No pay, no gain? Are apprentices being systematically underpaid?
Stephen Evans, Chief Executive, Learning and Work Institute
The Apprentice Pay Survey suggests that almost one in five apprentices is paid less than the minimum they are legally entitled to. Even accounting for reporting error, this is a shocking statistic.
New analysis by Learning and Work Institute delves deeper and shows the risk of non-compliance with the minimum wage is biggest among: hairdressing and children’s learning and development; apprentices aged under 19 and those in the second or subsequent year of their apprenticeship; and those undertaking a level 2 apprenticeship.
This deserved more attention than it’s received: the evidence suggests young people are being short-changed on an almost industrial scale.
This should be a top priority for the Director for Labour Market Enforcement. We need to increase employer and apprentice awareness, for example stating legal entitlements in contracts. We also need to boost enforcement, for example ensuring apprentices are aware of what to do if they think they are being underpaid.
Apprenticeships have become a mainstay of the vocational education system. We need to make them the gold standard.
The good news is the Government commissions a regular survey of Apprentice’s pay. The bad new is that it paints a depressing picture and action to date hasn’t matched up to the scale of the challenge.
An apprenticeship is a job with substantial training. To reflect employers’ investment of time and money, apprentices have generally been paid a lower wage. Through the history of apprenticeships in this country and across much of the world, this has been regarded as the quid pro quo — the apprentice’s investment in getting the training and future career prospects.
The Government has reflected this in National Minimum Wage rates. As of April 2017, those aged 25 and over are entitled to at least £7.50 per hour, 21–24 year olds £7.05, 18–20 year olds £5.60, and under 18’s £4.05. The Apprentice rate of £3.50 applies to apprentices aged 16–19, and those aged 19 and over in the first year of their apprenticeship (in the following years they are entitled to the relevant rate for their age group). The number of rates has grown over time.
There are three key elements to this ‘deal’ between employers, apprentices and the Government:
Apprentice pay — employers are able (but not obliged) to pay a lower rate than for other employees. But they must pay at least the legal minimum; Substantial, high quality training — while an apprentice, people must receive substantial high quality training that equips them for their job and career. This is now set out by standards, agreed by groups of employers; and Career prospects — The training and employment experience should lead to long-term job, careers and pay prospects. · This reflects both the investment that the individual (through lower pay), Government (through contribution to training costs), and employer (through investment to lead to improved productivity) have made. All have invested, so all should benefit.
All of this matters perhaps now more than ever. Part of the Government’s Industrial Strategy and response to Brexit, is to boost our home-grown skills base. And this has meant a focus on growth in apprenticeships, with a target of three million across England by 2020, and reform of technical education. These have been historic weaknesses for our country, our Achilles’ Heel as one of many previous reviews put it.
Apprenticeships are a great route for many people and employers. The best apprenticeships meet all three of these tests. But for too many, this vision of apprenticeships is a long way from reality.
Our previous research has shown how some UK apprenticeships don’t match the best in the world: the curriculum and experience can be narrow (helping people in their current job, but not career); focused on accrediting current employees with existing skills (rather than new starters or those whose role in an organisation is changing); and with unfair access (gender segregation is significant and those from poorer families are less likely to access the highest-return advanced level apprenticeship.
Industrial-scale low pay?
The 2016 Apprentice Survey, of 9,422 apprentices during June and July 2016, adds to this picture. The headlines show the median pay for apprentices is £6.70, but that this varies significantly by sector: from £8.75 in management to £3.47 in hairdressing.
Shockingly, almost one in five apprentices reports being paid less than their minimum legal entitlement: rising to almost one in two in hairdressing. It’s surprising that this did not gather more attention, beyond excellent coverage in the Financial Times, FE Week, and TES. Where are HMRC’s dawn raids on hairdressers?
The survey relies on apprentices reporting their hours and total pay, so is prone to some error. But there would have to be some huge errors to account for this level of apparently illegal pay. Learning and Work Institute have dug down below these headline figures to paint a clearer picture of what’s going on and where the priorities for action should be.
Our analysis seeks to work out what it is that’s driving this low pay. For example, hairdressing apprentices are disproportionately young and female. Is it these characteristics, which are more generally associated with being low paid, that are driving the levels of seeming non-compliance with the minimum wage, or is it the sector itself? To do this, we seek to isolate the effects of particular characteristics: for example, what would be the level of reported under-payment in hairdressing if the proportion of hairdressing apprentices who are young and female matched that of apprentices as a whole?
The key findings are:
Framework: In line with the headline figures, hairdressing apprentices are 3.8 times more likely to report being paid below the legal minimum than business and related (the fourth most popular of 12 framework groups) apprentices. But controlling for other factors makes children’s learning and development apprentices 3.48 times more likely to report being paid less than the relevant minimum wage.
Age: The riskiest age group is those age 19 or over, in the second or later year of their apprenticeship. They are 2.8 times more likely to report being paid below the minimum wage than 16–18 year olds. Those aged 19 and over and in the first year of their apprenticeship are the least likely age group to report being underpaid. This suggests issues with understanding and enforcement of the entitlement of 19+ apprentices to a minimum higher than the apprentice minimum (which only applies in their first year);
Gender: The headline survey figures show that women are more likely to report being paid below the statutory minimum than men. However, once age, framework etc are accounted for this gender difference virtually disappears. It is important though to be clear that in practice it is not easy to disentangle these effects; and
Training: Apprentices that report getting at least the 20% off-the-job training required by an apprenticeship were more likely, all else equal, to report being paid at least the statutory minimum wage.
Figure 1. Factors affecting likelihood of reporting minimum wage non-compliance

