HC Deb 16 July 2003 vol 409 cc132-40WH

4 pm

Jon Cruddas (Dagenham)

I want to raise some issues concerning the demand for labour in the UK economy, which has some important implications for my constituents. I shall relate those to some of the assumptions made by Government policy makers about employment, education and skills, and then touch on some issues concerning labour market regulation.

To put it simply, it seems that much of the debate on public policy has been premised on specific assumptions and data sets concerning future demand for labour, which I think are more contentious than is sometimes assumed. Those assumptions centre on the notion of the new knowledge-based economy, which has been a dominant theme in Government thinking since 1997 and assumes that we are witnessing a profound change in the nature of work, fuelled by globalisation and the revolution in information and communications technologies. It offers a seductive political vision of the future in the development of so-called smart technologies and the new economy overtaking the so-called old economy with its more traditional patterns of work. The assumption is of rapid growth in scientific, technical, managerial and professional work and a corresponding decline in traditional forms of manual labour. Because of the liberating assumptions regarding new technology, Government emphasis is placed on supply-side strategy t o equip people for the new global revolution in work where market failure occurs.

There is a massive amount of literature about the new knowledge-based economy. During Labour's first term, that informed much of the thinking in the Department of Trade and Industry, culminating in a White Paper on the subject. It also seems to inform thinking within the Department for Education and Skills, and I want to examine some of those assumptions and tease out some of the thinking behind the Department's policies.

Ministerial speeches are littered with references to the knowledge-based economy. Much Government analysis seems to presume that future demand is almost entirely driven by high-wage, high-skilled, knowledge-driven labour and that is what I want to consider this afternoon. I want to consider what underpins some recent statements from Ministers. For example, the Secretary of State for Education and Skills stated this year: Demand for graduates is very strong, and research shows that 80 per cent. of the 1.7 million new jobs which are expected to be created by the end of the decade will be in occupations which normally recruit those with higher education qualifications. During a recent debate in the House, the new Minister for Lifelong Learning, Further and Higher Education stated that the Institute for Employment Research showed that 1.7 million jobs will be created in this country between 1999 and 2010 and that nine out of 10 of those jobs will require higher education and graduate education.

I want to ask the Minister a number of questions. First, is that a correct reading of the research? The statistics come from "Skills in England 2001", and as far as I can see, the relevant quotation is on page 7 of that report, which states: This rapid growth in the numbers employed in a range of occupational groups where qualification levels are currently relatively high, combined with the decline of several occupational groupings where qualifications are relatively low, will lead to around 4 in 5 of the new jobs being at least at NVQ level 3, or equivalent, by the end of the decade. Two pages later, it states: It is likely that around 8 out of 10 of all of the new jobs may well be at NVQ levels 3 or 4 or their equivalent. I understand that NVQ level 5 relates to postgraduate degrees; NVQ level 4 relates to first degrees, teaching qualifications, nursing qualifications, HNC, HND and the RSA higher diploma; NVQ level 3 relates to 2 or more A-levels, the RSA advanced diploma, ONC, OND, national BTEC, City and Guilds advanced craft certificate, trade apprenticeship arid advanced GNVQ. It seems clear that ministerial statements that eight out of 10 new jobs require graduate qualifications is not quite the case, in that the 80 per cent. also covers the demand for labour for people with NVQ level 3 qualifications.

Table 3.5 of the research report. which was the basis for those recommendations, states that 55 per cent. of new jobs will require NVQ level 4 or higher by 2010, and not 80 per cent., the other 25 per cent. being the disaggregated figure relating to NVQ level 3 in terms of extra demand for labour. The ministerial statements do not refer to replacement labour demanded by 2010. What would the total demand for higher qualifications be as a percentage of actual jobs in the economy if we took on board replacement jobs as well as the figure for new jobs—1.7 million—by 2010? Again, to quote the "Skills in England" document, page 9 states: The volume of replacement demand that is likely to be required, and thus the relevant skills to go with them, may well be around 5 times as great as the volume of new jobs and the skills that go with them.

What happens when we combine that replacement labour with the expanded demand for new jobs? If they are added together—as shown in one of the tables in the report—the five growth categories in the English labour market by 2010 will be clerical and service-related elementary occupations, administrative and clerical occupations, sales occupations, caring personal service occupations—

4.6 pm

Sitting suspended for a Division in the House.

4.21 pm

On resuming—

Jon Cruddas

To recap briefly, I was making a point about replacement labour, in addition to new jobs, by 2010. Once we take on board replacement demand, the top five growing occupations cover elementary occupations, administrative and clerical work, sales, caring and personal service occupations, and managers and proprietors in agriculture and services.

