Better Britain

Better Britain: How to solve the UK’s productivity problem

BY Lawrence Barton   /  20 June 2019

As the contest for our country’s next Prime Minister chunters on, it’s important the victor projects a vision for a post-Brexit Britain beyond bold tax cuts and populist spending pledges. Implementing an effective programme to tackle the UK’s productivity crisis would secure them a legacy their predecessor never had.

UK productivity is falling. Since 2008 productivity growth has been half that of France, less than a third of that in Germany, and less than a fifth of that in the US. UK productivity is now nine per cent below Italy, 22 per cent lower than the US and France, and 25 per cent less than Germany.

Yet the driving factors behind the country’s faltering productivity are less obvious. The labour market has many positive attributes. Unemployment, for example, is at its lowest level since 1974, while employment is at a record 76.1 per cent. And despite the emergence of the so-called ‘gig-economy’ and an increase in unskilled and insecure work, the actual quality of work in the UK compares favourably by international standards. The labour market also shows high levels of flexibility with the UK ranking 8th out of 140 countries in the World Economic Forum’s measure.

Instead, major shortcomings with our labour market come in terms of skills and education provision. Levels of literacy and the provision of vocational training are poor relative to many of our northern European neighbours.

Many young people remain wedded to the pursuit of a university education often on the false premise that it is the key to a successful and prosperous future, unaware of other avenues open to them. While university for many remains the most suitable option, this isn’t the case for all. Five years after graduation nearly half of all graduates find themselves languishing in non-graduate jobs.

The net result is a triple whammy blow. Graduates take several years out of the labour market accumulating debt while they could be training in the workplace. The taxpayer is saddled with billions in unpaid loan repayments when the debt is written off. And, third, employers are confronted with a young workforce with over-inflated wage expectations and lacking many of the skills required for the workplace.

The situation is compounded by the frustrating fact that viable alternatives are available. New, higher-level degree apprenticeships, for example, provide young people with the opportunity to gain the life-long transferable skills employers need without accumulating the thousands of pounds of debt associated with traditional university degrees.

Research from several studies, including the Sutton Trust, show degree-level apprentices earn more than the average non-Russell Group graduate. A 2014 study by the Million Jobs campaign revealed over a third of all graduates (39 per cent) have lifetime earnings below those of the average higher apprentice. Meanwhile, nearly half (46 per cent) of those from post-1992 universities earn less than higher apprentices. This evidence is echoed in other countries, including Germany and Switzerland where more than half of young people do higher-level apprenticeships.

Unfortunately, despite the alternative route of degree-level apprenticeships being available, last year saw only 11,000 people begin a degree-level apprenticeship, compared to over 300,000 taking up university degrees.

We need to get serious in addressing this problem. To do so requires a three-pronged solution to ensure the labour market is equipped for the appropriate skills demanded by the jobs market.

First, the Government needs to fund a dramatic expansion in the range of higher-level apprenticeship courses available covering a variety of industry sectors from banking and finance to journalism and mechanical engineering.

Second, a major marketing initiative needs to be launched to educate and inform teachers, young people, their parents and those looking to upskill and retrain regarding the opportunities available through modern apprenticeships.

Lastly, their needs to be greater public awareness of the poor earnings and employment potential of some university institutions and the individual courses they offer.

Transparency, a better-informed marketplace, and investment in higher apprenticeships can do much to address the unfair bias towards universities at the expense of vocational education. Doing so will do much to plug the root cause of our productivity crisis, while ensuring the next Prime Minister secures a legacy they can be proud of.

Lawrence Barton is the Managing Director of GB Training UK Ltd


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