The Resolution Foundation’s report on wage growth and productivity yesterday notes the ongoing decline of training. Time spent on all training has been falling for the last decade or so but the deterioration has been sharper for off-the-job courses.
The decline in off-the-job training has been most marked for the younger age groups. As the Resolution Foundation comments:
The ongoing deterioration in training rates has been mainly felt by employees aged under 50. While training intensity has always declined with age this gap has narrowed: training rates are over 30% below their 21st century peak for 18-29 year olds and 30-49 year olds, but only 16% down for those aged 50 and over.
The maintenance of training for older workers is a positive trend: boosting productive work among the over-50s will be key to ensuring our economy keeps pace with demographics. But falling training investment for the under-30s – when workplace skills are least developed and productivity gains are usually most rapid – raises concerns about long-term skills and earnings potential, with both individual and macroeconomic implications.
The figures would almost certainly look even worse if they included the self-employed. There isn’t much data on training and the self-employed but this UKCES report from four years ago found that they spent considerably less time on it than employees.
It is likely that this pattern has persisted over the past five years. The increase in the proportion of the workforce in self employment almost certainly means that training per worker is even lower than the ONS figures suggest. If it were possible to calculate an all worker training measure it would, like the all worker earnings measure, look worse once the self-employed were included.
Last month, Nigel Meager, Director of the Institute for Employment Studies and one of the UKCES report’s authors, remarked:
[I]n an economy in which rapid change puts a premium on skills acquisition and lifelong learning, the question of how the self-employed (who, the evidence suggests, have much lower levels of training in work than employees) update their skills and human capital is a challenge which few policy-makers have even begun to address.
Vicky Pryce made a similar comment last year when she told a conference of the self-employed:
You [self-employed Britons] tend to work below your skill level, you tend to find it quite hard to make ends meet and very often you just don’t employ anyone additional.
You are not usually compensated for what you lost before, with the result that there is very little productivity growth. Very often it means that firms will not grow, and very often society has lost quite a lot of potential.
Skills gained at employers’ expense are often not updated when people leave the corporate world. As the skills of the self-employed gradually ossify, the country’s stock of human capital diminishes.
None of this bodes well for productivity. The productivity increase we will need to sustain the current rate of wage growth is unlikely to come from a workforce where, each year, less and less time and money is invested in skills development. This might seem odd, in a country where employers are constantly complaining of skills shortages but as UKCES said earlier this year, some of our firms are free-riders, preferring to buy rather than build. An increased supply of freelancers, migrants and older workers, already trained by someone else, make freeriding that much easier. This will only ever be a short-term fix though. Eventually the skill base will start to shrink, especially if fewer younger people are receiving training. Politicians and business leaders keep talking about a productivity boost sometime soon but if investment in skills development continues to fall, they could be in for a long wait.