Growth in low-paid work with limited skill needs reduces incentive to invest time, energy and money in gaining qualifications, writes Professor Ewart Keep
Scotland’s colleges face many challenges – helping to reduce youth unemployment, improving the skills of the adult workforce, supporting apprenticeships and doing more with fewer resources. In delivering on these objectives, one of the key obstacles that they face has remained largely hidden from view and from public debate. This is the problem of the growth in low-paid work and in jobs that lack opportunities for progression.
The traditional policy narrative around skills has always argued that demand for skills is rising across the entire economy. The problems lie in configuring schools, colleges and universities to meet employers’ needs for more and higher skills.
Unfortunately, this picture is only partially true. Demand for more and better skills is certainly rising in some Scottish sectors and occupations, but there also remains a considerable swathe of employment where skill needs are limited. For those who think they may be heading towards such work, the incentive to invest time, energy and money in learning and qualifications may be weak.
The problem arises in the following way. There are broadly two kinds of incentives to learn. The first is bound up with how well and enjoyably education and training is delivered. For example, we will all recall from our own schooldays how a good teacher made a subject come alive and how this engaged us.
The second set of incentives to learn is outside education and located within the family, wider society and the labour market. These incentives include the higher wages and social status associated with skilled and professional employment, requirements in some occupations (eg. medicine and engineering) for compulsory continued professional development, and families’ support for their offspring’s learning and educational success.
The difficulty is that while nearly all professional jobs create strong incentives to learn – they are better paid, have higher social status, and are more interesting – there are a lot of jobs at the lower end of the labour market that offer remarkably few incentives to learn. Wages are low and this is often compounded by the fact that an individual’s chances of progressing beyond entry-level employment and moving into better-paid supervisory or managerial work are small and uncertain. Moreover, employers’ recruitment and selection processes for these jobs places limited reliance on qualifications, especially vocational qualifications. One of the reasons for this is the growth in recent years in “informal” recruitment methods, such as word-of-mouth recommendations by existing employees.
The number of low-paid jobs is quite high and is rising rather than falling. About 22 per cent of the UK workforce is low paid, by the EU’s definition (earns less than two-thirds of the median wage). Since 2009, the number of workers earning less than the living wage has rocketed from 3.4 million to 4.8 million in April 2012. In Scotland, this means that in 2012, 18 per cent of all employees were below the Scottish living wage threshold (£7.45 per hour). Current projections see no sign of any decline in low-paid occupations this side of 2020.
Moreover, the New Economics Foundation has demonstrated that the range of jobs available to non-graduates is shrinking and that most of the job growth that people without degrees can access will be in the lowest-paying sectors.
The UK labour market is distinctive in how limited the levels of demand for skills are for many lower-end job openings. Thus the relative prevalence of low-paid, relatively low-skilled work helps explain the alarming fact that, according to the OECD’s recent Adult Skills Survey, the UK has the second lowest employer demand for people educated beyond compulsory schooling out of 22 countries. In addition, because the need for skills and qualifications is often weak, mismatches between what the education and training system supplies and what the labour market requires occur. The OECD’s Adult Skills Survey also suggested that the UK has the second highest level of apparent over-qualification in its workforce (after Japan). Many workers reported that they held qualifications at a level higher than those needed to obtain their current job.
The combination of these factors means that the wage boosts that students studying many lower-level vocational qualifications can expect to receive are low and often quite uncertain. It can also be very hard for an individual to work out what obtaining any given vocational qualification might bring them by way of better employment opportunities, as this varies with each qualification and occupation, as well as being influenced by the learner’s age, gender and location. This situation reduces people’s enthusiasm for learning, not least as research shows that those with limited financial resources tend to be the most risk averse when it comes to making investment decisions.
All this leaves colleges, and the Scottish education and training system more generally, facing some major problems in encouraging individuals to invest in learning, and in delivering courses that really can add value within the labour market. Some partial solutions lie inside education. Better teaching and instruction can help motivate learners; clearer and more supportive careers advice and guidance can point students towards more rewarding job opportunities; re-design of vocational qualifications can help tailor them more closely to what employers want. However, if the lower end of the labour market remains characterised by the structural features outlined above, these changes will have, at best, limited effects.
Wider and more lasting solutions rest with finding ways to increase the general level of demand for skills, the wage premia that qualifications attract, and the hold that qualifications have on who gets the job. This will not be easy to achieve, but besides the obvious problems that low pay brings to the individuals who undertake such work, and the public purse which tops up wages through tax credits, it also makes the work of the education system much harder, especially when dealing with young people and adults who see themselves heading towards, or trapped within, such jobs.
There are, however, already signs of new thinking and new policies in Scotland that can offer a way forward. The Scottish Funding Council’s skill utilisation projects, which aim to help re-design work to boost skill usage are one example. Some of the labour market measures discussed in the Scottish Government’s recent paper on economic policy represent another.
The second phase of the work of the Commission for Developing Scotland’s Young Workforce, under Sir Ian Wood’s leadership, should also provide a valuable opportunity for wider discussion of these issues.
• Professor Ewart Keep is a member of the ESRC Centre on Skills, Knowledge and Organisational Performance at Oxford University