In the 1940s, and the 1980s, the UK’s economy underwent significant restructuring – the first induced by the war and resulted with an unprecedented level of state intervention in the economy, the second induced by globalisation, digitalisation and political ideology. Pre-Covid the 2020s was already set to experience change similar threefold forces of economic change (the intangible economy), technological change (AI & automation), and political forces (Brexit), now add to that the “war-like” Covid economy and a restructure is inevitable.
We did not manage the 1940s and 1980s restructures well: experiencing rationing deep into the 1950s and comparatively sluggish economy compared to even more war-torn Germany and Japan; while high levels of unemployment lingered through the 1980s until the early 1990s and many parts of the country still live with that scarring. We must manage a restructure better this time.
Pessimistic but realistic scenarios suggest high and persistent unemployment through 2021 and deep into 2022 and possibly beyond. We know that high employment, low skill, sectors are the hardest hit (hospitality and retail), and that high skill, low employment, sectors likely growth areas as we recover (tech, life sciences, professional services). Lower skill people that have lost work unlikely to benefit from growth of such sectors. This is made worse because economic recovery is likely to be geographically uneven given where growth areas are (London with ⅙ of the UK population created ⅓ of the jobs during the 2010-17 recovery).
Meanwhile the pandemic is likely to have accelerated technological change and automation, disrupting low skill high employment sectors (retail and low end services such as call centres). We are at an acute risk of experiencing simultaneous high employment and skills shortage due to the mismatch between the skills and location of job growth and job loss.
There is an opportunity however. With 80-90% of our estimated 2030 workforce already in the labour market today, with automation anticipated to displace 10-25% of jobs, covid 19 causing unprecedented disruption to the economy, and migration set to decrease significantly, meeting our skills needs will rely on retraining and upskilling people already in the labour market. If we retrain and upskill adults we can create a more efficient, fairer and prosperous economy.
The big barrier to this is that UK employers invest little in training. Employer investment in training fell steeply after the global financial crisis and been stagnant since (and likely to fall sharply as a result of this crisis). And what training employers do invest in is increasingly on-the-job uncertified training that employers can’t ‘take with them’ to prove to their next employer they have relevant skills.
An even deeper concern is that those identified as most vulnerable to the impacts of economic and technological change – low to mid skilled lower paid workers outside the south east – are the least likely beneficiaries of employer investment in training, with degree educated professionals in the south east are disproportionate beneficiaries of it. Yet even the higher skilled in the UK receive less certified training than counterparts elsewhere in Europe. UK employers are also more likely than any other in Europe to recruit over train. This is likely because of a wide pool of English speaking (second language) labour across Western Europe, who have disproportionately taken up professional jobs in the past two decades – particularly in London, whilst lower skilled jobs have disproportionately been taken up by migrants from Eastern Europe. When labour is in high supply, there is less incentive for employers to invest in training. Although evidence from Australia, suggests even a tighter migration system will not address this behaviour unless employers are made to.
If we want employers to invest in training and take part in the skills system that we want them to benefit from, they must be made to – as they are in central Europe and Scandinavia. The apprenticeship system is part of the solution. Apprenticeships are a learn as you earn programme, designed to one of over 400 different ‘standards’ aligned to occupations, that last at least a year, with one day of classroom training a week (“20% off-the-job” training), to enable the person to transition into work.
The apprenticeship levy forces large employers to engage and invest in training, whilst the system encourages employers to thoroughly engage and design skills standards. Most employers say they are using the levy to recruit and train new staff, with a third saying they use it to upskill existing staff. However, employers also complain that apprenticeships are not suitable for upskilling as those already in work don’t need a year of in-work experience, and shorter more modular training would be more suitable for such groups. Employers and government alike are also criticised for the levy causing training to being rebadged as apprenticeships. There should be more flex in the system to allow it to be better used for training – especially for older workers who are less likely to consider themselves ‘apprentices’. The levy is a lever, but it is also a much resented one – we should make it a little less so.
We should rebrand over 25 apprenticeships as ‘retrainingships’ to adapt for in-work retraining using same system and expand traineeships (lower level pre apprenticeships for under 25s) to all ages to support people without prior qualifications, allowing levy funding to support training costs. We should review the 20% off-the-job requirement and 12 month minimum for over 25s, to make it shorter and more flexible to suit older worker’s needs. We should allow more flexibility for levy spend for upskilling and retraining – with an approved list of non-apprenticeship courses that levy funds can be spent on. We should keep funding training costs of SMEs and remove all national insurance from apprenticeships for employers. Finally we should make employers train again by calling out those who don’t in a national campaign.
We don’t need to create anything new, we need to take one that works for hundreds of thousands of people already and make it better.
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