Today saw the launch of Building productivity in the UK - the latest publication from the Advisory, Conciliation and Arbitration Service (ACAS). As contributors to the report, research and findings from the UK Commission for Employment and Skills (UKCES) helped form a series of 7 key levers through which productivity in the UK could be improved.
In our latest blog, Katherine Chapman, Assistant Director at UKCES, examines the main challenges facing productivity growth, and looks at how they could be resolved.
Productivity in the UK has been a hot topic of late, and taking a look at the facts it’s easy to see why this problem has so many talking. The UK workforce is well educated, by 2020 nearly half of the workforce will be qualified to degree level above (overtaking the USA) and the number of highly skilled jobs is growing more than any other EU state.
Yet our productivity growth remains slow. There is huge potential to improve, and part of what’s holding us back are persistent skills shortages that prevent business getting the skills they need and poor management capability that is failing to maximise our potential.
The skills problem
The UK Commission’s Employer Skills Surveys reported that skills shortage vacancies – where vacancies can’t be filled due to a lack applicants with suitable skills or experience - increased by 60% from 2011 to 2013. These shortages cover nearly a quarter of all vacancies and are concentrated in sectors critical to growth such as manufacturing and business services.
An even greater number of the workforce has gaps in the skills they need to be proficient in their jobs. This matter because firms need a workforce with the right skills for their businesses to innovate and grow.
The management problem
The supply of skills is not the only problem. Nearly half of UK employers report having employees with skills that are not being fully utilised. This equates to 4.3 million workers, or 16% of all employees. And this affects employees across the board, at all skill levels. According to the OECD amongst our international competitors, only Spain has more employees that regard their job as requiring a primary education or less.
Effective use of skills in the workplace matters. Added productivity comes from the ability of employees to innovate and turn investment in new technologies and equipment into better products and services. This brings competitive advantage and allows businesses to grow and move up the value chain, creating more and better jobs and progression opportunities. Globalisation, technology and demographic change are also changing the nature of work and putting a premium on the ability of businesses and employees to adapt.
While the UK has a healthy proportion of world class businesses, it has a ‘long tail’ of weakly managed businesses and we are seeing the consequences –valuable skills left underemployed. Ultimately, we can continue to improve the supply of high-level skills but unless we have the capability and ambition to make use of those skills, the impact on productivity will be muted.
The high-performance solution
Arguably, our real challenge in the UK lies in our ability to turn our skills and knowledge base into world class businesses with high-value jobs. As UKCES highlighted in its recent report Growth through People, business leaders, employees and policy-makers need to recognise the importance of the workplace and how skills are developed and deployed within it. This means thinking differently about job design, use of technology, work organisation and effective leadership and management.
Firm-level initiatives such as Investors in People have supported businesses to improve performance through better development and use of people. UKCES is also supporting the development of human capital analytics to help firms better understand how people contribute to business performance and so make better decisions about investing in and managing.
Firm-level activity also needs to be supported by a wider ecosystem that encourages employers, trade unions, colleges and universities to work together to cluster expertise and stimulate new forms of work organisation and job design that improve skills use and productivity in the workplace. We need stronger employer networks and knowledge transfer in sectors, local areas and supply chains that can support businesses to adapt to future opportunities that arise from technological advancements and globalisation.