6. Summary and assessment
Investment in skills developmentin conjunction
with many other kinds of investment (in machinery, equipment,
innovation and other assets)has an important part to play
in fostering productivity growth. Hence in this report we compare
the UK with three high-productivity industrialised countriesthe
US, France and Germanyin terms of the mix of high-level
and intermediate skills that is produced and the different ways
that general and vocational education and training is provided
in each country.
Overview of qualifications
The graduate share of the workforce in the UK has
now caught up with the US and is well above the graduate shares
in France and Germany.
At higher education level, Germany stands out from
the other three countries for its long-established graduate-level
courses of a practical or occupation-specific nature in Fachhochschulen
('universities of applied sciences') which operate in parallel
with traditional, more 'academic' university courses.
At intermediate qualification levelsbetween
university graduates and workers with low or no formal qualificationsseveral
inter-country contrasts stand out:
relatively large share of French employees with technician-level
qualifications (below Bachelor degrees, above NVQ3 level)
relatively large and stable share of the German workforce holding
intermediate vocational qualifications (mostly at the equivalent
of NVQ Level 3) which reflects the strong German tradition of
UK's relatively large share of general education qualifications
at NVQ Levels 2-3 which contrasts with the much greater emphasis
on vocational education and training at these intermediate levels
in both Germany and France. The US is more similar to the UK in
emphasising the development of general skills at intermediate
Many generic skills such as communication and mathematical
skills are keenly sought after by employers. However, in both
the US and UK, any advantages deriving from general education
may only apply towards the upper end of the skills spectrum. International
comparisons suggest that average levels of numeracy proficiency
in both countries are relatively low.
Both the UK and US have benefited from the ready
supply of university graduates in terms of innovation and productivity
growth in recent decades. Indeed, the UK's weak productivity performance
since the 2008-09 recession might have been weaker still were
it not for the contribution made by growth in high-level skills.
In spite of the apparent advantages of mass higher
education, there are similar concerns in both the UK and US about
a number of issues relating to graduate supply, in particular:
shortages of graduates in STEM (science, technology, engineering
and mathematics) disciplines
deficiencies in the 'employability' skills and 'work-readiness'
of many new graduates
proportions of graduates who (at least at the start of their careers)
experience difficulties in finding jobs requiring graduate-level
In both countries difficulties in recruiting STEM
graduates tend to be experienced by relatively low-paying employers
in STEM-related industries (especially in manufacturing). High
demand for numerate STEM graduates in non-STEM jobs and industries
may partly reflect deficiencies in mathematical skills in other
sections of the workforce in each country.
Another feature common to both the UK and US is pressure
for graduate employability skills to be developed prior to their
taking up employment. This appears to reflect growing unwillingness
by employers in each country to recruit and train graduates who
lack prior work experience.
In France and Germany the STEM shares of university
students in both France and Germany are higher than in the UK
and US and the two Continental European countries also benefit
from the extent to which structured work experience and training
is integrated with higher education and the prevalence of courses
that are practical and work-related. Such courses depend heavily
on co-operation between employers and universities.
Average salary premia attached to Bachelor degree-level
qualifications in both the UK and the US remain high and positive.
However, in both countries there has been some widening in the
dispersion of returns to university education reflecting under-utilisation
of some graduates' skills, particularly when they first enter
the labour market. Underemployment is also a problem for sizeable
minorities of graduates in France and Germany, partly due to post-recession
labour market weakness and to ongoing technological changes which
may be reducing demand for high-level skills in all industrialised
As with high-skilled workers, the principal mechanisms
by which intermediate-skilled workers can contribute to productivity
centre on innovation and improvements to efficiency.
Research evidence suggests that intermediate-level
education and training contributes most to economic performance
(1) it produces a mix of technical, practical and
occupation-specific skills combined with generic skills such as
communication skills, problem solving skills, team-working skills
and customer handling skills
(2) classroom-based learning is reinforced by employment-based
training in some way (preferably through apprenticeship training)
so that trainees learn a range of skills which are best acquiredor
can only be acquiredin workplaces
In this context, as is well known, Germany benefits
greatly from its well-established apprentice training system (although
a growing proportion of young people do not have access to that
France benefits in particular from the considerable
resources that it devotes to two-year technician-level courses,
including work placements for full-time students and growing numbers
of higher apprenticeship places. After completing these courses,
students can choose between entering employment or going on to
study for Bachelor or higher degrees.
Craft-level apprentice numbers have also grown in
France in recent decades. However, a large majority of French
students in vocational education still attend full-time vocational
schools with limited exposure to workplaces. In addition, unemployment
rates are high for holders of low-level vocational qualifications
Apprenticeship training in the US has long been very
limited in scale. Where the US does have unsung strengths is in
community colleges whichin spite of being poorly funded
compared to universitiesprovide an opportunity for large
numbers of students to gain or upgrade work-related skills, including
students who are already in employment of some kind. US community
colleges also offer two-year Associate degree qualifications which
are typically less expensive for students than the first two years
of study in four-year colleges. In some ways akin to French technician-level
qualifications, Associate degrees serve as potential stepping-stones
to either intermediate-skilled employment or to further study
to Bachelor degree level.
These comparisons have important implications for
intermediate skills policy in the UK, in particular, policy relating
to the balance between higher education and intermediate-level
education and training.
