A new perspective on education and skills policy

In the UK’s educational landscape, and in particular England, policies and reforms seem to change as frequently as the seasons. Traditionally, education policies have centred around the accumulation of skills among the youth, with the hope that employers would harness this talent for economic growth.

However, as the country grapples with persistently underperforming productivity metrics, is it time to reconsider the approach and look critically at the intricacies of training needs and how organisations can effectively leverage the skills at their disposal?

The belief in the symbiotic relationship between the education system and productivity growth has been a cornerstone of successive UK governments. From substantial expansions in higher education to numerous reforms in vocational education and training, the commitment to nurturing human capital has been ongoing. But the effectiveness of these endeavours has come under scrutiny, particularly as productivity, wages, and living standards have plateaued since the global financial crisis.

Changing focus

The prevailing narrative around education policy has been supply-oriented, focusing on amassing skills for employers to deploy as needed. However, a closer look reveals a fragmented system beset by skill mismatches, regional disparities, underinvestment, and policy churn.

To truly boost productivity, it is necessary to shift the spotlight from the supply side to understanding the demand for specific skills. This involves acknowledging the changing needs of employers, the regional nuances, and the impact of technological evolution.

The Productivity Agenda advocates for a shift in thinking, emphasising the pivotal role of employers in shaping labour market demand. As architects of the workforce, employers decide on job locations, workforce composition, and technology adoption.

The rise of digital technologies presents opportunities to enhance productivity, especially through the recruitment of high-skill tech workers. However, this trend raises pertinent questions about the commitment of employers to training and career pathways for their employees, particularly in the era of blended workforces.

This figure uses the methodology outlined in Minimum Wage and Skills: Evidence from Job Vacancy Data by Elodie Andrieu and Malgorzata Kuczera .

The regional element

Regional imbalances in skills further complicate the productivity puzzle. High-paid employment opportunities tend to be concentrated in certain regions, triggering a 'brain drain' effect as talent gravitates towards economic hubs.

Government intervention, influenced by the Inflation Reduction Act (IRA) and CHIPS and Science Act in the United States, is steering economic and spatial policies. Both major political parties, Labour and Conservative, are pursuing industrial strategies and regional policies to address these challenges and stimulate economic growth.

Lack of joined-up policy

The constant flux in policies and institutions over the years poses a formidable challenge. A lack of coordination and coherence, especially in the triad of higher education, further education, and apprenticeships, impedes progress and hampers productivity improvements.

Addressing these challenges necessitates a holistic and integrated approach. A shift towards a coherent tertiary system, consistent investment across learning types, and better coordination with economic and industrial strategies are crucial. Empowering regions to tailor systems to their unique needs and providing incentives for employers and individuals to invest in training are essential for sustainable progress.

The future of skills and education policy

The upcoming general election offers a window of opportunity for a recalibration of education and skills policies. Reimagining a system that not only bridges skill gaps but also aligns with regional and industrial needs requires collaboration, sustained funding, and a long-term vision will collaboration beyond political lines.

Only through a united effort can UK hope to navigate the productivity challenge and chart a course toward enhanced living standards and economic prosperity.

Find out more

• Read 'Skills for productivity growth' in The Productivity Agenda, by Damian Grimshaw , Mary O'MAHONY and Andy Westwood .
• Read How can education and skills policy in England boost productivity? by Andy Westwood in the Economics Observatory .
• Listen to Skills, Innovation, and Productivity: Further Education Colleges and Place episode of Productivity Puzzles, featuring Jen Nelles , Ben Verinder and Bart van Ark .
• Read Tackling the UK’s regional economic inequality: binding constraints and avenues for policy intervention by Anna Stansbury , Daniel Turner and Ed Balls.

The Productivity Institute

The Productivity Institute is a UK-wide research organisation exploring what productivity means for business, for workers and for communities - how it is measured and how it truly contributes to increased living standards and well-being. It is funded by the ESRC: Economic and Social Research Council .