Carrot or stick?

Employers are being slammed for their lack of investment in skills development
and there is talk of returning to the levy system. Would such a statutory move
give UK productivity the much-debated boost it is said to need? Lucie
Carrington reports

The latest research from the Learning and Skills Council (LSC) shows there is
still a huge gap between policymakers and employers when it comes to ideas on
training and developing the workforce.

Skills in England 2002 – the LSC’s second annual skills assessment – paints
a fairly dismal picture of employer training in the UK. It finds that as well
as being unwilling to invest sufficiently in training and development,
employers often aren’t even aware of the skills they need to boost their
performance. The feeling is that despite the hurrah surrounding initiatives
such as National Training Awards, Investors in People, even the Learning and
Skills Councils, nothing much changes.

"In some ways we’ve even gone backwards," says Rob Wilson,
principle researcher at Warwick University’s Institute of Employment Research
(IER) and an author of Skills in England 2002. "If you look back to the
heady days of the industry training boards and the levy system which used to
fund training, at least employers were investing in skills training. They
didn’t like that, but that’s been replaced with what is much more of a
free-for-all. I’m not sure this voluntary approach is working very

"The researchers’ findings are pretty worrying, given that most
businesses and policymakers now accept that developing skills is a key plank of
any attempt to raise productivity and efficiency. According to the report,
nearly one in four companies still suffers from skills shortages. They have
been reported across the board but the more serious gaps are in the retail,
hospitality and manufacturing sectors. More specifically, many employers cite
problems with customer services and communication skills.

Older workers

While there is a good deal of employer training going on, much of it is
focused on health and safety and induction. Beyond that, access to training
remains concentrated on workers who are already well qualified. The result is
that manual and service workers, part-time staff and older employees all miss
out on training and retraining that will enhance their work skills.

This is crazy given the realities of business today – a high proportion of
older workers with poor basic skills contrasting with a projected growth in
higher-skilled jobs. With an ageing population to boot, it is clear that the
people we need to do those jobs are already in the labour market, which means
employers have to fill the gap.

The authors of the report suggest the Government should intervene with
incentives such as tax credits, which the Treasury is looking at, and even a
spot of coercion such as a return to training levies. "Rather than just
criticising the inadequacies of existing systems, they need to get involved in
the process and essentially put their money where their mouths are,"
Wilson says. "Unless they are prepared to get involved and make a contribution,
it is going to be difficult to see how the focus of training will change."

However, employers do not agree with this analysis of the state of employer
training. "These statistics can be interpreted in two different
ways," says James Foster, senior policy adviser at the CBI. "The
results the authors have chosen to highlight refer to off-the-job, not
on-the-job training. But 70 per cent of employers offer job-specific
training." What is more, earlier research showed that employers were
spending more than £23bn on job-specific training each year.

Qualification levels

The LSC is targeted on qualification levels, so its concern with formal
qualifications is hardly surprising. But this is not what employers are
concerned about, points out Foster. "Employers are only interested in
qualifications where they are relevant," he says. "We need to improve
the quality of public provision and make it much more flexible. Until then,
employers will continue to spend on private sector training."

As for employers concentrating their efforts on those who are already
well-educated and qualified, well that is just good business sense, Foster
maintains. "Clearly these are the people employers need to train up to
benefit the company. Research into training for lower-skilled staff shows the
impact is negligible," he insists.

The Engineering Employers Federation (EEF) is equally scathing about the
charge that employers don’t train. "If the situation was as bad as Skills
in England 2002 says, then many of our member companies would have gone bust
years ago," says Claire Donovan, skills policy adviser at the EEF.

Like Foster, Donovan wants more flexibility in the system, citing the need
to free up the rules governing Modern Apprenticeships, which do lead to formal
qualifications. "The engineering industry has taken up Modern
Apprenticeships like no other because it is what employers want," said
Donovan. "We have 6,500 new starts every year." But engineering firms
want to be able to use the scheme as a means of retraining older workers too –
as Skills in England 2002 recommends.

The situation in engineering is typical of the problems that Skills in
England 2002 flags up. Look at the large-scale redundancies going on and it’s
the lower skilled workers who are leaving. "Employers want support to
bring these people up and over. [the skills barriers]. We don’t want them
retrained as waiters and housing officers because then the industry loses them
for good," Donovan says.

Lower to medium skills

The suggestion that a return to the levy system could be one way of ensuring
investment in lower to medium-level skills fills her with horror. "It
didn’t work. It was excessively bureaucratic and didn’t deliver the training
employers wanted. It was nothing but a stick to beat us with," she said.

Most employers and experts agree with Donovan that the levy system,
disbanded more than a decade ago along with industry training boards, is
unlikely to return. Rob Wilson at the IER admits that employers almost
certainly won’t sign up to it and chairman of the LSC Bryan Sanderson describes
it as a ridiculous idea. However, not all employers and their representatives
are so dismissive.

Indeed, in certain quarters, training levies have remained. The audio visual
industry operates a voluntary system and the construction industry still runs a
statutory levy through the construction and engineering construction industry
training boards (the CITB and ECITB).