We need to take on board replacement labour and the fact that the estimates for new jobs also cover NVQ level 3. Page 79 of the research report states: By 2010, on the basis of a fixed qualification rate assumption, nearly 30 per cent. of those in employment are expected to be qualified to NVQ level 4/5 or equivalent So, we are not talking about 80 per cent. When the statistics are broken down further they show that, by 2010, the figure for those in employment required to be first degree graduates or postgraduates will be 22.1 per cent. That is to say, in terms of the demand for labour by 2010, 77.9 per cent. of jobs will not require a degree. That compares with the earlier assumption that about eight out of 10 jobs will require a degree.

All the data imply that growth is occurring at both ends of the labour market. I accept that there are growth areas in professional, associate professional and managerial work, but there are also growth areas in relation to routine, low-waged and low-skilled jobs, many of which are in the service sector and which include work in care homes, sales, cleaning and security, and routine clerical work.

That suggests a growing US-style polarisation between a primary and secondary labour market, both of which are expanding. The primary labour market will cover some 21 per cent. of all jobs by 2010. If there is 50 per cent. participation in higher education, by 2010 two graduates will be after every one job in that primary labour market. Does that mean that graduates—many with significant debts—will have to move further down the labour market? That would shut off opportunities for those with fewer qualifications. How do people without a degree break into an over-subscribed primary labour market? What are the training and education options on offer for that group?

It is interesting to compare the statistics that I mentioned with those for the United States. US Federal Government projections of labour market demand in 2010 suggest that no more than 21.8 per cent. of the entire work force will need a degree or a higher qualification, which is very close to the 22.1 per cent. estimate for this country. It should also be remembered that a US bachelor's degree is probably equivalent to our HND or foundation degree.

The US is often seen as a seductive model in Government policy-making circles and as the classic model of the new, knowledge-based economy. Further Federal Government research indeed states that three of the 10 fastest-growing occupational classifications by 2010 will be at the cutting edge of the new economy: computer software engineers requiring bachelor's degrees, and registered nurses and computer support specialists also requiring associate degrees. However, seven of the 10 fastest-growing occupations in the USA by 2010 will require only short-term or moderate on-the-job training: fast-food workers, retail workers, clerks, security guards, waitresses, cashiers, office clerks and the like. Put simply, the knowledge-based economy will not be on the horizon for huge and expanding sectors of the US labour market by 2010.

In the United Kingdom and the US the knowledge-based economy relates to about 21 per cent. of jobs, and it is a much more segmented labour market than one would otherwise assume. The majority of people are excluded from it and they operate in more traditional yet expanding labour markets. That is confirmed by data, rather than projected demand, on the fastest-growing occupations since 1992. In terms of absolute employment growth since 1992, the fastest-growing occupations have been, first, in the four long-established services of sales assistants, data input clerks, storekeepers and receptionists, secondly in state-dominated health and education services, and thirdly in the caring occupations: care assistants, welfare and community workers, nursery nurses and so on.

In short, in terms of the demand for labour in the past 10 years, employment growth has been concentrated in occupations scarcely at the cutting edge of the new economy. For example, the fastest-growing occupation in the past 10 years has been hairdressing, and until 2010, the demand for labour in the knowledge-based economy will be in a small minority of very highly paid jobs for those who are highly trained. At the same time, the real growth—and much future growth—is in low-paid, routine and unskilled employment in occupations that have been pre-eminent for more than 50 years.

I want to consider the framework that underscores some public policy. First, there is the spatial dimension. The Department of Trade and Industry report, "A Regional Perspective on the Knowledge-Driven Economy" shows the enormous disparities in prospects for workers in different geographical locations. The conclusion, which will be no surprise to many people, is that the poorer the community that people live in, the less likely they are to plug into the new, high-wage world of work, and the greater the likelihood of their participating in the growing low-wage, low-skilled economy. Put simply, it is more difficult for my constituents in Dagenham on the east side of London to plug into the changes than for those in Westminster and Chelsea.

My second point, of which the Minister is aware, concerns the very low in-work demands being made on people's basic literacy and numeracy skills in much of the labour market. For example, the massive adult literacy survey of employees in Scotland provides some shocking statistics, and there is no reason to suppose that the figures for the rest of the UK are any different. A sizeable proportion of the Scottish work force are currently in jobs that demand virtually no reading or writing skills. The figures for reading skills are that 34 per cent. rarely or never use information from computers; 26 per cent. rarely or never use letters or memos; 35 per cent. rarely or never use bills, invoices or spreadsheets; and 53 per cent. rarely or never use manuals, reference books and catalogues.

