As the UK heads towards divorce from the EU, questions about the strength and flexibility of our labour market are getting louder. The unfortunate truth is, when it comes to Brexit, the biggest risk might not come from Brussels but our own people. Simply put, our population is too low-skilled to take advantage of the jobs that advanced industry is creating.
The OECD noted last year that in most countries, but not in England, younger people have stronger basic skills than the generation of people approaching retirement.
Our report [pdf], published on 6 November, puts this challenge into context. England has a national labour market, but is made up of diverse local labour markets. These markets are so diverse that in many cases what could help one area could damage another.
The automation of manual jobs might be a lifeline to Gloucestershire, a place creating more jobs every year than its population growth; but it could be a death sentence to the West Midlands, where significant employment is in industries considered at high risk of automation. For every productivity gain there is the risk of a longer dole queue.
In the short-term, government can do little about automation or the ageing of our society. It can, though, tackle the urgent skills gaps in our economy. At present England is below-OECD average in the provision of technical education, ranked 16th out of the top 20 OECD countries. By 2020, we are set to fall to 28th out of 32 OECD countries for intermediate (upper-secondary) skills.
Furthermore, our apprenticeships do not necessarily meet the standards of what classifies as an apprenticeship in other developed countries. In 2015, only a fifth of new apprenticeships, or a little over 100,000 starts, were reserved for 16–24-year-olds at the more advanced level that would be recognised as an apprenticeship in other countries.
Although the government is right to commit to high-quality technical education, there are concerns about the way this is working in the real world.
The new apprenticeship levy system has essentially devolved the matter to business. And while business needs an important voice, its track record in this space is weak. The Resolution Foundation’s report on work in Brexit Britain noted that much employer-sponsored training is considered poor and unequally distributed, with a disproportionate amount of training funds being spent on the already highly-skilled and highly-paid.
Concerns have recently been raised, for example, about the use of the apprenticeship levy scheme to fund senior executives attending MBA courses rather than training younger, lower-skilled people. Handing the problem to the market and then stepping back doesn’t seem particularly sensible given that most businesses, understandably, aren’t thinking beyond this year’s profit-and-loss sheet. If we’re going to deal with a potential post-Brexit labour supply squeeze we’re going to need to act fast and think long-term.
Our analysis suggests there is significant diversity in local labour markets, which means a solely national vision would be of limited use. What’s needed is locally-crafted detail on skills. and for that, more powers will need to be devolved out from Whitehall to local and regional authorities.
Two measures should be considered as priorities.
Firstly, as in Greater Manchester and in London by 2019/2020, the government should pass control of the adult education budget to the rest of England’s strategic authorities. This would empower them to convene local colleges, training providers and businesses to set the priorities for their local labour market. The principle of greater control of skills locally has already been set with the current devolution deals; now it’s merely a case of extending that to other areas.
Secondly, the government should take a top slice of 5% from apprenticeship levy accounts nationally in order to create a local skills development fund. This would raise approximately £140m that can be devolved and targeted on supporting efforts to raise the employment level of key low activity groups, in particular disabled people and those aged over 50. These two policies would give places the opportunity to improve local training and education, and the funds with which to do it.
A post-Brexit labour supply squeeze will affect parts of the country in very different ways and it is about time that government policy reflects this reality.
Liam Booth-Smith is chief executive of Localis, whose report, In place of work: influencing local labour markets, is published on Monday 6 November.
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