Introduction

Grugulis et al. (2004) argues that "a range of evidence suggests that the high-commitment, high-performance model promised by HRM ‘appears to be little more than a dream’ (Bach and Sisson, 2000:36), and that the take-up of the OECD and EU’s much vaunted high performance workplace model has been extremely limited. The bulk of research, from both case studies (Dench et al., 1998; West and Patterson, 1997; Ackroyd and Procter, 1998; Guest, 2000), and from surveys such as the DTI/ESRC's 1998 Workplace Employee Relations Survey (WERS) (Cully et al., 1999) shows that highly routine, relatively lowly skill jobs, offering very limited opportunities for trust, creativity or discretion remain prevalent in the UK economy. Indeed, data from WERS suggests that the percentage of UK firms that have in place well-developed high performance work systems is very small - probably no more than 2 per cent of the sample " (pp 12-13).

Lloyd and Payne (2003) discuss different visions of high skills societies. They identified, according to their criteria, Germany and Scandinavia as the best ‘actually existing’ examples of high skills societies. "These countries, founded on long-standing neo-corporatist ‘social settlements’ between the state, capital and labour, have, for much of the post-war period, been able to combine relatively high levels of investment, fairly generous welfare provision, limited social inequality, strong labour and social rights, and a broad distribution of high levels skills. This is not to suggest that such societies are perfect; merely that they offer the most desirable model of a high skills society for the UK" (Lloyd and Payne, 2003, pp 20-21).

The challenge, then, is to consider whether the UK could move towards a British variant of the North European model. This leads to another set of questions:

• Can these models be transferred?
• Can UK institutions be radically changed?
• Are current German/Scandinavian models sustainable?
• What is the threat of globalisation?
• Can a coalition be formed in favour of the vision?
• Could a government impose the project?
• Why would a government attempt such a strategy?
• Is a strong trade union movement a pre-requisite?
• Is the high skills vision economically viable?
• Is the vision sustainable? (Lloyd and Payne, 2003, p. 21).

"However, a big question mark looms over the sustainability of the ‘exemplar’ German and Scandinavian models, even among hitherto staunch supporters (see Streeck, 1997). It is difficult to prove that these economies deliver better economic performance at the best of times, let alone when they appear to be experiencing major economic problems of their own. No wonder then that many academics often choose to be less than candid about whether and how these models might be ‘transferred’ to the British context" (Lloyd and Payne, 2003, p. 22).

Keep (2003) thinks a more useful approach to imagining what a UK high skills society might look like is to provide is a set of three scenarios for the year 2015 (of which a high skills society is but one). The purpose of these scenarios is to gauge progress towards some form of high skills society (or, to a lesser extent, a knowledge driven economy).

SCENARIO 1 - THE HIGH SKILL SOCIETY (KEEP, 2003)

By 2015 England has become a high skills society in the full meaning of that phrase or concept. It is a prosperous, high wage, high productivity economy, where all share in the nation’s economic success. The skills of the workforce are being utilised to full effect. Higher wages are meaning that the need for in-work state benefits is sharply declining and will ultimately all but cease. As productivity has risen, the National Minimum Wage (NMW) has been increased to a much higher level, and poverty is much reduced.

The economy is internationally competitive, with high levels of exports – competitiveness here being defined as "the ability of companies, industries, regions, nations or supranational areas to generate, while being and remaining exposed to international competition, relatively high….income and….employment levels on a sustainable basis" (Hartzichronoglou, 1996: 12).

The country has a vibrant culture which is capable of maintaining its own distinct identity in a globalised world. Cultural activity and industries are a major source of export revenue. Moreover, the political culture has been transformed via a written constitution, a freedom of information act, and the devolution of power from central government and its agencies to communities, localities and regions, where empowered citizens and elected bodies are willing and able to play an active part in shaping their own social, economic and political destinies. The notion of citizenship in a European sense has started to take root, and the days when England was the only Northern European country in which elected local or regional had no formal role within the governance of tertiary education are long since over. There is a strong emphasis upon building a society that is just, inclusive and in which individual rights are counterbalanced by strong collective responsibilities. In many senses what is emerging is a European model, albeit one adapted to cope with English circumstances. England has chosen the ‘Nice North’ over the ‘Wild West’.

