Low skill economy? More like wrong skill economy

Low skill economy? More like wrong skill economy

I was chatting to a Dutchman the other day who said if he was choosing anywhere to live in Europe, it would be Britain. Why, I asked? Because, he said rather unexpectedly, of Britain’s education system.

In the Netherlands and much of mainland Europe, he said, university students tended for the most part to study the discipline they intended to work in. British students, on the other hand, were far more likely to study general humanity subjects like history or literature, before going on to work in a totally unrelated field.

As a former English Literature student who now writes about something totally different, his point struck a chord. But it also made me wonder about something else.

There’s an ongoing debate about whether the UK is a low-skill, low-wage economy and, more to the point, what to do about it. It’s not a new debate; economists have discussed this, plus Britain’s persistent productivity issues, for many years. But the discussion has been given new momentum due to a few recent developments.

The first is that Britain has a severe shortage of workers. The most prominent example of this is a shortage of truck drivers, which in turn is exacerbating distribution problems around the country. But labour shortages go deeper than this. Just look at the latest ONS data on vacancies (see below).

But, back to that debate, is it really true that the UK has a preponderance of low-skilled workers? I’m not entirely sure it is. Of course, it depends on what prism you’re looking through.

For instance, above is a measure of the proportion of people, across various different OECD countries, who have only below-secondary education qualifications. As you can see, the UK is actually well below the OECD average. In other words far from having a preponderance of low-skilled workers, we have comparatively fewer than in most other developed countries. The workforce here is actually pretty highly-skilled. Hurrah - right?

Well, perhaps. Or perhaps not. Because while Britons are pretty well-skilled, there is another issue. The OECD has something called a skills mismatch metric. Essentially it’s comparing the jobs available with the skills of the workforce, and gauges whether prospective workers have the appropriate qualifications for the job. It looks at level of skills (are you too low-skilled for this job?) and also at the type of skills, and that’s what I’d like to focus on for a moment.

Have a look at the chart above. This shows you the field of study mismatch level for various OECD countries, with the UK highlighted in red. As you can see, it is very high - one of the highest in the developed world. What does this mean? In short, that skilled as our workforce is, they don’t necessarily have the right skills for the job they’d like to do.

What’s going on here? One hot take comes back to those comments from my Dutch friend. Is it because we have lots of humanities degrees? Because we’re a nation of educated generalists? Another less benign take is that as this country deindustrialised (and did so faster than most other developed countries) we failed to equip those former steel-workers etc with the necessary skills to work in that new economy.

Either way, it’s a reminder that the debate about skills is often somewhat more nuanced than the coverage might have suggested. We are not a low-skilled nation, but a wrong-skilled nation.