Real progress on poor productivity and falling real wages requires urgent focus on demand side of the skills agenda and end to confused economic steers, says CIPD

 

Successive Governments have allowed inconsistent thinking and a lack of co-ordination between government departments and policy priorities to send the UK economy in contradictory directions. This has led to an approach to skills policy that has focused almost exclusively on the supply side, with little attention and understanding of the demand for skills and how best to utilise skills in the workplace, undermining the country’s productivity and long-term competitiveness, according to a new report from the CIPD.

The report, Industrial Strategy and the Future of UK Skills Policy, produced for the CIPD by the Centre on Skills, Knowledge and Organisational Performance (SKOPE), highlights the contradictions and inherent tensions in recent industrial strategies, whereby competing government policies and priorities have in practice encouraged businesses down the low road of competition based on low cost, while also exhorting businesses to take the high road of innovation, efficiency and higher skills.

The low cost, low road economy means Britain has the highest proportion of low skilled jobs in the OECD after Spain. 22% of UK jobs require no more than primary education, compared with less than 5% in countries like Germany and Sweden. Low skilled jobs obviously mean low pay and carry wider social implications. In-work poverty has increased by 20% in the last decade, creating a huge benefits bill.

Too much focus on increasing the supply of skills and neglecting the need to increase demand among employers for investment in skills and creating more productive workplaces and working environments also means the UK has the second highest level of what the OECD refer to as ‘over qualification’.  30% of workers believe they are over-qualified for their jobs and there are far fewer graduate jobs than graduates, meaning that too many people’s skills are being under-utilised in the economy.

These two skills problems – of low skilled jobs and under utilisation of the higher skills workers have – are major factors in the UK’s poor productivity levels. Productivity is the key to increasing real wages above the rate of inflation. Recent CIPD research has identified that we currently face the most sustained and severe fall in real wages since at least the Second World War and warns that this poor record on productivity means a return to economic growth is unlikely to significantly reverse the trend.

The CIPD believes that a forum or Workplace Commission is needed to coordinate policy development relating to work, the workforce and the workplace across government and with employers and employee representative bodies. The proposed Workplace Commission must also redress three decades of misaligned skills policy.

Peter Cheese, CIPD Chief Executive, says:

“Unless we address the demand side of the skills equation, we will fail to improve our poor productivity or to achieve the sustainable increases in real wages that have become such a dominant feature of the current media and political narrative.

“We’ve been down the road of simply increasing the supply of skills without increasing UK productivity or the number of skilled jobs in the economy. We now need to improve skills utilisation and stimulate demand for higher level skills through increasing the number of higher skilled roles available.

“To do this, we need to encourage more employer investment in building productive working environments, with investment in skills growth and the management and leadership skills needed to deliver high performance workplaces which are more likely to compete through innovation, continuous improvement and quality.

“The most glaring absence at the heart of government policy is coherent, integrated thinking and strategy that focuses on understanding and growing demand for skills, embracing growth, innovation, employment relations and the labour market. A Workplace Commission could fill this hole and help address the critical need to improve the utilisation of skills and productivity in the UK.”

As published on www.cipd.co.uk

 
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