The findings on writing skills are even more shocking: 37 per cent. rarely or never write or fill out letters or memos; 42 per cent. rarely or never write or fill out forms, bills, budgets or invoices; and 51 per cent. rarely or never write reports or articles. Given the demand for labour, there are some uncomfortable questions to be asked about what is achieved by offering adults in those jobs adult literacy training on the supply side without reform on the demand side. A more interventionist role is needed to consider the nature of the jobs being done and the needs of people who do them.

Thirdly, I want to speak about the DFES assumptions about the wage premiums that result from some of the qualifications. The DFES assumes that five good GCSE results produce a financial return of about 20 per cent. to the individual; NVQ level 2, which is what the employer training pilots offer, produces a rate of return that is so low it is not significant, reinforcing the argument that in a huge segment of the labour market, employers are not necessarily looking for employees with even basic literacy and numeracy skills, which is truly shocking for our economy's productive capacity.

I raise all of the above in order to chuck out a few points and obtain so me responses. First, what are the assumptions of the future demands for labour requiring a degree by 2010? Secondly, will the Department accept that here, as in the USA, virtually 80 per cent. of jobs in 2010 will not require a degree, contrary to some of the inferences surrounding the public policy debates that are about to begin? Thirdly, what can be achieved by offering to adults publicly funded vocational education and training to level 2? How will that influence the broader issue of productivity movement? Is the strategy of incentivising training on the supply side workable without changing the nature of the demand for labour? Does the Government's in-work benefits regime reinforce and reincentivise low-wage, low-skilled jobs rather than reform them? How can a voluntary strategy operate without our seeking to regularise those low-wage, low-skilled labour markets more thoroughly, so that it will reincentivise investment in people and technology by choking off the low-wage, low-skilled options for employers?

Overall, is it not the case that the preconditions based on a stylised view, of the world—the so-called knowledge-based economy?—distract us from the real problems around the current and future demand for labour? We should prioritise a more interventionist agenda for those growing low-wage, low-skill labour markets, and seek to alter the demand for cheap, unskilled labour, rather than seeing our labour market problems as market failure on the supply side. That implies regulation, which boosts productivity, rather than deregulation, which reinforces our low-wage, low-skilled productivity capacity.

4.31 pm
The Parliamentary Under-Secretary of State for Education and Skills (Mr. Ivan Lewis)

I congratulate my hon. Friend the Member for Dagenham (Jon Cruddas) on securing the debate. It is an important debate and he raises several significant issues.

The White Paper on skills, "Realising Our Potential", which was launched last week, addresses some of my hon. Friend's concerns about how we prioritise lower-level skills in the same way as higher-level skills. We must be conscious not only of the economic arguments but the social inclusion arguments. People with low-level skills become parents and their attitude towards education often influences the educational potential and aspirations of their children. It is misleading to argue that higher-level or lower-level skills are more important. We need a rounded approach that tackles the fact that by 2010 there will be more jobs requiring higher-level skills. We have a responsibility to recognise that we must increase the number of people who can access adult literacy and numeracy skills and level 2 qualifications.

We should not apologise for our commitment to ensure that approximately 50 per cent. of young people experience higher education by 2010. We also aspire to ensure that by 2010 90 per cent. of young people have qualifications and skills that help them to access skilled employment. It is also important to mention that foundation degrees, to which we have made a commitment, such as HNDs—my hon. Friend referred to them—have always been classed as higher education. They provide the skills that our economy needs. Some people claim that foundation degrees represent a dumbing down. High-quality courses such as foundation degrees ensure that our graduates fit the needs of the economy far more than they have in the past, and that we have an appropriate mix of academic skills and work-based skills.

My hon. Friend raised several statistical questions. It is important to recognise that currently in the UK we have relatively low qualification levels compared with other Organisation for Economic Co-operation and Development countries: 17 per cent. of the UK labour force is educated to degree level, compared with 28 per cent. in the United States. Of the 2.1 million additional jobs expected to be created by the end of the decade, 80 per cent. will be in occupations that normally recruit those with higher educational qualifications. It is accurate to say that a knowledge economy requires that more young people get up to degree level and we are able to ensure that our competitiveness and productivity are where they need to be in a global economy.

It is also right that we continue to stimulate demand for lower-level skills, which we know will be a major challenge. We must ensure that far more people leave the compulsory education system with at least basic decent qualifications than has historically been the case—various policies should lead to that—but we must also ensure that those people who are at present in the labour market or who are about to enter it also have opportunities throughout their lives to upskill and reskill.

My hon. Friend discussed the need for an approach to skills that is sensitive to individual sectoral and regional labour market priorities and requirements. The proposals that we announced in the White Paper only last week were a real attempt to move away from a "one size fits all" national approach.