In order to achieve this profound change, a whole range of political, social and economic reforms have been put in place, with government acting as the catalyst for this change:

• The government (at national and regional level) has sought to block off access to the ‘low road’ to competitive advantage. The NMW and product and labour market regulation have played a part in helping achieve this. The national strategy for economic transformation has identified segments of the economy that need to raise their game and to move up the value chain, and has put in place incentives to encourage this to take place. Education, skills and R&D are embedded in this plan. The government’s investment strategy is geared to the need to push more of the economy onto the high road and to reinforcing sectors and industries where we have sustainable strengths and advantages.
• Another lever has been the fostering of a more sophisticated and demanding consumer base. As wages have risen across the population, the market for goods and services sold chiefly on the basis of price is starting to shrink, and this is triggering a shift in employment opportunities out of some of the worst dead-end service sector jobs.
• The role of trade unions has been widened, European models of social partnership have started to be introduced and the unions’ role in skills policies has been transformed. Instead of acting simply as evangelists of learning to their members (a useful but ultimately marginal role), unions now have rights to bargain on the issue and are closely in the governance of the VET system.
• Company law has been reformed to encourage a multiple stakeholder view of the firm, and support a long-term perspective on investment.
• Employee relations have been revolutionised, with new forms of mandatory employee communications and involvement that offer all workers a direct say in the long-term future of their organisation. High trust people management systems, which encourage new forms of work organisation and job design (and thereby a sharp reduction in dead end, no skill jobs), are increasingly the norm. Government pressure, exerted not only through legislation, but also through public sector purchasing and sub-contracting policies have helped leverage this change. The spread of the High Performance Work Organisation model (HPWO) is providing a workplace context in which higher levels of skill can be developed and then used productively.
• R&D has been boosted, both by government spending, but also by the use of sectoral R&D levies, not dissimilar to that used in the Australian wine industry. We are returning to the upper end of the OECD league tables.
• Labour market regulation has sought to discourage the most exploitative forms of employment and to put a floor under contractual conditions. Work/life balance issues have been eased by a much more rigorous enforcement of the Working Time directive. Stronger labour market regulation has helped boost the formation and use of skills, not least by reducing labour turnover and the ‘easy come, easy go’ culture that surrounded it.
• Higher taxation has helped provide the necessary resource base for public services and infrastructure investments, not least in education.
• Education and training’s role in social and economic change has been carefully thought through. In order to help support social mobility, much greater effort has gone into supporting those from less advantaged backgrounds to gain access to the best educational opportunities, rather than simply endlessly expanding provision (for example in higher education) to the advantage mainly of less able middle class children. Training has been much more closely integrated into wider economic development policies, and the quality of provision has been raised. Poor providers and employers who are unwilling to offer quality have seen government funding switched off. Vocational courses are now broader based.
• The VET system is now managed in a more devolved and higher trust fashion. There are fewer initiatives and wheezes, institutional stability is much greater, and the use of targets is much more sparing and these are tied to forecast need rather than blanket percentage of age cohort measures. The timescales for designing and developing new initiatives and interventions has lengthened and the spread of evidence based policy and practice is increasing.
• Watchwords of this revolution have been: ‘a living wage’, ‘solidarity’, ‘social cohesion’, ‘the common good’, ‘quality of life’, ‘voice and participation’, ‘local control’, and ‘work as a source of dignity and personal development’.

The overall sea change in the direction and tenor of policy has taken very considerable political courage. Rejecting the neo-liberal, laissez faire approach that characterised the preceding two and a half decades the government has embarked on a range of fundamental social, constitutional and economic reforms based around the slogan, ‘A New England for a New Century’. It has fought and overcome opposition from powerful interest groups as varied as the City, US multinationals, public schools, the national press, and a range of business organisations. Progress has been slower and patchier than hoped, but is starting to become obvious. Social inequality is declining, and social cohesion and the sense of a society more at easy with itself is becoming clearer. There is still a long way to go, particularly in some parts of the economy, but we are on the road…….

SCENARIO 2 - COMPLEX AND CONFUSED ATTEMPTS AT CHANGE (KEEP, 2003)

By 2015 it has become abundantly apparent that traditional VET policies, centred around attempts by the state (whether national, regional or local) and its agencies to supply a more highly educated and trained workforce, have reached the limits of what can be achieved, and that if further progress towards some form of high skills vision is desired, new types of policy and broader forms of intervention will be crucial. The nature of the skills problem as one deeply embedded in the structure of our economy has become more and more obvious, and this has raised the issue of the need for wider reform and modernisation. The precursors for at least some of the new policies that might be needed are already in place.

The adult workforce is, thanks to a range of government interventions, including study leave, adult entitlements, and many forms of direct and indirect subsidy to employers to train, now better qualified. The existence of a higher education system that encompasses a greater proportion of the age cohort (and also achieves far higher completion and pas rates) than the vast bulk of other EU countries means that England now has a large and rising stock of graduates in its workforce.

