2015 10 – Wasting the Workforce’s Talents

Does the CIPD really point the way?

Mark Langhammer looks at a report on education and training by the Chartered Institute for Personnel Development

It has been the outlook of Labour Affairs (and its predecessor, the Labour and Trade Union Review) for some time that a more productive Britain, paying its way in the world, can only come about with an alternative economic and industrial vision for the UK. With the election of Jeremy Corbyn as Labour leader, the emergence of Tax-research-UK’s Richard Murphy as an economic advisor and the early articulation of ideas such a  UK investment bank to be capitalised by cancelling private sector tax reliefs and subsidies; and ‘people’s quantitative easing’ (which means printing money but in a way that directs new money into economic and social projects that add value) there is at least the prospect of an alternative.

At present, the wastage of the talents of our workforce, and particularly our young people, within a “fly by night”, low skills, low pay, job market is ubiquitous. We all have all anecdotes of well qualified graduates waiting tables, pulling pints in bars, working as receptionists or as tour guides in the tourist trade.

A recent report of the CIPD (Chartered Institute for Personnel Development, the professional body for HR and people development.)Over-qualification and skills mismatch in the graduate labour market[1] – calls for a national debate about how to create more high-skilled jobs as graduate over-qualification reaches saturation point

The UK has too many over-qualified graduates entering non-graduate jobs. Too many will not realise returns on their personal investment in higher education, carrying an unnecessary debt burden for too many young people entering the labour market.

The report finds that the increasing number of graduates in the labour market has significantly outstripped the creation of high-skilled jobs, leading to negative consequences. These include the growth of “credentialism”, where employers using degrees as a requirement when recruiting for traditionally non-graduate roles, despite no resultant change to the skills requirement for these jobs. This has led to a situation where many graduates are simply replacing non-graduates in less demanding jobs, or entering jobs where the demand for graduate skills is non-existent. This trend has particularly affected occupations where apprenticeships have been historically important, such as construction and manufacturing

The report, also makes important international comparisons, suggesting that graduate over-qualification is a particular problem for the UK

  • The UK has the second highest graduation rate in the OECD (54%) with only Iceland having a greater proportion. Germany, for example, a vastly more productive economy, has a graduation rate of just 31%
  • The growth of graduates significantly outstripping the growth of high-skilled jobs generated by the labour market is prevalent among most OECD countries, but is particularly pronounced in the UK
  • The UK has 58.8% of graduates in non-graduate jobs, a percentage exceeded only by Greece and Estonia. In contrast, countries such as Germany, the Netherlands and Slovenia, which have a history of strong vocational training, have 10% or less of graduates in non-graduate jobsThe CIPD report notes that graduate skills are under-utilized and graduate over-qualification is squeezing lower qualified workers out of jobs. This conveyor belt of graduates are unable to affect or address poor UK productivity growth. Instead, they are left deeply indebted, with the Government’s own research indicating that 45% of graduates will never be able to repay their student loans. The CIPD report concludes that the Government needs to “take stock” on whether Higher Education delivers the desired returns for graduates? Or for society? When it comes to solutions, the CIPD is timid. It recommends better careers advice, without addressing that most careers advice is dispensed by teachers or lecturers as a “bit part” of their real jobs, and with limited labour market information at their disposal.The English government’s general response has been to increase the number of Apprenticeships available, without addressing the variable quality and “currency” of these apprenticeships. Even with the increase of the apprenticeship rate to £3.30 per hour in October, the rate stands at less than half the statutory minimum wage. It remains to be seen whether George Osborne’s announcement for an employer levy to pay for post 16 apprenticeships in England will impact. [2] In practice, more apprenticeships are rightly seen by young people as dubious “schemes” – palliatives to the problem of long term or youth unemployment, rather than career developing VET programmes. So, what to do?Labour Affairs has long argued for reasoned Industrial strategy, access to ‘patient’ finance with reformed conception of the purpose of banking, creating clear blue water between utility and Investment banking, implementing the Tobin (Robin Hood) tax, with a New Deal in banking biased to promoting industrial development and better quality jobs. Tax Fairness, such as argued for by Tax Research UK[4] remains central to boosting the UK economy. We have argued that workers control (or workers voice, as it is politely termed today) has a role to play, along with structured, employment focussed vocational education and training. A reconception of the state as a driver of innovation and good work, as a “player” in economic development, such as proposed by Marianna Mazzucato[5] is necessary. Under a Corbyn leadership, Labour could reinvigorate the modest blueprints for an alternative economy of such as the Compass group[6] as well as revisiting the policy proposals arising from Jon Cruddas’s review.We need to develop a narrative around what a broadly defined and progressive company, with environmental and societal obligations, should look like. Without this sort of approach, better quality jobs and real hope for our young people are a distant prospect.
  • In Britain, that it takes the CIPD to point our movement in the direction of better quality jobs is a sad indictment. Corbynomics has, at least, made a start to setting out an alternative vision.
  • There is also a need to do more to legislate for a more broadly based, civilised, conception of company law. Traditionally, companies were invented by “companions” who banded together to share risk to perform a vital economic or other function from which they would profit. Mainstream commentators such as Will Hutton have long argued that companies should petition the state for a licence to practice and accept reciprocal societal obligations in return. This classic conception of company has been debased by the narrow notion of short term shareholder return, a notion which will consider quicker routes to shareholder return than investing in people to develop a great organisation. Merger and acquisition to extend market share, tying senior management to stock market performance through share options, increased managerial opportunism and the use of performance related pay for middle and junior managers to effect cost minimisation all serve to reinforce the short term view of the company, rather than the need to invest in skills development.
  • In Scotland, the Edinburgh Government has undertaken modest work on interventions to stimulate the utilization of skills (and recognize the need to plan and intervene in the economy to stimulate better jobs) as well as commissioning a potentially ground breaking “Working Better Together” review of industrial relation under Jim Mather[3]. Taken together, the trajectory of Scotland’s efforts are towards a collaborative, Scandinavian economic and industrial relations settlement.
  • Commentary
  • Another perceived pressure on the traditional indigenous working class is that the UK remains attractive to immigrant labour, with net migration to the UK last estimated at 333,000 per annum. In fact, three-quarters of all UK employment growth is accounted for by non-UK nationals, with 3.2m non UK nationals now working here. Instead of blaming immigrants for “taking our jobs” we should try to understand more about why immigrants are attracted? Or, more pointedly, why they are more attractive to UK employers.
  • Effectively, our young people are being asked to make career choices by “second guessing” the labour market – like driving without a dashboard and with only vague ideas of their intended destination.
  • To compound this, a separate report by the Resolution Foundation “A Steady Job”, reinforces this, noting a drop in the rate of “job-hopping” since the 2008 Crash, leading to a labour market freeze, with careers stalling. It notes that 30 year olds (those born in 1983) have taken a wage hit of £2800 per annum on average. It describes limited movement in the job market, with episodic (at best) employment at the start of careers, and very limited movement between employment sectors.
  • The UK also has one of the highest levels of self-reported over-qualification among graduates in Europe.

[1]  See at http://www.cipd.co.uk/binaries/over-qualification-and-skills-mismatch-graduate-labour-market.pdf

[2]  See at http://feweek.co.uk/2015/07/08/summer-budget-osborne-announces-apprenticeship-levy-for-large-businesses/

[3]  See at http://www.gov.scot/Publications/2014/08/4647

[4]  See at http://www.taxresearch.org.uk/Blog/

[5]  See at http://marianamazzucato.com/the-entrepreneurial-state/

[6]  See at http://www.compassonline.org.uk/publications/plan-b-a-good-economy-for-a-good-society/