Report Finds Teen Subsidies Discourage Part-Time Work and Impact Future Earnings
The Institute for Fiscal Studies revealed that the outcomes indicate a potential decrease of up to 3.5% in later-life earnings for disadvantaged students who received the Education Maintenance Allowance (EMA).
A recent study found that government subsidies, like the EMA, targeting low-income students to encourage them to stay in school did not lead to improved educational achievements and could have impacted their future earnings.
This absence of part-time work deprived them of valuable work experience that could have been beneficial when they entered the workforce as adults.
The EMA, which was phased out in England in 2011, was initially tested by the Labour government in 1999 before being introduced across the UK in 2004. It provided £30 per week (equivalent to £50 in today’s money) to 16- to 19-year-olds from low-income backgrounds who remained in full-time education.
The funds were intended to assist students with expenses like travel and course-related costs to enhance the long-term outcomes of disadvantaged learners.
However, researchers, backed by the Nuffield Foundation, concluded that while the program did increase full-time education participation, it did not achieve the desired outcomes of enhancing educational achievements and future job prospects.
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The IFS statement mentioned that the study’s findings indicated a potential 3.5% decrease in later-life earnings, particularly for the most disadvantaged EMA recipients.
‘Discouraged’ Part-Time Work
Research suggested that the EMA caused a 7% drop in earnings for young people at the age of 17.
This decline was attributed to reduced part-time job opportunities for students who would have chosen full-time education even without the EMA.
Authors concluded, “The EMA seems to have discouraged part-time work alongside study.”
They highlighted the importance of part-time work in enhancing long-term employment prospects despite the potential benefit of more study time.
‘No Evidence’ EMA Improved Attainment
The report also highlighted that there was no measurable evidence indicating that the EMA resulted in improved academic achievements, despite the requirement for students to attend classes to receive the allowance.
The IFS study concluded, “The EMA did not lead to a measurable increase in attainment.”
Students react after receiving their A-level results at City of London Academy in London on Aug. 17, 2023. Peter Nicholls/Getty Images
The study also reported no improvement in A-level grades, pass rates, or the likelihood of obtaining Level 2 or Level 3 vocational qualifications among eligible students who received the EMA.
“There is also no evidence that the EMA improved educational performance beyond the period of eligibility, with no increase in university attendance,” the report added.
Reduced Outcomes in the Long-Run
Recipients of EMAs also experienced slightly reduced earnings and employment in the long run, estimating a 1% reduction each year throughout their 20s.
Additionally, individuals who received EMAs as students were slightly less likely to be employed and slightly more likely to claim out-of-work benefits as adults.
Negative Consequences
By 2010, EMAs cost £900 million annually (adjusted for 2024 prices) across the UK. In 2011, the program was replaced with a more cost-effective 16 to 19 Bursary Scheme in England. However, EMAs continue to be available in Scotland, Wales, and Northern Ireland.
Nick Ridpath, a research economist at the IFS and co-author of the report, remarked, “The EMA, which cost billions in the 2000s, did not yield the expected positive effects on educational achievements and future employment outcomes.”
He added, “In fact, it seems to have had negative consequences by discouraging disadvantaged youth from gaining work experience.”
Emily Tanner, program head at the Nuffield Foundation, emphasized that these findings underscore the challenges in enhancing participation and meaningful engagement in post-16 education and training.
“With the ongoing Curriculum and Assessment Review, there is an opportunity to enhance 16–19 learning pathways across all levels to provide more effective routes to quality employment,” she noted.
Following the July general election, the Labour party initiated the Curriculum and Assessment Review to ensure that 16- to 19-year-olds have access to valuable qualifications and training to prepare them for the changing job market.
Since regaining government control, Labour has committed to enhancing educational outcomes for disadvantaged children as part of its Plan for Change, aiming to address child poverty and disrupt the link between background and future success.
