The UK Commission on Employment and Skills (UKCES) has hit the nail on the head. Their report last week, Growth through People, highlighted the fact that one in four jobs in the UK economy require the cognitive ability of the average 11 year old. It could be 1814 not 2014. The UK economy is facing a long-running productivity crisis which has worsened since 2009.

Indeed it now stands at 14% below its pre-crisis trend and 2.2% below the position in 2008. And in 2008 our productivity levels were below other leading nations such as France and Germany and the US by some considerable degree. What this now means is that whereas in France something will have been completed by the end of Thursday it will take the British worker to the end of Friday to complete the same task.

One of the reasons productivity has fallen so much is because growth since 2009 has largely been in low paying jobs requiring low levels of skill. This is the existential challenge facing the UK economy. How to drive up high productivity high wage jobs?

And if this is the over-riding economic challenge of our time it means it is the challenge that should be most exercising Further Education colleges. For it is colleges' mission to provide first class routes into work and offer local economies the skills they need to succeed. Colleges are part of the supply side solution to our economic woes and at the moment part of a system that is fundamentally not working well enough.

But back to productivity. First what is it? Put simply productivity is the rate of output per unit of input. It is mediated by two primary factors of production. The level of capital investment in equipment and systems and the level of skill of the workforce. In order to boost the productive capacity of the UK we need to invest more in both these factors of production but austerity over the last five years has rather stymied this simple equation. Government, individuals and companies all started paying off their debts at roughly the same time during 2009 – 2012. Latterly companies and individuals have flirted with investing more but it's all a bit half- hearted while Government did a volte face around two years ago and started spending again on infrastructure and other things. In terms of improving our skills system as one of the routes to improving productivity it is a very complicated task. As Ewart Keep of Oxford's Skope centre has stated, all the easy problems of the last 30 years have been solved. What we are left with are the intractable ones.

The challenge of having a truly demand-led system is that at the moment we have too many conflicts of interest around what the different participants in the skills system feel they need to be doing at any given time. The simplistic notion that a supply side push of people with more qualifications into the economy would stimulate the uptake of demand has proved illusory. Part of the reason is that in the UK employers (who are now supposed to be in the driving seat) are less than clear about their roles, rights and responsibilities. In better skills systems such as Germany's employers do understand these things as does everyone else involved from students to parents to government. It's a quaint old fashioned notion called social partnership.

Whereas in the UK our employers too often sit detached complaining about a lack of responsiveness and action from the supply side and demanding everyone else spend more to deliver the over-supply of skilled people they need to keep their labour costs down and talent pipeline fat. The statistics in this case don't lie. Training spend by employers is now back to where it was in 1993/4.
Individuals on the other hand act reasonably and rationally by getting qualifications in X and then going to work in Y industry. Take the example of STEM graduates. We produce plenty but they then go and work in Finance or some other higher paying profession. Yet everyone knows we have a crisis of supply of STEM qualified people in STEM industries.

In the middle of all this confusion sit colleges laden with targets from government that simplistically equate supply with demand and believe - also simplistically - that creating a market of providers will deliver the better matching outcomes the targets are designed to deliver. In response to this confusion there can only be one strategy for colleges. They must demand more local accountability and work with local stakeholders to create local social partnerships in which every player knows their part. This means co-production of curricula with employers and employers offering workplaces as places of study. It means colleges developing deep areas of expertise and excellence in provision. And it means students receiving and responding to better information, advice and guidance.

Get all that right and we may see UK productivity begin to rise... then again.

Nick Isles is deputy principal at Milton Keynes College

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