Many UK employers clearly value employability skills
and occupation-specific skills that are best learned through employment-based
training and experience. However, that is not the same as being
willing to pay for large quantities of employment-based training.
As mass higher education has developed in the UK, it has been
tempting for many employers to recruit more and more graduates
from full-time HE courses (educated largely at state and individual
expense) and then to complain about their lack of employability
French technician-level education and training exemplifies
a very different pathway which, after two years study in higher
education, enables students to choose between entering employment
or going on to study for Bachelor or higher degrees. The majority
of these students will have participated in structured work placements
or higher apprenticeships before reaching the point of choice
between job-seeking or further academic study. (A similar choice
is offered to US students gaining Associate degrees in community
colleges but these courses are much less likely to have involved
employment-based training or experience).
Expanded provision of pathways offering a choice
between skilled employment and further study after two years of
higher education could help the UK to shift the balance between
higher education and intermediate skills development in the direction
of intermediate skills. If that is a chosen objective, the UK
would not need to imitate foreign examples. Two-year higher education
qualifications such as Foundation degrees and Higher National
Certificates/Diplomas are already in place andif linked
to Higher Apprenticeships on a larger scale than currently existscould
serve as a basis for expanded provision of technician-level skills.
A key advantage of this kind of education and training
pathway offering a potential stepping stone towards further study
for Bachelor degree qualifications is that it would recognise
the strong incentives confronting UK students to aim for such
qualifications. This continued study need not follow directly
after completion of two-year qualifications and associated training.
Indeed, given current high levels of HE tuition fees, many students
might be interested in Higher Apprenticeship arrangements with
employers whereby, following completion of their training, they
work at technician level for an agreed number of years in return
for future employer support with HE tuition fees.
However, to achieve this, steps would need to be
taken to arrest the present decline in Foundation degree enrolments
and to greatly increase the number of Higher Apprenticeship places
offered by employers. Newspaper reports suggest that employers
currently offering high-quality apprentice training places (including
support for HE studies) typically receive a large number of applications
which far exceeds the number of trainee places on offer. 
Below Higher Apprenticeship level, the UK's apprenticeship
system has expanded to reach a high number of trainees and looks
on the surface to be very promising in terms of skill development.
However, a large proportion of employers of apprentices do not
appear to offer high-quality training. Many trainees are aiming
only for NVQ Level 2 qualifications rather than the Level 3 or
higher qualifications which are typically associated with apprenticeship
training in Continental Europe. Furthermore, some training under
the 'apprenticeship' heading for older workers in their existing
jobs seems to amount to little more than short-duration skills
updating or accreditation of existing skills.
In short, employer commitment to apprentice training
in the UK continues to be limited by comparison with Germany and
some other Continental European nations. In large part this reflects
the business strategies deployed by many British firms which do
not seek to specialise in high skill, high value added product
areas or to organise their workplaces in skill-intensive ways.
In this context there is only limited demand for
Level 3 apprentice skills among British employers and the government
may encounter resistance from some employers to its recent proposal
to introduce a levy on large firms to help fund apprentice training.
Considerable challenges lie ahead to design such a levy in ways
that will both achieve its objectivesto expand high-quality
apprentice trainingand secure buy-in from a significant
proportion of employers.
Continuing training for adult workers
Although a majority of British employers display
relatively low demand for the types of skills that are developed
through long-duration apprenticeship training, there are good
reasons for many of them to finance short periods of continuing
training for existing employees. In 2013 just over 70% of UK establishments
reported that some of their employees needed to acquire new skills
or knowledge, with many of these new skill requirements deriving
from factors such as the introduction of new goods or services
or new work practices or new technologies.
These skill updating needs were reported across a
wide range of occupations but applied particularly to professionals,
personal service workers, managers and skilled trades workers.
The main types of skill in need of improvement included technical
and practical skills, planning and organising skills, problem-solving
skills, advanced IT/software skills and customer handling skills.
Cross-country evidence on continuing training does
not show clearly how well the UK compares in terms of continuing
training and needs to be treated with caution. However, it is
of concern that evidence internal to the UK points to growing
weakness in the average volume of job-related adult trainingin
terms of days per employeewhich fell by about a half between
the mid 1990s and 2012, with the strongest effects on those in
younger age groups and those with lower levels of prior education.
This is paralleled in the US by similar evidence of employers
reducing their commitment to training for existing employees.
Renewed thought needs to be given to policies and
initiatives which could help reinvigorate employer provision of
job-related training in the UK. However, the challenge of avoiding
deadweight will always remain. One option might be to follow the
example of the well-known French training levy scheme, introduced
in 1971, under which firms are obliged to spend specified proportions
of their wage bills (varying by firm size) on continuing vocational
training. However, the impact of this levy is hard to disentangle
from other influences on continuing training expenditure. On balance,
given the alarming issues that have been raised about the quality
of much apprenticeship training in the UK, it seems wisest for
any new initiatives regarding training levies to focus solely
on apprentice training for the time being.
10 For information on highly regarded apprenticeship
schemes having to turn away large numbers of applicants for training
places, see for example: http://www.telegraph.co.uk/finance/jobs/8710305/School-leavers-scramble-for-apprenticeships.html