Employers spending a fifth less on employee training than a decade ago
Analysis raises questions about how the UK will turn around stagnant productivity and meet its climate commitments
19 March 2024
The amount employers are spending on training their workers has dropped by almost a fifth in the last decade, according to research from the New Economics Foundation (NEF) published today.
The analysis raises serious questions about how the UK will turn around its stagnant productivity when few workers can afford the risk of upskilling during a cost of living crisis. It comes after latest figures from the Office for National Statistics (ONS) suggested UK output per hour fell 0.3% over the year to Q4 2023, and output per worker fell 0.6% over the same period.
The lack of investment in skills also leaves the UK at risk of being left behind in the race to develop green industries, making it even harder to meet its climate commitments of reaching net zero by 2050.
The report recommends introducing a National Skilling Wage (NSW), set at a rate equivalent to the Real Living Wage. This would be paid, in the form of a tax credit, to all employers for every hour a worker spends on an approved training course. It also suggests reforming student finance so that mid-career learners can receive the NSW through a Personal Learning Account.
Alex Chapman, senior researcher at the New Economics Foundation, said:
“Everybody is entitled to a respectable standard of living, regardless of whether they are in work, out of work or in training. However, we currently have a system which makes it too difficult and too expensive for employers to train their workers, or for people to retrain later in life.
“This is having dire consequences on our economy right now with low productivity and limited options for people to develop and earn more. But it also means we are seriously behind where we need to be in the transition to a green economy, with a significant skills gap in renewable energy, home energy efficiency, and other emerging sustainable industries.
“A National Skilling Wage would act as an important step to provide workers and businesses with the financial stability and confidence to commit to training. This would benefit businesses through increased productivity and provide a long-term return to the state through additional corporation tax.
“Crucially, it would also help people through the cost of living crisis and increase our ability as a country to meet our climate commitments.”
NEF analysis of the Employer Skills Survey 2022 reveals total investment in skills declined 19% in real terms between 2011 and 2022. In the North East and South West of England the decline was even steeper, at 27% and 32% respectively.
While spending on skills has fallen in all business types, some have scaled back further than others:
- Larger businesses are spending 35% less
- Primary sector businesses are spending 44% less
- Public service sectors are spending 38% less
The report, Solving the UK’s Skills Shortage: How a National Skilling Wage Would Future-Proof Our Economy, sets out how overall the UK is lagging behind most of its European neighbours when it comes to providing training for workers.
Data from the Learning and Work Institute suggests around 28 million adults (51% of the population) have had no training in the last three years, with almost half (46%) citing barriers such as cost and caring responsibilities.
The decline in business spending on skills is compounded by the decline in public spending on skills. The Institute for Fiscal Studies suggests the total government adult education budget in 2024 – 25 will be 23% below its level in 2009-10 (adjusted for inflation).
Contact
James Rush /james.rush@neweconomics.org
Notes
The New Economics Foundation is a charitable think tank. We are wholly independent of political parties and committed to being transparent about how we are funded.
The full report, Solving the UK’s Skills Shortage: How a National Skilling Wage would future-proof our economy, can be read here.
NEF analysis looks at the Employer Skills survey 2022, published in late 2023 available at: https://www.gov.uk/government/statistics/employer-skills-survey-2022.
Changes between 2011 and 2022 have been adjusted for inflation and are shown on a per-employee basis.
ONS analysis of productivity, published 15 February 2024, can be found at: https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/articles/ukproductivityintroduction/octobertodecember2023andjulytoseptember2023
IFS analysis of public spending on adult education is available at: https://ifs.org.uk/education-spending/adult-education-and-skills
Learning and Work Institute analysis of barriers to individual upskilling is available at: https://learningandwork.org.uk/what-we-do/lifelong-learning/adult-participation-in-learning-survey/
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