INDUSTRY VIEW : Sir Ron must solve the 16-plus education riddle

Ask passers-by in the street how much change they would get from a fiver for a sandwich costing pounds 1.24, and one in six of them will have trouble working it out. According to the Basic Skills Agency, many adults have serious literacy and numeracy problems.

But this is just the tip of the unskilled iceberg. Policy-makers across the political spectrum agree that something needs to be done to improve the skills of the British workforce. The question taxing their minds most heavily at the moment is who should pay the bill.

Last week the Government announced that Sir Ron Dearing is to lead a review of the funding and structure of higher education, to come up with a better way to finance the expansion of universities.

Two days later it emerged that Labour had abandoned its long-standing proposal to introduce a training levy on all employers who did not provide a critical amount of in-house training. Instead they are considering tax relief for individuals and employers who contribute to individual learning accounts.

The search is on for a fair and effective way to develop post-16 education. The current system fails on both counts. Many individuals do not acquire the skills that they and the economy need. Meanwhile the greatest subsidy goes to high-earning graduates rather than low- skilled, low-paid people. Individuals, businesses and society as a whole all gain from post-16 education. The question is how the cost of improving education should be split between the different beneficiaries.

In a paper for the Centre for Economic Performance, economists Richard Layard, Peter Robinson and Hilary Steedman argue that businesses should only pay for training when they are able to capture enough of the returns to the investment. They distinguish between "general training" which raises the productivity of employees in every way - and equips them to get better jobs elsewhere - and "firm-specific training", where the productivity gains are particular to the firm and the technology it uses. One serious disadvantage of Labour's old training levy was that it could not distinguish between general and firm-specific training. Firms that spent a lot of money on training staff to use unique technology would have escaped the levy, despite the fact that the skills they taught were useless in any other employment.

Layard and others argue that employers already provide firm-specific training, and they should not receive any extra subsidy from the state to continue doing so. But nor should they be expected to contribute to the portable vocational skills which make up general training; that should be up to the individual and the state.

The academics may be right. Unfortunately little research has been done into the kinds of returns that employers get from training, or into the reasons behind their training decisions. What is clear, however, is that employees benefit disproportionately from the kinds of training that firms undertake.

In a new paper for IPPR's Commission on Public Policy and Business, Steve Machin and David Wilkinson have analysed who receives training and who doesn't. In an examination of the Labour Force Survey they discovered that companies educate the well-educated.

In 1994 26 per cent of graduate employees had received training in the previous four weeks, compared with 18 per cent of those with A-levels or equivalent, 13 per cent of those with GCSEs and 4 per cent of those with no qualifications at all. Moreover, firms train even when employees pick up considerable financial returns as well. Those same highly educated employees who are receiving in-work training also pick up the greatest personal return from the courses they take.

This finding has several consequences for policy-makers. If individuals already have good basic education or portable vocational skills, then firms seem ready to shower firm-specific training on them.

Two problems need to be resolved. The first is ensuring that everyone gets adequate basic education. And the second is finding an effective and fair way to fund the acquisition of additional portable vocational skills.

Ideally basic education should be provided by the school system. But as long as it fails to do so, people also need access to courses at other stages in their lives. Unskilled individuals are unlikely to be able to afford the cost in advance, nor will they see huge wage returns afterwards, given that they are simply catching up with the education others received courtesy of the taxpayer. So the state will have to invest on their behalf instead. And given that there are fewer low-skill jobs available, investing in the low skilled has the added social benefit of keeping them off the street and out of the dole office.

Another possibility is to force firms to contribute towards general education for unskilled employees. Advocates of Compulsory Learning Accounts argue that employers should be obliged to contribute a certain percentage of the payroll towards an individual education fund for each member of staff. Firms will inevitably see contributions to general portable skills as another tax on employment. An alternative way to ensure businesses contribute to the skill base they benefit from is to finance broader education through the general taxation to which businesses already contribute.

But the news is not all bad for the taxpayer. There is even less reason, in the light of the IPPR evidence, to continue with such a huge subsidy to higher education. Going to university doesn't just mean a one-off boost to your earning power. It also confers access to further training and education throughout your life, so it seems reasonable that graduates should contribute to the education too. Eighteen-year-olds are rarely in a position to stump up several thousand pounds in advance, but borrowing and then repaying the money over a long period makes perfect sense.

Sir Ron Dearing will consider ways to make graduates pay towards their education without crippling them with debt, or discouraging them from going to university in the first place. Academic education is one form of portable skill. Other portable skills - such as bricklaying - may be just as useful for employees moving between jobs. But at the moment academic education absorbs all the state subsidy, while would-be bricklayers are forced to invest in themselves.

Politicians and policy-makers are right to be concerned about expanding and financing post-16 education. But they should not do so in a vacuum. Whether it be portable vocational training, or higher education, the state should take a similar approach to each.

Individuals who get the highest returns from their education should contribute most. Examining higher education in a vacuum will only produce more inequities and complications in the funding of post-16 education. Sir Ron Dearing's remit should be widened to consider everyone else's adult education too.

Sport
The sun rises over St Andrews golf course, but will it be a new dawn for the Royal and Ancient Golf Club?
sportAnd it's Yes to women (at the R&A)
Arts and Entertainment
Liam Neeson said he wouldn't
tv

Liam Neeson's Downton dreams

Sport
A 'Sir Alex Feguson' tattoo
football

Arts and Entertainment
A spell in the sun: Emma Stone and Colin Firth star in ‘Magic in the Moonlight’
filmReview: Magic In The Moonlight
PROMOTED VIDEO
Voices
voicesApple continually kill off smaller app developers, and that's no good for anyone
Arts and Entertainment
Ben Whishaw is replacing Colin Firth as the voice of Paddington Bear
tv

Thriller is set in the secret world of British espionage

Life and Style
life

News
ebooksAn unforgettable anthology of contemporary reportage
News
ScienceGallery: Otherwise known as 'the best damn photos of space you'll see till 2015'
Life and Style
fashion

Bomber jacket worn by Mary Berry sells out within an hour

Travel
travelWhy Japan's love hotels are thriving through an economic downturn
Arts and Entertainment
Rapper Jay Z performs on the Pyramid Stage at Glastonbury in 2008
musicSinger sued over use of the single-syllable sample in 'Run This Town'
Life and Style
Alexander McQueen A/W 2014
fashionPolitics aside, tartan is on-trend again this season
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Audit Manager Central Functions

To £85,000 + banking benefits: Saxton Leigh: You will be expected to carry out...

Credit Risk Audit Manager

Up to £90,000 + benefits: Saxton Leigh: Credit Risk Audit Manager required to ...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week