Thoughts on a High Wage High Skill Economy

Dave Gardner

Last month I wrote about the government’s desire to force most young people not doing A levels to do a new type of demanding qualification called the T level. They intend to do this by defunding vocational alternatives such as the BTEC level 3. I was wrong in thinking that the government is going to defund all level 2 programmes for semi-skilled work. Instead they recognise that not all will be able to take T levels successfully and they are currently reviewing level 2 qualifications. I will comment on this in due course.

I would like to focus on the consequences, intended and unintended, of the government’s policy. Policy on vocational education is caught between two conflicting imperatives. The first is to provide know-how for the economy. In an advanced economy, this involves quite high levels of literacy and numeracy and thus a good level of general education. Many British people do not achieve this. In 2016 the OECD reported that a quarter of working age adults in England possessed low literacy and/or numeracy skills, below that expected of an 11-year old. Poor quantitative reasoning skills and/or difficulty with simple written information meant that many adults struggled to read a petrol gauge or understand instructions on a medication bottle. The report also found that there were more university students in England ‘with weak literacy and numeracy skills’ than in most other countries. Good technical education at level 3 (A level equivalent) depends on students having good Maths and English abilities. So there is already a challenge for T levels. The second objective of vocational education policy is to get more people into jobs. The least educated are the most liable to unemployment. Therefore, to get them into employment they need to be equipped with the requisite know-how certified by a qualification. These will in the main be the people referred to in the OECD report.

Putting all its money on T levels, the government is gambling that the English economy will receive a steady supply of higher technical know-how that will enable it to become ‘high wage, high skill’ as announced by Johnson at the Tory party conference. If this means that low attainers have certain avenues closed to them, most notably the level 3 BTEC vocational qualifications, then so be it. A clear decision has been taken to make economic development, not social inclusion, the main objective of vocational education policy. This decision aroused a great deal of anger in the House of Lords, notably from Lord (Kenneth) Baker who declared that the policy made him ashamed to be a Conservative. There was also criticism from David Blunkett and David Willetts. Presumably the revamped level 2 qualifications will take care of the social inclusion side of vocational education policy. 

The interesting question is whether this bold policy will work. There are some reasons for doubt. It’s worth saying however, that there is nothing wrong with the idea of a high skill high wage economy. It’s something that the Labour Party should be forming policy to achieve. The question is how you get there and part of the answer is that it’s difficult, takes a long time and involves co-ordinating educational, economic, employment and regional policy.  That’s not something that British governments have traditionally been good at and they certainly don’t like taking a long time over implementing reforms.

The second thing to say is that this looks like a traditional supply-side measure beloved of liberal economists. Supply creates its own demand according to the nineteenth century economist Jean-Baptiste Say. Except that it doesn’t. We can see this on the graduate market where at least a third of graduates are employed in jobs that don’t need a degree. There is undoubtedly demand for higher technical skills in some sectors in some regions, but whether there is likely to be mass demand for them is a moot point. Merely increasing the supply of technicians will not by itself increase the demand for them unless other measures are taken to stimulate that demand, for example by encouraging high-tech businesses to move to regions where colleges are producing people with the right qualifications. If the jobs aren’t there then T level graduates will either go to university or take a level 4 or 5 higher technical qualification that will lead to a supervisory or managerial role or into jobs that could be done with lower qualifications. The fact that the English economy is, in many locations, particularly outside the South East, dependent on low skill low wage work cannot simply be wished away. It will be the work of years, requiring sustained and co-ordinated work, investment and co-operation with local and regional governments stretching well beyond a four year electoral cycle.

The third point is that the pool of potential T level candidates will include a large number of those with very weak literacy and numeracy. T levels will demand far more than the threshold ability, described by the OECD, to understand written instructions or to read a petrol gauge. Well under half of 16 year olds attain a grade 5 in Maths and English, the minimum needed to succeed on most T level programmes. Just under half the age cohort go to university. The government realises this and intends there to be a one year transition programme prior to taking a T level for those with weak achievements in Maths and English.  This mirrors the situation in Germany where many young people have to go through a transition programme before they can access Dual System apprenticeships. There is no evidence to suggest that such a programme will work if it just involves taking GCSE exams that pupils have already failed.  Some new thinking will be required if the transition phase is going to work. But in any case, the government acknowledges that many young people will not be able to access them. Since quite a lot of young people, disproportionately from ‘Red Wall’ constituencies, get to university through the shortly to be defunded BTEC qualification route, it hardly needs pointing out that denying young people a chance to go to university is not going to play well with their parents, particularly if there are no alternatives available.

The fourth and final point concerns the political and social influence of the universities. As we have seen, expenditure per student dwarfs that for vocational education and universities enjoy massive political influence compared with Further Education colleges. If the government hopes that T levels will provide an alternative route to adulthood through skilled employment, bypassing the universities, it will have to do a lot more to reduce the relative power of graduates on the job market. The problem is that although a degree may not necessarily equip someone to do a job or may not be appropriate to the job applied for, employers tend to take a university degree as a marker of employability rather than as a marker for a particular job. This disadvantages young people without a degree who may be perfectly capable of doing that job. T levels will be an unknown sub degree qualification that will have to fight its corner. One solution would be to reduce the number of university graduates, a policy that in theory at least has some merit. However, the political costs of taking something away from people which they have come to feel is their entitlement may be very high. We will look at this conundrum next month.