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Supply and demand for skills – the launch of the OECD Skills Strategy

Authors: Dr Paul Sissons Paul Sissons and Nye Cominetti

21 May 2012

The OECD is today  (21 May) publishing its Skills Strategy following a UK launch last week at The Work Foundation. We welcome the analysis, in particular because of its attention to the need for both supply side and demand side measures- it focuses both on improving skills and on how these skills are used. Policy makers do not always connect demand and supply issues when it comes to skills. The strategy has a number of useful lessons for skills policy in the UK, in particular around the need to understand skills acquisition and use as a lifelong process.

The strategy outlines three broad objectives: improving the quality and quantity of skills (in particular it argues that pressured budgets should not deter investment in skills); ‘activating’ skills supply (i.e. encouraging people to supply their skills to the labour market); and putting skills to effective use (ensuring people do jobs that use their skills effectively and fully). Alongside these, the strategy also highlights the need to view skills across the life-course, the need for a skills system to be nimble enough to meet short-term challenges as well as longer-term strategic aims, and the need for both a whole government approach to skills as well as a central role for employers.

The strategy is international in scope but its points are certainly relevant to the UK. Structural change in the UK’s economy, and the growth of the knowledge economy globally, make skills more important than ever in determining labour market outcomes. There remains (despite university expansion) a significant wage premium attached to higher level qualifications, and those without qualifications have suffered the most during the recession. There is also evidence that the skills that we do have in the UK are not always used efficiently. Our skills system must adapt to reflect changes in the economy, and the OECD’s guiding principles provide a basis for a modern skills strategy for the UK.

However, there are further challenges specific to the UK which a full national skills strategy would need to address. One is the disparate ‘transition’ processes faced by young people entering the labour market. The move from education to work is substantially easier for those with an academic background, for whom access to the main professions is clearly mapped out. Other routes into work can be less clear. Second, more discussion is needed around the skills needs of those groups who have been out of the labour market for extended periods, for example those on sickness benefits or lone parents. The OECD rightly note that these people commonly suffer skills atrophy, but we need to understand far better the scale of the intervention required to meet these skills needs. Some people may require extensive retraining, which is time consuming, and potentially clashes with conditionality rules for unemployment benefits.

Third, as people are increasingly expected to work later into life there are questions about how to enable them to continue working, or potentially how to equip them with the skills to find alternative, more suitable employment. For instance, people doing physically demanding jobs may need support planning for a career change as they get older.

The OECD’s strategy reaffirms the importance of skills for the UK’s labour force and economy and marks a start point. It is now up to UK employers, employees and policymakers to deliver on the aim of both a better skilled and better utilised workforce.

 

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