In 2030 the United Kingdom will need more qualifications or more skills ??

In my last article on LinkedIn, I mentioned about the receding state of business productivity in UK reflected in the erosion of stature of London as the financial powerhouse of Europe. Based on that article ( https://lnkd.in/dmdT7iMC) an Indian company gave me the mandate to carry out research on Labor Productivity in the UK in order to decide between the choices of asset-light (capital-light) or labor-high model to further its business in the UK. My research was focused on labor productivity and this article is derived from one of the three compartments I trifurcated my entire research into.

Context

The United Kingdom is staring at a steep decline in productivity that has continued unabated from 2015 onwards. Between 2010 and 2015 the rate of growth in productivity was a meagre 0.2% per year falling from 2.4 % between 1970 and 2007. Yes the global financial crisis of 2008 took a massive toll on the productivity of the financial sector, which was responsible for a decrease of 20 % in the growth slowdown in the UK compared to 10 % in the US. Even though between 2010 and 2017 the rate of growth in UK averaged 0.9 % it lagged behind France and Germany by 20 % in terms of absolute level of productivity.

Decline in labor productivity and low capital investment after Brexit referendum are the most significant reasons for the drop down in productivity.

SMEs (small and medium enterprises) represent a significant segment of the UK economy accounting for nearly half of the business employment and turnover. UKESS (UK Employers Skill Survey) has shown that these SMEs mostly follow a “low road “strategy. These businesses provide little opportunity for training, have low demand for skills and operate strategy that does not require significant skill usage.

Unsurprisingly the Skills and Employment survey published in 2017 revealed that in terms of the qualifications required to access work, 17% of survey respondents stated that no qualifications were required to be considered and appointed for their role, and over a quarter (27%) reported that their jobs only required school-level qualifications to access (GSCE/A Levels). On the other hand, 41% of jobs either required a university degree (32%) or a higher degree-level qualification (8%).

Skill mismatch- Cause or Effect??

Another very critical problem is that of skill utilization and skill mismatch. Skills utilization is most easily understood as the way in which individuals deploy their skills at work. This is shaped not just by their existing attributes and abilities, but also by the way in which work is organized, how jobs are designed, and by other human resource practices deployed by businesses. Skill mismatch is based upon?the extent to which the workforce feels it is over/under skilled for a particular job.?The Skills and Employment survey data highlights the extent of both over-skilling – that is, the proportion of individuals who perceive that they have skills to cope with more demanding duties – and over-qualification in UK workplaces. Overall, 37% of survey respondents report that they are over-skilled and 27% report that they are over-qualified for their roles.

Skill mismatch occurs when employees either lack the skills needed for their roles or have the skills to cope with more demanding duties. In 2015 OECD (Organization for Economic cooperation and Development) released a data in which UK was ranked fourth in terms of skill mismatches. Also, a very high proportion of jobs in UK demanded very low skills.

For many years the UK government has focused on expanding higher qualification with an assumption that a highly qualified workforce will motivate employers to shift to high-value, high-skill business models. This inflation of high qualification has led to the birth of ‘credentialism’, which means entry into jobs are determined by qualification at the point of hire overlooking skills which are necessary for performing in the job. This also leads to many under-qualified but skilled people to be deprived of job opportunities.

Difference between skill and qualification

It is important at this point of time to understand the difference between skill and qualification. Though used interchangeably skills broadly refer to the set of competencies required to do a job. Examples may include typing, writing reports, effectively using power point skills, nursing a wound, administering vaccines etc. Qualifications on the other hand are formal degrees encompassing a few subjects of study. Examples in this case are BA, BSc, MBA, MBBS etc. Skills often are imparted through practical approaches and may or may not include theoretical foundations. Qualifications are based on theory and may or may not include practical demonstrations.

Why skills mismatch can be detrimental for an economy?

It is very important for any economy to reduce the mismatch in skills.?Ensuring that people’s skills are utilized effectively in their jobs is not only beneficial for individuals themselves, but also for the organizations they work for, and for society and the wider economy.

When individuals are able to use their skills fully, organizations benefit from improved retention of workers, increased productivity, greater employee engagement and enhanced relations between management and employees. Individuals benefit through increased earnings potential, greater levels of job satisfaction and reduced levels of workplace stress. In terms of the wider economy, evidence from the OECD suggests that if the UK could reduce skill mismatch to best practice levels, it could lead to a 5% productivity gain. And, for the Government, better skills match results in better return on investments in education, with increased tax revenue from businesses and individuals.

Where is the problem??

At the core is the focus of the UK skill system on qualifications rather than complementing qualifications with vocational training and adult education. The second reason lies within the broader context of business strategy and economic development. Employers can evolve to higher value-added employment enhancing business performance and benefiting employees through higher wages resulting in increased consumption and revenue for the state. This reason lies outside the remit of this article. However, one fact is established that UK is inundated with jobs requiring low qualifications and, paradoxically, still it has one of the most qualified workforces in the world.

