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Mind the skills gap

Kathleen Henehan, research and policy analyst at the Resolution Foundation, examines the intergenerational and international skills gap faced by the UK, and looks at alternative ways into work than the A-Levels to graduate route. 

The perennial skills story in England is one of poor performance on literacy and numeracy at school, as highlighted by the OECD’s Survey of Adult Skills, followed by a period of catch-up when people enter work. 

The fact that our skills gap with other advanced economies reduces with age has taken away the urgency of dealing with this poor performance, particularly for those not taking the well-trodden A-Levels to university route into the world of work. British firms and our flexible labour market have traditionally done a pretty good job of picking up the slack on skills. 

So the kids are alright, then? Maybe not. 

Research published as part of Resolution Foundation’s Intergenerational Commission has identified four trends that cast doubt on whether this model of adult human capital development will be in place for today’s – and tomorrow’s – young people.

First, despite the overall unemployment rate being at a four-decade low, lower-qualified young people today have a higher unemployment rate than similarly qualified young adults in the past. Of those with GCSE-level qualifications (or lower), unemployment at ages 25-30 rose from an average of 6% for those born during the mid-1960s to 8.7% among the millennials born in the mid-1980s. 

Second, growing shares of lower-qualified people, and men in particular, are shifting into insecure and part-time employment. Although better than not having a job, this type of work reduces opportunities for training and in-work development.

Third, growing shares of young people are entering jobs that require fewer skills. Four in five young people born in the 1960s had mid-level qualifications but worked mid- or high-skilled work. This proportion has fallen to fewer than three in five young people today.

Finally, there’s training. The proportion of 28-year-olds having recently received work-related training has fallen from 32% to 27% over the last 15 years. The duration of training has also fallen. These trends hold across all occupations and job types, not just the lower-skilled and less-secure ones that younger people are increasingly entering.

Thankfully, there are efforts to improve future generations’ skills, and politicians are starting to recognise that there’s more to post-16 education than the Russell Group.

For example, a new system of Level 3 ‘T-Level’ qualifications are expected to benefit younger learners outside of the A-Level to university track by giving them a clearer understanding of the educational routes that sit before them. T-Levels will require young people to have core skills in areas like maths, English and digital, and offer a substantial element of work experience. 

This is a welcome development – but they will need a major cash injection and much more engagement with businesses to get them off the ground.

But what about those young people who have already left formal education with lower-level qualifications and now find themselves with fewer opportunities for skills development than their predecessors?

We need to encourage employers to better utilise and invest in their workforce’s skills. To do this, our Intergenerational Commission has called for the government to build on its recent Industrial Strategy white paper and develop ‘sector deals’ with lower-paying sectors like social care, retail and hospitality. 

Government, firms and worker representatives would band together to design and publicise clear progression paths for staff. Firms would be offered help should they wish to train up staff to fill skill shortages.

However, for some young people, their best chance for developing skills and career progression lies in changing occupations altogether. 

That is why the Intergenerational Commission has also called for a ‘Better Jobs Deal,’ through which the government would develop mechanisms to help young, lower-qualified career ‘switchers.’ 

This would include publishing information on in-demand occupations, providing support for retraining, and funding some upfront costs associated with moving regions for work, such as a deposit on a rented property.

Of course, all this extra support carries a cost – around £2bn in total. The government can fund this by halving the remaining corporation tax cut to 1p and taking it to 18%. 

This would deliver important human capital funding, which businesses frequently cite as a major barrier to international competitiveness, while still leaving the UK with one of the lowest rates in the OECD.

Skills and human capital are not a side issue – they have long underpinned wage growth and living standards for us all. Today’s young people should therefore be offered the same opportunities for training and progression that their predecessors had in the past.