The problem is that this has failed to deliver any major improvement in productivity, and that there are now very clear signs of under-employment and over-qualification among significant segments of the labour force. There is also mounting concern and political pressure centred on the prevalence of low skilled, low paid, dead end employment in large sections of the service economy. The burden of in-work tax benefits has risen, and both the social and economic costs of large numbers of workers living on very low incomes have become increasingly apparent. For example, many regions have realised that having a low wage economy dooms large sections of their local service sector to competing on price, and thereby creating and sustaining more low wage jobs. Breaking out of this vicious circle is seen as key to making any further progress on regional development. Calls for more regulated labour markets are being heard, not least from that section of employers who manage to offer superior wages and conditions.

The efforts of a few of the more successful regional governments and SSCs has shown that, with concerted help and support, some firms and sectors can, over time, be helped to move upmarket, improve productivity, and become better employers. The problem is how to move the bulk of the economy and to impact on the mass of low performers. Exhortation is plainly not going to do the trick.

The trade unions have tired of the role allotted to them by government of simply acting as evangelists for the benefits of learning to their membership, and are now demanding a more central and active role in skills policies, both at national level but also within the workplace. A statutory right to bargain over skills is central to their demands.

This issue is linked to a wider disillusionment with the state of employee relations, employee voice in the workplace, and a host of life/work balance issues. The governments minimalistic approach to information and consultation, and to working hours regulation, has left UK workers with fewer rights, less influence, and longer hours than almost anywhere else in Europe. The social costs of poor life/work and family/work balance are more and more apparent and less and less tolerated by large sections of the populous. A new reform agenda is being pushed by a coalition of trade unions and other pressure groups. Declining levels of job satisfaction and employee commitment are also forcing a major re-think of the state of people management.

The issue of social mobility is also causing anxiety. The latest studies show that it has further slowed, and this, coupled with increasingly overt competition for those educational opportunities that do deliver the good jobs (degrees at a handful of top universities) has served to weaken faith in education’s redistributive potential and to underlined the education system’s role in reproducing existing class advantage.

All of these developments have made it very apparent that the old model of low wage, long hours, low productivity working cannot be banished simply by pumping more skills into the economy. A high skills economy for all (or even a majority of the population) is not emerging. The realisation that skills are not a magic bullet has now begun to permeate government and political debate, and politicians are now starting to argue about what other factors, besides skills, are needed to deliver the economy and society of the future. The prime minister recently argued, in a speech to the CBI, that, "boosting the levels of skill in our economy was the easy part, the much more difficult task of developing an economy and workplaces that can use them to maximum productive effect is one we must now pursue".

Thus disillusionment with traditional VET policies has forced policy makers to contemplate broader forms of intervention. Some of these are already being piloted (marked with a *):

• Increasing consumer rights and seeking to create a more demanding and discerning market for goods and services*.
• Public purchasing policy to push to raise their game*.
• Public naming and shaming of poor employers.
• Imposing conditions on sub-contractors in the public sector to discourage low waged employment*.
• Experiments with work organisation and job design, particularly in the public sector, but also in the private sector via a government-sponsored Work Design Unit*.
• Encouraging the growth of sources of patient and competent capital.
• The development of an economic ‘vision’ whereby a desired future shape of the economy can be mapped out and then act as a goal for driving policy. Although the term ‘industrial strategy’ is not used, this is what it is.

Fierce debate surrounds many of these actual and projected developments. Many favour sticking with the old neo-liberal, laissez faire, de-regulated approach, but economic and social indicators suggest that this has achieved all it can, and that if a different level of economic performance is desired, we will have to move beyond this model. Naturally, a wide range of interests are gathering against such change – not least the City, the financial press, and some employer bodies. Whether a sufficient coalition to overcome such interests can be constructed, and whether the government has the stomach to attempt such a fight in earnest, remains to be seen. A huge political choice is now looming.

SCENARIO 3 - THE POLARISING SOCIETY (KEEP, 2003)

By 2015 England has become, by some measures at least, a high skills economy, though not necessarily a very productive one. In terms of input measures, the indicators generally look fairly positive:

Participation in higher education hovers around the 50 per cent mark (it is difficult to be precise because what constitutes higher education has become ever more blurred in order to ensure that the target remains attainable). The quality of what is being delivered within the HE system is also increasingly open to question. Other countries in the EU continue to refuse to recognise Foundation Degrees as a degree-level qualification, and their take-up, outside of a few subject areas, is disappointing. Graduate unemployment has risen, and the stock of what might be termed graduate type jobs (i.e. ones where a degree is either essential or desirable in order to do the work effectively) is now far exceeded by the number of those qualified to fill them.

