Friday, 18 May 2018

The Regional Skills Gap

Something else that has been bothering me for a while is the notion of the 'regional skills gap', as mentioned for example here.

Productivity and Skills for West Midlands Combined Authority (WMCA) region are one of the biggest challenges for the regional economy. GVA per head in the WMCA is currently at £19,423, nearly £3,500 [less than the UK average] for each of the 4 million WMCA residents leading to a £14bn output gap compared to the national average.

WMCA report that the components of the output gap highlight issues across all the productivity drivers with insufficient skills, too few in employment and the quality of the indigenous WMCA business base.

* Skills: % of number individuals with qualifications at NVQ4+: in the West Midlands Region is 27.6% against a national picture of 34.9%

* Employment: employment rate in the West Midlands Region is 67.2% against a national picture of 71.5%...

It is essential that Education and Business work together, not just through the Corporate Responsibility Agenda and supporting students develop the essential work ready skills but also to:

* Shape academic programmes and content to reflect the needs of regional sectors

*Identify the key growth areas across the region to ensure that training and development reflects the local economy

It's a bit like the notion that you can get house prices down in the South East by building more homes - it only makes sense if you ignore the fact that people can migrate freely within the UK.

If you assume that people growing up in the West Midlands intend to stay there, then sure, train them in things which will get them a job locally. But they won't.

It's a circular problem.

1. Those with the initiative to undertake education and training want to do whatever will earn them the most money, which is unfortunately not the productive sector but the non-productive sector, finance, insurance, real estate, legal and accounting (i.e. little old me).

2. The best paying jobs are in London, which is why, apparently, nearly half of recent graduates from UK universities move to London.

3. So the reason why relatively few people in the West Midlands have NVQ4+ qualifications is not because there's anything wrong with their education system, but because many of those with NVQ4+ qualifications bugger off elsewhere.

4. The less ambitious/less qualified remain in the West Midlands, inevitably, productivity and output declines, exacerbating the effect; businesses do worse, meaning fewer well paying jobs, meaning people are more likely to bugger off.

5. If the West Midlands offers more education and training, that makes it even easier for people to bugger off.

As an aside, Flipchart Rick did a post a while back called "Why a richer Africa means more migrants" explaining that this is effect is observable on an international level.

To paraphrase, few people from really underdeveloped countries emigrate because nobody wants them. Developing countries try to lift themselves with their own boot straps and invest what little surplus they have into improving their education systems - but that makes it easier for their people to emigrate (Filipino nurses, for example) instead of staying and helping grow the economy. So for some decades, this is a net loss to the country. It is not until the economy has developed to the level where there is less incentive for people to move abroad that their economies really benefit; but you can't grow an economy until the better-educated people stay there etc etc in a vicious circle.


Rich Tee said...

"The best paying jobs are in London"

In gross terms yes, but not once you've taken the increased cost of housing into account.

Mark Wadsworth said...

RT, true. But people behave otherwise.

James Higham said...

The best paying jobs are in London

Exorbitant costs too.

Mike W said...

MW I take the broad point you are making. What caught my eye was the article you link: Brain drain of graduates to London leaves cities facing skills shortage.

Chart shows that 27% of students already in London leave! Scotland and North West resist London gravitational pull. And Northern Ireland seems to function as a seperate nation with 'border controls' on grads :)

Mark Wadsworth said...

MW, of course a lot of people come from elsewhere to study and then go home again.

L fairfax said...

@"To paraphrase, few people from really underdeveloped countries emigrate because nobody wants them."
Are you sure? I have met some immigrants from South America who did a great benefit to their country by coming here. I have no idea what percentages are, I am not sure that I trust Government statistics on the subject.
Don't forget that some Muslims would emigrate because Islam encourages it.

L fairfax said...

PS all immigrants I have met from Spain in the last few years have come here because of lack of Jobs. Although I am not sure if you count Spain as an under developed country.

Mark Wadsworth said...

LF, by underdeveloped I mean countries where most people can't read and write. That clearly doesn't apply to South America. In any event, the problem is perception. If you judge a country by the people who have emigrated from there to here, you are meeting the best educated and most ambitious/enterprising. Australians think Brits are hard working; Brits think Poles are hard working, and so on.

Another example of this internal brain drain is East Germany, which is permanently f---ed (apart from maybe Berlin) as all the better educated, ambitious, enterprising go to West Germany. That started happening the day the wall came down and has not stopped.

Islamic emigration is sort of the reverse of this, but that's a purely political/ideological thing, not an economic thing.

LF, Spain is of course a fully fledged third world country and every bit as developed as the UK. I too have met people from France, Spain, Germany (!) who come here because it is easier to find work (!).

L fairfax said...

I speak Spanish and I can assure that if you speak Spanish, you realize that a lot of Spanish speaking immigrants are not all the best of the best from the country. I met one who thought that dinosaurs still exist! Some are very talented however, I think probably more of them are above or below average than in their own countries.

Bayard said...

LF, dinosaurs do still exist. They are called birds.