The Education Maintenance Allowance (EMA) is a government scheme that helps those who are unemployed and are not in full-time education. The scheme has been successful so far. Its impact can be seen in three main areas: the economic impact, the increase in participation rates in post-16 education, and the effect on the labor market. Below are some key findings that are worth considering.
The economic impact of education maintenance allowance
The government recently abolished the Education Maintenance Allowance (EMA) scheme in a bid to reduce the cost of education. The EMA was a government initiative to help post-16 students who need financial support to pay for their studies. It provided up to PS30 a week to students from low-income households. It is now being replaced by a PS180m bursary scheme. This is intended to support students from low-income families in continuing their education.
The EMA scheme was a means-tested cash transfer given to 16 to 18-year-olds enrolled in full-time education. The EMA program was a way to support low-income families who were unable to afford tuition fees and living expenses. The students who received the EMA had to be 16 or 17 on 31 August of the start of the school year.
EMA recipients reapply for it at the end of their academic year. The removal of EMA funds could have lowered the retention rates of those students who meet the required income criteria. The EMA is a key benefit to lower-income families, especially for students who have a larger preference for immediate monetary rewards. However, the EMA is only one of many factors that affect the overall economic outcomes of higher education.
The economic impact of education maintenance allowance varies across countries. In Mexico, the scheme has cut the cost of attendance by nearly half, and enrollment has increased by ten percent. However, the payments are conditional on the child attending school and being enrolled in a health clinic. This means that the payments are effectively negative user payments. While the costs of attending school have been reduced, the demand for education is still low in these countries. The problem lies not in the cost, but in the cultural barriers that keep many poor people from accessing education.
The economic impact of education maintenance allowance on school enrollment and quality is not immediately obvious. However, studies show that user payments increase school demand, which in turn should lead to improvements in academic outcomes. In rural Mali, school attendance decreased when fees were raised but jumped when new schools were built close to rural communities. Eventually, parents realized that the schools had improved and were more attractive to attend.
The IFS report does not take into account the wider social benefits of the scheme. While the IFS estimated that the EMA costs the government PS550 million a year, the benefits are even greater. That said, this doesn’t mean that EMA is a deadweight loss. It is a crucial policy tool in reducing the cost of schooling and improving the quality of education for the poorest children.
The economic impact of education maintenance allowance on the child’s welfare is difficult to determine, and research has shown that there are several other determinants of welfare. For example, if the child receives a PS30 payment, their desired labor supply would decrease by an additional pound for each hour the child works in the labor market. The result would be a lower income for the child and a higher welfare level.
Increased participation rates in post-16 education
There is a strong link between educational attainment and socio-economic status. Those in the lowest social groups achieve a level 2 qualification less than half as often as their peers. Nevertheless, the effect of the additional year of study narrows this gap. This means that the proportions of students from low-socioeconomic groups achieving a level 2 qualification by age 17 are nearly equal.
An initial evaluation of EMAs showed that these payments increase participation rates in post-16 education by at least five percentage points. Specifically, EMAs increased the number of eligible students in Year 12 by nearly half. Whether or not EMAs are effective depends on the context.
The introduction of EMAs may have been associated with increased participation rates, particularly among young people from lower-income households. But some studies have concluded that the benefit of EMA is not the only reason behind the increased participation rates. Other factors may also be at play, such as unemployment and low educational attainment.
EMAs were created to be an incentive for young people to continue their education after compulsory school leaving age. They are provided to young people who continue their education or training in government-funded institutions for a maximum period of three years. Some of these young people are older than 18, but the primary focus of EMAs is on young people under the age of sixteen.
Although there is no guarantee of 100% participation by legislation, both parties agree that an increase in voluntary participation rates must precede any legislation. The Liberal Democrats and Conservatives have both opposed the use of compulsion to raise the participation age. As such, these measures are only feasible if they are accompanied by increased levels of achievement.
Impact on labour supply
The Education Maintenance Allowance (EMA) is a new payment that aims to increase post-compulsory education participation. It was introduced in 2004 and has been the subject of several evaluation studies. It was intended to provide a financial incentive for young people to continue their education and training.
We first examine the impact of EMA on labour supply for waves 3 and 4 of compulsory schooling, which are the final year and the first year of post-compulsory schooling. During compulsory schooling, no one is eligible for EMA. We then use fixed-effect estimates to identify the transitions into EMA for individuals who meet the income criteria.
Results of the present study suggest that EMA payments can increase participation, but only if the rate of payment is increased. The EMA is not increasing in line with inflation, so a higher rate of increase would be necessary to make the effect statistically significant. Further, the coefficient for girls in waves 3 and 4 is significant, but only marginally so. This is probably due to the imprecision of the later estimates.
The findings also support the assumption that EMA receipt is positively related to the labour market opportunities. However, there is an important difference between male and female teenagers in terms of EMA take-up. Female teenagers were less likely to pursue post-compulsory education than male teenagers, and the partial correlation between EMA take-up and unobserved characteristics is stronger in one gender than in the other.
The United Kingdom government introduced the EMA scheme as a national scheme in September 2004. The allowance was set at PS30 per week for young people who were in full-time education, subject to attendance and punctuality requirements. It also provided bonuses for successful outcomes. The scheme also provided a reduced EMA for parents whose income was between PS13,000 and PS30,000. This reduced amount was applied on a sliding scale.
The effect of the Education Maintenance Allowance on labour supply is an important test for whether an effectively altruistic head of household is present in the labour market. In the case of teenagers, a PS30 per week EMA payment reduces their labour supply by three hours per week. Furthermore, this reduction in labour supply is accompanied by a 13 per cent reduction in the probability of employment.
EMAs have a direct impact on participation and attendance in post-compulsory learning. However, the effect is unlikely to last beyond the time of the introduction of EMA. However, it is worth noting that a strong correlation exists between socio-economic status and EMA. This association is reflected in Chart 2 (Extracted from the YCS/LYPE analysis).