Incentives needed for businesses to train their employees for post-COVID-19 world

Covid-19 has made these needs all the more urgent – particularly for younger workers or those with lower levels of educational attainment.
- Jiaqi Li, research assistant at the Centre for Economic Performance
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New policies are needed to encourage employers to invest in their workers, especially younger, less skilled individuals who are being particularly hard-hit by the COVID-19 pandemic, a new study recommends.

The research report – Trends in job-related training and policies for building future skills into the recovery published by the LSE’s Centre for Vocational Education Research (CVER) – says that there is an urgent need for training, as employees ‘upskill’ to cope with new work patterns and technology adoption, or to retrain in a new occupation. This comes after a general decline in job-related training in the UK over the past 20 years.  

As young people are more likely than other age groups to be made redundant during the COVID-19 crisis, with the risk of long term “scarring” on their wages and job prospects, the report authors recommend giving firms incentives to train young people, in particular. 

They point out that it is less-educated, part-time and self-employed workers who have been less likely to receive workplace training in the past. While younger workers have historically received more work-related training, this age group has seen the steepest decline in recent years. These groups are among those worst affected by the COVID-19 economic hit. 

While the authors welcome recent policy announcements to encourage individuals to invest in their skills – including the Lifetime Skills Guarantee and further programmes of support in the Plan for Jobs – they recommend four further ways to increase the amount and quality of training: 

  • Human capital tax credits: using incentives in the tax system to increase the amount that firms invest in upskilling their workforce. 
  • A more broadly defined Apprenticeship Levy: including stronger incentives for firms to use their funds to train young people. 
  • More local control over skills policy: local knowledge of skills gaps can help to increase the effectiveness of apprenticeships policy, where there is sufficient local capacity. 
  • Job creation and retraining schemes: workers with lower levels of qualifications are more likely to be at risk of unemployment, the 2020 spending review has allocated £138 million towards adult training, but the authors say that this is not likely to be enough. 

Jiaqi Li, research assistant at the LSE’s Centre for Economic Performance (CEP), said: “The analysis in our report suggests that the UK was already in need of improved policies and incentives for increased investment in workforce training. COVID-19 has made these needs all the more urgent – particularly for younger workers or those with lower levels of educational attainment.” 

Anna Valero, ESRC innovation fellow at CEP, said: “Training needs must be considered in the context of the current shock as well as broader trends. As we rebuild from COVID-19, an effective skills policy will also be crucial in the transition to net-zero greenhouse gas emissions and enable individuals to access new ‘green’ jobs. The government has already made an important step in this regard in establishing a new ‘Green Jobs Taskforce’.” 

Guglielmo Ventura, research assistant at CVER, said: “Given the context of rising unemployment due to COVID-19, many of those who will need training might not be in employment or work with on-the-job training opportunities. Increased financial support targeted at individuals will therefore be valuable. But there is also a role for support or incentives to improve the quantity and quality of work-related training offered by firms.”