Published by Damian Hinds MP, Minister of State for Employment on 6 October 2016
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- The Reformer Blog
6 October 2016
Our country’s productivity is a third lower than the US, France and Germany and is holding back domestic growth, depressing wages and living standards. To address this we need to find ways to create high skilled, high wage jobs and to build a skilled and resilient local workforce that can benefit from that.
While we are renowned for our ‘blue chip’ professional and financial services and our luxury consumer goods, half of the weaknesses in our productivity derive from structural economic shifts producing strong job growth in relatively low value-added, low paid sectors of the economy. At the same time employers continue to grapple with skill shortages which act as a brake on their expansion and productivity, while over-qualified, over experienced workers are not able to make use of the skills they have. Meanwhile the Joseph Rowntree Foundation has shown that many deprived areas have jobs on their doorsteps but their low employment rates suggest that their residents lack the skills to take advantage of them. Essentially our labour market is not functioning as efficiently as it should, so we need more effective brokerage between employers and local communities.
Investment in skills and employability has an important part to play in fostering productivity growth in conjunction with other kinds of investments in innovation, connectivity and infrastructure. We know, for instance, that inward business investment is attracted to economies with a high skills base. Investments in new technologies will reduce in value unless they are supported by a human capital endowed with capacity, knowledge and ideas at both professional and intermediate levels in the labour force.
Greater emphasis and funding on vocational education and apprenticeships by the Government is to be welcomed, but there are still many challenges which remain. A shortage of STEM graduates, worryingly coupled with the few who do graduate with these skills often working in non-STEM jobs. We have deficiencies in the employability skills and ‘work-readiness’ of our school leavers, while sizeable proportions of our graduates are finding it difficult to find jobs requiring graduate-level skills. All – both young and old – require strong and supported career pathways. Those whose’s school days are in the distant past are often forgotten about in the public policy discourse on this subject. This is despite ‘in-work’ progression being central to curbing the rising in-work benefits bill and taking families out of relative poverty.
To begin to address these issues requires central and local government to work together on industrial strategy and welfare-to-work policy. Local government needs to be empowered by Whitehall to reorient their local economic plans around increasing productivity – within business sectors and across local labour markets.
Careers and employment support services have a central role to play in supporting national and local strategies by increasing labour market participation; supporting in-work progression; supporting young people to transition into work; attracting and retaining highly skilled workers and addressing the mismatches between labour supply and employer needs.
The benefits are potentially huge in lifting families from poverty and low wages; in promoting business growth, and in doing so generating more business rate income that can be invested in public services; and producing benefits for the taxpayer by making savings from in-work and out-of-work welfare benefits.
Nick Bell is the Chief Executive of the Prospects Group