Institute for Public Policy Research (IPPR) European Jobs and Skills Summit.
Thank you very much for that kind introduction. It’s great to be here today at the launch of your new programme on the future of employment and skills across Europe.
This is an area where IPPR has had a longstanding interest.
And it’s particularly timely for us to talk about this subject now.
Because this year, 2014, we’re celebrating a major anniversary.
Twenty years ago, the world was a very different place.
Following a sharp recession, the British economy was getting back on its feet; in America the President was staking his reputation on healthcare reform; and in Eastern Europe the Russian Army had marched home, never to trouble that part of the world again.
That all seems so far away today.
A brief history of labour markets
But it’s also the twenty year anniversary of something as influential as any of those, certainly in the area we’re talking about today!
The OECD’s seminal job study.
Back in 1994, this piece of work brought together – for the first time – precisely what had gone wrong with international labour markets, and what worked to fix it.
In forensic detail, it showed how countries could get themselves and their populations back on track.
In Britain, our labour markets had ebbed and flowed over the post war years.
After the war, the tough work of reconstruction, the reopening of global trade and the baby boom led to a long period of vital, vigorous growth. And until the mid 1960s the state played an increasing role in the economy – particularly in pursuing full employment - a core tenet of Rab Butler’s politics.
But then things began to change. These were the days of detailed central planning and state control of the ‘commanding heights of the economy’. Government even tried to nationalise Tate and Lyle.
And over time, that tight government grip started to strangle growth.
Centralised micro-management couldn’t keep up with the real-world demands of business; industries grew sluggish; unemployment started to climb.
And whilst the state was beginning to strangle the life out of the product market the UK also tried to import a German model of the labour market, where government, employers and trade unions work together as one to regulate working life.
But it turns out importing another’s country’s social contract isn’t the same as importing your favourite Scandinavian crime thriller.
Some things don’t translate.
As the OECD Job Study pointed out, “policies to achieve social objectives were extended with the unintended side-effect of making markets, including importantly labour markets, more rigid”.
When the economy was tied up in centralised planning and restrictive labour laws, we ended up with the 3-day week, and the winter of discontent.
We reached a low when rubbish famously piled up on the streets and the dead were left unburied. Then with the arrival of Margaret Thatcher things started to change again.
By the time the OECD report was being written, in 1994, it had become clear that an efficient labour market was vital both for a successful economy and a fair society.
A labour market that caused unemployment in the name of social goals led only to the social ills that unemployment brings.
That central principle of the value of flexible labour markets has been broadly accepted since. Working labour markets allow people to work and, importantly, to choose where to work.
What’s interesting is that countries that have broadly followed the OECD jobs report have broadly successful jobs markets, while those that haven’t, don’t.
The 1994 report gave Britain a ringing endorsement. Our labour markets were flexible, delivered prosperity and support growth.
And when other countries around the world were struggling, the OECD pointed to Britain as an example of how labour markets can work, and work well.
From jobs to schools
The Job Study was the big news of the 1990s.
But the next decade brought more international research – and more international soul-searching.
In PISA and, later, PIACC, the OECD turned its attention to schools and skills.
And we learnt that our education system was like the England cricket team: by international standards average – very, very average – and behind the Netherlands.
Far too many people were passing through the education system without picking up the essential skills they need to succeed.
And more than a decade on, we showed no improvement.
While our competitors raced ahead, our results stagnated.
Years of wasted opportunities
Just last year, the OECD published PIACC – a ground-breaking study into adult skills.
Which showed that 16 to 24 year olds in this country were among the least literate and numerate in the developed world.
Out of 24 nations, the country which publishes more books than anyone but the US and China ranked 22nd for literacy. The country that produced Alan Turing and Peter Higgs was 21st for numeracy.
Most shocking of all – ours was the only country in the world where young people performed no better than their grandparents, who had finished formal education many decades before.
A generation leaving school with gay marriage about to become law had no edge over a generation who left school when homosexuality was still illegal.
Despite more and more adult qualifications being proffered, too many 18 year olds in this country finishing more than a decade of formal education unable to read, write or add up properly. It is not just an economic drag anchor – it is a tragic waste of talent.
Experimental data recently published on maths and English performance at 16-18 are shocking. Of all those who did not get a C at GCSE in maths and English – around a third of 16 year olds in 2010 - only 15% of young people were entered for GCSE English and 16.5% were entered for maths. Just 7% passed. Yet a GCSE in maths and English is of inestimable labour market value. For most students it’s the difference between getting a job and unemployment.
It means young people leaving school without the sort of knowledge or qualifications which further study requires, and employers demand; which equip you to get a good job, to go to university or start an apprenticeship; to choose your own path in life.
Across society as a whole, it stunts people’s careers and lives; puts the brakes on social mobility; means employers can’t find the calibre of workforce they need; holds back employment, and holds back growth.
Urgent action to drive up standards
Years of grade inflation gave opponents of education reform the perfect alibi – and young people have been the ones to suffer.
Reform is not easy, and involves facing up to many vested interests – but it is vital. Vital for young people. And vital for employers to get the skills they need.
Youth unemployment went up over the last decade as the education system failed young people. Education was divorced from the reality of real work.
One of the central goals of our reforms is to bring together employment and education. We are making education more rigorous and more responsive to employers.
As well as the drive for more maths and English, this is behind our transformation of apprenticeships, where it is employers - not bureaucrats or intermediaries - who are deciding what every apprentice should learn.
