18 February 2019

The UK must invest in training, or risk being left behind


It is almost universally accepted among British policymakers that worker skills and retraining are essential for the British economy to thrive in the future. Fourth Industrial Revolution technology such as robots, AI, and big data algorithms are expected to make more than a third of the current workforce redundant by 2030.

Employers are increasingly using flexible work arrangements and atypical contract types to turn workers into contractors, meaning we can work for multiple employers across a range of markets. For example, a web designer is more likely to work freelance for clients across the world than for a single employer in an office.

We are dying older, meaning we will have to work for longer too. It is likely that the state pension age will rise to over 70 and higher, meaning that an 18-year-old joining the labour market today can expect to work for another 52 years, retiring in the 2070s. Imagine what our society and economy will look like by then! Imagine what skills will be needed to keep up with changes to our economy and society.

The near-term forces of globalisation and economic cycles also increase the urgency to focus on making sure our workers have the requisite skills to remain resilient in the modern economy. Carillion, SSI and BHS are all recent examples of how workers can find themselves out of a job as a result of their company succumbing to competitive pressures.

All of these near to long-term trends need to be addressed by completely re-evaluating how we help British workers stay ahead of the curve and invest in their own skill capacity.

Unfortunately, we start from a low base. Fewer British workers take part in vocational training courses than our international competitors. Less money is spent by both the Government and businesses on helping workers get access to training opportunities. What little businesses do spend is often in the form of health and safety training or on-boarding of new recruits – hardly economically valuable or productivity boosting.

The Department for Education’s own Employer Skills Survey found that employers are struggling to fill vacancies because of a lack of qualified candidates with the requisite skills. The number of Skills Shortage Vacancies was at nearly a quarter of a million in 2017, 250 per cent higher than in 2011.

We estimate that 10 per cent of British workers are currently studying for a nationally recognised qualification. Using Government research, we estimate that a worker achieving an increase in educational attainment by one level would equate to an increase in GDP per capita of £7,00-8,000. If half of British workers studied for a nationally recognised qualification, we could see a boost to GDP of £125 billion. This is without looking at how work and education can help boost someone’s mental and physical health, increase community participation and give individuals a greater sense of purpose and pride. The economic and social opportunities are boundless.

So, as we recommend in a new report at the Centre for Social Justice, the Government should get on the front food and use the newly announced National Retraining Scheme to give every worker in Britain the power to save up and invest in their own skill capacity, giving every worker access to a Personal Learner Account. Similar to New Labour’s Individual Learner Account, the PLA would help workers and employers save towards training opportunities. Tax deductibility and potentially conditional support from the Government could help top-up savings. We forecast that someone on median earnings could save £2,761 by their 30th birthday.

Yes, if we want to prepare for the future we should spend more money on early years, better parenting, improve vocational education and help the most marginalised in to society back in to work. But unless we support workers to upskill now, productivity will continue to stagnate and we risk being caught out when the Fourth Industrial Revolution changes our economic model. Across history Britain has stood out as one of the most progressive economic forces in Western economics, we should focus on preserving that tradition.

Patrick Spencer is Head of Work and Welfare Unit at the Centre for Social Justice.