Yes, qualifications are very important because I will not like to be operated by a surgeon who doesn’t have the required qualification yet in the long run, from an economy’s perspective, skills mismatch affects productivity more than qualification mismatch.

Who is blameworthy??

The culprit is the UK skills system. A report from City & Guilds mentioned that over the last 35 years skills policy has been overseen by 65 secretaries of state accompanied by 11 changes in departmental responsibility.

Historically inconsistent, is it??

In 1980 Manpower Services Commission was directed to allow private sector to provide youth and adult training and National Vocational Qualification was formed which had no influence on how direction was established in London. In 2017 Leitch Report on skills focused on adult skills. An objective to elevate 40 % of working-age population to Level 4 ( degree or equivalent ) was set. This report led to the birth of two programs- Train to Gain and Learner Accounts. A new body, UKCES-UK Commission for employment & skills was formed.

In 2010 the coalition government scrapped the targets and in 2015 UKCES was abolished and skill development was moved to the education department. In 2011 Alison Wolf Report criticized the role of center and led to a more devolved system in which employers were given more control over design of Apprenticeship system. In 2014 an OECD review stated that vocational courses such as Higher National Diplomas had been subsumed by increase in university degrees. Following this, in 2015, the government applied the Apprenticeship Levy and targeted provision of 3 million apprenticeships between 2015 and 2020.

Also in 2014 the coalition government set up several industrial partnerships to initiate employer-led direction to skills development but in 2015 the conservative government withdrew all the funding leaving skills development high and dry.

Though there have been initiatives by various governments in different years but these initiatives have fallen short. Let’s look at the probable reasons:

1.?????Inconsistencies in direction of policy, endless changes in structures, incentives and targets, frequent changes in ministries and departmental responsibilities.

2.?????Massive decrease in budget since 2010.

3.?????An imbalanced approach of focusing on apprenticeships neglecting adult education.

4.?????UK employers spend lesser than other countries in the EU such as France & Germany and much lesser than the EU average. Employers hiring graduates for non-graduate roles means lesser investment by employers in training for intermediate skills.

5.?????UK has over expanded, relative to demand, the higher education sector. The number of jobs that require a degree is significantly lower than the number of degree holders.

?It is still not clear if the biggest problem facing the UK with respect to productivity is too many high-level qualifications, or too many people in jobs that make poor use of their skills or, too many people who do not have sufficient skills, or some combination of the two.

In fact, productivity does not, historically, seems to be an area of concern for the British government. While elaborating on post-Brexit plan, Autumn Report in 2016 stressed on infrastructure, science and innovation and skill-development was conspicuous by its absence. The chancellor announced 25 billion ponds to be spent over the next 5 years ?following 2016 on infrastructure including housing and big-ticket items, which have a lag effect, such as innovation and science. Surprisingly only 1 billion pounds was earmarked for education sector and workplace skills development. It will be too optimistic to expect employers and individuals contributing to bridge the gap created by decrease in public funding in workplace skill development considering the not so successful Apprentice Levy on training volumes.

Apprenticeship- a new ray of hope ??

Apprenticeships have represented the largest government funded program for delivery of workplace learning in UK. The model of apprenticeship evolved over the years has been that it is a government scheme delivered by private contractors. There were few yet significant problems with this model:

·??????Apprenticeship acted as a medium for transfer of government subsidy for narrow and low –level vocational training.

·??????Too many apprenticeships were at Level 2( lower secondary qualification) rather than Level 3 ( intermediate or upper secondary level).

·??????Did not cover Math, English or Science.

·??????Too short in duration reflecting lack of substantial learning content.

The British government did Richard Review of Apprenticeship in 2012 and developed a new employer-led model. Few of the reforms suggested within this model are as follows:

·??????Redefining apprenticeships as only for those new to the job or are transferring to a role that requires sustained and substantial training

·??????Apprenticeships to last for a minimum of 12 months

·??????Employers in each sector/occupation to establish new apprenticeship standards, which will replace existing (Sector Skills Council designed) apprenticeship frameworks. There will be a single standard for each occupation

·??????Math and English to be mandatory components of all apprenticeships, with the ambition that once GCSEs are reformed, they rather than functional skills qualifications will be used.

·??????Assessment to be largely undertaken towards the end of the apprenticeship (rather than through continual assessment) and be conducted by a body independent of either the employer or the training provider

·??????The Government to route funding for apprenticeships directly to employers (instead of largely through private training providers [PTPs] as at present).

What is the responsibility of an employer??

It goes without saying that investing in skills should be a defining characteristic of a responsible and enterprising business. It is expected from a private employer in a government funded Education & Training system like that in the UK ?to:

?????????????????????i.???????????Offer work experience to the long-term unemployed adult population.

