News story

UKCES bulletin: UK skills and international competitiveness

UKCES bulletin: the first in a series of features on productivity, the UK labour market, and skills.

International productivity comparisons.

The US is down and Japan is a surprise to many. Ireland beats Italy, and New Zealand is predictably impressive. The rugby world cup is not the only arena in which there are winners and losers. It’s a truism that a competitive national economy requires a skilled workforce. Competition means comparison – so tracking countries’ skills levels against one another is vital to assess the UK’s progress.

The recently published UKCES report UK Skill Levels and International Competitiveness places the UK’s skills attainment in an international context, providing insight into the current and projected trends that will determine future UK competitiveness.

The report looks at the proportion of adults educated to low, medium, and high skill levels across the OECD, a members’ club of developed economies, looking at levels both now and projected to 2020. Low skills include adults with no qualifications through to GCSE grades D-G or NVQ Level 1. Intermediate skills covers those with GCSE A*-C or NVQ Level 2 through to those with A Levels or NVQ Level 3. High skills include those with higher education qualifications, NVQ Level 4 or above, through to advanced Apprenticeships and Doctorates.

The UK over time

Over time, the UK’s skill profile has changed: there has been a well-documented shift in proportion from low level skills to high level skills. But this trend is not unique to Britain. We know that the UK’s competitors and emerging nations are also making rapid progress. The UK, then, must run to stand still if it is to maintain its relative position.

The UK’s relatively high proportion of low-skilled adults is a particular weakness. 19 out of the 32 other OECD countries perform better, placing the UK well below average for both the OECD and the EU.

Projections indicate that the UK will improve its low skilled performance, with the current 25 per cent of adults with low skills declining to 17 per cent by 2020. However, this is where relative and absolute diverge: similar improvement is expected in other nations, leaving the UK with no overall change in the rankings.

For intermediate skills, the UK is currently ranked 25th, with the proportion of adults qualified at this level expected to decline slightly from 36 to 34 per cent. Stronger performance by other countries will result in the UK’s decline to 28th by 2020: four in five OECD countries will have better performance at intermediate level.

So where’s the good news? The UK’s strength lies in its pool of higher skills. Against the 33 OECD countries, the UK is ranked 11th, with 39 per cent of the adult population educated to degree level or above. This performance is set to get even healthier, with a ranking of 7th expected by 2020, and half of the adult population educated to higher level. The projections indicate the UK will improve its relative position to overtake both the US and New Zealand at the highest skill levels in the coming years.

As with all projections, this data comes with a health warning. Models necessarily simplify reality, and in this case are based on past performance. It should go without saying that these models cannot account for any future policy changes that may affect national performance and international rankings.

Also, the data measure qualifications, not skills themselves. Achieving a qualification is not an exact proxy for learning a skill. So, while the projections are a valuable insight into the likely trajectory of the UK’s performance, they are not concrete forecasts.

Optimal splits, pressing priorities

It is not always clear what the optimal split between intermediate and high level skills should be. The UK’s strengths lie in its pool of high skilled labour. In contrast, countries like Germany have built their successful economic strategies on foundations of solid intermediate skills. Clearly, the level of skills available in an economy is only one consideration; matching those skills to the needs of businesses, and ensuring organisations utilise them well is also critical.

It would appear that the most pressing priority for the UK’s skill profile is to reduce the long tail of low skilled people in the UK population, both by supporting progression for those already in the labour force and helping them to move up into the intermediate band as well as by minimising the proportion of new entrants to the labour market who lack attainment at this level.

As international competition intensifies, skills are vital to an economy seeking growth and productivity. It is clear that the UK’s strength is - and will continue to be - its bank of higher skills, but the improvements to the performance of lower level and intermediate skills will likely prove more challenging. But not, one suspects, as challenging as beating the All Blacks.

Published 30 October 2015