Apprenticeship in higher education

Authors : Alain Triolle, Antoine Armand, Clément Chaffard, members of IGF, Fabienne Bartoli, Fréderic Laloue, members of IGAS, Eric Piozin, member of IGESR

In a mission letter dated April 9, 2021, the Ministers for Labor, Employment and Integration, Higher Education, Research and Innovation, and Finance
gave the General Inspectorate for Social Affairs (IGAS), the General Inspectorate for Finance (IGF) and the General Inspectorate for Education, Sport and Research (IGÉSR) a mandate to evaluate the practices and financial model of apprenticeship in higher education. In particular, the mission was asked to provide an overview of the current situation, given the rapid growth in the number of apprentices in level 5, 6 and 7 courses (each corresponding to baccalaureate+2, baccalaureate+3 and baccalaureate+5 degrees), to examine the benefits of this education type and to shed light on the corresponding economic model.
The mission worked on the basis of available documentation and data, interviews with all stakeholders and a review of the situation in a cross section of around 20 apprentice training centers (CFAs) deemed representative of the “statutory” diversity of these establishments (public, private, sectoral, corporate, etc.). The apprenticeship reform brought about by the law of September 5, 2018 for the right to choose your own professional future has completely changed how apprenticeships work (financing CFAs by contract according to funding support levels (NPEC) decided by the professional sectors, end of prior approval for opening a CFA, simplification of employer support). These changes help account for the major upturn in the flow of apprenticeships (525,000 contracts signed in 2020), particularly in higher education (296,000 contracts). This trend has seen the number of apprentices (numbers in training) almost double between 2018 and 2020 (from 180,000 in 2018-2019 to 323,000 in 2020-2021) and the number of apprentices in higher education also exceeded that of secondary school apprentices for the first time in 2020–2021. While this growth affects all levels of training, the increase is stronger in level 7 training courses that do not lead to the award of national qualifications, and particularly in specialties such as management, banking, finance and business. The number of CFAs is increasing significantly and their offering is expanding. This increase is partly linked to the deferral of professionalization contracts (84,000 contracts for those under 30 in 2020, compared with 181,000 in 2019) and is also based on the implementation of the one-off support payment to employers for recruiting young people in apprenticeships as of September 2020, which applies to higher education courses. This one-off support has made apprenticeship contracts in higher education highly attractive for employers. For companies eligible for the support, whatever their size and whatever the qualification level offered, hiring an apprentice represents a residual cost of between €26 and €203 per month, depending on the age of the apprentice.
The socio-economic effects of apprenticeship in higher education are documented by studies with different methods, scope and historical perspective :

  • in terms of employment insertion, the professional insertion rates at six, twelve and thirty months for apprentices in higher education are higher than those of young people who have achieved the same qualifications under student status. However, this gap is less substantial in higher education than in secondary education ;
  • in terms of short-term employment quality, studies tend to highlight higher indicators for apprentices, whether in terms of job stability, compensation or the relevance of the job in relation to the training taken ;
  • in terms of social origin, the impact is not as firmly established. The available data indicate that the children of blue-collar and white-collar workers are better represented in higher education courses offered as apprenticeships than as students, but these results vary depending on the courses evaluated. The most significant positive differences are in engineering and business schools ;
  • in terms of curricula, there are more holders of professional and technological baccalaureates in apprenticeships at all levels, and graduates of short higher education courses (BTS and DUT) are more likely to take level 7 courses through apprenticeships than through student status. Public spending is increasing significantly as a result of the growing number of contracts :
  • expenses covered by France compétences have risen sharply while the amount of statutory contributions has been affected by the crisis :
    • the estimated cost of the new apprenticeship cohort contracts signed in 2020 will reach €5.5 billion in the France compétences budget, 56% of which will be in higher education according to the mission’s estimate. Training in higher education is more costly for public finances than in secondary education, even though it takes less time on average ;
    • other associated expenses have also increased significantly, in particular the general operating grant (DGF) (€318 million), the allocation to Opco skills operators (around €800 million ; part of this is allocated to professional training) ;
    • due to these expenses and the increase in other professional training expenses, as well as the impact of the coronavirus pandemic on the operator’s revenues, France compétences recorded a deficit of €4.7 billion in 2020 and is expected to record a deficit close to €3.4 billion in 2021, based on a total budget of €9.8 billion for 2020.
  • expenses covered or compensated by the State for apprenticeships have also increased, in particular one-off support for hiring apprentices (€1 billion in 2020 for aide unique now replaced by aide exceptionnelle support), and compensation for exemptions from employee and employer contributions (around €800 million in 2020).
    The regulations in the current system, which are based on setting funding support levels for training according to sectors, seem flawed and ineffective :
  • the stakeholders have little incentive to moderate the NPEC : the CFAs have no interest in moderating their costs, since they are directly responsible for financing the training courses ; the sectors have no interest in moderating the NPEC, since they do not individually bear the impact of these rates, the financing of which is entirely shared ; at this point, France compétences intentionally operates on the median of the tariffs initially adopted by the sectors, without any incentive to align with the lowest rates ;
  • in addition, the technical mechanisms that are supposed to enable this regulation are not properly established : there is no apprenticeship section in the France compétences budget that would enable the balance of earmarked revenues and expenditures to be assessed ; the status of the NPEC remains unclear and the cost accounting of the CFAs, which is in its first accounting year, has significant qualitative limitations. The subcontracting channels, which are decisive from the point of view of the relevance of reporting, are poorly understood by the administration ;
  • the means for ensuring the quality of training and testing are scattered and poorly interconnected, and may therefore result in risk areas linked to the activity of the CFAs, which is now scarcely regulated. The mission made projections of contract volumes and extrapolated their budgetary impact, subject to particularly strong methodological precautions due to the uncertain context and the many factors to be taken into account. These projections were based on changes in student demographics, the trend growth in apprenticeships, the effects of the one-off support and the transfer of professionalization contracts for those under 30 (only possible substitutes).
    On this basis, the mission selected four simulated trajectories :
  • a low trajectory, estimating 400,000 apprenticeship contracts in 2024 (50% of which are in higher education) and 580,000 work-study contracts ;
  • a low average trajectory (527,000 apprenticeship contracts and 612,000 work-study contracts in 2024) ;
  • a high average trajectory (590,000 apprenticeship contracts and 675,000 work-study contracts in 2024), which was selected as the pivotal trajectory by the mission ;
  • a high trajectory (710,000 apprenticeship contracts and 735,000 work-study contracts in 2024).

