Last week, the UK’s Prime Minister, Boris Johnson, gave a speech on one of the government’s top policy priorities: levelling up. It had a welcome recognition of the importance of human capital (which I’ve written about previously). It also highlighted the potential for less prosperous places to house more people and businesses enabled by digital connections. If more than a quarter of UK jobs could be done remotely (the highest proportion among peer countries), maybe more of them could be in these areas? Remote work tends to suit occupations that are higher-paid, so could in theory be quite a boost to these regions.
“… it is the mission of this government to unite and level up across the whole UK not just because that is morally right but because if we fail then we are simply squandering vast reserves of human capital, we are failing to allow people to fulfil their potential and we are holding our country back…”, Boris Johnson, Prime Minister, United Kingdom
The previous week, I had had the honour of joining the Digital Economy Council’s meeting chaired by the Secretary of State for the Department for Digital, Culture, Media & Sport, Rt Hon Oliver Dowden MP. One of the main discussions on the agenda was the role of digital technology as one of the potential solutions for levelling up. The input will feed into the government’s White Paper to be published in the autumn.
That White Paper might need to say more about digital skills than the PM’s speech did, however. [A word search for “digital” in the speech brought up zero matches; “skills” were mentioned six times as was “education”; and a search for “broadband” got two hits.] After all, it is these skills that will allow local employment to grow in the jobs of the future; or at least mitigate against a somewhat inevitable decline in some of the jobs most likely to be automated (whether here in the UK or somewhere else in the world).
Local areas whose workforces have the right skills will be able to attract new investment and enable businesses to grow, creating more high-quality jobs; and those businesses, in turn, will likely continue to upskill their workers as requirements change over time. [In the UK, businesses spend far more on workforce skills than the government; only 2% of the UK’s current education budget is spent on adult learning.]
But the UK’s “left behind” places suffer from a chicken-and-egg situation. If their current skill levels are poor (which they are, see below), they are unlikely to attract growing businesses (or unlikely to enable existing businesses to remain competitive). If these places don’t have thriving businesses, they won’t attract highly educated or skilled people to move in, to complement the local population; nor benefit from the human capital investments such businesses make (both implicitly — e.g., through better management practices — and explicitly — e.g., through training expenditure).
As some people say, they are stuck at a “low skills, low investment equilibrium”. [I don’t personally believe in equilibria (even as a mental model) when it comes to complex adaptive systems made up of people (such as the economy), but prefer to think about virtuous and vicious cycles, or reinforcing feedback loops, that tend to create winner-take-all dynamics. For more on these as relates to local areas, see e.g., #17 here.]
Unfortunately, there seems to be a misconception that building great broadband will somehow fix this problem. This misconception could reflect a number of different things: a simplistic mental model (“more is always better”), a poor undrestanding of complex systems (where the entire system may be held back by a single bottleneck resource), or vested interests. It is also possible that broadband is much easier to “fix” than skills are, so in that sense is a logical lever to reach for.
However, it is still important to be aware of the facts. Indeed, broadband download speeds (top left hand panel of the chart) are already better in the “lagging behind” places — those with low and only slowly growing household incomes — than they are in some of the country’s most dynamic areas. Since the benefits of broadband have been demonstrated to depend on suitable and complementary skills, adding more capacity is highly unlikely to do much for the majority of the population. [Or, more accurately, it is unlikely to do much for their economic prospects. I’m not saying anything about their enjoyment of streaming services like Netflix.]
At the same time, the “lagging behind” places could definitely do with more remote-enabled jobs, better overall proficiency levels in the workforce, and digital skills. As the top right hand panel in the chart shows, many fewer occupations currently in the “lagging behind” areas are suitable for remote work than is the case in areas that are “charging ahead”. The national average for this type of job is 26%, but they only make up 22% of the employment in local areas that really need levelling up. [Note: my focus here is on economic levelling up, which is not the same as improving people’s life satisfaction.]
The same pattern is visible when it comes to education and skills. On average, 73% of the population in the UK have an A-level qualification or higher; but in the “lagging behind” areas, only 69% do. There aren’t any good statistics on digital skills at the local authority level (that I have been able to find), but since digital skills are mostly learned by using digital systems, the occupation mix in different areas gives us some clues. Up to 45% of people in the “lagging behind” areas work in jobs that don’t require significiant the use of a computer or other digital systems; while only 33% in the “charging ahead” areas do.
Now, it could be tempting to jump to the conclusion that we need to improve education in those areas to reduce these disparities, and that is certainly necessary. But it is very far from sufficient. The average age of the person that needs to be retrained or reskilled in the UK workforce is 42. However brilliant our education system or T-level, traineeship and apprenticeship programmes, they are unlikely to be a universal solution for retraining or upskilling mid-career. Instead, what is needed is life-long learning. Few countries have succeeded in delivering it consistently (see e.g., here), but the CBI’s recent skills report is a great start on what could work in Britain.
Other blogs by me on levelling up (in reverse chronological order):