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Skill use in regional economies

The under-use of workers’ skills at work is a problem. Depending upon how it is measured, between a quarter and a third of UK workers are over-qualified for their jobs. This skill surplus is greater than the country’s skill shortages. If workers have more skills than they are able to use at work they can become frustrated. Their employers do not maximise their productive capacity, and private and public money invested in training and education to acquire qualifications is wasted. Maximining this untapped potential will be essential to economic recovery post-Covid.

Making progress to improve skill use requires working closer with firms to encourage them to make skills use an organisational priority. Better using skills is beneficial to both workers and firms. Workers benefit from increased wages and job satisfaction, which are important features of job quality. Firms benefit from a more productive workforce and less employee turnover. From a place-based perspective, better use of skills is especially important for labour markets with sub-optimal productivity performance. OECD research has demonstrated that improving skills use could result in aggregate productivity gains of 5% in the UK.

In 2017, Chris Warhurst contributed to a major report published by the OECD: Better Use of Skills in the Workplace. His focus was developing policies and practices for improving skills use locally. This is a new area for public policy but now recognised as important by the UK Government’s Department for Education (DfE).

Supported by the DfE, and the Department for Business, Energy and Industrial Strategy, Chris and IER colleague Peter Dickinson have been working with the OECD and the Leeds City Region on developing a local skill use strategy, drawing on ideas from the original OECD report.

The Leeds City Region has a widening productivity gap with the UK average. A local upskilling through increased educational attainment in the Leeds City Region has not translated into better productivity outcomes. A new OECD report co-authored by Chris, Better using skills in the workplace in the Leeds City Region, based on the needs of the Leeds City and West Yorkshire Combined Authority (WYCA) region was published in 2020. It recommends a shift in policy thinking to include skills deployment (use) as well as skills development. Other recommendations suggested how this policy shift could be translated into workplace practice.

The need to improve workplace skills use locally is now accepted and features in the report released in early 2020 by WYCA’s Future-Ready Skills Commission. This Commission was tasked with developing a blueprint for a skills system that better meets the needs of individuals, businesses and the economy. Part of its recommended change is to recognise that ‘An effective approach to workforce skills means enabling businesses to get the skills that they need and to deploy them to best effect in the workplace.’ As part of its £1.4bn economic recovery plan for West Yorkshire announced over summer 2020, WYCA and Leeds City Region LEP ask the UK Government to fund a £3m skills utilisation pilot.

The next task is to secure that funding and then implement the pilot to help businesses maximise their productivity potential.