The budgetary impact appears to be potentially very serious for public finances : in the high average trajectory, deemed pivotal by the mission, France compétences would record expenditure of around €7 billion for all apprenticeship-related expenses, constituting a deficit of €3.4 billion in 2024, solely for apprenticeship, and public expenditure for all apprenticeship support of €10.1 billion would be recorded for all public budgets combined. However, the mission acknowledges the desire of the public authorities and all of the mission’s contacts to see apprenticeship in higher education continue to grow. Consequently, the recommendations made take this main objective into account, and aim to improve the existing regulatory and administrative structure without a priori evaluation of the number of contracts signed.
Firstly, several proposals aim to create regulatory mechanisms specifically for an “open rights” system, without a limited budget. A France compétences commission could be tasked with defining a national apprenticeship development objective and monitoring the budgetary impact of the associated outcomes, in a budget section dedicated to apprenticeship. In addition, the option of defining the remaining costs for companies, as a percentage of the NPEC, should be made available to the sectors, so that they can tailor their policies by splitting the costs between public budgets and employers, according to their priorities in the trades. Secondly, improvements could help simplify and optimize the current NPEC regulation scheme. Only the sectors that are genuinely interested in training courses should be entitled to set the NPEC. The opinion of the Opco skills operators could be routinely sought on the levels of funding support. Lastly, France compétences’ recommendations should now specifically target the objective of financial sustainability. In terms of tools, CFA cost accounting should be routinely certified by a third party (auditor, chartered accountant, public accountant) and inspected by France compétences, with appropriate means. The InserJeunes system, which enables young people and their families to find out about the performance of CFAs in terms of professional insertion, should be extended as soon as possible to cover all higher education institutions. The institutions responsible for the various inspections of the CFAs should be able to exchange the information collected and a coordinator should be appointed. From a financial perspective, two measures could contribute to a partial rebalancing of the apprenticeship accounts without affecting the number of contracts signed : firstly, the option for companies to make voluntary payments, and secondly, revising the scope of exemptions from the apprenticeship tax. Looking ahead, the mission has developed three different scenarios, corresponding to three possible strategies of the public authorities regarding apprenticeship in higher education. Each scenario is in response to a different rationale :

  • the first scenario would be to consider that, in view of the potential effects of apprenticeship on employment and growth, the State budget ensures the financial balance of the public policy without increasing the apprenticeship tax contributions paid by companies. The additional financing requirement, including the effects of the previous proposals made by the mission, would be around €1.2 billion per year from 2024 to compensate for NPEC-related expenses alone (and around €2.4 billion for all the operator’s expenses related to apprenticeship) ;
  • the second scenario would be to consider that it is the responsibility of the companies to finance the bulk of apprenticeship-related expenses, the effects of which benefit the entire economic fabric. In this scenario, the additional financing requirement would be partially covered by an increase in the apprenticeship tax rate, although this would not be sufficient to cover the operator’s estimated deficit (even with a 0.4 point increase in the apprenticeship tax, only France compétences’ deficit for NPEC-related expenses alone would be covered in 2024 ; the operator’s deficit for its other apprenticeship-related expenses would still be €1 billion) ;
  • the third scenario would be to consider that it is primarily the employers of apprentices, the first de facto beneficiaries, who should finance apprenticeship. From this perspective, it would be possible to reduce the NPEC in higher education, managed by each sector and accompanied by a contribution from companies to cover all or part of this reduction (the mission illustrates one of the possible options – a 20% reduction in all levels of higher education compensated by employer contributions, which would almost entirely cover the operator’s deficit in terms of NPEC-related expenses alone, but would leave the operator with a deficit of around €1.7 billion in 2024 in terms of all apprenticeship-related expenses).

These three scenarios, and particularly the combinations of measures suggested, are primarily intended to illustrate the possible options and to highlight the need to redefine the resources and expenses associated with apprenticeship, in consultation with all stakeholders.

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