The skills conundrum – education and beyond

Since the Blair mantra of education, education, education as his three priorities when he came to power in 1997, we have seen the steady rise of expenditure on education, and the growth in numbers of young people going to university. 

This year again there were a record number of applicants in England and Wales and we now have close to 50% of young people in higher education, which is almost 10% above the average for OECD countries.

So are we building a better base of skills for businesses and becoming more competitive as a nation? What about the alternatives of vocational education, and what of the future?

A key outcome of higher education in particular should be greater levels of employment and enhanced jobs prospects – the so called ‘graduate premium’. Yet by the UK government’s own estimates, around 45% of graduates will never earn enough to pay off their student loan and debt, which for students in England, Wales, and Northern Ireland are amongst the highest in the world, estimated now at an average of over £40,000. Furthermore, although not easy to measure, there are significant numbers of graduates working in jobs that don’t need or utilise this level of education. The OECD estimates that it’s around 30% of graduates, but CIPD research last year found that almost 60% of graduates are working in non-graduate jobs.  

In reality, there is a growing mismatch between education and the world of work, and with the projections for future jobs and the huge impact of technology and artificial intelligence, this gap is only likely to grow. At one level, employers have complained for some years now about lack of basic employability skills (work disciplines, ability to communicate, work in teams etc), but they are also experiencing more and more difficulty in recruiting for highly-skilled jobs. However, it’s not just those jobs that are proving difficult to fill. Sectors like agriculture, construction, hospitality and logistics are not finding enough young people who want to develop trade skills or have the interest in these kinds of jobs, and that has been a big factor in the employment of non-UK migrant workers.

But there are two sides to the story. Businesses themselves have not been creating the jobs that give opportunity to more highly qualified workers, and there are real and perceived lack of progression routes beyond the entry level jobs. The result is a disproportionate number of low skilled low wage jobs in comparison with most other of the developed OECD nations. There is also much evidence that in the UK we have had an over reliance on relatively cheap and available labour instead of investing in the workplace or in the development of the workforce. Employers have been reducing their expenditure on skills development and training for their employees over the last decade or so. Some estimates put this as much as a 50% fall in training volume per worker since the late 90s. Hard to ascertain, and training should have become more efficient with more e-learning opportunities for example, but, nonetheless, it has to be a concern if businesses are being challenged by skills gaps, but then not investing enough in the development of their own workforces.

These skills mismatches at a macro level are a major problem to productivity, and in the UK, what has become known as the ‘productivity puzzle’. Why is it that the UK languishes in the lower echelons of developed nations on labour? As the economist Paul Krugman notably observed in 1994, ‘productivity isn’t everything, but in the long run it’s almost everything.’

Future trends for employment increasingly point to more people working for themselves in a so called ‘gig economy’, and jobs and skills needs changing much more rapidly than in the past. Most of the jobs growth in recent years has come through self-employment or people working in micro-enterprises. All of this begs significant questions for our systems of education, for employment regulation and legislation, and even for our welfare systems. A policy focus only on the supply side of pushing more people in to increasing levels of education when they are young, whilst not understanding the demand from a shifting world of work, makes no sense.

Hence the growing promotion of apprenticeships and more work-based or vocational learning as part of the solution. Learning as you earn can be done at any age, sounds sensible but has been challenging to promote, to align, and to ensure the right quality. The UK has fallen far behind many other countries, most notably Germany and Switzerland, in the positioning and uptake of apprenticeships. The push to get more young people to university has undoubtedly moved the focus for young people, their parents, and for sure the schools away from other routes into work, and it will also take a significant culture shift to really reverse this trend.

When the Conservatives were elected in to power in the UK in 2015, their manifesto contained a promise to deliver three million apprenticeships. This was on the back of a rapid increase in the number of people starting apprenticeships in the years beforehand and as part of a wider ambition to increase youth employment.

However, just chasing numbers can encourage quantity over quality. A recent CIPD report highlighted that many apprenticeships are now Level 2 apprenticeships, rather than advanced and higher level 3 apprenticeships, while the number of people under 25 starting one – who were set to be the main group to benefit from them - has dropped dramatically. A decade ago, 99% of apprenticeships were given to people under 25, today that figure is 57%.

To fund the growth in apprenticeships and shift the emphasis to employers funding and investing in their workforces, a key policy proposal is to raise a levy, or tax, on larger employers with wages bills greater than £3m. At present this is not being particularly welcomed or taken seriously. A recent CIPD survey showed that more than 25% of employers are unaware if they will have to pay it or not, and of those who do expect to pay it, 50% are opposed to it. Many view this simply as another tax and on top of the national living wage and pension reforms will be adding to the cost of labour for most organisations. Even though the intent may be to encourage more spending on training and skills development, the famous laws of unintended consequences are likely to be rife.

There is already evidence that the levy will take investment away from other equally valuable forms of training and development, causing organisations to effectively re-badge existing training schemes as apprenticeships simply in order to reclaim levy funding. This could lead to many large employers, particularly in low margin sectors and the public sector, making significant cuts to their training budgets as a result of the levy, or having to find other ways to pass on the additional costs.

More consultation is needed before the government implements a blunt instrument of this nature, but the signs of this happening have not been promising.

In returning to the original questions, it seems there is much to do in the UK to address skills gaps and mismatches, and to provide for further development in the future across business and the education system. We need a more balanced rhetoric about different routes through education and in to work, less specialisation early on in schools and opportunity to develop for everyone the broader skills they will need in whatever job or career they do in the future. Skills like basic problem solving and critical thinking, numeracy, literacy, communication skills, ability to work in teams, understanding of the digital world, and perhaps a basic understanding of the fundamentals of business are needed if we are going to see many more entrepreneurs and people working for themselves.

We will also need much more debate between government, policy makers, educationalists and business leaders about the future of work. We need to think about how to support the growing number of independent workers, how to better align the world of work and the world of education, how to support people in work, lifelong learning needs of future generations, and ultimately, to create more opportunities for people to have meaningful, productive, healthier and better working lives.

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