Training for young people is a good move, but Labour should be asking more of employers

Without reference to how Labour intends to bring about good growth there is little point talking about training.

Without reference to how Labour intends to bring about good growth there is little point talking about training

At last the press are more interested in what Ed Miliband is saying than how well he eats bacon sandwiches. On the question of welfare he has started a conversation, which in turn tackles the notion that Labour are coming to the next election lacking ideas.

The proposals themselves are clearly a step in the right direction. At a time when the Chinese state press are effectively snorting at the UK’s place in the world – calling it a ‘petty’ and ‘declining’ empire – something needs to change.
We prepare for this change in the following way: by emphasising skills and training rather than resigning young people to the scrap heap of benefits. We draw on the best from other European welfare models and seek to steer the emerging workforce to a place that helps the country become more competitive.

There is a problem, however. While showing how the next Labour government is set to reduce the number of ‘NEETs’ – those not in education, employment or training – makes for good headlines, it doesn’t exactly complete the picture.

Take for example Germany, a country that is nine years into its own welfare reforms. The story of how those reforms came to be is a familiar one: it was assumed by critics that the welfare system was too generous. Merkel’s first cabinet couldn’t have that on its conscience so sought to change it.

Did it succeed? This depends on how you measure success. If it’s by number of unemployed then yes it did; there are fewer claimants in today’s Germany than before. But this is ultimately the outcome of so-called ‘mini-jobs’ and falling productivity. Real wages have also fallen. Even critics of the UK welfare system would surely want to avoid this trap.

It is no coincidence that, like Germany, the UK has seen productivity fall below pre-crisis levels (which has stumped the Bank of England), and a rise in jobs that don’t measure well for income or skills. A Centre for Cities report last year points out that some UK cities rate badly on their Good Growth Index where there has been a gradual rise in private sector employment. Whither collective bargaining?

So while Miliband is correct to highlight the skills deficit as something he would want to correct, for this to have any impact at all will require a lot more thinking about what Labour intends to do for jobs and growth.

It may save taxpayer money to take some 18-21 year olds out of benefits system, but there are costs associated with falling productivity and poor growth.

Interestingly IPPR have noted this before. Back in 2006 the think tank published a report showing that 2.5m employed people with no skills or qualifications were active in the market with some 7.4m jobs that required workers with no skills or qualifications. A total of 4.9 overqualified workers, in sectors such as retail with the fewest routes of progression.

By 2020, so say the IPPR researchers, there are projected to be just 585,000 economically active adults with no qualifications (which Labour’s policy will intend to contribute to) – but a similar number of jobs as in 2006 requiring no entry qualifications.

The point I’m making here is very simple: what jobs are young people being trained for? Without reference to how Labour intends to bring about good growth there is little point talking about training at all, if training is merely a road to false hope.

Yesterday the Living Wage Commission has said that bringing about higher pay more widely will rely on employers themselves, not legislation. While there are a few cases of employers wanting to be ahead of the curve and pay staff more, one thing we know is that firms don’t compete with each other on how much they pay staff.

The same can be said for investment in training by employers. Perhaps Labour’s announcement on training for young people is a realisation that we cannot rely on employers to train staff into better jobs – but we shouldn’t be footing the bill for what employers are failing to do. Labour should be asking more of employers.

Ed Miliband has seen the skills gap and wants to do something about it – and he’s right to do so. But unfortunately his planned changes raise more questions than they answer. What about jobs? What is good growth? To what and where will these young people be trained? Are we missing the bigger picture?

To avoid confusion Labour is going to have to say how their changes fit in with a wider narrative.

Carl Packman is a contributing editor to Left Foot Forward

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