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16 February 2022

Boris Johnson’s plan for “high-wage, high-skill” Britain is falling short

Despite jobs growth across the economy, those in low-skill, low-pay work are struggling to move into higher-paid roles.

By Katharine Swindells

In October, Boris Johnson pledged a shift towards a “high-wage, high-skill, high-productivity economy” amid falling real wages and a rising cost of living. And it is true that, in theory, the post-pandemic economy could be an opportunity for a skills revolution, with workers upgrading to fill the high-skilled occupations of the “levelled-up” green economy.

But labour market economists say the data reveals a different picture. Early figures suggest that those in low-skill, low-pay work are struggling to move into higher-paid roles, and the current infrastructure for adult education and retraining is falling far short of what is needed.

Nevertheless, despite the pandemic, unemployment rates have remained low. “It almost goes without saying, the furlough scheme was a massive success in terms of keeping people in jobs and protecting living standards,” Hannah Slaughter, a labour market economist at the think tank the Resolution Foundation, tells Spotlight. “The unemployment rate has barely budged since the [job retention] scheme ended, [with] a very small rise compared to what we saw earlier in the crisis, and definitely very, very tiny when we think about previous crises.”

In January 2020, the UK unemployment rate was 4 per cent. The job retention scheme and other financial support offered to businesses meant that at its pandemic peak, in November 2020, unemployment hit 5.2 per cent. In comparison, through 2008 and 2009 the rate rose by almost three percentage points, up to 8 per cent of the aged 16-plus population, and it would not begin to significantly decline until summer 2013.

The employment picture isn’t all rosy, though. The number of economically inactive people has risen by 3 per cent since the same period in 2019 and the number of people inactive due to long-term sickness is up by 12 per cent. Overall, the number of people in employment has yet to recover to where it was before the pandemic, largely because of older people dropping out of the workforce.

This is despite the fact that the jobs market has never been hotter. Between October and December 2021 there were a record 1.25 million vacancies, up 11 per cent on the previous quarter, and more than 50 per cent higher than the same period in 2019. 

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Vacancies have grown the most in lower-paid industries such as food and accommodation services, and transport. But there are significant vacancies across every sector of the economy, including skilled trades and knowledge-based work.

“Every single industry has got vacancies above pre-pandemic levels, which is pretty unusual by historic standards,” says Tony Wilson, director of the Institute for Employment Studies. “It’s pretty remarkable.”

In most cases, the pandemic has accelerated pre-existing trends. There was already demand for highly skilled information and technology professionals, and for a higher level of digital skills across the workforce; the rapid digitalisation caused by the pandemic only strengthened this trend.

Analysis by Global Data found that the number of job adverts referencing key digital skills has soared since the pandemic began. In January 2020, 2 per cent of newly listed job ads in the UK mentioned “data and content management”, and by December 2021 that had climbed to 3.4 per cent. Similarly, skill in “human resource and payroll applications” rose from 1.7 per cent of job ads to 3 per cent.

“Most of the jobs growth in the last ten years has been relatively high-skilled and better-paid work,” Wilson says. “But the problem is how you then distribute those jobs more fairly, how you support people to get the skills they need and also to understand the opportunities that might be available.”

In an ideal world, this would be the perfect conditions for people looking to move into higher-skilled work – the booming post-pandemic economy would be an opportunity for businesses to invest in high-skilled green jobs, while remote and flexible working makes many jobs accessible to applicants outside of London, or with children or other caring responsibilities. 

But so far the data doesn’t suggest signs of a more stable, upskilled economy. The number of young people working on a zero-hours contract has jumped back to over 10 per cent – back to where it was before the pandemic began. A Resolution Foundation analysis found that in Q2 2021, fewer than 12 per cent of adults were in a higher-skilled job than the year before, the lowest proportion since 2012.

More recent detailed data on exactly how people are moving jobs isn’t yet available, but as the New Statesman reported in November, in aggregate the majority of job moves seem to be driven by “low-skill” workers moving to similar jobs, likely for slightly better pay and conditions.

Data from the Labour Force Survey Flows estimates shows that between July and September 2021 there were 1.25 million job-to-job moves, 37 per cent higher than the number seen in the same period in 2019. The number of job-to-job moves into high-skill occupations was 18 per cent higher than in 2019, while the number of moves into low-skill occupations was 88 per cent higher.

Of course, not all jobs are equally easy to get into, with some industries used to high turnover rates and on-the-job training, while others expect applicants to have previous experience or training.

While the job retention scheme proved effective in preserving businesses and living standards, it also had the effect of freezing the labour market as it was in March 2020. No one knew how long the lockdown would last, and what state the economy would be in when it reopened, but in a time of incredible uncertainty furlough offered some stability. So it’s no surprise that many people opted not to make big career changes: in the third quarter of 2020, job-to-job moves because of a resignation fell to their lowest point since 2009.

“People might have had an income shock if they were furloughed and only getting 80 per cent of their pay, or having to spend more on energy bills because they’ve had the heating on all day while they were working from home,” Slaughter says. “I don’t know how much appetite there is to make big career changes when things are still so uncertain.”

While the media has been full of stories of people using lockdown to study and upskill, the reality is that the financial hardship and ongoing uncertainty of the past two years are hardly ideal circumstances for people to invest in their own human capital. A survey by the Learning and Work Institute found that adults in higher socio-economic groups were twice as likely to take part in lockdown learning compared with adults in lower socio-economic groups, and adults who stayed in education until 21 were three times as likely compared to adults who left school at the first opportunity.

So while the post-pandemic economy could provide an opportunity for reskilling and upskilling workers, significant investment is needed to support them in filling the vacancies the country needs, and our current systems for training people fall woefully short, Wilson says.

“We rely a lot on academic routeways to prepare primarily young people with the kind of broad range of knowledge economy skills they might need in future, and after that we just rely on employers to do the right thing and invest in their employees,” he says. “And we’re massively overly reliant on apprenticeships as the route to higher-skill training in particular.”

The answer, Wilson argues, is two-fold. Firstly, he calls for a local employment service that is available and accessible to all – not just those claiming unemployment benefits – and that is linked up with local businesses and other support services.

But even if the UK perfects this infrastructure, there still needs to be a culture shift on life-long learning, Wilson says. Whether it’s because they had bad experiences in formal education, or because of childcare and other caring responsibilities, a national jobs and skills strategy needs to go directly to those who are hardest to reach.

“I think there’s a real risk that the levelling-up agenda overly focuses on place rather than the people in the places that actually are levelling up,” Wilson says. “Place, ultimately, is just where people live. It’s the people that matter, and we’ve got to be much better at supporting people.”

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