Today’s exam question: how do we remedy the growing skills divide?

Published on Shared Growth

Amid the annual excitement of A-Level and GCSE results days, young people and their parents understandably pore over the exam marks that show the qualifications they have gained. But alongside celebrating individuals progress, it’s worth stepping back to consider the bigger picture of increasing qualifications for the UK as a whole, and what this means for the labour market.

The good news is that qualification levels are up and gaps have closed across gender, region and ethnicity. However, looking at sectors of our economy and specific occupations we can see that some have experienced little to no growth in education levels, alongside declining amounts of training. So while we certainly should celebrate the educational achievements of today’s young people, we shouldn’t shy away from tough questions about our skills system – in particular why we see a growing divide between the highly skilled and the ‘low wage, low-skill’ sectors of the UK economy.

There are lots of ways of trying to measure these big changes of recent decades to our ‘human capital’, or, the skills and attributes of the labour force, from how much money is spent on education, the average number of years people spend in education, educational qualifications or, like the ONS, the expected lifetime labour income of our workforce, which is in part driven by – you guessed it – levels of education.

Whichever way you look at it, there has been substantial growth. In 1996 roughly three in ten working age people had an A-Level equivalent or higher, today six in ten do. We can see some of this change by looking at the composition of today’s working age population: about four in ten people in their mid-30s have a degree, as compared to two in ten of those in their mid-60s.

Source: RF analysis of Labour Force Survey

And while gaps remain, there has been a sharp reduction in the proportion of working age people with no or low qualifications across all ethnicities, balanced out by a rise in the proportion with mid and higher level qualifications, particularly degrees.

Source: RF analysis of Labour Force Survey

We see a similar pattern when looking at change in qualification levels by gender: between 1996 and 2016 the percentage of working age women with no qualifications fell by 19 percentage points (from 21 to 12 per cent) while the proportion with degrees rose by 21 (from 10 to 31 per cent). For men these figures were 12 and 14 percentage points, respectively.

Source: RF analysis of Labour Force Survey

This is good news for individuals, who can on average expect higher qualifications to result in higher pay. This is also good news for the productive capacity of our economy. And yet, not all occupations and sectors have benefited equally – with the workforce doing lower skilled occupations tending to see lower level – if any – expansion in educational attainment.

Since 1996, average education levels (measured here by median years of formal education) have risen for professionals and associate professionals, like teachers, scientists and business people, more so than they have for people in mid and lower skilled occupations, which have had lesser (sales and caring occupations) or no (transport and machinery, secretarial) gains in median years of formal education.

Source: RF analysis of Labour Force Survey

Of course, a person’s skills and capacities can – and ultimately should – grow even after they’ve left formal education. This is particularly the case in an era of rapid technological change, where work-related training and lifelong learning are increasingly important for an individual’s own career progression just as they are to productivity. And yet it’s here that the inequalities outlined above are magnified. Today, a disproportionate amount of work-based training goes to those who already have the highest levels of education (and who, for the most part, work in highly skilled occupations). For example, degree-holders comprise roughly 35 per cent of the 18 to 64 year-old labour force but 45 per cent of the labour force who’s recently had work-based training.

Source: RF analysis of Labour Force Survey, 2014-16, 18-64 y/o. ‘Trained’ indicates per cent of workers with work-related training in the past 13 weeks.

And while the proportion of the labour force reporting that they had some job-related training or education in the last 3 months has remained roughly stable over the past decade (at about 25 per cent), the length of that training is, across all occupations, significantly down on the past decade, with lower-skilled occupations seeing the largest falls in training time.

Source: RF analysis of Labour Force Survey

In 2005-06, over two-thirds of plant and machine operatives who received job-related training went on programmes that lasted longer than a week; by 2015-16 fewer than half did. Across all occupations, there was a substantial rise in the share of trained workers whose training lasted less than a week, with lower skilled occupations tending to see the largest overall declines in training length. As we have increased the length of formal education before starting work we have been shrinking the length of crucial in work training.

This isn’t to detract from the more immediate, positive story about exam results and the growing numbers of highly-educated young people – whose success should be celebrated. It is, however, important to think a bit more deeply about the dynamics of our skills system: we need one that supplies relevant and updateable skills fit for all occupations and industries. But we also need to challenge ourselves, particularly at a time when the National Living Wage means low paid labour is becoming relatively more expensive, to see where we can do better than a ‘low-wage, low-skill’ business model by seeking productivity in part through the continual investment in and upgrading of the UK’s human capital stock. How we get there is today’s exam question.