The Industrial Strategy Council, chaired by Andy Haldane, the Bank of England deputy governor, is the government’s adviser on boosting the productivity and competitiveness of the economy. Last week it published a report setting out the role and increasing prevalence of skills shortages in holding back growth. A large majority of employers report that a lack of access to the right skills is a big threat to UK competitiveness; England has a significant problem with basic literacy and numeracy skills among young people; digital skills are in short supply; and more than a quarter of workers lack the qualifications required by their job.
You can quibble with the specifics, but overall the story is clear and consistent across many similar analyses. The UK suffers from skills shortages and this is a factor holding back growth in productivity and wages.
What is striking is the mismatch between this sort of analysis and the apparent success of our education system. GCSE results today look far better than they did in the 1990s and far more young people are going to university than in the past. We are on course to meet the old New Labour target of getting 50 per cent of young people into university. Our workforce is more educated than ever before.
This ought to be driving a spurt in productivity and earnings growth. Instead, both are flat. Indeed, the so-called productivity puzzle — the lost decade of productivity growth that we are living through — is even more of a puzzle than it first appears. Earnings and productivity are stuck fast even as the education and qualification levels in the workforce keep rising.
In one of a series of lectures marking the 50th anniversary of the Institute for Fiscal Studies, tonight I will offer some thoughts on why, despite its apparent successes, our education system is not working as well as it should be.
First, it creates failure and then does far too little to help those who fail. This happens early on. Eleven-year-olds who don’t make the expected grades in tests at the end of primary school have almost no chance of getting the benchmark of five good GCSEs at age 16, yet we offer them no real alternative. Those who don’t get their GCSEs at 16 have too few good options thereafter. Of the third of young people who have failed to meet this basic benchmark (or equivalent) by age 18, around three quarters are still not there by age 28. Just missing a grade C in GCSE English by one solitary mark dramatically reduces your chances of getting further qualifications. Instead of providing opportunities and ladders up, our system too often slams doors shut.
Second, we remain far too obsessed by the A-level and university route. That is a great route for many, but not for all. Relative to other European countries, we have more young people following these routes and far fewer studying for high-level technical and vocational qualifications.
The choices and difficulties facing those wanting to take a different route are complex and daunting. The present government is trying to remedy this with its focus on apprenticeships and the introduction of T levels (technical equivalents of A levels). This new approach looks sensible enough — it’s just that it’s the latest in a long line of similar innovations by governments of all stripes. We will have to wait to find out whether these changes prove successful and durable or are just yet another failed experiment.
Contrast that with the incredible stability of GCSEs and A levels, which, despite name changes, have remained recognisably the same since the 1940s. There is too little willingness to contemplate real change here. What, after all, is the point of GCSEs? They were designed for a time when most finished education at 16. Few countries have similar exams at the same age. And why do we persist with such an absurdly narrow curriculum at A level?
Third, we offer almost nothing in terms of qualifications between A-level standard (level 3 in education-speak) and degrees (level 6). Whatever happened to levels 4 and 5 — the higher nationals (HNCs and HNDs), foundation degrees and certificates and diplomas? The numbers studying at these levels have been declining sharply to extraordinarily low levels, despite clear evidence of demand for these sorts of skills. The Augar review, published this year, pointed the finger at the existing system of funding, which provides huge incentives to offer three-year degrees and very little incentive to provide education at intermediate levels. Incentives matter.
Finally, at least one in ten students enters university with inadequate literacy or numeracy skills and these are too rarely addressed once there. As the Organisation for Economic Co-operation and Development has pointed out, there is “an imbalance between an entry pool with weak skills and a high level of university participation”.
While graduates continue to earn a lot more than non-graduates, their hourly wages by the time they are in their late 20s and early 30s are, on average, no higher today than they were a quarter of a century ago. Returns to different degrees are highly variable, with many offering no wage benefit at all by age 30, suggesting that they are not equipping students with useful skills. The biggest state subsidies go to the courses whose graduates earn the least. Graduates from wealthier backgrounds do far better in the labour market than graduates from the same course at the same university from less privileged backgrounds. Universities, often lauded as the success story of our education system, cannot be allowed to rest on their laurels.
Of course, education isn’t just about skills for work and earnings and productivity. But if it fails to deliver on those counts, then it fails us all.
Paul Johnson is director of the Institute for Fiscal Studies. Follow him on @PJTheEconomist
This article was first published in The Times and is reproduced here with permission. The live stream of Paul's talk at 'IFS at 50: The future of education' on Monday 28 October 2019 will be available here from 6:30pm, or on Twitter. Please follow us on @TheIFS or via the hashtag #IFSat50.