Can employment training help address the UK’s productivity puzzle?

21st September, 2017

The most recent labour market data from the Office for National Statistics shows that the employment rate has never been so high. But real wages are still below their 2007 peak and productivity remains stagnant, suggesting that despite the employment-led recovery, some important labour market challenges remain.

As stressed in our latest briefing on the industrial strategy, a key problem of the UK economy is its skills base. The skills of any workforce are crucial for building a strong economy and improving businesses, growth and wages. But as shown in “Competing with the Continent”, most UK cities are lagging behind their European counterparts in this area.

There is evidence that employment training can be effective in tackling this issue by not only bringing people back into work but by also helping them acquire new skills and move up on the earnings ladder. In around half of the evaluations on this topic reviewed by the What Works Centre (WWC), employment training had a positive impact on wages and employment.

But in terms of outcomes, the way the training is designed matters. Looking at the duration of trainings, the review found that short programmes are more effective for less formal training activity while longer programmes generate gains when the content is skill-intensive but the benefits take longer to materialize.

When it comes to the format of the training, on-the-job training programmes tend to outperform classroom-based ones. This is because employers engage directly with the course and the participants tend to acquire skills that match more closely what employers need. This could also be due to the fact that the participants have already established a relationship with their potential employer.

But the evidence on the effectiveness of different types of delivery remains inconclusive. Looking at the public versus private delivery, the review did not come to any strong conclusions on which one is more effective.

The evidence was also inconclusive on whether a programme delivered nationally is more effective than one delivered locally – none of the evaluations reviewed looked at this issue specifically. But understanding the role that local government can play in tackling the skills issue is crucial for two reasons. Firstly, Centre for Cities research shows that the UK is not a national labour market but a series of overlapping one, and skills programmes can bring benefits if tailored to meet the demands of the local economy. Secondly, the newly elected metro mayors can make a difference on this policy area as skills is one of the powers being devolved.

The Government seems to be becoming more and more aware of this local element with the recent announcement of new employment schemes that will more closely reflect the different economic realities seen in different places.

But what the What Works Centre study reveals is the lack of evidence on what policies are effective in this area. As my colleague Elena Magrini argued in her recent blog, to make the most of these schemes, local authority officers involved in these new programmes should become the champions of evidence. This means that when implementing these schemes, local authorities should build on the existing evidence that the What Works Centre provides. Once these schemes are up and running, they should be accurately monitored so that we can improve our knowledge of what works in this important area.

This piece was first published on the Centre for Cities blog.

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