The wide array of state funded adult learning entitlements, coupled with a relatively tight labour market created by demographic shifts and an ageing workforce, means that, compared to many developed countries, the adult workforce now appears reasonably qualified, though problems with adult literacy and numeracy remain stubbornly persistent. Indeed, recent OECD league tables show that, in terms of formal qualifications, the UK workforce as a whole now has a higher level of attainment than the USA.

One of the few blackspots in terms of targets is post-compulsory education participation, where young people have concluded that, in a world where half the labour force entrants now have degrees, and where any qualification below Level 3 produces no discernible return whatsoever (either in terms of higher wages, or access to ‘better’ employment) continuing study for those not entering HE or a strong Level 3 vocational route makes little or no sense. As a result, despite increasing levels of government spending on Education Maintenance Allowances (EMAs) and Further Education Maintenance Allowances (FEMAs), our participation rates at 17 and 18 remain at the lower end of the OECD league tables.

Employer engagement in VET provision also remains patchy and problematic (particularly with regard to government schemes and the use of the reformed qualifications structure). The government’s response has been to continue to make vague threats about moving to a ‘post-voluntarist’ settlement, and to increase levels of state subsidy, individual entitlement and intervention. The one relatively radical element has been the introduction of a statutory right to educational leave (largely unpaid), which formed one of the centre pieces of New labour’s third term manifesto. As has been the case in many other EU countries that have adopted similar measures, take-up of the leave is patchy and at a fairly low level.

The trend towards an ever-greater emphasis on the education system as the main vehicle for upskilling (or at least raising qualification levels) has continued apace. These approaches are justified by reference to a continuing supposition of widespread market failure within the employer training system.

The VET system remains a complex and shifting jungle. Institutional reform has remained a key government ploy, and the LSC, SSCs, and SSDA have all been subject to major change. The continuing levels of instability in the system, coupled with a multiplicity of partnerships and overlapping remits, render comprehension of the system’s architecture and operation very difficult.

There are two main problems with VET policy. The first is that there are widespread signs that the supply of qualified labour is tending, in many occupations, industries and localities to exceed underlying demand. This is particularly true with respect to graduates, where the 50 per cent target has meant that graduate penetration has increased massively across all sectors of the economy. As the traditional graduate professions are full to capacity, a greater and greater proportion of graduates have penetrated sectors (such as retailing) and occupations that have previously been largely non-graduate. Many of the jobs they are now doing are ones that, in the past, demanded few, if any, formal qualifications. Dispersion in graduate earnings has risen very dramatically, and many students do not repay their loans.

One of the many adverse results of this situation is that positional competition for the still-finite supply of good jobs has become more and more intense. Rows about university admissions policies (particularly those of Russell Group universities) rumble on, with private schools and elite state specialist schools doing all they can to ensure that their pupils gain the places that offer the points of access to graduate recruitment in fields such as banking, consultancy, high-end media work, and other ‘blue chip’ employers (Brown and Hesketh, 2004). Interestingly, public debate does not focus on the recruitment practices of the large graduate recruiters, due to the presumption that whatever they do is liable to support meritocracy and to be driven by an objective reading of the labour market.

The second key problem is that rising qualification levels across the workforce have not been reflected in higher productivity levels, nor has the nature of work for many millions at the lower end of the labour market been transformed. There are a number of potential explanations for this. To begin with, private sector R&D investment remains very low by OECD standards, as does investment in plant and machinery. As ever, many UK firms are keener on dividend payouts and using cash to finance merger and acquisition activity than they are on laying the foundations for organic growth. The public infrastructure, not least in the field of transport, continues to lag behind what is available in other developed economies.

Despite a great deal of effort and the investment of much political capital, the impact of the RDAs, outside of the three regions that opted for elected regional assemblies (North East, Yorkshire and Humberside, and North West), has been limited. To some extent this reflects the fact that they are locked in a zero-sum game. It also bears testimony to their lack of leverage over crucial public investment decisions (e.g. transport infrastructure), where the capital city’s tail (as ever) wags the English national dog. SSCs have suffered the legacy of weak inter-firm networks and the artificiality of many of the sectoral groupings into which they have been shoehorned. Most have sunk into acting as delivery agencies for the latest government skills supply initiative.

