Devolution, Inclusive Growth and Local Skills Strategies

In today’s blog, CURA’s Jonathan Payne argues that the devolution agenda in England has so far been driven by a neo-liberal “growth first” approach that eschews consideration of the challenges presented by inclusive growth. He argues for an inclusive growth approach that is more sensitive to the quality of employment and the lower end of the labour market, and he specifically considers the role that local skills strategies might play in such a policy agenda.

Since 2010, UK governments have promised to empower local communities to drive growth as part of the devolution agenda for England. This has seen the creation of Local Enterprise Partnerships (LEPs), bringing together local authorities and members of the local business community, along with ‘City Deals’, ‘Growth Deals’ and ‘Devolution Deals’, brokered between central and local government. The question is what kind of growth and for whom? The emerging discourse of ‘inclusive growth’ reflects concerns over poverty and inequality, and the general idea that everyone should benefit. The Prime Minister, Theresa May, has spoken of building an economy that ‘works for everyone’ and of spreading the benefits of growth across all parts of the UK. Against the backdrop of weak productivity, ‘industrial strategy’ is being promoted, with the aim of creating good high-value jobs, while the National Living Wage for the over-25s supplements the Government’s welfare-to-work agenda and its commitment to ‘make work pay’.

Inclusive growth is a hot topic, with an All-Party Parliamentary Group looking at the issue, and the RSA’s Inclusive Growth Commission, Manchester University’s Inclusive Growth Analysis Unit, and the Joseph Rowntree Foundation, amongst others, producing reports. The term remains, however, a contested one. A key distinction is between a neo-liberal, growth-first approach which seeks to create more jobs and connect more people, including marginalised groups, to the labour market, and a growth-shaping agenda which goes further by developing more and better jobs. Importantly, the latter puts the spotlight on job quality and includes the lower end of the labour market, an approach favoured by, amongst others, the Joseph Rowntree Foundation.

This is vital because nationally government policy remains firmly wedded to the growth-first approach. Industrial strategies since 2010 have been about sexy, elite sectors and technologies which employ only a tiny fraction of the working population, and have had little to say about the ordinary economy where most people work. Here, one in five UK workers are in low wage jobs and one in eight are ‘working poor’. Many of these jobs are low skill and insecure. While the National Living Wage is welcome, it remains age-restricted and is not a living wage. Progression out of low wage work also remains problematic, with only one in six managing to permanently escape after ten years. Government worships at the shrine of a ‘flexible’ labour market, which gives the green light to employers looking to compete through low wages and poorly designed jobs, ‘zero’ or short-hour contracts and other forms of ‘labour flexibility’, problems which extend far beyond the ‘gig’ economy. With the UK’s low paying sectors a major contributor to our productivity gap with European competitors, there are glaring policy tensions. Austerity also squeezes wages and corrodes investment, while welfare cuts and a punitive regime of conditionality and sanctions applied to those on benefits suck money out of deprived communities and are designed to drive people into any job.

Locally, there are real challenges in fronting up to inclusive growth. Funding for local growth has been cut from £11.2 billion between 2006/6-2009/10 to £6.2 billion between 2010/11 to 2014/15. Local authorities have experienced cuts of 40%. LEPs have limited resources and staffing. Devolution is top-down, limited and uneven, with a crazy paving of devolved powers and responsibilities, which threatens to worsen already stark regional disparities in one of the most centralised countries in the western world. There are concerns that central government is off-loading responsibility for spending cuts, uneven development and deep-rooted structural problems in our economy and labour market. Secret deals, brokered behind closed doors between central and local elites, can mean that questions of ‘what kind of growth and for whom?’ and the lower end of the labour market do not get a look in.

This is not to suggest that local actors have their hands tied when it comes inclusive growth. There are certainly things they can do to directly address low quality employment, whether it be local authorities ‘leading by example’, using public procurement to lever improvements in private-sector contractors, enlisting the support of local ‘anchor institutions’, such as universities and hospitals, or campaigning for employers to sign up to voluntary Living Wage Compacts. Preston’s experiment with Community Wealth Buildingis one approach, and it will be interesting to see how this plays out.