We will also put employment and education side-by-side through new degree-level apprenticeships, so that you can train in professional roles such as law and nursing and space engineering through an apprenticeship instead of attending university.
Our reforms to vocational qualifications are just as radical. Employers must now sign-off vocational qualifications for young people so that we know the courses are valued and respected.
Those qualifications that are not endorsed by employers - which Alison Wolf, in her fantastic review, damned as having “little to no labour market value” - are being removed from league tables.
We no longer recognise pole fitness instruction, self-tanning or balloon art as proper qualifications.
Which is bad news for the people who organise Silvio Berlusconi’s birthday parties.
More than 3,000 for 14 to16 year olds and more than 3,000 for 16 to 19 year olds have already failed to make the grade - shocking proof of how bloated the system had become.
We believe that by putting employers in the driving seat for apprenticeships and technical qualifications, we will help bring an end to the outdated segregation between academic and vocational education.
And today, we are announcing 77 more employer-supported Tech levels, to add to the 140 approved last year.
These employer-led qualifications are central to our drive to bridge the gap between education and employment, and our commitment to helping every learner progress does not end there.
Our new national curriculum expects more of young people; exams are becoming more rigorous and more stretching.
The new accountability regime is getting rid of perverse distortions and instead, across a common academic core and a range of academic or vocational subjects, will reward the achievement, progress, and crucially destination of every pupil - not just exam results.
To make sure that every young person masters the essentials, we’re focusing on improving maths and English from early years right through to 18.
We are addressing standards in education.
But there is also a fault line when people leave education. We need to know we are doing everything we can to link the leap from education to employment.
In other words, how do we help young people leaving school, college or university to get a job – and not just any job, but the right job? The kind of job that will lead to a career.
We need to know how we can help young people to make the best possible entry into their working life, whatever they want to do.
And help them not to miss that first step on the ladder – the first step that can make or break their employment prospects for ever.
Extra help for young people
Once they leave school, the new norm will be for young people to choose between an apprenticeship and university.
The number of ‘full’ 16 to18 apprenticeships – quality apprenticeships lasting at least 12 months and involving a real employer – more than doubled from 53,600 in 2009 to 2010 to 110,900 in 2012 to 2013.
For those who aren’t yet ready for either, we’ve introduced new traineeships, giving work experience, extra maths and English, and a chance to learn the essential skills and behaviours which employers demand.
We’re getting more employers involved in providing high-quality careers advice, and encouraging more schools to offer top quality guidance – inspiring young people, providing work experience and mentoring.
And in last month’s Budget, we announced extra funding for the Apprenticeship Grant for Employers of 16 to 24 year olds, with particular focus on small businesses; and an extra £20 million over 2 years to support degree level or postgraduate apprenticeships. Employer National Insurance contributions have been abolished for those under 21 and we’ve made it easier to hire people with controversial changes including to tackle pernicious tribunal claims.
And partly in result youth unemployment has dropped at it’s faster rate in over a decade, and 16 to18 NEETs are at their lowest on record.
The number of pupils taught in under-performing secondary schools has fallen by almost 250,000 since May 2010; and in a year, the number of young people studying the core academic subjects in the English Baccalaureate has risen by almost 60%. If the numbers hold steady, we’re on track to see 2 million people starting apprenticeships over the course of this Parliament alone.
And as shown by OECD analysis released – well, actually, almost exactly at this moment – the additional PISA 2012 problem solving assessment places England’s young people significantly above the OECD average.
We’re not at the top of the table yet – and many countries of the east are ahead of us – but within our overall PISA results, this is an important point of strength.
The value of international evidence
But we must do more. And to do that I want to scour the earth for the answers.
Each of the game changing OECD reports I’ve talked about – the Job Study, PISA and PIACC –held up a mirror to governments, economies and societies, all over the globe. The reforms they inspired have, directly or indirectly, changed lives.
Another OECD report, called ‘From Initial Education to Working Life’, reviewed how 14 countries, including the UK, helped young people to make the transition from education to work successfully, in the middle of a recession and in the first years of the recovery.
That report was fantastic.
But it was published in 2000 – and based on research from the decade before.
A time before offices used email as a matter of course. Before most people had mobile phones, let alone smartphones. When Amazon was primarily a river in Brazil and ‘Angry Birds’ was a Jim Davidson sketch, not a best-selling app.
Since the 1990s, the world has changed. In the meaning of words, and in so much else.
Young people today face more competition – and have access to more opportunities – than any other generation in history.
So I think the time has come for a deep, fresh look at this hugely important issue.
So after the groundbreaking OECD reports on jobs, then on education, we now need the groundbreaking report on how to get from one to the other.
I believe we need to look again at how the best countries in the world support their young people through the transition from education to work.
Bringing together their work on labour markets, and on education – bridging the gap between the Job Study and PISA – we need updated and rigorous OECD analysis into policies helping young people to make the transition from education to employment.
Finding out which countries do well, and which countries can do better – what works and, almost more importantly, what doesn’t.
Let me be clear – I’m not calling for a one-size-fits-all template but for high-quality global analysis, which we can share, discuss, and interpret in whatever way best suits.
Here in Britain we need a clear mind. Not a false prospectus of worn out retread so-called guarantees that guarantee nothing but expense for the taxpayer. But instead practical, grounded answers based on responding to employers, putting power in their hands, and driven by research.
That way, we can tackle the scourge of youth unemployment, and in so doing, give millions the chance to live, to earn, and to ensure economic security for their future.