By Terence Hogarth – ReWAGE* expert and Professor of Practice in the Institute for Employment Research (IER) at the University of Warwick.
Terence leads a programme of research at IER on vocational education and training, (VET) with a particular emphasis on apprenticeships, which seeks to understand the relative effectiveness of national VET systems in satisfying both current and future labour market demand. Related to this, he also leads a programme of research at IER on skill mismatches. Between 2016 and 2020, he was a Senior Adviser at Fondazione Giacomo Brodolini, a not-for-profit research foundation based in Rome, where he led a programme of cross-national research on employment and skills.
Intermediate level skills have long been regarded as a driver of productivity and national competitive advantage, providing the skills that are seen to be a key constituent part of a high skill, high value economy.
Successive government policies on skills development over recent years have struggled to develop strategies to tackle the shortage of employees with the intermediate level skills that are needed to fill a potentially expanding number of technical and professional jobs. Demand is currently outstripping supply and an insufficient number of applicants with the skills, experience, or qualifications that employers require has resulted in hard-to-fill vacancies.
Countries that have displayed relatively high levels of productivity, such as Germany and the Netherlands, have tended to rely more heavily on the productive contribution of people working in technician roles compared with the UK. If the answer to the UK’s productivity problems lies in creating an increasingly large body of technicians and associate professionals, then a means needs to be found of increasing the supply of people with the skills required to fill these roles.
Increasing the supply of skills is sometimes seen as a magic bullet which will stimulate productivity and employment growth and in doing so solve many longstanding weaknesses in the economy. Over the past 30 or so years policy makers in the UK have been innovative in trialling initiatives to stimulate the demand for skills and find the means for the supply side to suitably respond. Some of these provide a basis for thinking about how to both increase the demand for skills and simultaneously match supply to it.
From an international perspective, the demand for intermediate level skills in the UK is relatively modest compared with other countries. It is also evident that employers struggle to meet their demand for intermediate level skills currently. If demand for intermediate level skills were to be stimulated, it stands to reason that skill shortages will increase unless measures are taken to improve supply.
With this in mind, we need to consider how to incentivise employers to invest in the skills of intermediate level skills and how to empower individuals to invest in their own skills development.
The cost of training, and concerns about appropriating the return on any training investment in skills, are factors that limits employer investments in skills. To stimulate demand so there needs to be some way of minimising the risk employers face when investing in training. It would be worth considering setting the employer costs of training apprentices to completion to a realistic level to increase volumes and reduce the net cost of apprenticeship training to employers. This should make employers less risk averse when it comes to investing in this form of training.
Providing guidance for employers about the skills their workforces need to acquire to meet future changes in the demand for skills, would also help, as would encouraging employers to engage in training of a type which confers benefits on businesses and individual workers – tax credits may provide one means of achieving this aim.
But it is not all about employers. Individuals need to be empowered to invest in their skills (both those making the transition from education to work and adult workers) so that they can make decisions about the skills they need. Individual Learning Accounts have the potential to fill this role but will need to be supported by careers guidance.
Individuals also need to be attracted to vocational programmes which lead to the acquisition of intermediate level skills. T-levels and high-quality apprenticeships have an important role to play here and there is a need to ensure that sufficient places will be available to those who wish to pursue training at an intermediate level.
Intermediate level skills demand cannot simply be left to the market to determine.
It is apparent that there have many policy innovations in the UK over the past thirty years which have the potential to increase investments in intermediate level skills. It may be worthwhile revisiting some of these, such as Individual Leaning Accounts, to see how they might effectively increase those skilled to an intermediate level skills.
This blog is based on the content of the ReWAGE evidence paper How to address skills shortages at the intermediate skills level, which was commissioned and funded by the Gatsby Foundation. The views and opinions expressed in this blog are those of the author and do not necessarily state or reflect those of the Gatsby Foundation.
ReWAGE is an independent advisory group that analyses the latest work and employment research to advise the government on addressing the current challenges facing the UK’s productivity.