The White Paper set out several key principles. We need greater clarity about the rights and responsibilities of key stakeholders, particularly the state, employers and individuals. We need a system of education and training with greater transparency and simplicity for its users, whether individuals or employers, and one that is far more responsive to their needs. Finally, we need a far more sophisticated system that cart respond to the needs of regions and sectors.

Some of the key reforms that were included in the White Paper directly address some of my hon. Friend's concerns about the balance of priorities and investment of public resources. We announced a new universal entitlement to free learning, including advice and guidance for a first level 2 qualification—a very important step forward. We also said that in cases of proven market failure, whether regional or sectoral, the level 2 commitment would be extended to level 3. We said that we would make available a weekly maintenance allowance to support young people, particularly post-19 students, who want to participate in full-time further education vocational courses.

In addition, we designated information and communications technology as the third essential skill for life alongside literacy and numeracy. My hon. Friend said that 7 million adults in this country lack basic literacy and numeracy skills, but we have made significant progress on that problem. By 2004, 750,000 people who do not have basic literacy and numeracy skills will have them, and we expect that figure to increase to 1.5 million by 2007. By designating ICT as an essential skill alongside literacy and numeracy, we acknowledge that it is not a luxury but an essential requirement for employability and social inclusion in the modern world.

The White Paper also reiterated the Government's commitment to the expansion and development of modern apprenticeships. People say that it is a shame that we no longer have apprenticeships in this country, but in fact some 234,000 young people are participating in modern apprenticeships. We expect 28 per cent. of young people to be undertaking some form of modern apprenticeship by 2004. It is vital, in terms of stimulating demand, to reform the adult information and guidance services.

We also announced in the White Paper the introduction of the sector skills council project to replace national training organisations. By next year, some 90 per cent. of the work force in the public and private sectors will be covered by sector skills councils. That should ensure that decisions about education and training strongly reflect the needs of particular sectors. We want the sector skills councils to be more effective, more employer-led and more strategic, and to have better labour market information than the national training organisations ever did.

The White Paper also proposes sector agreements. If sectors can make specific agreed proposals about how they will meet their labour market requirements, the Government will facilitate the implementation of the agreements over a period. The White Paper also contains the announcement of the employer training pilots to which my hon. Friend referred. We said that we would use the lessons of the successful pilots to inform the development of a national employer training scheme aimed particularly at those who are employed in small and medium-sized enterprises and do not have access to the necessary training.

We have also committed ourselves to a new employer-friendly qualification framework, which will support unitisation of qualifications and credit transfer. Modern apprenticeship is not the province of young people alone; we have committed ourselves to lifting the age cap so that there is no artificial cut-off at 25. That is particularly relevant for those who reskill or upskill and need access to apprenticeship later in life. We are committed to ensuring that, in every region, our approach to skills is far more holistic than it has been. By bringing together the regional development agencies, the local learning and skills councils, Jobcentre Plus and Business Link we shall be in a better position to stimulate demand than we have been.

One of the reasons for the White Paper is the fact that the skills delivery agencies are fragmented. Lots of organisations wish to make contact with business and to stimulate demand from both business and individuals, yet until now we have not had an effective, strong and cohesive approach. For the first time, we also have a commitment at national level to a social partnership that will drive forward the skills agenda. The TUC, the CBI and the Small Business Council are working with key Departments to give the same messages and to ensure that we achieve the step change that is needed on skills. That is an important development; for the first time, we have a national structure that brings together all the organisations charged with delivering on the skills agenda in an effective way.

All of that should demonstrate to my hon. Friend that our passion about basic skills and level 2 qualifications equals our commitment to higher education. Our objective should be to ensure that we create a compulsory education system in which far more young people stay on and progress—some of them into higher education via the conventional means or perhaps via a modern apprenticeship, and others via a high-quality vocational route into a modern apprenticeship. The curse of the education system, which we cannot afford to ignore, is the fact that too many young people drop out and blight their life chances.

We have to create more ways for young people to progress, develop and achieve within the compulsory education system. We also have to make lifelong learning a possibility for those who are already in the labour market or close to it. In order to do that, we must take a smarter approach. We must have clear national priorities in relation to basic skills and level 2 qualifications, but we must also have a system that is sufficiently responsive to the needs of regions and sectors.

I hope that I have demonstrated that our approach is more sophisticated than is sometimes articulated. We are as passionate about people who are not going to go into higher education as we are about those who are. Both are essential if we are to create a society that is both fair and economically successful. We must continue to raise the standards in our compulsory education system, but we also need to raise our game in a significant way when it comes to adults who are already in the work force and those who are close to the labour market.

Question put and agreed to.

Adjourned accordingly at fifteen minutes to Five o'clock.