Skills drive productivity increases, says Learning and Work Institute report

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A report published earlier this year by the Learning and Work Institute (L&W) shows the intrinsic link between skills and productivity increases.

The report, Time for Action: Skills for Economic Growth and Justice, says skills improvements have contributed to one-fifth of UK economic growth over several decades.

These increases were driven by a higher proportion of highly qualified people in the UK. One study showed that each percentage increase in the number of graduates leads to a 0.2% to 0.5% productivity bump.

Analysing UK and global research, the report reveals that there are five reasons for why skills impact productivity.  L&W call these the ‘five foundations of productivity’. So what are they?   

Ideas

High-skilled people produce ideas they apply to business, which converts into higher productivity. For example, a company won’t be able to use a new technology unless it has highly skilled people to implement it.

People

The report argues that the UK has a low quality of leadership and management, leading to bottlenecks in the ability of companies to implement innovations. Also, one study by Dearden, Reed and van Reen in 2006, found that a 1% increase in the number of workers training in an industry-led to a 0.6% rise in productivity, with half going to the worker in increased wages and half to the business.

Infrastructure

The economy doesn’t work without good infrastructure – think trains, buses, broadband and energy. Without transport, people can’t get to work, and without broadband, businesses can’t make use of the potential of the internet. An effective infrastructure needs an excellent skills base to build it.

Business Environment

A good skills base makes it easier for people to start businesses. And businesses will invest in a country, region, or city that has the skills they need.

Place

The UK, like the US, has big disparities in its skills base across regions. Productivity in London is 50% higher than the rest of the UK. The report argues that concerted action is needed on all give preconditions for productivity to counter regional inequalities, which, in turn, would improve the country’s performance as a whole.

The Learning and Work Institute says government and companies need to invest £1.9 billion per year and reverse falls in adult reskilling to achieve real productivity gains. Given government pledges to spend an additional £120 million for technical institutes, while apprenticeship starts are growing only slightly, it seems right to reflect on the gap between what is needed and what is offered.

Richard Alberg, CEO of MWS Technology

“We’ve always known that, globally, productivity increases and economic growth are founded on retraining people in much-needed skills. Our entire business model is built on contributing to skills development by enabling training providers to deliver programmes efficiently, with built-in features helping them to nurture and progress learners.

“This new report really helps us to understand why skills matter and why what we are doing as a company is based on sound economic facts. I’d urge all those in the sector to read it and absorb its lessons.”

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Education Select Committee says FE Colleges need funding boost

The Parliamentary Select Committee for Education has published a damning report into education funding for the FE sector.
Calling for a ten-year plan to “fix the broken school and college funding system,” the report refers to a “troubling lack of a long-term vision” and “winner takes all short-termism” driven by a “politically-driven spending review cycle.”

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Augar report turns the tables on educational funding priorities

Deborah Talbot, Communications Officer at MWS, looks at the recently published Augar report and asks whether it really has the answers to the challenges facing post-18 education.

The Augar report on post-18 education has been eagerly and nervously awaited in equal measure. Published in May 2019, the report made recommendations on post-18 funding as well as on the balance between vocational and academic education.

Sceptics claim that the report, commissioned by Theresa May, may not ever translate into policy given the effective ending of her government and the ongoing Brexit crisis. Critics from the university sector have also pointed out that proposals to shift funding to the FE sector from HE, by increasing the cost of student loans while lowering tuition fees, will mean students will lose out in terms of course quality and long-term financial security.

However, as MWS’s CEO, Richard Alberg, pointed out:

“The writing has been on the wall for some time in terms of higher education funding. The inclusion of student loans into the national debt, which happened last year, would inevitably precipitate a review of HE financing. What is unclear is whether the Augar report has the right answers or will even be translated into policy.”

In the wake of ongoing research showing the gap between the content of education and employers’ expectation and needs, it has long been a mission of this government to rebalance academic and vocational education and prioritise skills training. What’s new about the Augar Report is that it advocates a shift of emphasis to the FE sector, which for ten years has, according to the Institute for Fiscal Studies, been the most significant recipient of government education cuts.

To summarise the proposals:

  • The report’s core message is that ‘the disparity between the 50 per cent of young people attending higher education and the other 50 per cent who do not needs to be addressed’.
  • Technical and vocational education at the sub-degree level (levels 4 and 5) need to be strengthened to meet skills shortages.
  • Cuts to adult skills training should be reversed, and part-time and ‘later life learning’ encouraged.
  • Reform and re-fund the FE sector – rationalise provision, increase funding for high return courses, improve links to HE, invest in staff to improve recruitment and retention.
  • HE institutions should ‘bear down on low-value courses’ and align provision with the needs of the economy.
  • HE fees reduced to £7,500 per year and instead direct funding to high-cost and high-value subjects and disadvantaged students.
  • Increase learning flexibility and lifelong learning (supported by a ‘lifelong learning allowance’), in line with changing career structures.
  • Freeze the repayment threshold for student loans and extend the repayment period.
  • Improve apprenticeship provision with better wage return information for careers, strengthening quality through enhancing Ofsted’s role and addressing the barriers SMEs experience in accessing the system. Level 6 and 7 apprenticeships should not be funded if recipients already have a degree.

Education and the economy

There are very few who would argue with more funding for the FE sector and the vital role they play in skills training and lifelong learning. Moreover, over the past few years, many colleges have been adept at reforming and reorganising to become significant players in local and regional economies.

Yet many would also argue that the contribution of degree, masters and doctoral education to economic performance is also hugely significant, particularly as we enter the Fourth Industrial Revolution and the importance of knowledge sectors such as IT, AI, research and the creative economy.  

If educational experts and practitioners were put in a room together, they would undoubtedly agree that all sectors of the education system, from pre-school to doctoral, from level 2 to level 8 apprenticeships, all play a vital role in social mobility and economic performance. Indeed, it has never been more evident that the economic prospects of a nation are intimately linked to the educational level and skills of its citizens, as Enrico Moretti’s ground-breaking research found.

Investment in education has a high return, yet the Augar report, while arguing for increased spending, presents funding options as a series of either/or – you take from one sector to give to another. It never asks the question as to whether the funding pot should be increased across all sectors to amplify those socio-economic returns.

Vocational/technical and academic education

The report implicitly views vocational/technical and academic education as two separate forms of knowledge, yet increasingly, both FE and HE sectors are eroding the barriers between the two. This process is most clearly seen in the apprenticeships sector, where academic and theoretical learning is combined with skills training – and arguably this occurs across all levels to different degrees, not just at level 6 and above.

Why? Because the UK economy performs better when it’s focused on high-skilled jobs, and high-skilled jobs need both skills and technical knowledge as well as lateral and creative thinking. Indeed, according to Klaus Schwab, author of the book The Fourth Industrial Revolution, what defines the new economic realities are a fusion of the social, biological and digital worlds, which impact all disciplines. AI will need experts on ethics, sociology and economics as well as high-level technical and scientific skills.

The Augar report has played a valuable role in highlighting the precarious and undervalued state of the FE sector and the 50% of young adults who never make it to university. It also has started an important conversation about skills and employment.

However, it has yet to convince that it has sufficiently understood the relationship between education and training and socio-economic needs, or that it has an innovative plan for the future of education.

When the Levy breaks — Interview with Mark Dawe

calculator and piles of coins

Is the government’s apprenticeship policy working? And why is there a fall in new apprenticeship starts but a potential levy overspend? MWS’s Deborah Talbot talks apprenticeship policy and funding with Mark Dawe, CEO of the Association of Employment and Learning Providers (AELP).

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