labour market

Devolution, Inclusive Growth and Local Skills Strategies

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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.

Workshop: Local Economic Development and Skills Under Austerity

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In this post, Jonathan Payne reports back on a two day workshop on local economic development (LED) and skills policy under austerity held by the Centre for Urban Research on Austerity (CURA) in May.

The workshop brought together leading UK academics in the areas of LED, governance and skills to debate the changing institutional landscape around LED in England and the opportunities and constraints afforded by policy commitments to ‘localism’. This afforded a rare opportunity for academics interested in economic geography, local governance and skills to come together and discuss how the ‘localisation’ agenda is playing out in practice.

As Ewart Keep argued, for the last thirty years skills policy in England has tended to be a national project, focused on generalised workforce upskilling in pursuit of government targets. With government now promising to devolve more of the adult skills budget to local areas, there are questions around how much autonomy local areas will have and what level of resource they might draw on. Furthermore, past experience would suggest that a narrow focus upon education and training, or boosting the supply of skills, runs up against problems of weak employer demand for skill, linked to the way many firms in the UK compete, design jobs and manage staff. This is reflected in a high proportion of low skill, low wage jobs compared with many other advanced European countries, relatively low productivity, and problems of ‘over-qualification’ and ‘under-utilisation of skills’ within the workplace. As the UK Commission for Employment and Skills has argued, there are limits to what boosting skills supply can achieve on its own without wider measures to influence the ‘demand side’. The latter requires effective measures such as industrial policy, economic development and business improvement to grow the proportion of high skill jobs and upgrade the skill content of work more generally. Skills policy might work better if integrated and joined up with such activity.

The role of local enterprise partnerships, city-deals and combined authorities is clearly of relevance here for a number of reasons. First, government is promising to ‘empower’ local communities through these mechanisms to drive LED. Second, skills policy is being localised and skills often figure prominently within this agenda. These claims are controversial, particularly in terms of how ‘real’ localism is at time of funding cuts. However, localism is also a moving picture, and if skills and economic development are to be integrated as part of a more holistic approach, then this is one of the few areas where we might look for examples of progress (or not).

Many issues came to the fore during these discussions: the tendency for LED governance to bounce back and forth between different scales and for policy to ‘keep failing forwards’; the uneven capacity of LEPs; the role of power in devolving ‘risk’; the need to understand how local actors comprehend their situation and what motivates their engagement; the tendency for policy to eschew interventions inside the ‘black box’ of the firm; and the question of what ‘localism’ can tell us about the ‘neo-liberal state’ in a period of crisis management and the narratives it constructs. What is clear, however, is that research will be better placed to address such issues where academics work across disciplinary boundaries. LED, governance and skills are an example of one such interface where collaboration is likely to prove particularly fruitful.

Jonathan Payne is Reader in Employment Studies at De Montfort University and a member of CURA (Centre for Urban Research on Austerity) as well as CROWE (Contemporary Research on Organisations, Work and Employment

Local Enterprise Partnerships, Skills Strategies and Austerity

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In this post Jonathan Payne introduces a CURA-funded scoping study that he is carrying out with Phil Almond and Jonathan Davies into the role of local enterprise partnerships in developing skills strategies in a context of austerity

Many commentators on skills policy in England have long argued that the approach has been too narrowly focused on boosting the supply of skills without paying sufficient attention to employer demand for skill and the need to ensure that skills are put to productive use in the workplace.  The approach reached its height during the New Labour years when government set national skills targets and tried to use the power of the public purse to boost skills supply. By 2010, this approach was clearly running into problems, with major issues around ‘over-qualification’ and the ‘under-utilisation of skills’. Indeed, the UK Commission for Employment and Skills has argued that unless these problems are addressed, the UK will struggle to address its ‘productivity problem’.  Put simply, skills policies are likely to work better if ways can be found to integrate skills supply, demand and utilisation. This means linking skills supply with economic development and business improvement.

Progress has been very slow, and it might be argued that austerity only makes matters more difficult. However, the fact that government now has little money to throw at the ‘skills problem’ may open up opportunities for new thinking and approaches. The current government also wants to develop ‘employer ownership of skills’, which really means getting employers to pay more for training rather than relying on government support. Again, however, substantive progress is unlikely to be made unless ways can be found to raise employer ambition around skills. This essentially means impacting on local economic development as well as the way employers compete and design jobs which shape their actual skill requirements.

Enter local enterprise partnerships (LEPs), the new kid on the block when it comes to sub-regional economic development. LEPs bring together local councils and businesses around a wide ranging agenda, which includes economic development and skills, and occupy a complex institutional landscape involving Combined Authorities, City Deals, City-Regions, Enterprise Zones and more.

Amongst other things, LEPs are grappling with the challenge of developing more locally responsive, ‘demand-led’ skills strategies which feed into their strategic economic plans. However, they have courted controversy in terms of whether they are locally accountable, and whether they have sufficient powers and resources at their disposal to make a difference. What local actors understand by a ‘demand-led’ approach to skills is also unclear. Is it about responding to employer needs through better skills matching or is about raising employer demand for skill? How can ‘employer demand’ and ‘learner demand’ be combined, and does the current funding regime for skills help or hinder matters? For example, more adult funding is being routed through LEPs, while adult loans prioritise individual choice, with labour market intelligence and careers advice expected to square the circle. National targets and priorities also remain, in terms of the number of apprenticeships for example, while the new ‘apprenticeship levy’ is national rather than local in approach.

