Skills reform

Employers may be in the driving seat, but the skills system’s engine has stalled

L&W analysis reveals a decade-long decline in employer investment in skills, and a policy paradigm that only encourages more of the same, explains Stephen Evans

L&W analysis reveals a decade-long decline in employer investment in skills, and a policy paradigm that only encourages more of the same, explains Stephen Evans

6 Oct 2023, 5:00

According to the latest Employer Skills Survey, employers invested £46 billion in on- and off-the-job training in 2022, including the wage costs of employees while they were training.

That’s a big number, but Learning and Work Institute analysis shows it’s actually a 26 per cent fall in training investment per employee since 2005 after accounting for inflation. That’s a huge drop, equating to £15 billion in lost investment each year.

With the government also investing £1 billion less each year in learning and skills in England, it’s no wonder we’re falling further behind other countries.

Who gets the training?

There’s been little change in the proportion of employees getting training each year. This sits at around 60 per cent. But the average number of days’ training per employee is down from 4.3 to 3.5.

Part of this could be a shift to new ways of learning. For example, two-thirds of firms provided online training compared to one-half before the pandemic. It’s also possible that employers are getting more bang for their buck and spending money more effectively.

Nevertheless, they are spending half the EU average on training. So are they really twice as effective at spending it? Given that overall our productivity is lower than many EU countries, this is questionable.

The sensible conclusion is that employers are clearly investing less in training; there’s not enough jam and it is being spread ever more thinly.

The Employer Skills Survey also shows that the decline in employer training investment per employee is broad-based, but larger in sectors that were already investing the least before. Construction, one of only two sectors to see a rise over the past decade, invests more than twice as much per employee as sectors like retail.

This holds back growth and productivity; unsurprisingly it is the sectors with the lowest investment in staff development and training that generally have the lowest productivity. And the fall is starkest among large firms: training spend per employee is down one-third in large firms. This suggests that the apprenticeship levy hasn’t increased large firms investment in skills.

The problem with policy

The reasons this is all happening are complex. Lack of investment in training is both a cause and a consequence of poor economic growth since the global financial crisis, coupled with ongoing political uncertainty for much of the period since. Employers will invest less in skills if they can’t see their markets growing. To stop this negative feedback loop, we need better economic growth and certainty for businesses to invest.

But it’s also down to shortcomings in skills policy. Our research shows that policy increasingly just passively follows employer decisions, rather than also seeking to tackle areas of under-investment. For example, three-quarters of skills bootcamp participants already had a level 3 qualification, while the number of adults improving their literacy and numeracy each year is down 62 per cent over the decade.

It’s little surprise then that you’re three times more likely to get training at work if you’re a graduate than a non-graduate. But a society that doesn’t invest enough in more than half of its population isn’t one that’s going to succeed long-term. The government should be more active in setting a framework  within which employers make their choices. So that we tackle, rather than reinforce, market failures.

There have been so many initiatives, many with the stated aim of putting employers in the driving seat. Their consistent focus has been on how employers can help to direct the publicly-funded skills system. Far less attention has been given to how we can get employers to invest more and use skills in the workplace.

And yet, this is ultimately the heart of the challenge. There is a good case for setting local skills investment plans the task of increasing employer investment in training as well as setting priorities for public funding.

The findings of this report make one thing certain: We must do better, or face sleepwalking ever onwards into stagnation.

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