Moreover, the ‘low road’ to competitive advantage has still not been blocked off. Labour market and product market regulation remains among the lowest in the OECD. Indeed, the government’s anti-poverty policies mean that there are a huge raft of low paid jobs supported by in-work tax benefits – in other words more and more indirect subsidy is being offered to inefficient employers to support their low productivity, low wage strategies. One fast growing segment of this state subsidised labour market has been domestic labour – nannies, cleaners, gardeners, dog walkers – as a new servant class emerges to support the ‘cash rich but time poor’ professional classes. Naturally, any attempt to interfere in this type of employment would be met with howls of protest by ‘middle England’ and its representatives among the national press.

In terms of popular debate, these labouring poor remain conveniently semi-invisible, but the evidence that there continue to be many low wage, low skilled (or at least low qualification requirement), dead end jobs has caused policy makers some heartache. However, the general official consensus is that, in part, this is because people have chosen this type of employment (trading off pace of life and pressure against wages). More importantly, those occupying these types of positions are viewed through the lens of personal deficiency models of labour market functioning, whereby their low wages are ascribed to their lack of human capital, dynamism, self-reliance, entrepreneurial talent and drive for self-improvement. They have selected themselves for their miserable lot. The fact that these jobs exist in abundance and demand to be filled by the employers offering them, and the lack of better alternative forms of employment in many local labour markets, is conveniently ignored.

More generally, the quality of working life for all groups has tended to deteriorate. The pace and intensity of work has further increased, the Working Time directive has continued to be implemented in a manner that renders it ineffective, discretion has carried on declining across the board, and the level of employee ‘voice’ in many workplaces remains minimal.

Income polarisation has grown ever wider, particularly as higher earners in the top decile have pulled away from the rest of society. Between 1997 and 2002, the number of UK individuals earning £100,000 per annum doubled. Since then it has increased several-fold. Just as the low wages and poor working conditions of those at the bottom of the labour market continue to be ascribed to their lack of human capital and to a deficiency model, those at the top justify their massive gains by pointing to the scarcity of the skills they hold and to the vital importance of retaining the motivation of those upon whom economic prosperity rests. Top people’s pay, or so it is argued, reflects a human capital regulated meritocracy. Thus, far from a knowledge driven economy in which the skills of the bulk of the workforce make the difference, those at the top argue that it is the skills of the few (perhaps the top 5 per cent of society) that make all the difference and it is they rather than the rest of the workforce who therefore deserve to be richly rewarded.

Overall some now look back to the period from the 1950s to the end of the 1970s as a ‘golden age’ in which working hours shortened, productivity gains were shared across the workforce (not least through collective bargaining), income inequalities were narrowing, and social mobility was increasing (albeit slowly). In 2015 this golden age seems a distant memory. Work is getting longer and ever harder, gains are shared increasingly inequitably – winner (or highly placed looser) takes all, income inequality is back to late Victorian levels, social mobility has sharply declined, and there is now sharp positional conflict over the limited supply of 'good jobs' among an increasingly over-qualified pool of potential candidates. The concept of work as a source of dignity, personal respect and self-fulfilment has rarely looked more distant.

Despite these problems and difficulties, the political consensus remains stuck in a familiar groove. The knowledge driven economy is just around the corner, estimates of future skill requirements, if read selectively enough, show rising demand. Further efforts to boost skills, particularly those of the ‘bottom half’ who are not going into higher education are now the centre of attention. Although there is some hand wringing about the state of employee relations and people management, the path of exhortation and models of best practice continues to be pursued. Much ink has been spilled over the virtues of the HPWO model, but the means of getting the bulk of employers to adopt it remain illusive. In part, this reflects the ‘mind map’ of the policy community, which continues to rely on a simple reading of human capital theory, on rates of return analysis to individuals investing in skills, and on an implicit presumption that wider forms of intervention are impossible or wrong. Moreover, to change course would be to admit the failure of the dominant trend in policy over the last three decades. As the most of the economy has not shifted of its own volition towards the high skills, high wage model, all that government can do is continue to nudge employers and to try and make the best it can of the low wage, low productivity outcomes being generated by the bulk of firms.

Polarisation has also not only failed to shift political discourse, it has also largely failed to shift political sentiment. For those who have done well out of the last fifteen years the current run of policy is the natural order of things, and any divergence therefrom a threat and an abomination. Those who do well, do so because they work hard and are talented (however that might be defined). Those who do not do well have only themselves to blame. Their talents are lacking and they may well be lazy. The prevalence of this explanation is one of the ways in which English society has continued to Americanise. Those who do less well tend to be politically disenfranchised, not least because none of the main parties has an agenda that directly addresses their concerns.

A new white paper on skills has just been announced………………..

References

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