'Productivity is a puzzle for policymakers, but not for FE'

Lynne Sedgmore

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Apparently leading economists and policymakers are puzzled about the poor performance of the UK economy in terms of productivity. There has certainly been economic growth, but that’s a result of the increased numbers of people working, many – though not all – of whom are recent migrants. The amount produced per hour worked, however, is lower than it was in 2008, which is one reason why living standards have also been stagnant. In recent weeks, the issue has puzzled such eminent commentators as the Financial Times, The Economist and the governor of the Bank of England.

It may be a surprise to policymakers, but it’s much less so to those who take an interest in education and training. Over the past few years we have seen investment in training by employers, carefully monitored through the national employer skills survey, suffer a significant decline. We have seen financial incentives offered to firms to increase their training used to subsidise training that would have happened anyway – Train to Gain was perhaps the most egregious example, but recent experience with adult apprenticeships comes close. Finally we have seen cut after cut in adult further education, reducing the opportunities for individuals to invest in their own futures through attending college.

Over the longer term, there have been systemic changes in the structure of the economy that have affected training.  The public utilities and local authority works departments (which traditionally trained new recruits for whole sectors) have been sold off to private firms with a greater interest in short-term profit than the long-run competitiveness of UK plc. The trades unions' loss of power and the growth of temporary and part-time employment – symbolised by zero-hours contracts – has made it easier for firms to adopt a low-pay, low-value product strategy, investing neither in sophisticated machinery nor quality training. The strength of the financial services sector has constrained the growth of manufacturing without replacing employment in the skilled trades.

The political response to these changes has been a mixture of denial and nostalgia. All hopes are pinned on a resurgence of traditional apprenticeships, when the evidence is that the conditions that fostered them have gone – many employers are markedly reluctant to take on young people and, despite generous funding, 16-19 apprenticeship numbers are falling. Placing employers "in the driving seat" is seen as a panacea despite ample evidence that employers don’t want added responsibility for training – they’ll take public money if it’s made easy, but that’s not the same thing at all. Individuals are increasingly expected to bear the cost of their own training, but it's hard to see why they should if it doesn’t lead to higher pay.

What we need is a new policy for productivity that stands current arrangements on their head. In a world where jobs change rapidly, public investment should be focused on individuals, helping them to improve their circumstances by increasing their skills. Loans can play a part but need to be carefully phased in, as they were in the higher education sector, and, for many vulnerable groups, education will need to remain free or heavily subsidised. We need to reinvent, not dismantle, the night-school tradition.

As far as employers are concerned, instead of inviting them to help manage public funding – a role they neither want nor carry out with distinction – industrial policy should try making it harder for firms that don’t invest. We should try making them pay for training whether they do it or not through a strengthened system of levies; we should raise the minimum wage to make unskilled labour less attractive; we should enforce higher standards of safety and product quality, requiring firms to invest in order to compete. As long as low-skill, low-wage, low-security employment remains a profitable and easy option, the apparent "puzzle" of low productivity will remain.

Lynne Sedgmore is executive director of the 157 Group of colleges

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