The Skills Dilemma Skills Under-Utilisation and Low-Wage Work

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The Skills Dilemma
Skills Under-Utilisation and Low-Wage Work
A Bottom Ten Million Research Paper

Jonny Wright and Paul Sissons January 2012

Contents

1. Introduction 2. Skills under-utilisation in the UK and low-wage work – the scale of the problem 3. The challenge of improving low-wage work: the role of skills utilisation 4. An analysis of skills under-utilisation in two low-wage sectors – retail and hospitality 5. Conclusions and policy recommendations Appendix I: Under-use of skills in The Work Foundation’s Knowledge Workers Survey

3 8 11 17 27 32

List of Boxes, Figures and Tables Box 1: Approaches to skills utilisation Box 2: Summary findings: Drivers of skills under-utilisation in low-wage sectors Figure 1: Percentage of employees over and under-skilled, by industry Figure 2: Percentage of employees over and under-skilled, by occupation Figure 3: Employment by occupation in the retail sector and the whole economy Figure 4: Employment by occupation in hospitality and the whole economy Table 1: Making bad jobs good 5 23 10 10 18 20 16

Acknowledgements
This paper is published as part of our Bottom Ten Million research programme. We would like to thank our sponsors – Barrow Cadbury Trust, Private Equity Foundation, The Tudor Trust and Working Links. We would also like to thank the following expert interviewees: Prof. Ewart Keep, Thomas Baum, Dr. Odul Bozkurt, Michelle Irving, Anne Murphy, Aoife Ni Luanaigh, David Fuhr, Bob Butcher, Mike Darby Prof. Irena Grugulis, Katerina Rudiger, Linda McLeod, Marc Robertson, Kate Tetley, Prof. Dennis Nickson. Jonathan Wright has left The Work Foundation, the report does not represent the view of his new employers.

This paper is the second in a series of publications as part of The Work Foundation’s new research programme, The Bottom Ten Million, which focuses on the employment prospects of Britain’s low earners between now and 2020 and seeks to identify the priority measures that need to be taken if they are to share in the sources of growth and prosperity over the next decade. There are ten million people in Britain who currently have annual incomes of less than £15,000. The Bottom Ten Million programme is sponsored by Working Links, The Tudor Trust, the Barrow Cadbury Trust and the Private Equity Foundation.

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The Skills Dilemma

1. Introduction

There is a skills dilemma in the UK. Successive governments have focussed on supply-side measures to tackle the UK’s skills problems and to improve the nation’s international economic competitiveness. However, despite increased investment in skills and educational attainment, labour productivity in the UK lags behind other comparator countries.1 Lord Leitch’s review of skills found that the UK’s relatively poor skills base only accounts for around one fifth of the productivity gap with countries such as Germany and France;2 with the rest mostly attributable to our poor record of ‘investing in physical capital, R&D and infrastructure’, but commentators have also identified the importance of work organisation and job design in boosting productivity.3 This paper challenges the implicit assumption in much skills policy making that the skills problem lies solely on the supply-side. Supply-side interventions can certainly boost competitiveness and also have an important influence on individual labour market outcomes; however in isolation they have not been sufficient to close the productivity gap with competitor nations.4 We therefore argue that greater attention needs to be paid to the limited demand for skills. This argument is not new, Wilson and Hogarth advocated this view in the early 2000s,5 however acknowledgement of the issue in policy circles, and progress towards better demand-side policies, has been painfully slow. The UK faces significant skills challenges. The suggestion of demand-side concerns should not be taken as implying that there are not further improvements that can be made in the supply of...
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