Left behind in the lower realms of the labour market

Times are undoubtedly tough for the 350,000-plus graduates who now leave university every year. Collapsing demand in some parts of our jobs market has seen competition for jobs intensify and many graduates now seek jobs for which they are over-qualified, accepting lower wages than their qualifications would usually be expected to command.

And yet for all the hyperbole of a ‘lost generation,’ graduates remain the overall ‘winners’ in our increasingly polarised labour market. The coveted graduate wage premium is still a reality with the average economic return to a degree remaining fairly constant (and rising steeply for top graduates). Possession of a degree is still associated with significantly increased prospects of moving up the earnings ladder.

As hard as things may seem, graduates entering the labour market today are in a far stronger position than the large numbers of their contemporaries making their first foray into the world of work with intermediate levels of qualification (levels 2 and 3).  Moreover, young people with intermediate qualifications are increasingly forced to compete for an expanding pool of low-skilled jobs with those graduates who cannot find jobs to match their own newly acquired skills. And while for graduates these jobs often serve as bridges to future opportunities or as temporary post-recession redoubts, for young people with intermediate qualifications they are increasingly all there is.

A new report by Steven Roberts for the Resolution Foundation shows that more and more young people with intermediate levels of qualifications are becoming trapped in low paid, low skilled jobs, with limited chance of progression. Given that level 2 and 3 qualifications are the highest level of educational qualification that 49% of adults in low to middle income households will attain during their lives, this skills trap in the lower realms of the labour market should be a concern for anyone interested in raising the living standards of the 10 million working-age adults in this group.

Over the last decade there has been something of a consensus around skills policy with parties on all sides in agreement that lifelong learning and the opportunity for every individual to rise up the skills ladder are key to economic prosperity. Yet it is becoming clear that the drive to achieve a world-class skills base has masked the fact that many intermediate qualifications do not provide workers with the skills that the labour market demands whilst also being a poor proxy for actual skill levels.

This partly explains why, despite the government’s insistence that “training for adults at level two and above brings the greatest financial and wider benefits to individuals”, the economic returns to intermediate skills vary widely. Thus, while the return to many STEM level 2 and level 3 qualifications is particularly high, the value of other qualifications such as NVQ2 certificates has consistently been found to be low or even nil.

If the supply-side focus of recent skills policy has not led to a genuine up skilling of a large section of the workforce, what can be done to improve the situation? Part of the answer lies in re-balancing UK skills policy so that it focuses more acutely on outcomes; not just the levels of skills but acquiring the types of skill demanded by the labour market. Roberts suggests that intermediate qualifications too often entail the mere accreditation of pre-existing knowledge rather than providing the opportunity to develop skills which are geared to business needs and enhance productivity and earnings potential.

Progress also means accepting that success in today’s labour market is not simply about qualifications. Indeed, evidence suggests that qualifications are increasingly used as a method of screening rather than a guide to actual skill levels of workers. More thought must therefore be given to looking beyond qualifications and toward better ways of recognising and measuring the non-cognitive skills that are key to accessing higher paid jobs.

The truth is, if cracking the problems of the skills trap for those with intermediate qualifications were easy, we’d have done it. Academics have argued for years that mid-level skills are our Achilles heel. In his paper, Roberts suggests that new institutions, such as co-operative expert forums or greater workplace democracy could enhance in-work training and development in a way that matches skills to labour demand and facilitates career progression.

Whatever the policy solutions that offer a way forward it is clear that the current system is failing too many young people with intermediate qualifications. Without a shift in focus toward the outcomes of gaining particular intermediate qualifications and away from a supply-side focus where quantity too often takes precedence over quality, many young people with intermediate qualifications face a bleak future mired in the lower realms of the labour market.