Skill-gotten gains

Acquiring Skills
November 22, 1996

If there is one belief that is shared across the spectrum of British politics from the right of John Redwood to the left of Tony Benn, it is that our future economic prosperity depends on the skills of our workforce.

Tony Blair's threefold commitment to education, John Major's passion for the same subject and Paddy Ashdown's pledge to raise income tax to pay for it are no mere gestures towards academic excellence for its own sake.

None of them believes there are votes to be won through a vision of a nation of scholars able to enjoy the classics in the original and capable of summarising Stephen Hawking's theories on one side of a piece of paper, though no doubt such a society would be preferable to the one we have today. Their aim is rather to produce a nation with the skills to create goods and services that compete in the international marketplace and so ensure our future prosperity.

There is a similar shared commitment across industry. The area in which the Trades Union Congress and the Confederation of British Industry have worked most closely in recent years is in the promotion of training targets. Trade unionists are making a valuable contribution alongside employers to the work of the Training and Enterprise Councils. Employment and education secretary Gillian Shephard is also on record as challenging the TUC and CBI to work together to promote the Investors in People Standard, a standard that has at its heart a commitment to increasing the skills levels of the workforce.

The need to improve our nation's performance on training is, however, not a newly recognised priority. One of the main debates at the first Trades Union Congress in 1868 was based on the growing skills gap between Britain and the newly emerging German industrial power. But as Alison Booth, Dennis Snower and colleagues demonstrate, the issue has become more urgent in recent years.

The British unskilled male manual worker is in danger of going the same way as some of our native wildlife, but with even more worrying consequences. Technological change, industrial restructuring and the greater internationalisation of trade are doing to the British male manual worker what myxomatosis did to the rabbit.

In previous recessions workers were able to wait for business to pick up and resume similar jobs to those which they had been forced to vacate. No longer. Unskilled or even semi-skilled work can be bought in the Far East or Eastern Europe at a fraction of the going rate in Britain. British Airways' decision to transfer 200 accounting jobs to Bombay is a worrying development but by no means unique. And the consequences of large numbers of young people, especially young men, with nothing to offer industry have implications that go far beyond the workplace, into the social security policy and even into the criminal justice system.

But if the problem is so obvious and the need for skills acquisition so widely accepted why do we not adopt the Nike approach and "Just do it"? The reasons are set out in meticulous detail by Booth and Snower.

Contrary to what the right would like to believe, in this area at least, the market cannot provide the answers. The market in skills is far from perfect. Whether it is the employer or the worker who pays, neither can be assured of getting a worthwhile return on investment in skills acquisition. The poacher who snares workers trained by a rival with the promise of higher wages is able to do so because he is not meeting the costs of training. The low-tech, low-skills firms are as likely to stick with what they know rather than risk the expense of investing in new capital equipment and then not getting the best out of it because their workforce lacks the skills to use it to best effect.

But Booth and Snower argue that government intervention will not necessarily correct the failings of the market. Again the principle is familiar - government schemes lack flexibility, are costly and subject to political whims. The details in all their depressing rigour are set out in this book.

So what is to be done? Those familiar with Snower's earlier work will not be surprised at his conclusion. He argues in an all-too-brief final section that market failures generated through the unemployment benefits system and welfare programmes can be tackled by linking training subsidies to unemployment benefits and other welfare payments. Thus, an employer taking on an unemployed person would receive from the state the benefits payment previously received by that person, on condition that the money was used for training purposes.

On the basis of Snower's earlier work, such a scheme, but without the training element so clearly specified, has been taken up by the Government in the pilot Workstart schemes. The indications so far do not augur too well, with indications that fewer than one in five jobs created through the scheme is genuinely new and a strong suspicion that many of the employers would have taken on extra workers even without the incentive of extra government money. Whether the training element would make a difference and whether the pilot Workstart schemes really are a fair test of Snower's ideas are questions that need to be addressed.

In the meantime, this book provides a thorough analysis of the difficult issues behind the shared national commitment to make training and skills acquisition a national priority. Though the algebra in some chapters will be beyond some, this book is certainly required reading for all involved in developing training policy. And with the general election approaching, it contains questions that need to be put to any politician who glibly asserts the importance of training but is unwilling to demonstrate how such a commitment would be put into practice.

John Monks is general secretary, Trades Union Congress.

Acquiring Skills: Market Failures, Their Symptoms and Policy Responses

Author - Alison Booth and Dennis Snower
ISBN - 0 521 47205 9 and 47957 5
Publisher - Cambridge University Press
Price - £45.00 and £15.95
Pages - 354

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