???????????????????ii.???????????Offer more apprenticeship places, particularly to people aged under 24.

??????????????????iii.???????????Redesign national educational standards by offering placements to students in schools, colleges and universities.

??????????????????iv.???????????Help design various aspects of the curriculum and not just STEM (science, technology and mathematics).

????????????????????v.???????????Forecast future skill requirements.

??????????????????vi.???????????Provide adult workforce with employability skills.

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????Why there is a solid case for reskilling in the UK??

??????Even though digital adoption is underway and has gathered an appreciable momentum in the UK and the country does well in internet access, basic digital skills, and the adoption of cloud computing it is not up to the mark in the integration of information systems across the value chain, business process transformations, enterprise digitisation, and robotics. By 2030 around 66 % of the UK workforce will lack basic digital skills.

?The impact of technology on the workforce is never consistent. Jobs requiring intermediate and advanced technical skills are affected positively where as the ones that require low to basic technical proficiency are affected adversely. Technological advancement leads to up skilling because the business models are woven around such skills. The business of platforms and digital transformation including use of Artificial Intelligence and Machine Learning are pertinent examples. Conversely the low-level technical jobs stand on the brink of collapse because these can be automated and the workers can be substituted by the machines very easily. A study by MGI (Mckinsey Global Institute) states that 30 % of the UK workers may need to transition between occupation or skill levels by 2030.?Ageing population and Brexit makes the case for reskilling very profound in UK.

?Reskilling is basically two-folded- up skilling, which is advancing a worker’s skills and retraining, which implies provision of new skills to enable a change in role. If the study of MGI is creditworthy then retraining is the panacea for the woes of the labor market in the UK with respect to decline in productivity and paucity of skills. The sad part is the statistics…only 62 % of workers in blue-collared jobs received workplace trainings in 2017 and these trainings included the mandatory ones such as health & Safety and onboarding.

?Recommendations for employers:

?Now when the case for reskilling has made a cogent argument the question is what employers need to do to avert the talent crisis waiting to upend their business models in as lately as in 2030?

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?????I.???????????Strategic workforce planning:

§?Skill-gap analysis should focus on capabilities rather than qualifications.

§?The talent plan needs to be granular. Each role should be broken down into skills as much as possible.

§?Weightages should be assigned to specific combinations of skills and then the decision to either up skill or retrain or source new talent should be taken.??

?????II.???????????Reinvent the L&D(Learning?and Development) :

§?Its high time that L&D department runs after line managers for nominations for its offerings.

§?L&D has to move away from a tick-box exercise to validate its existence.

§?How to develop a mechanism for measuring the ROI (Return on Investment) of training? The HR, the line management and the L&D need to quantify the levels of proficiency in each set of skills that will transform into deliverables required to meet the requirements of the business.

§?The internal context of an organizations has to be borne in mind. Does an average employee has time for formal training. How can be modules packed into on-the-job training and on-demand training requirements? Thus the training pack needs to ?be composed of all modes of training such as reinforcement and immersive experiences.

§?The pandemic has shown the utility of modular, bit size training modules supplanting, in a lot of cases, integrated modules, which are difficult to retain and process when the time comes.

???III.????????????????Lifelong learning:

§?The employee lifecycle needs to be attuned to the concept of lifelong learning.

§?Reinforcements should be taken as sacrosanct.

§?Let the employee choose how he wants to be retrained/reskilled.?Give her the?options and the only non-negotiable principle is that she has to get retrained/reskilled or up skilled. Period!!

§?Career advancement should be tied to the requirements of up skilling and not only performance.

§?Because lifelong learning is an insignia of a Learning Organization and such an organization is the result of an enabling culture the leadership should demonstrate the significance attached to lifelong learning. Who says that leaders need not be retrained?? In my opinion they need to be retrained the most on most of the soft skills otherwise they will not be effective in days of turbulence and disruption and I never said that I need leadership in halcyon days.

?Conclusion:

The UK needs to build an education system that meets the needs of a fast-changing digital economy, upgrade the skills of its existing workforce and ensure that businesses have the managerial skill-set to productively lead that workforce and support digital transformations.

Denmark’s flexicurity model can be a role-model for the British Government.?The flexicurity model brings together trade unions, government and businesses to maintain a flexible labor market while also supporting workers in finding new employment opportunities. Two core-components of the model are an active labor market policy that provides incentives for continuous learning and retraining, and a generous social welfare program that helps unemployed workers retrain while they look for a new job. The Danish government spends around 1.5 % of its Gross Domestic Product (GDP) on offering guidance, a job or education to the unemployed. This figure makes the Jobseeker’s Allowance spent in the UK ( 0.2 percent of GDP) between 2011 and 2016 look paltry.

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