Job skills training is not leading to people getting real jobs. The best remedy is to pay providers by results
Something has gone badly wrong with our adult skills system. Typically, people who take ‘Level 2’ National Vocational Qualifications – supposedly equivalent to good GCSEs – earn less after the course than they did before. People who don’t take NVQs, but don’t have good GCSEs either, earn more.
Too many people are taking qualifications employers don’t recognise in subjects that don’t give them marketable skills. Last week the Local Government Association pointed out that England's 'skewed approach to training' is churning out armies of hair and beauty workers all qualified for jobs that don't exist. And today a new OFSTED report has found that colleges in England are failing to put job seekers on courses that help them find work.
The problem is that colleges are given money to get students to enrol on their courses, and a bit extra if they get them to pass. The money is handed out whether or not the training leads to a job or a better wage.
So the Social Market Foundation is proposing a new solution: pay further education providers by results for courses that demonstrate that they impart increased earning power for their trainees. If they encourage students to take courses that lead to jobs and better wages, providers would receive extra funding. They would be motivated to drop courses that don’t lead to jobs and better wages, and to steer learners towards those courses that do.
Colleges that do best would receive the most, and those that don’t will cotton on or get taken over by the better performers.
Such a system would encourage providers to focus on the skills employers want. But there are some big technical hurdles to overcome. How do you measure a college’s performance? How do you differentiate between people who are taking training while in work and those out of work? And how do you join this up with other programmes to get unemployed people back to work, like JobCentre Plus and the Work Programme?
It would be expensive, unreasonable and ultimately fruitless to expect adult FE providers to survey everyone who did their courses, asking them whether they got a job or a wage increase. Instead, the only way to get reliable data on trainees’ job outcomes would be to use the tax system. Next year HMRC will introduce a new PAYE system to collect the hourly wages of workers. By tracking trainees this way, the government can compare providers’ performance, and give more cash to the best.
For employed people, who are doing some training while in work, the government can compare how students’ wages change before and after training. If trainees from College A see a five per cent average wage increase, while those of College B see no change in their wages, then College A must be adding more value.
By comparing providers this way – looking at their relative performance measured against the prior wages of their trainees - government would avoid the pitfalls of the Work Programme, where a tanking economy effectively cuts the funding of providers because jobs, or in this case pay rises, are harder to come by.
But how can such a system work for people who are out of work? Here, after all, you can’t measure wage increases because trainees don’t have a wage to start off with. So the government should focus on subsequent employment rates. For the short-term unemployed, colleges’ performance could be determined by the numbers of trainees referred to them by the JobCentre Plus who go on to get jobs.
For people out of work for a year or more, the government should offer Work Programme providers vouchers for training at colleges and other training providers: providers, already incentivised to get people into sustained employment, could direct the funding to people who would most benefit from it.
The Work Programme providers’ time limit for getting them back to work should be extended, in line with the training time, to eliminate any bias against skills acquisition. This would also eliminate any incentives to park the least promising candidates in training until the Work Programme time limit runs out.
Payment by results systems are tricky beasts – they require careful thought and design if the incentives are to work well. But they offer a powerful tool for the state to get providers of training to raise their game, and get more value for the public money spent on further education. It’s time to introduce one in adult skills.
John Springford is an Associate Fellow at the Social Market Foundation
