The Data Deficit

Why a lack of information undermines the UK skills system

22 March 2018

By Charlotte Alldritt and Andy Norman

5 minute read

The skills system in the UK is an example of chronic policy failure. For decades, the fragmented array of institutions, funding arrangements, incentives and accountability mechanisms have not provided learners with the skills they need to access highly paid jobs, or businesses with the workers they need to grow. Launching the major review of post-18 education in February, Theresa May lamented the “wasted human potential” this has caused.

In the policy community, ‘skills’ is a term that quickly narrows to institutional structures, qualifications and funding mechanisms. But underneath our managerial understanding of these systems and processes are broader ideas and identities, including class, culture and sense of self-agency, that are intrinsically bound to the efficacy of programmes and policies. These intangible issues cut across policy agendas and local, sub-regional and national bureaucratic boundaries. Even under new (albeit limited) devolved, place-based policy and investment arrangements, the question of how we create a more effective and responsive ‘skills system’ remains elusive.

This report, the first from the new Centre for Progressive Policy, argues that for the UK’s skills system to function properly, we must tackle the pervasive information gaps currently preventing optimal outcomes.

As a prospective learner, which course will set me up with the best job and earning prospects, and at which institution? As a policymaker, should I incentivise the provision of certain courses over others? If so, where? As an employer, how do I go about finding people with the skills I need to grow my business? What role should I play in the skills system and will engagement pay off for my company? The government has recently acknowledged the need for greater information on outcomes for Higher Education courses. The same principles should apply to FE and apprenticeships so that people can make informed choices across the full range of post-16 education and training options.

Piecemeal efforts to ‘fix’ structural weaknesses, ensure ‘parity of esteem’ between technical and non-technical routes, or create qualifications which have little or no reference to the needs of employers have done little to address these information failures. Unless we can tackle the root causes of the system’s problems, we will continue to look across to our key competitors, notably Germany, with bemused admiration.

This report presents four key insights that can ease chronic information failures and drive improved outcomes across the system:

Wage differentials myth: Analysis suggests that at least 75,400 higher education students who graduated in 2015/16 were in non-graduate roles six months later. The average advertised salaries of these non-graduate roles done by graduates was £25,560 in 2017, lower than for more than two thirds of the 54 occupation groups identified by CPP as linked to technical education. Adding in those who graduated in 2015/16 and were unemployed 6 months later, this suggests that every year at least 92,800 higher education graduates could have been better off choosing the technical route instead.

Potential for significant increases in incomes: In 2017 there were 1.4 million postings in the UK for core technical roles, with an average salary of £34,800. At £21,150 per person, the potential salary increases on offer for people moving from Living Wage occupations paying £13,650 into these types of technical jobs is significant.

Persistent technical skills shortages: The steady march of higher education towards 50% participation has been matched by the growing proportion of graduates in non-graduate roles. Both now sit at up to 49%. At the same time, skills shortage rates for skilled trades roles have remained stubbornly 10–15 percentage points above those for all other occupation groups. Supplying the skills for these types of roles continues to be a challenge.

Importance of place-based skills policy: National skills shortage analysis does not tell the full story, with significant skills shortage rate variation at the Local Enterprise Partnership (LEP) level. The skills shortage rates for skilled trades roles, for example, is as high as 73% in the Black Country LEP and as low as 26% in Cheshire and Warrington LEP. LEP level case studies of the supply and demand of technical skills show that in some instances provision could be better aligned, both with the needs of local businesses and with the opportunities for high wages that technical education can offer.

These four key insights – when used as a basis to address crucial information failures in the system – will help to bring the supply of skills in line with demand from employers and enable people to identify routes into high paying careers. We believe that, in time, this will allow places to strengthen their offer to investors, create additional quality jobs and empower people to contribute and benefit from growth.

Successive attempts at structural reform – whilst in some instances positive – have not been accompanied by the necessary levels of information for them to work successfully. Key to this is recognising that while there are problems with the skills system, there are plenty of examples of excellent courses and qualifications. To root out the poor provision and allow the good to flourish requires bridging the informational failures described in this report.