One feature of this trend is that the top 10% of the income distribution has benefited over the last 20 years and that they will continue to benefit. We now have an ‘hour glass’ economy with a large number of professional and low-skill jobs and little in the way of intermediate technical positions on which the economic strength of German rests.
The decline in trade unionism has had a calamitous consequence in allowing wages to stagnate, income distribution to deteriorate and vocational education in England to remain little more than a sick joke. Another factor to bear in mind is the huge scale of tax evasion and avoidance – estimated at £120 billion a year. We need to bear this in mind when we hear of nostrums from One Nation Labour about ‘predistribution’. There is a lot of scope still for redistribution before we even get on to the issue of improving people’s incomes.
This is not a stable situation. The offshoring of jobs has now bitten deep into middle class and graduate employment; law, software engineering, accountancy, banking and general administration are all exporting jobs to developing countries where there is graduate labour available at a fifth of the cost in the UK. The future for employment for 90% of the population is not looking too good. We need to bear in mind that in three years time graduates will be emerging onto the labour market with around £40-50,000 worth of debt and that their chances of enjoying the middle class life of their parents will, for the great majority, be bleak.
The Tories in the form of David Willetts claim that all is well as the government is eliminating income tax at lowest end of the earnings spectrum and is pressing ahead with apprenticeships which will reskill the population. We need to look carefully at these claims. They are not in fact all that different from what is promised by One Nation Labour. Abolishing income tax for the first £10,000 or so of earnings unfortunately also benefits the highest earners so can hardly be termed a relief measure for the low waged alone.
Tax credits have made life bearable for many people on low wages while making life easier for employers who do not have to bother to pay a decent wage to their employees and that this taxpayer subsidy for employers who do not pay their employees sufficiently cannot continue to increase. In this connection it is worth noting as well that the absence of controls on private rents is putting increasing pressure on households and that, once again, greedy landlords are being subsidised by the taxpayer through housing benefit.
One issue that has become apparent is that the low wage, low skill economy operated by Britain is contributing to this state of affairs. This journal has written extensively about this issue and we note that all the parties pay lipservice to the ‘reskilling’ of the economy, particularly of the skilled worker/technician category of labour. David Willetts claims, like Gordon Brown before him, that the number of apprenticeship is being rapidly increased. Gordon Brown is mainly responsible for calling virtually any kind of training scheme, for young people or adults an ‘apprenticeship’. The figures that the government quotes in the media are, therefore highly misleading.
An apprenticeship, properly so called, is a programme of three years or more duration, combining workplace practice, technical knowledge and continuing general education, which results in a level 3 qualification (roughly equivalent to two A level passes). Lower level forms of training and retraining for adults should not be included in these figures as they are either for lower skilled work or they are helping the current workforce to find a new job.
They cannot be counted in the provision that we make for young people to enter the labour market as skilled workers. We need to make this clear so that apprenticeship rates in England are properly compared with those in Germany, for example, which uses a very successful mass apprenticeship system for its young people.
This is what we obtain from government statistics when we look at Advanced (level 3) Apprenticeships for the under 25s. Starts have risen from 32,000 in 2006-7 to 51,600 in 2010-11. This looks like a reasonable rise after years of decline but it is still a drop in the ocean when compared with the million or so young people not in employment, education or training. However, when we look at completion rates for the 2006/7 cohort in 2009-10 we find that there are only 25,400, quite a modest figure representing an attrition rate of nearly 21%, a huge waste. So the way in which successive governments are addressing the needs of the economy and of young people to earn a decent living are not very impressive. It is simply a fraud to pretend that we are moving to a mass apprenticeship system and to the transformation of our economy.
David Willetts has made the point that he does not think that the poaching of apprentices by firms who do not train is a serious issue. The implication of this is that the government does not need to do anything about obliging firms to train. They can instead, it is claimed, be bribed to do so.
Brown tried this for many years without any success. Now it is true that firms that do not wish to take a high skill route will not be interested in poaching trained employees from other firms but neither will they have any incentive to train their own if what they sell requires little skilled input. Willetts, like Brown and his ministers does not want to tell employers what to do.
They, like Ed Miliband and One Nation Labour, are not going to introduce a levy grant system, whereby a compulsory employer payroll tax is recouped for training purposes, because they are afraid of employer resistance. It therefore won’t happen unless the trade union movement exerts some pressure to make it happen.
The brutal fact of the matter is that the strivers will continue to strive in vain as long as Britain is short of good jobs. And those jobs will never arrive so long as employers are not obliged to up their game and develop high specification goods and services. They are only likely to do so if they have to invest in their workforces. The fact that they do not and that neither the government or Labour will oblige them to do so point to continuing economic decline in Britain.
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