Source: L&W analysis
Taking some of these factors in isolation, our analysis shows that young people are, all else equal, more likely to report not being paid the relevant minimum wage. This may be related to older apprentices being more likely to have been working for their employer before they started their apprenticeship. Similarly level 2 apprentices are far more likely to report being paid less than the minimum than level 3 apprentices.
Figure 2. Marginal effects of age and level of learning


Source: L&W analysis
In addition, our analysis shows the interaction between framework and age (controlling for other factors, including whether someone is in the second or subsequent year of their apprenticeship, which the previous analysis showed is a big risk factor for being paid less than the relevant minimum wage for those aged 19 and over).
Figure 3. The impact of framework and age

Source: L&W analysis
The analysis shows that for all frameworks young people are more likely (all else equal) to report being paid less than their statutory minimum. However, the highest risks are for children’s learning and development, hairdressing, and health, social care and sport.
Low pay today, better pay tomorrow?
Many of the sectors with relatively low apprentice pay (and high levels of reported non-compliance with the minimum wage) also have low pay in general. The real risk is that people are accepting low (and possibly illegal) pay today, for slightly less low pay tomorrow.
Some of this can be seen in wage returns data for apprentices. While apprenticeships have good wage returns overall (9% for Level 2 and 13% for Level 3) this varies significantly by sector.
Evidence shows wage returns of 16% in hospitality and hair and beauty compared to non-apprentices in the same sector. This suggests a good outcome for many hairdressing apprentices, though this is in the context of relatively low pay in the sector as a whole, and of course there is no excuse for not paying the legal minimum. By contrast there is little to no wage return for retail and health and social care apprentices.
What to do?
- Information and effective enforcement
Apprentices should have a clear statement of their minimum wage entitlement when they start their apprenticeship. The Director of Labour Market Enforcement should focus on ensuring apprentices know their legal rights and how to enforce them.
If the results of the survey are accurate then it seems likely there is a big information gap, with people not knowing the minimum wage rate they are legally entitled to, and potentially employers and training providers being unclear on the rules too. So there is a clear case for action on information, including perhaps a clearer statement of the wage rate apprentices are entitled to and what it includes (i.e. the off-the-job training) at the start of an apprenticeship. Our analysis shows the ages and frameworks most likely to report being paid less than they should: this should give focus for information and enforcement action.
Having rights and knowing what these are is no use without ready means to enforce these rights. The statement of minimum wage entitlement when an apprentice starts could include what to do if you think you’re not being paid that minimum. Civic society and trades unions can also play a role in ensuring apprentices know their entitlements and in targeting action on those groups and in those sectors where non-compliance seems highest. Beyond this, HMRC have a clear role to play. There is little sign of decisive action to date: the new Director of Labour Market Enforcement should make apprentice pay one of his top priorities.
2. Focus on quality
The Institute for Apprenticeships should benchmark apprenticeship quality and training content against the best in the world.
Even if there is full compliance with the minimum wage legislation, apprenticeships need to be of high quality to be worth the time and money investment of all concerned. We were pleased the Taylor Review endorsed our call for the Institute of Apprenticeships to benchmark the quality of apprenticeships and pay and job destinations of apprentices to the best in the world. For example, there is some debate currently about the requirement for 20% off-the-job training. There are questions about the mechanics of this (how it should be delivered) and whether it should be a proportion or number of hours etc. But it is worth noting that many comparator countries, like Germany, have apprenticeships that last longer and have higher training requirements (although it is always difficult to compare systems directly).
3. Wide focus on skills
The Industrial Strategy needs to focus on tackling the drivers of productivity in low pay, low productivity sectors. As part of this, there is a case for widening the focus of the Apprenticeship Levy and developing non-apprenticeship routes for workforce training.
Some sectors have a high proportion of low pay in general (not just for apprentices). This is often associated with low productivity — the long-term driver of economic growth. In this case low pay for apprentices is a symptom of a wider problem. So improving apprentice pay and long-term job prospects in these sectors relies on an Industrial Strategy focused on the drivers of productivity like skills more generally, investment, innovation and infrastructure.
As part of this, some have made the case for widening the scope of the Apprentice Levy to focus more widely on skills and workforce development. This is growing compelling: apprentices have become all-consuming in the same way that for someone with a hammer everything looks like a nail. The challenge is to do this in a way that increases overall employer investment in skills and ensures a greater proportion of this is focused on those with the lowest skills. This could involve developing non-apprenticeship routes for workforce training which, while important, does not justify a lower minimum wage rate.
The best apprenticeships are a great way to combine earning and learning. They’ve been around for centuries and are a cornerstone of vocational education systems in many countries. The expansion of apprentices in England is welcome, but the industrial levels of pay below the statutory minimum reported in many sectors is not. Apprentices need to know their rights and be supported to enforce them. And we need to boost growth, training and productivity more generally in low pay sectors.
