The Economics of Youth Training in Britain

Abstract

The future health of any economy lies primarily in educating and training its young people and matching them to appropriate jobs. The extent to which schools, colleges and employers can adequately perform this task so that the next generation can successfully filter from school to work is questionable, particularly against a background of rising youth unemployment. Many countries in recent years have introduced large-scale state training schemes in an attempt to alleviate youth unemployment problems. It is unclear whether such a training scheme is an adequate substitute for a co-ordinated system of private-sector training which is integrated with manpower policy and provides the appropriate training investment incentives for both individuals and firms. The transition from school to work for young people in the late I970S and I 980s has become more difficult than at any time in post-war Britain. Over this period we have seen youth unemployment rise to nearly 25 % by I983 (see Hart, I 987). At the same time we have seen the collapse of British manufacturing industry and with it the decline in the numbers entering traditional apprenticeships from 240,000 in I964 to 63,700 by I986. In response successive governments have chosen to spend large sums, up to I .3 billion by I988, at I985 prices, on youth training schemes (YTS) which, at their height, involved nearly half a million young people in I 986. The average unit cost of training, at I985 prices, was ?2,500 per YTS placement per year, nearly double the cost of having that person on the unemployment register. Is such expenditure justified? In this context it is important to determine: how long the school to work transition process takes, whether having been on a government training scheme speeds up the process and whether it enhances future earnings and employment prospects. This leads to the main question which concerns the extent to which such expenditure and government intervention can be justified on economic grounds. Therefore it is important to examine the effectiveness of these training programmes and evaluate the relevant policy arguments. This paper will survey the main economic policy issues in the provision of training in the UK economy without presenting a detailed discussion of the econometric issues involved in the assessment of training as this is discussed elsewhere (Dolton, I993). Likewise the paper is not a detailed survey of the