Community, Employees, Public Policy

The statistics lose none of their power to shock despite constant repetition. Seven million people in the UK lack basic skills. Little more than a quarter have 'intermediate skills', compared to half in France and two thirds in Germany. The economic cost is huge, with output per hour between a quarter and a third higher in the UK's main international competitors.

So what chance does the government's latest attempt to close the gap have of actually working?

Don't hold your breath. The problem is that the white paper's proposals are almost exclusively supply side measures. That is, they attempt to increase the volume and quality of training for employees. In this, they follow a long succession of laudable government initiatives to get both sides of industry working together with government (this time dubbed the 'skills alliance').

What's missing from the new strategy, however, is any substantial investment in the pull side - employers' demand for and use of new skills. A little noticed Cabinet Office PIU report in 2001 called for "a demand-led system in which the demands of individuals and employers . . . shape the type and quantity of workforce development provision that is available". More is the pity that this seems to have been quietly dropped.

The problem of low employer demand for high-skilled workers pervades small enterprises in particular- firms with low-cost, low added-value market strategies have little reason to invest in workforce development. Larger companies have a clear incentive in terms of greater efficiency and higher quality to encourage this change of mindset through their value-chains.

So what can socially responsible companies do to encourage the demand for skill development? Firstly, stimulate management interest in improving their own skills. Extending internal executive training programmes to include SME owner-managers or working with employer federations to improve their training opportunities are two good representative examples. Secondly, recognise and encourage efforts by suppliers to invest in human capital. Working with SMEs to achieve external standards, such as Investors in People, or promoting industry specific awards for performance improvement derived from workforce development represent the kind of initiatives we need to see more of.

Working with small businesses to drive up demand for workplace development will not only help the government close the skills gap, but will also result in bottom-line benefits for companies with large- and potentially better skilled- supply bases.

Corporate Citizenship Briefing, issue no: 71 - September, 2003