Andy Cook is Chief Executive of the Centre for Social Justice.
Over a decade ago, I started a charity called Twenty Twenty in an estate in Loughborough. On the surface, it was an employment charity running courses for young people. We took kids who’d fallen through the gaps at school and were unemployed and gave them the training and life skills they needed to get back into employment or education.
But when you stripped back the different courses, certificates and support, the principle was a simple one: we released their inherit talent and potential. Our strap line that ‘young people are potential to be developed, not problems to be solved’ drove us to recognise the gold already in them and help polish it up for others to see.
Today, the Centre for Social Justice publishes a landmark report that looks at national productivity, and despite the language of finance, GDPs, and GVA’s being eye-wateringly removed from those backstreets I once trod, the findings of the report are actually the same. In short, this country has incredible potential that is stored in places unknown to politicians and businesses alike; and we must release it.
Productivity is not often considered a social justice issue. And productivity growth has historically been the preserve of macroeconomists, the Bank of England and abstract statistical analysis. However, three issues brought the CSJ to steam roll in.
First, the CSJ was founded on the principle that the best route out of poverty is in work. Our hundreds of grassroots poverty-fighting charities across the UK know only too well that getting people into work is essential for the long term economic and social health of individuals and of the country. However, they also know that productivity growth has historically come at the cost of employment, with ‘efficiency savings’ in a business often costing those last and lowest in. Since reducing employment is not good policy for anyone, any efforts therefore to boost UK productivity should incorporate a pro-employment and poverty reduction agenda.
Second, employment has reached record levels in the UK – a good news story. But the policy question now turns to how we help improve the quality of jobs and quality of working life for the 32.1 million people in work today.
Third, and perhaps most significantly, our analysis shows that productivity stagnation has been partly driven by issues facing the poorest sections of society. Whether it is in employment or wage data, regional growth rates, and survey polling, the problem of low productivity is being driven by problems faced by those on the margins of society. Jobs in industries that classically attracted blue collar workers have declined. 134,000 jobs have been lost in the last 20 years in machinery manufacturing alone. In the place of these industries have grown low wage and low skilled employment in the service sector.
There is also a consensus that wages have stagnated, much like productivity, since the end of the financial crisis. Analysing median weekly wages, this is true. Real average weekly wages have still not returned to their pre-crisis peak of £480 after falling to £450 in 2014.
However, analysis from the Institute for Fiscal Studies (IFS) shows that over a longer 20-year period, wage performance has varied across the population. In fact wages, in the bottom quarter have consistently underperformed compared to wages at the top. In layman’s terms, the bottom 20 per cent of the population have barely had a pay rise in 20 years.
The problems don’t stop there. Low wage work is inherently less secure than well-apppaid work because low wage workers are ultimately easier to make redundant and cost less to take on. Life on low pay perpetuates the problem of productivity stagnation as it has a vicious cycle effect on an individual’s ability to increase his or her productivity. Like worklessness, low paid employment can repeat across generations. Ill health and depression is more prevalent amongst low paid workers. And given the UK’s comparatively low incidence of occupational progression, few low wage, low-skilled workers in the UK ever progress to middle wage, middle-skilled occupations.
Therefore, getting the productivity puzzle right is not just the preserve of macro-economists and the Bank of England, it is the stuff that gives lives hope and purpose. And to that end the Government must act to help people realise their potential. It must do much more to promote universities, apprenticeships and FE colleagues equally to ensure our young people are getting the skills they need to equip themselves for the workforce. T-levels is a good start, but more should come.
Polling conducted for our report found that technical skills and apprenticeships were the top demand for employers, but a lower priority than a degree for young people. Since perception is nine tenths of the law, the addressing of this imbalance will be crucial to giving people the right paths towards work. The Government needs to reduce the barriers that prevent young people from disadvantaged backgrounds from starting their own business too. Discussions with enterprise coaches, often found that the single largest barrier facing young entrepreneurs from disadvantaged backgrounds remains confidence.
The Government should also lead a campaign to increase take-up of both women and disadvantaged students in STEM subjects. STEM graduates earn 20 per cent more than non-STEM graduates and yet women and poor students are under-represented. For this nation to reap the benefits of being more productive, it must look to the incredible talent that is all across the estates and the backstreets of this nation. For here lies the overcommers, the creativity and the graft which many like those at TwentyTwenty see each day.