Sunday, October 22, 2017
Mind the skills gap, or we really will struggle
Posted by David Smith at 09:00 AM
Category: David Smith's other articles


My regular column is available to subscribers on This is an excerpt.

The Organisation for Economic Co-operation and Development (OECD) attracted headlines this week by saying that leaving the European Union will damage the economy and stifle growth for years, and that Britain’s best interests will be served by maintaining the closest possible ties with the EU.

It is right, but this is familiar territory. Nor do I want to waste time on the saboteurs, including former Tory cabinet ministers, who would have us leaving the EU without a deal, on WTO (World Trade Organisation) terms. I dealt with the consequences of that in my “Still clueless on Brexit” piece a couple of weeks ago. There are none so blind as those that will not see.

Instead, it was another aspect of the OECD’s Economic Survey of the UK I wanted to focus on this week. It explains why so many British employers have been glad of the supply of migrant workers, and in particular those from the EU. It also has worrying implications for the future, in the sense that if things do not improve we will struggle.

I refer to the problem of low skills and poor education. According to the OECD, more than a quarter of the UK workforce has low basic skills, identified as low levels of numeracy, or literacy, or both. Many, as identified by the Leitch Review of Skills more than a decade ago, are functionally illiterate. Though definitions vary, one commonly used measure of this was an inability to look up something simple in the Yellow Pages like finding a plumber.

The proportion of young people, 16-24 year-olds, with these low basic skills, 30%, is high in Britain compared with other countries. In addition, and in contrast to pretty well everywhere else, the proportion of the young with low skills is similar that for older people, those in the 55-65 age group.

The norm elsewhere in the advanced world is that younger people are better educated than older age groups. In Britain, disturbingly, that is not the case.

And, while some have sought to blame low-skilled immigrants for weak wages and low productivity, the evidence is that most of the problem of low skills is home grown.

As the OECD put it: “The productivity of low-skilled workers is weak in the United Kingdom, and some estimates suggest that their contribution to aggregate productivity growth has been negative. Insufficient skills could explain the high reliance of the UK economy on immigration. Between 2010 and 2016, average annual GDP per capita growth was 1.2%, out of which increases in hours worked per capita of immigrants explain nearly 60%. Over the same period, the contribution of native workers was about nil.”

This is not, of course, the first time the problem of low skills and educational shortcomings in Britain has been identified. The Leitch Review, commissioned by Gordon Brown, was one in a series. Most governments have, at one time or another, tried to address the problem.

This one is applauded by the OECD for its efforts to boost vocational education, including the July 2016 plan to transform post-16 education, which included a streamlined set of 15 technical skills routes. The official aim is parity of esteem between academic and vocational education.

There have also been 2.5m apprenticeships begun since 2010, with 3m more planned by 2020, though the record on these so far has been more mixed than hoped. Some apprenticeship schemes are very good, others rather less so, Organisations, meanwhile, have grumbled loudly about the apprenticeship levy.

The government has also reformed school funding, somewhat controversially, with the intention of closing the gap between disadvantaged pupils and the rest. The OECD likes free schools, which it points out one of the highest performing groups of non-selective state schools.

Gaps in education, though, start at a very young age, as young as two. Children from disadvantaged families are eligible for free early education and childcare from two but take-up is less than it should be. And clearly, improvements that start in early childhood will take some time to feed through to adult skills and education levels.

So the problem persists. At every educational level, including those educated at university, basic skills levels among 16-34 year-olds are lower in Britain than the OECD advanced countries’ average. The proportion of 20-45 year-olds who have undertaken professional vocational education after leaving school is lower than pretty well anywhere else.

These things matter. There are still 790,000 “Neets” in the UK, young people aged 16-24 not in education, employment or training. They account for 11% of people in this age group and about 41% of them are actively looking for work.

The problem of Neets has been with us for some years, and so has the rise in the number of non-UK national employed in Britain, up from 928,000 to 3.56m over the past 20 years, split between 2.37m EU nationals and 1.2m from the rest of the world. Even at the current 42-year low unemployment rate of 4.3%. 1.44m people are officially estimated to be unemployed.

Should employers have done better and employed more people from the pool of unemployed UK nationals, including those Neets looking for work? Possibly, though there is a big difference in recruiting workers who are underqualified even for low-skilled jobs, compared with the norm for EU migrant workers, which is that they tend to be overqualified. There is also a question of attitude and reliability, which all the anecdotal evidence suggests is more of a problem for UK recruits.

I have quite a lot of sympathy with employers, who spend £45bn a year on skills, according to the CBI. They can be expected to recruit young people with the right attitude to work – 86% of employers say this is the most important factor – but they cannot be expected to nursemaid unenthusiastic applicants with very low literacy and numeracy skills, particularly when more able recruits are available. That is the job of the education system, and supportive parents, which too many children lack.

When I talk to business people about leaving the EU, the availability of workers is one of their biggest concerns. Theresa May has sought to reassure EU nationals already in Britain, though some have already voted with their feet and left.

The situation regarding future migrants, meanwhile, is up in the air. The needs of the economy look to be entirely incompatible with a net migration target in the tens and thousands.

In time, one would hope, Britain would be able to tackle her problem of low skills levels and poor education standards. It might, however, take a very long time.