Under the CITB scheme, all construction firms with a wage bill of more than
£61,000 pay 0.5 per cent of that wage bill for direct employees into the pot.
They also pay 1.5 per cent of payments to labour-only sub contractors. This
financial year (2002/ 2003), the CITB expects to use this money and other
earnings to issue £75m worth of training grants to construction firms.

The levy remains amazingly popular with the construction industry. House
builders such as Westbury understand its value, although the firm receives
little back directly from the CITB, says training manager Ashley Hawkins.
"We support the levy because not being able to get hold of the skilled
trades is a major cause of us not meeting production targets," he says.

Meanwhile, the printing industry is actively campaigning for a modernised
training levy. Both the British Printing Industry Federation and trade union
the GPMU, have been in discussion with adult skills minister Ivan Lewis.
Richard Beamish, chief executive of the Print and Graphic Communication
National Training Organisation, has been chairing the employer/union group looking
into levy options. "We are talking about something that is small, light
and unbureaucratic," he says.

Statutory levy

There are signs that the Sector Skills Development Agency (SSDA), which is
spearheading the Government’s latest tranche of employer-led training quangos,
Sector Skills Councils, may also look favourably on the levy. Lesley Giles,
head of research at the SSDA, points out that it is still government policy to
support a statutory levy if both unions and employers in an industry want it.

"The levy system has received a lot of criticism for being
bureaucratic, centrally imposed and providing training driven by government
agendas rather than responding to employers’ needs. However, I am coming round
to the belief that a training levy per se isn’t necessarily the problem – it’s
what you do with the money and how quickly employers can get a return that
counts," Giles says.

While she acknowledges there is a lot more employer training going on than
Skills in England 2002 identifies, Giles says it is time employers woke up to
business realities. "Our productivity in the UK lags behind international
competitors and a key determinant of productivity is the labour force."
They have to start training those who have never been trained.

The LSC is half way through a year-long £40m initiative aimed at doing just
that. Employer Training Pilots (ETPs) have been designed to provide basic
skills and vocational training leading to recognised qualifications for 25,000
low-skilled workers. The aim is to get them at least to level 2, regarded as
minimum workforce entry level qualification, says Michael Stark, head of skills
and workforce development at the LSC.

There are six pilot schemes operating around the country and participating
employers have agreed to release staff for a minimum of either five or 10 days’
training over the year. In return, they are reimbursed wages costs. Small
employers can receive up to 150 per cent of wage costs and larger employers up
to 75 per cent. Meanwhile, employees are wooed with the chance of job security,
promotion, even a £500 hand out – all these incentives are being trialled.

So far 1,800 learners and 6,000 employers have signed up. No employer has
withdrawn from the scheme and only 20 learners have dropped out. These low attrition
rates make it a highly cost effective scheme says Stark. "It’s as cheap
for us to train people through this route by paying employers as it is to reach
an equal number of learners through an individual route with the high drop out
rate that incurs.

This month [9 April] the Chancellor is set to confirm the Treasury’s support
for ETPs with a £130m grant for a second year. As the programme triples in size
so it will be extended to other LSC regions.

ETPs are not going to solve productivity problems or skills gaps overnight –
we need workers to have higher skills than NVQ level 2. But by raising minimum
standards it is getting employers and employees who don’t train used to the
idea. "It’s building people’s aptitude for learning," Stark says.
"I know of no other scheme like it in any OECD country."

Participate directly

The critical tone of the Skills in England 2002 report has given employers a
bit of jolt. This may be no bad thing. However, the LSC, SSDA and the DfES have
to be careful that, in this war of words, positions do not become polarised. It
is all very well to demand that employers become more engaged in training
systems, but successive governments have steadfastly failed to engage them –
look at Training and Enterprise Councils, National Training Organisations and
even the LSC. These were all set up as employer- led organisations and even the
LSCs are having problems attracting employers to participate directly.

If government and employers are to tackle the low skills base of the UK
workforce together, then the Government needs to work much harder at building
bridges, by talking more to employers, and understanding that their priority
remains to survive and thrive. We watch and wait to see whether Sector Skills
Councils can fill this gap.

Inside the report

Key points from the Skills in England 2002


– 23 per cent of companies reported a skill gap – up7 per cent
on 2001

– Skill shortages are highest in retail and hospitality
industries – 29 per cent.

– 24 per cent of firms reported a shortage of customer service

– More than half of employers say they are having problems
meeting customer service and quality standards as a result of skills shortages

– Nearly a third have suffered delays in new products or lost

– 78 per cent of employer training is linked to health and
safety and 58 per cent is linked to induction training

– Access to training is concentrated on high-skilled workers


– Employers need to target training efforts on enhancing the
work skills of employees

– They need play a more active role in post-16 education and
training and take up a larger share of the costs

– They need to become more demanding in the workforce skills
they want. Many are not sufficiently ambitious in their target and goal setting

– Policymakers need to alter the one-size fits all approach to
training schemes such as Modern Apprenticeships and develop a wider range of
workforce development opportunities

– They need to consider more active state intervention, perhaps
through a training levy

– At the same time, they need to provide greater incentives to
encourage employers to invest in training.

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