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8 July 2024

Back to 1997: Education, Education, Education


Edward Thomas Jones
Senior Lecturer in Economics
Bangor University

After six weeks of TV debates, many election leaflets through the letterbox, and meticulous analysis of everything said by political candidates, the United Kingdom has finally held its General Election.

A common belief is that the contest was uninspiring, with candidates more interested in political scoring than tackling the genuine issues confronting the country. The Institute for Fiscal Studies called it a “conspiracy of silence” and accused the major political parties of ignoring the necessary discussions on taxes, spending, and structural reform needed by the country. Perhaps it was naïve to expect the previous government to recognise how hard things have been or the opposition to admit how tough the road ahead will be.

GDP per capita is a popular metric used to measure the average prosperity and well-being of a country. The last general election took place in 2019 and since then, the UK has experienced a 0.2% decline in real GDP per capita. Real GDP per capita in the US increased by 6.0% during this period, compared to 3.9% in the EU and 2.5% in Japan. Between 2019 and 2022, Wales real GDP per capita had fallen by 2.8%. According to the Organisation for Economic Cooperation and Development (OECD), the UK is likely to have the lowest economic growth rate of the world’s seven largest so-called advanced economies (the “G7”). To put it bluntly, the UK has struggled to grow its economy, and it is unlikely to improve soon.

Besides a sluggish economy, Wales faces many other problems. 29% of children were at risk of being in relative income poverty in 2023. Pisa results for in that year showed Wales continued to be at the bottom of the rankings for the whole of the UK in maths, reading, and science. The construction of 4,556 dwellings began in 2023, down from 6,224 in 2019. 17% of pensioners were in relative poverty in 2023. Waiting lists for hospital treatment hit a record high, reaching 768,899 patient pathways on the list in March 2024. One in every four people of the working age is economically inactive.

American economist and New York Times columnist Paul Krugman’s aphorism continues to be fitting for a country looking to address the problems mentioned above: “Productivity isn’t everything, but, in the long run, it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.”

Productivity is all about achieving more with less effort. It is reasonable to expect that as we increase productivity while reducing effort our living standards, including the quality of public services and our personal spending capacity, will improve. If there is to be an improvement in the living standards of people nationwide, the new government must place its focus on improving productivity.

What are the underlying reasons for the lacklustre productivity in both the UK and Wales? There are multiple culprits, and fixing some is easier than others.

Investment feeds productivity, but the country has suffered from chronic underinvestment. Many firms are stuck in a low-skills, low-wage, low-productivity mode because of decades of under-investment by government and businesses.

Which investments could enhance productivity? Investing in developing workers’ skills and capabilities is one solution. By making substantial investments in skills, government and businesses can increase labour productivity by developing knowledge across all levels, from basic to high-level technical and managerial. Additionally, it would also allow greater job mobility, which leads to a better match between supply and demand.

Education enhances people’s human capital by equipping them with skills and ability that makes their time and energy more valuable to the economy. Researchers have identified a significant connection between education and productivity, which policymakers and business leaders have used to support past investments in programmes focused on building human capital.

The foundation of today’s workforce’s skills and ability was established before they entered the school system. Studies show that early childhood education is a highly cost-effective strategy for fostering economic growth. