February 2006 – Skills shortages in the UK

Those who have worked in the employment and recruitment sectors for more years than they care to recall will know that the problem of skills shortages is something of a hardy perennial emerging usually at the very stage that an economy is beginning to over-stretch itself.

Impending demographic changes highlighted in last week’s column, however, mean that current skills shortages in the UK, apparent for some years now, and offset only partially by the import of skilled people from overseas, are likely to grow even more acute over the next decade.

The need for some revision of education and employment policies to meet these shortfalls was acknowledged to some degree by Gordon Brown, the Chancellor of the Exchequer, when, in December, he launched a national debate on skills after the publication of the interim report of the Government-commissioned review of skills by Lord Leitch.*

The report warned that the current expansion of education and training was insufficient to raise UK productivity rates above some of its most important European competitors, such as France and Germany, in the long term. It pointed out that more than a third of UK adults – over 5m people - had no school-leaving qualification. This is double the proportion of those in Canada and Germany. One in six British people, it said, lacked the reading and writing ability expected of an 11-year-old. Numeracy standards were even worse.

Earlier this week Chris Humphries, director general, City & Guilds, added some weight to the debate in a robust report complaining of a “serious imbalance in public policy” created by an emphasis on academic learning to the detriment of practical skills development.

While the Government had been right to expand academia, said Mr Humphries, it needed to do more to encourage higher levels of skills over a broad range of occupations, including those in the building trades and manufacturing.

Much emphasis had been placed in the past, he said, on the need for generic skills of “employability” such as basic numeracy, an ability to communicate and a friendly attitude towards customers. While these were important, he said that the biggest cause of skills shortages was a lack of specific technical occupational skills. “Employability skills are necessary but not sufficient for employer competitiveness,” he wrote.

Both the Leitch and Humphries reports stress that long term skills training must take in to account the accelerating performance of competitor nations such as China, described by Lord Leitch as the “potential factory of the world” and India, “the remote office of the world”.

In the next decade, at the very stage that these external forces begin to bite, some 600,000 fewer young people between the ages of 15 and 24 will be feeding in to the UK labour market, says the City & Guilds report. Employment growth in the same period, it points out, could create a demand for more than 1.5m extra employees, leaving an employment gap of more than 2m jobs at this time of shrinking supply.

“Adults already in work may contribute to this need by working longer, as may immigration, but the significant growth is likely to come from current unemployed or non-employed adults entering or re-entering the labour force,” it says.

Not for the first time the report raises the ethical and economic issues raised by importing skills through immigration, a popular solution to skills shortages among some employers who would prefer to avoid the cost of training their own people. What Mr Humphries calls “asset stripping” of developing countries not only undermines the growth of those countries but increases their aid dependency on the richer industrial nations and does little to stimulate the cross-flow of international trade that is so important to global economic growth.

Much of his report, and that of the Leitch review, is focused on UK Government policy. But the Humphries report also points to a need for a change of attitude to training among private employers.

“The majority of employers still see skills and training as costs to be reduced, rather than as assets that create genuine competitive advantage,” he writes, urging companies to view their workforces as “human capital” that can be improved by investment, feeding through to the bottom line of a business.

While this message may be understood by larger businesses it has been ignored for too long by most companies in the UK where past neglect of training has led to sector training levies, the kind of intervention that continues to draw Government support.

The problem with levies is that they do little to remove the perception among employers that training is a burden to be avoided where possible. Most graduate employers, however, understand that the quality of their recruits may depend on their willingness to provide high quality employee development.

Mr Humphries worries, however, that this attitude does not always extend in to vocational training of job entrants who have not undertaken university education or who may be returning to the workplace. Underpinning his concerns seems to be a fear that preparation for employment in the education system is creating a two-tier system – that led by qualifications ahead of university and a graduate career – and that preparing people for a trade. The former, he notes, tends to attract far more attention than the latter.

“Our school education system serves one half of the population – those with strong academic leanings – extremely well, but singularly fails the other half,” he says. The same, he says, is happening in the employment system. “The return to productivity from upskilling low skilled staff is high, yet employers consistently prioritise their spending on training to those with the highest level of skills, not the lowest.”

I blame part of this tendency on human resources professionals who find greater kudos in promoting “talent management,” managerial fast tracks and succession planning among fellow senior executives than in broad-based training schemes.

Given the thrust of his report, it is not surprising to see that Mr Humphries is urging the Government to rethink its rejection of the report by Sir Mike Tomlinson that last year recommended a vocationally-focused educational qualification replacing GCSEs and A-levels. Such a qualification would not only lend greater status to practical skills, it would also, if supported by greater access to continuous learning, allow a greater depth of skills acquisition and more scope for skill specialisation.

Another of Mr Humphries’ recommendations – the introduction of “licenses to practice” for technical trades and crafts, mirroring those of the professions, seems to hark back to the old guild systems. Whether this is such a good idea is debatable. While professional-style qualifications can be comforting to a customer they also tend to be accompanied by professional-style fees. A system that bars entry to the self-taught and the experienced-but-unqualified practitioner may create as many problems as it solves.

* Skills in the UK, The Long Term Challenge, interim report of the Leitch Review,
http://www.hm-treasury.gov.uk/independent_reviews/leitch_review/review_leitch_index.cfm

** Skills in a Global Economy, by Chris Humphries, City&Guilds www.cityandguilds.com