Local Skills Strategies and Inclusive Growth

Another issue worthy of attention is the role of local skills strategies in all of this. At national level, skills have been the policy lever of first and last resort for addressing international competitiveness, productivity and social inclusion over the last 35 years. We know skills have a role to play in productivity and better jobs and in helping people to access work and progress in their lives. But research also tells us that skills have to be used in the workplace if they are to add to productivity. Equipping people with education and training can help some individuals to get better work but it cannot magic away low-skill, low-pay, insecure and dead-end jobs which still have to be done by someone. Neither should we think Robotics and Artificial Intelligence will ride to the rescue or that they will eat all the jobs. The ‘skills problem’ is not just one of too few people with the right skills (weak/misdirected skills supply), it is one of too many jobs which are not effectively using the skills and capabilities of many of those already in them (weak employer demand and poor utilisation).

Skills figure prominently in the devolution agenda, including a number of City Deals and are often an area where devolution deals have requested more influence. We also have the planned devolution of the post-19 adult education budget to Combined Authorities/LEPs by 2018-19, the most visible element of skills devolution to date. However, cuts to adult skills funding leave a massively reduced budget of £1.5 billion across England, much of which is already committed to meeting statutory learning entitlements. Schools and 16-19 funding remain a fiefdom of the Department of Education. Apprenticeships are nationally funded and administered through the Apprenticeship Levy, with government having set a target of 3 million new starts by 2020. Schools and Further Education Colleges both operate in competitive markets for learners, and are subject to centralised accountability mechanisms in the form of ‘high stakes’ national inspections. The ability of local actors to exert influence over the local skills system looks to be pretty limited.

The danger is that local skills strategies focus simply on boosting qualification stocks, addressing skills gaps and shortages, and equipping young people and the unemployed with the ‘right’ skills and attitudes for work, against the backdrop of massively reduced funding. As Ewart Keep has persuasively argued, locally we could see mini-versions of the same skills-supply, target-driven agenda, an approach that nationally has done little to address problems of weak employer demand and poor utilisation over several decades with much bigger volumes of public funding. As the OECD/ILO have also argued, if local skills strategies are to contribute to national productivity and inclusive growth they need to go beyond traditional skills supply measures and address employer demand and utilisation. They call for a major re-think of the ‘skills problem’ which would involve integrating skills into broader initiatives around economic development and business improvement, and working with employers to address issues of product market strategy, work organisation and job design, and the way people are managed. A key challenge is firms bedded down on the ‘low road’, competing on the basis of price, with low wages and low skill job design.

This raises interesting questions for local skills strategies in England at a time when Government is asking Combined Authorities and LEPs to bring forward ‘local industrial strategies’. How far will local growth strategies address low paying sectors? Will we see skills integrated with economic development and business improvement initiatives in ways that do not neglect the lower end of the labour market? Do local actors have the resources, capacity and expertise available to do any of this and can they think differently about the ‘skills problem’? How much progress can be made locally in terms of raising employer demand for, and use of, skills in the context of a weakly regulated labour market and shareholder-driven economy? On this latter point, we will only really know if we try. I have recently been carrying out research, funded by CURA, that has probed these issues in the Midlands, focusing on local actors’ understandings of the ‘skills problem’ and approaches to addressing it. The main finding is that local skills strategies are struggling to move beyond a narrow supply-driven agenda and develop a more integrated approach which fronts up to the challenges presented by low skill, low wage jobs. However, these are still early days. What is clear is that a focus on the ‘whole economy’ and the quality of jobs must be at the heart of inclusive growth agendas.

Jonathan Payne is a core member of CURA and Professor of Work, Employment and Skills at the Department of Politics, People and Place at De Montfort University.

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