Climbing unnecessary ladders

Sam Freedman, Head of the Education Unit at Policy Exchange

It is a major flaw of the Leitch review, and government skills policy in general, that skills and qualifications continue to be treated as equivalents. While the review graciously allows that it is possible to have skills without qualifications (and vice versa) it nevertheless treats them as equivalents throughout. Most qualifications have some value to employers, not because of the skills they theoretically represent; but because they act as a screening process.

The more people, though, that have any given qualification the less value it has as a filter. Badly designed qualifications can actually warn off employers (there is evidence from the IFS that NVQs have this effect).

Higher Education

One just has to look at what has happened in Higher Education over the past 40 years. The Government's lingering obsession with herding 50 per cent of young people through HE is indicative of their alarmingly naïve acceptance of the equation: qualifications = skills = economic growth. Of course, it has been historically true that a degree has led to higher earnings potential, but that is because higher education has always acted as a "signal" for employees.

When only 10 per cent of the population went to university employers could use a degree as a proxy (though not an entirely accurate one) for the most able in the country. It was never, in most cases, a measure of the skills imparted by the degree. At 40 per cent or 50 per cent degrees cannot be used as a proxy for the very best, so employers have, for some time now, been making judgments about the type of degree and where it was taken.

Degree value

This means that while some degrees remain profitable many now have little value. In fact a 2005 study by Nigel O'Leary and Peter Sloane at the University of Swansea found that male arts graduates had, on average, a negative return on investment. This was confirmed in an analysis from the Institute of Education published earlier this year. Figures released recently by HESA (Higher Education Statistical Authority) show that only 66 per cent of graduates are in graduate jobs four years after completing a degree. It isn't hard to guess which types of degree are most and least likely to lead to graduate employment. Only 2 per cent of those studying medicine are in non-graduate jobs compared to 40 per cent who took "mass communications and documentations" (i.e. media studies).

Where you study

Where you study also makes a huge difference. According to figures collected by the Sunday Times, 93.6 per cent of LSE graduates are in graduate jobs sixth months after completing their degree compared to 43.4 per cent at Bath Spa University. The average starting salary for LSE graduates is twice as high as that for the lowest ranked institution (Trinity College in Carmarthen).

So why does this matter? Well for a start the taxpayer subsidises all 2.3 million students to the tune of £11 billion a year. I have nothing against education for education's sake, but the government's justification for this subsidy (and the 50 per cent recruitment figure) is that it will lead to economic growth. The evidence from the Swansea study and other similar reports makes this argument ever more untenable: it is not even in the economic interests of the individuals, let alone the country.

Unskilled jobs

The government keeps telling us that there will only be 600,000 unskilled jobs in the UK by 2020. But a close reading of the analysis underlying Leitch shows that even on the most optimistic projections there will still be 2 million jobs in "elementary occupations" in 2020 along with 2.7 million sales and 2.8 million administrative jobs respectively. While many of these jobs will require some level of formal qualifications, it is stretching it to call them "skilled jobs". Indeed Leitch suggests there will be 300,000 more customer service jobs in 2020 than there are now; yet in a recent Financial Times survey, more than two thirds of employees in customer service occupations felt they were overqualified. The overall proportion of those who thought they were overqualified has increased by 5 per cent in last five years.

As more and more people gain each level of qualification they will lose their "signal" effect for employers forcing young people to move to the next level even if that qualification will leave them drastically over-qualified.

Yet the real skills problem - an educational underclass that cannot master functional skills will remain. We should stop worrying about the number of people at level 3 or level 5 and instead put additional resource into making sure every child can read and write on leaving primary school - no qualification required.