At the risk of sounding hyperbolic, dear chancellor, you are being wildly optimistic. But not just on cuts to public spending. The pledge to plough billions into housebuilding, flood defences and “the biggest road building programme for a generation” is missing a vital ingredient: who is going to build all these houses and tunnels?
George Osborne trumpeted the government’s latest infrastructure plan in his autumn statement as evidence that “Britain is raising its ambition”. Ambitions are helpful. Having people to fulfil them is vital. Ask anyone who has had the ambition of getting a fuse box repaired. Or a garden wall built.
Of course, the chancellor told us this was a winter budget supporting skills. But then again, he also vowed Britain was on course for lower taxes. In reality there was little to cheer those who have been warning about the country’s skills time bomb, particularly in engineering and construction.
There was some help for companies hiring young apprentices, as well as a small boost to careers advice and help for postgraduate students. But it will do little to fill the skills gap where it is widest. The construction sector, for example, lost almost 400,000 workers during the recession and another 400,000 are due to retire over the next five years, according to the Construction Industry Training Board. Even before taking into account the government’s latest plans, the industry is struggling to keep up with, or capitalise on, resurgent demand. Building companies repeatedly bemoan a shortage of skilled workers, particularly bricklayers.
The picture is similar in engineering. More than half of employers surveyed by the Institution of Engineering and Technology earlier this year said they were having difficulties recruiting the staff they needed for their businesses to expand. Meanwhile, research from Engineering UK suggests Britain needs to double the numbers of engineering-related apprentices and graduates coming out of colleges and universities.
These skills shortages have much broader implications than individual companies’ or sectors’ ability to grow. There are repercussions for workers, prosperity and the public finances.
For individual workers, the risk is that pay will continue to stagnate as more people find their skills are out of sync with a changing workplace. They find themselves in a growing pool of workers stuck in low-paying jobs. At the top-paying end of the labour market there is also a big pool of workers, in high-skill jobs. The mid-level jobs in between those two poles, such as secretarial and clerical roles, have diminished, and so what emerges is an hourglass-shaped labour market. The squeezed middle ground hurts social mobility and raises inequality.
The hourglass effect, and the fact much of the growth in employment has been in low-paid roles, is a key factor behind an unprecedented fall in real wages. In yet another blow to the coalition’s record on living standards last week, British workers were revealed to have suffered the biggest drop in real wages of all major G20 countries in the three years to 2013, according to the International Labour Organisation.
For the wider economy, a lack of skills, and of skilled roles, dents efficiency. The UK’s record on productivity is one of the worst among advanced economies.
What this skills shortage means for the government is not just a dearth of workers to dig that tunnel under Stonehenge but also a tough task balancing the books. When Osborne was forced to admit he was even further off his targets to cut the deficit last week, a big culprit was poor income tax receipts for the exchequer because of the squeeze on pay packets.
But to be fair to the coalition and whoever takes over after May’s election, there is only so much government can do when it comes to skills. Where policymakers can help is on education and tackling the UK’s cultural deficit when it comes to how we view vocational training. Championing apprenticeships is a start. But ministers must be careful not to focus on young people to the detriment of older workers.
The National Institute of Adult Continuing Education (NIACE) argues that government cannot afford to neglect older members of the labour force, given that over the next decade there are anticipated to be almost twice as many job vacancies as there will be new labour-market entrants to fill them. “If the government is going to deliver flood defences, the ambitious road-building programme and create a ‘northern powerhouse’, this requires people of all ages and stages to train, retrain and stay in work longer,” says NIACE’s chief executive, David Hughes.
His organisation and others asking for government support for training should not hold out too much hope, however. It is not the season for giveaways and nor will it be for a few years yet. Only £35bn of spending cuts have already happened and £55bn are yet to come, according to the number-crunchers at the Institute for Fiscal Studies.
Ultimately, if industries can see they have skills gaps, they must find their own ways to plug them. That means more apprenticeships and more work with schools to make careers in areas like construction and engineering more attractive. But just as importantly, employers must provide lifelong training opportunities to keep more people in fairly paid, productive work.
