Edward Douglas is Senior Policy and Projects Officer at ResPublica.
Skills shortages aren’t new, but without a recalibration of our education and skills framework Britain risks being left behind other major global economies. That’s because of the fundamental imbalance between support for academic higher education students – £12 billion this year – and those in apprenticeships – £1.5 billion. What this means is that a minority of people are in higher education (47 per cent per cent is the latest figure), but get 600 per cent more support. While our key industries are experiencing serious skills shortages, the state is intervening to support a system that sees 32 per cent of graduates ending up in jobs that don’t require higher level skills.
Of course, shortages are always a feature of growing economies in the short run as people move from declining industries to high growth sectors. It takes time to re-train, so dynamic economies have to accept short term shortages (and indeed unemployment).
We’re in a different place at the moment because of the direct link between the shortages we are seeing and wider macro indicators of prosperity – mainly pay and productivity. Improving workforce skills is the most effective way to address persistent low pay and falling productivity. In the meantime, the UK’s global competitiveness has fallen: we now sit behind Sweden and Finland in the global rankings.
Our long-term prosperity depends on addressing this issue. There are unprecedented pressures in industries of strategic importance – construction being the best example, given our acute housing shortage and the Government’s infrastructure drive. Moreover, we’re seeing long-term shortages in key areas of the economy, and those needing digital and science, technology, engineering and maths skills are hardest pushed.
So we have huge skills shortages in key industries: from construction and tech to manufacturing. What unites construction and manufacturing is that jobs are increasingly becoming like those in high value services – with offsite construction, and automation in manufacturing, making those sectors need digital skills more than ever. Meanwhile, high growth industries such as tech don’t have the skills pool they need to thrive. The upshot is that low pay prevails as young people are not getting the skills training the economy needs – so it’s not surprising that career progression routes are closing off for non-graduates.
Skills must be a priority over this parliament. There’s no doubt that the Government is committed to this agenda: the drive on apprenticeships, typified by the new levy, is a big intervention in the market. But without a more fundamental rethink of the way our education system prepares people for work, these interventions look like tinkering at the edges. We have an opportunity to change how skills training is delivered and funded – and in doing so we can start to think about how the potential of policies like the Apprenticeships Levy can be realised.
The first thing is to see education and skills as genuinely part of the same spectrum. As a minimum, digital skills need to be taught from an early age and properly considered as part of Ofsted assessment processes. And vocational education needs to be seen as a viable and sensible career path for many young people – and as such started much earlier on. Higher quality, more comprehensive provision of careers advice services at secondary level must be seen as a fundamental part of our education system, not an optional extra. If we want to boost pay and productivity, we’ve got to be less squeamish about getting people prepared for work from secondary school onwards.
The second thing is to take a far more strategic approach to funding for higher education and vocational and skills training. Why should an electrical engineer have to fully take on the risk of training in his or her field, while the state will take on huge financial risk for art history students? £4 billion is spent each year to support arts, humanities and social science undergraduate students, a group that traditionally takes much longer to integrate into the labour market – nearly three times the budget for apprentices.
Restricting funding access in this way diminishes opportunities for millions of people and means that we are using very limited resources in the wrong way. What we really need is to broaden the student finance system to cover vocational and skills training. This would allow those who lose out as some industries decline to retrain, and move us to a parity between funding for academic and non-academic education.
These are simple suggestions that would open up more routes to high value employment to the 62 per cent of workers who are not graduates; and it would make sure our high growth and strategically important industries have better access to a local workforce equipped with the skills they need.