Policy has responded to criticisms around LEP capacity by boosting their core funding and is seemingly prepared to devolve more to ‘city-regions’ if they can make a strong case and satisfy certain government criteria. The question is whether this is a real step forward and if it goes far enough? Is central government serious about decentralisation and localism, or is it just handing local actors a set of problems without the means to really address them? Are we talking about the devolution of power or the offloading of responsibility? Local actors, with varying capacities, however, may try to run with this and see what can be done. An important question for research then is what progress can they make in developing an integrated, demand-led approach to skills which is long overdue, given the current policy dispensation?

Jonathan Payne, Jonathan Davies and Phil Almond are currently exploring these issues through a CURA-funded research project looking at the skills agenda for LEPs in the Midlands. Scoping interviews are currently being conducted with LEPs, local authorities, further education colleges and employer bodies with a view to understanding the issues on the ground, what progress is being made and the challenges local actors are coming up against.

On the 16th and 17th of May CURA will be hosting a workshop on Local Economic Development to discuss research agendas around local economic development and skills in England, if you are interested in attending please email Suzanne Walker swalker@dmu.ac.uk to register your place.

Jonathan Payne is a CURA member and Reader in employment studies at De Montfort University.

The Visible Hand: George Osborne and the Labour Market

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CURA’s Professor Phil Almond writes about contradictions in  labour market policy that are apparent in the government’s March 2016 budget.

George Osborne’s Budget appears to have been a much less successful exercise in fostering hegemony than his immediate post-election efforts. This is perhaps unsurprising given the contradictions involved in the joint pursuit of austerian governance, traditional Conservative clientelism, and the attempt to manage Conservative Party tensions on Europe through the mechanism of a referendum on European Union membership at a juncture where populist anti-elite pressures of varying political stripes are widespread and growing.

To an employment relations researcher like myself, contradictions are particularly evident in the labour market sphere. In particular, it is worth thinking about the relations between the legislative attack on trade union freedom of the Trade Union Bill (which coincidentally sustained non-fundamental, but non-trivial damage in the House of Lords on the the day of the budget), the National Living Wage, the continued confusion around the introduction of an Apprenticeship Levy, and the wider approach to political economy of the current government.

Of these, the Trade Union Bill is the simplest to decipher, representing as it does a straightforward continuity with Thatcherism. Nobody with experience of the 1980s and 1990s history of regulation of industrial relations would be particularly surprised that a Conservative government would pursue such policies. In industrial relations terms – ignoring for the time being the obvious partisan attack on Labour Party funding – most commentary seems to have concentrated on the increased balloting thresholds for strike action, and to a lesser extent on the issue of trade union facility time. Important as these are, it is regrettable that the proposal to lift the ban on using agency workers to replace permanent staff during strikes, which represents a fundamental challenge to the right to strike as understood in ILO conventions, has not taken greater prominence in the debates on and opposition to the Bill.

The National Living Wage and Apprenticeship Levy, however, need somewhat more thinking about. Having worked as a researcher on wage protection at the time that the National Minimum Wage was proposed and introduced by the first Blair government, and witnessed the extent of Thatcherite-Conservative opposition to the “interference” in the labour market that statutory wage protection represents, it is clear that Osborne represents something of a departure here from Keith Joseph.

Readers of this blog presumably do not require an employment relations academic to point out that the current upgrading of the minimum wage does not represent a progressive policy, coming as it does in the context of a shrinking of the benefits system that of course is profoundly regressive. It is also worth noting in passing the “National Living Wage” is nothing of the kind – any basic or minimum income level, however calculated, clearly has to be expressed on a weekly or monthly basis. Very obviously, if sustenance comes from waged labour, then an hourly rate is only as good as the multiplier of how many hours of work are paid for. Given those at the bottom of the labour market are generally on marginal part-time or zero-hours contracts, a vocabulary of “living” wage is not appropriate. That George Osborne is prepared to use this language as part of a hegemonic strategy is one thing, but those in favour of redistribution to the working poor should not.

Nonetheless, proposing non-trivial increases to minimum wages, in the context of austerian governance, does represent something of a change of thinking as to how the right goes about shrinking the state. The Thatcherite position of avoiding ‘constraints’ on employers in order to encourage the free market to clear has morphed into a position where the over-riding imperative is that the poor are not sustained by the state, even if this involves what a previous generation of Conservatives would have termed “interference” in labour markets. Whether George Osborne is a convert to established social democratic arguments that increasing minimum wages has positive effects on productivity is unclear. Still, to some extent, austerity seems to have trumped the “old school” brand of neo-liberalism of the Thatcher/Major era.

This is also the case with the apprenticeship levy; essentially, a pay-bill tax on large employers to be dedicated to apprenticeship training, sweetened in the Budget by a government top-up. How this will work, in particular what the resources raised will be used for in an, at-best, confusing system of initial vocational training, is unclear. However, some of the motives are not dissimilar to the minimum wage increase; vocational training needs to be improved, and the state does not want to bear the financial or coordination costs, notwithstanding the exceptionally poor degree of coordination between firms on skills and training in the UK. It is worth noting that in my conversations with practitioners aiming to attract foreign direct investment to the UK, it is clear that the idea of a levy has a substantial degree of opposition from mobile firms, including many that do require advanced skills. Again, while individual labour market policies need to be looked at within the context of the overall political economy and distributional policies of the government, it remains interesting that the Osborne strategy does in places require a fairly visible hand.

Phil Almond is Professor of Comparative Employment Relations at DMU, a member of CURA and CROWE, a DMU-based research group on organisations, work and employment.