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Cities, Skills and Growth

Professor Mike Campbell

professormikecampbell.com

City Growth Commission RSA18th March 2014

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It is an inconvenient truth but, the UK is, and is likely to remain, far from ‘world class’ in comparison to other OECD countries

The Skills Deficit: The International PositionWhere are we now? Where will we be tomorrow?

We need to upskill, big time and in quick time

Current rank Expected rank 2020

Low Skills 19 (below e.g. Poland and Hungary)

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Intermediate Skills

21 (below e.g. Finland, Australia and

Netherlands)

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High Skills 12 (below e.g. Korea, Australia and

Canada)

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Skills Matter, Learning Pays 10 KILLER FACTS

1. A fifth of UK economic growth is due to improvements in workforce skills (Bell et al 2005)

6. Achieving the ‘Leitch’ 2020 Ambition would, on conservative estimates, add between £5 and 6 billion net to GDP over 30 years (Leitch 2006)

2. An increase of 5% points in the proportion of workers trained could add 4% points to productivity. Increasing the numbers trained in the LCR by c.20,000 would add over £500 million to GDP annually, in perpetuity (Dearden et al 2005).

7. Eradicating poor basic skills would add £800 million per year to poorly skilled people’s earnings in the LCR (Bynner et al 2001)

3. The Top 10% of performing companies have a workforce on average with an extra qualification level than the 10% of worst performing companies (Haskel and Hawkes 2003)

8. The earnings premia associated with achieving higher qualifications are: Level 2 (15%); Level 3 (13%); Level 4 (28%); Level 5 (23%). These are ‘additive’ (Dickerson 2006)

4. ‘Low training’ companies are between 2 and 2.5 times more likely to go out of business as ‘High training’ companies (Collier et al 2007)

9. The Net Present Value of a Modern Apprenticeship (Level 2) over the holder’s lifetime is £73,000 and that for an Advanced Apprenticeship (Level 3) £105,000 (McIntosh 2007)

5. The average annual cost to employers (with > 50 employees) of low basic skills is £208,000 per year (Ananiadou 2002)

10. Improving workforce skills to the level of Finland could increase LCR growth by 1% per year: annually £750 million

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‘Skill Rich’ or‘Skill Poor’?

‘Skill rich’ areas in England include:

Surrey Sussex Berkshire, Bucks and Oxfordshire London Cheshire

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‘Skill Rich’ or ‘Skill Poor’?

‘Skill poor’ areas in England include:

Parts of Lancashire, Greater Manchester and Merseyside

West Midlands South Yorkshire

and Hull Tees Valley and

Durham East London and

Essex Notts,

Leicestershire and Northants

professormikecampbell.com 6

Rank – High Skilled¹

Rank – Low Skilled²

Birmingham 43 57

Bristol 10 16

Leeds 16 29

Liverpool 55 59

Manchester 19 36

Newcastle 26 30

Nottingham 26 30

Sheffield 33 32

London 4 18

Burnley/Blackburn 64 64

Cambridge/Worthing 1 1

Core Cities (PUAs): Skill Poor?

Source: Centre for Cities, 2014.Notes: 1. % of workforce qualified to Level 4+, rank from highest (1) to lowest (64). 2. % of workforce without any formal qualifications, rank from lowest (1) to highest (64).

Changes in the UK’s Occupational Structure:1987 to 2017

Managers and senior officials

Professional

Associate professional and technical

Administrative and secretarial

Skilled tradesPersonal service

Sales and customer service

Machine operatives

Elementary occupations

024681012141618

1987 1997 2007 2017

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Note: LCR has lower shares of the ‘top right’ jobs,and higher shares of the others than the UK

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What is to be done?Create a Virtuous Circle

Match/Mismatch(Skills and

Jobs)

Ambition

(Demand)

Skills Upgradin

g (Supply)

UnemploymentSkill Shortages and Gaps Underemployment/Over-

skillingIn/Out Migration

Prosperity - Employment - Productivity - Equality

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Upgrade People’s Skills Make the case for skills: raise

aspirations

Improve information, advice, counselling

Enhance the quality of provision: vocational education and training; schools; and universities

Develop incentives to upskill: financial; behavioural

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Match skills and jobs Align the skills available and the skills

required: tackle shortages, gaps, unemployment and underemployment; manage migration

Establish priorities and ‘economically valuable’ skills: Transferable and employability, as well as

technical and professional skills Utilise Labour Market Intelligence:

insight and foresight Develop more responsive provision:

with a greater focus on transparency e.g. outcomes

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Raise Ambition The level , growth and balance of the economy

combine to drive overall jobs and skill demand: Economic policy is crucial but there’s more to it…

Business Strategy matters: product market strategies drive the level and type of employers’ employment and skill needs and their utilisation in the workplace. We need more ‘economic pull’ from business

We need: more high value added businesses; move up the value chain; higher quality products and services; intense product, process and practice innovation

Employer ambition is ultimately driven by the direction and quality of management and leadership

We need more higher-skilled jobs for higher-skilled people to do.

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PUMA

Establish challenge, vision, objectives and report progress

Connect education, training and the world of work

Create a ‘Virtuous Circle’: Integrate education and training policy with employment and economic development policy

Fiscal Austerity: Go beyond public funding Change Behaviour: Information, empowerment,

incentives and ‘nudges’.

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A workforce with poor skills

not only makes their own

lives poorer, it makes all of

our lives poorer…

…and a highly skilled workforcewill not only make

their own lives richer,it will make all of our lives richer

Why Bother?

professormikecampbell.com