In this piece, Professor Richard Blundell FAcSS, Professor Rachel Griffith FAcSS and Professor Sandra McNally explore how improving educational outcomes for children growing up in deprivation, including social skills in the curriculum, placing the vocational pathway on an equal footing to the academic pathway, and funding training over the lifetime, can lead to increased productivity and growth.
Policies to promote productivity and wage growth for less educated workers
There is a lack of opportunity in the UK for workers who do not succeed in the formal education system. Providing continued opportunities for workers to gain and improve skills that are valued in the workplace will promote inclusive productivity growth.
Less educated and low paid workers have experienced very low wage growth in recent years (Joyce and Xu (2019), Blundell et al (2019)). Differences in pay progression are a key driver of earnings inequalities, and of the increase in in-work poverty and are associated with large and increasing gaps in a number of economic, health and social outcomes, as documented by the IFS-Deaton Review.
Poor educational attainment is both a cause and consequence of poverty. Educational inequalities emerge early in life, and cognitive and socioemotional skills developed in childhood are strong predictors of adult outcomes. School is one important place where children develop these skills, but there are large and persistent differences in educational attainment between children from different social and economic backgrounds. For example, 24% of people growing up in the most deprived areas in the UK left school with no qualifications, compared to 6% from the least deprived areas, and 2% of those who attended independent schools.
Until recently the tax and benefit system in the UK has bolstered the growth of low incomes and supplemented low earnings. The benefit system provides an important safety net to protect the most vulnerable. However, relying on benefits is both socially undesirable and politically untenable. It would be more desirable for individual workers to experience pay growth that is driven by increases in their productivity.
Globalisation, new technologies, and other changes to our economic structure have put downward pressure on the wages of less educated workers. So, what are the policies that will help to boost their job prospects?
Recent research has emphasised the importance of social skills – the ability to work well in a team and coordinate with coworkers – and an appropriate match to a firm that provides training and learning opportunities as a driver for individual wage growth. Such a match enhances a worker’s ability to contribute in the workplace, and so to gain opportunities for pay progression. Importantly, investing in and developing these non-cognitive skills is productivity enhancing, and so will be a driver of inclusive growth.
Implications for policy
This large body of research shows that productivity and growth could be increased by improving educational outcomes for children growing up in deprivation, including social skills in the curriculum, placing the vocational pathway on an equal footing to the academic pathway, and funding training over the lifetime.
Literacy and numeracy skills are important for success in the labour market (Machin et al, 2020, Vignoles, 2016). Improving the education system so that children growing up in deprivation can achieve more and better formal qualifications is an obvious policy target.
But this is not enough. Social skills are increasingly important, yet they are not part of the standard curriculum. This requires reform to the curriculum as well as increasing and reorganising skills investment. Firms require a diverse set of skills, and these change with changing economic circumstances. Close policy engagement with successful local businesses would help to develop programmes to improve skills that are valued in the workplace.
Alongside the curriculum, particular attention should be given to the level and structure of funding in further and higher education. There is a well understood academic pathway with a clear route from A Levels to university. However, vocational pathways are less clear, poorly connected across levels, and less well funded, as described in the Augar Review. This limits the skills and job opportunities of those not following the academic pathway, and limits the ability of the system to respond to changing economic conditions. There is also a ‘missing middle’ between level 3 (A Levels and equivalent qualifications) and level 6 (undergraduate qualifications). While there is a high premium to level 4 and 5 qualifications where they exist, few people have them. Better funding and clearer information on these pathways and their value in the labour market would help to develop them. The funding package for students needs to be comprehensive and fair whether they choose vocational or academic pathways.
Apprenticeships function as a good school-to-work transition in the UK, and it is important that these are available for young people, particularly at level 2 and level 3. Ring-fence part of the Apprenticeship Levy for young people to incentivise firms to provide these opportunities (See Layard et al 2023 and Frayman 2024).
The structure of funding for adult learners is also a problem, because money does not follow students over the age of 19 (the budget is capped, based on historic enrolment and agreed for a very limited time horizon). It is difficult for institutions to be innovative in these circumstances.
There is a need for training and education across people’s working life. For example, further digitalisation and the rise of AI will have major implications for the nature of work and for the organisation of firms. Addressing these challenges requires developing and implementing a system of carefully designed employer-based accredited qualifications in social skills, alongside technical and analytical skills. Ideally, support for training would be orientated to successful local firms with growth opportunities. The further development of Local Skills Improvement Plans (LSIPs) might be an appropriate forum for such approaches, ensuring that lessons are learnt from previous attempts at such approaches and consideration is given to what has worked well (or not) in the past or in different regions.
In summary, to support increased productivity and growth, we need policy interventions that will do the following:
- Improve educational outcomes for children growing up in deprivation,
- Include social skills in the curriculum,
- Place the vocational pathway on an equal footing to the academic pathway,
- Fund training over the lifetime.
About the authors
Professor Rachel Griffith is Professor of Economics at the University of Manchester and Research Director of the Institute for Fiscal Studies (IFS). She is an Editor of the Journal of Political Economy and an Associate Editor of Econometrica. Rachel won the Birgit Grodal award in 2014, was awarded a CBE in 2015 for services to economic policy and was made a Dame Commander of the British Empire for services to economic policy and education in 2021. She was President of the European Economic Association from 2013-2015, the first woman to hold the position. She was President of the Royal Economic Society, serving from 2018-2021, the Society’s first female President in over 35 years and only the second woman to hold the post in its 129-year history.
Professor Sir Richard Blundell, CBE FBA holds the David Ricardo Chair of Political Economy at University College London where he was appointed Professor of Economics in 1984. He was the founding Director of the ESRC Centre for the Microeconomic Analysis of Public Policy (CPP) at the Institute for Fiscal Studies (IFS) where he was Research Director 1986 – 2016 and is currently Co-Director and Research Fellow at IFS CPP. He was Knighted in the 2014 New Years Honours list for services to Economics and Social Science; he was awarded the CBE in 2006. He is a Fellow of the Econometric Society, the British Academy, the American Economic Association, American Academy of Arts and Science, the Institute of Actuaries and the National Academy of Science. He has been President of the European Economics Association; the Econometric Society; the Society of Labor Economics, and the Royal Economic Society.
Professor Sandra McNally is Professor of Economics at University of Surrey and Director of the Education and Skills Programme at the Centre for Economic Performance at the London School of Economics. She has directed the Centre for Vocational Education Research (CVER), a LSE-led consortium, funded by the Department for Education (2015-2020). This has a few ongoing projects. She is a co-editor of the Economics of Education Review and a member of research networks IZA and CESifo.
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