British employers blamed for £754bn brain drain

Concerns raised as employers use smaller proportion of nation’s natural human talent and skills

Whitehall Editor

British employers are using a smaller proportion of the nation’s natural human talent and skills than at any time since statisticians first started measuring the trend, it emerged yesterday.

The Office for National Statistics has revealed that the “talent deficit” is now costing the UK economy £754bn a year, as well-educated graduates find it hard to get skilled work after leaving university. The figures could go some way to explain why – even when GDP is growing – UK productivity remains stubbornly low.

For the last 10 years the ONS has been attempting to measure what it describes as “human capital” – effectively the knowledge, skills and competencies that workers bring to the economy.

In the years between 2004 and 2007 it found the value of the UK’s human capital stock increased steadily, at an average of 3.1 per cent a year. This increase was driven by a growth in employed working-age people and an increase in the skills level of the population.

But the recession has led to falling employment rates and lower earnings resulting in a significant diminution of the natural skills used. In 2012 the value of the UK’s employed human capital was £17.15trn; £68bn lower than in 2011. At the same time the gap between the UK’s full human capital and employed human capital was the largest since estimates began in 2004 at £754bn.

Economic studies have shown that countries with higher levels of human capital have greater potential output and income in the future. Controversially, the ONS weights younger workers higher than older workers – suggesting they are more productive, innovative and skilled than those nearing retirement.

The total value of women’s human capital was around 59 per cent of men’s, reflecting the shorter average time they spend in paid employment and their lower average labour market earnings. Ruth Spellman, chief executive of the Workers’ Education Association, told the BBC that Britain was failing to invest in continuing workplace education.

“Productivity has been falling and will continue to fall if we continue to take a short-term view [towards education],” she said. “If you look at statistics in other countries, 60 per cent of adults carry on learning throughout their lives while in this country the figure is 20 per cent.”

Neil Carberry, CBI director of employment and skills, said it was well aware that the UK’s workforce was “critical to economic success”. “That’s why the CBI is campaigning for more effective schooling, better apprenticeships and a more flexible system of work-based further and higher education that will help people gain new skills throughout their working life,” he said.

But TUC general secretary Frances O’Grady said: “Employers need to recognise their responsibilities to train their staff. While the last few years have seen employers making more effort to hold on to staff than in previous recessions, job losses mean the economy has still lost a trillion pounds worth of skills and talent since the crash.”

Capital idea: Defining human value

The ONS describes human capital as a measurement of a person’s competencies, knowledge, social attributes, personality and health, including creativity.

All of these factors enable a person to work and therefore produce something of economic value.

The technical definition adopted by ONS is provided by the Organisation for Economic Co-operation and Development (OECD). It identifies four main ways that human capital can be developed:

* Learning within the family and in an early childcare setting.

* Formal education and training.

* Workplace training.

* Informal learning (for example through daily living, civic participation and on-the-job training).

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