a minimum wage was set too high.
“Young people must not be priced out of apprenticeships in a difficult jobs market. If apprentices join the national minimum wage system they must do so at the right level and in a way that employers can understand.
“Otherwise firms will simply reduce their apprenticeship intake in a bid to survive the recession and protect other jobs.
“Employers invest significantly in an apprentice’s training, ensuring that they develop the skills to give them a great start to their careers, and young people benefit from a significant wage premium when they qualify.”
Most apprentices in England are already paid well above the minimum of £95 per week, with an average weekly wage of £170 a week. But the CBI warned that setting too high a minimum wage rate would deter firms from offering apprenticeships, and it urged the Low Pay Commission to exercise restraint when deciding in early 2010 whether to bring apprenticeships into the national minimum wage (NMW) rules.
Apprentices are already covered by a minimum weekly wage that is significantly higher than for apprentices across the UK’s EU competitors. Hiking the minimum rate further, or complicating it by paying an hourly rate or differentiating apprentices by age, would see further cuts in apprenticeships as firms struggle with the recession. Some sectors would also be much harder hit than others.
The CBI accepts that to improve national enforcement methods, apprentice pay should be brought into the NMW, but it recommends maintaining minimum pay at the weekly apprentice rate currently set by the Learning and Skills Council in England at £95. Minimum weekly pay for apprentices in Scotland, Wales and Northern Ireland is £55, £50 and £40 respectively, so adoption of the £95 rate would already represent a near doubling in the minimum pay rate.
The CBI’s concerns around apprenticeship pay unveiled today also complement the recent announcement of the CBI’s five-point plan to tackle youth unemployment:
1. Help employers to offer more apprenticeships
· a subsidy of £2,500 for firms that offer additional apprenticeships to young people, or employ an apprentice for the first time. This money would not subsidise existing apprenticeship places
· a £25m fund for employers who train more apprentices than they need for the benefit of their sector
2. Ensure that employing young people is attractive
· the employment prospects for young people with low skills are very sensitive to wage levels. Youth minimum wages and apprentice rates need to be set with this in mind
3. Practical help for young people to get a job
· more universities should offer additional practical sessions (sometimes called “boot camps”) to help students get a job or start a business. Those that do this have a big impact
· companies and careers services should encourage unemployed graduates to apply for internships, volunteer, continue their studies or use their gap year constructively to help develop employability skills
· tailored support should be given to the most disadvantaged including interview technique and confidence-building sessions
4. Offer more young people work experience
· firms should offer internships and encourage schemes for staff to mentor young people
· public and private-sector employers should open up work experience schemes to young people who are not in education, employment or training (NEET)
5. Ensure the education system teaches basic skills
· in today’s labour market young people must have basic literacy and numeracy skills. The UK’s performance here is still too patchy
· schools and colleges should emphasise the need to develop ‘employability skills’ such as communication skills and self-management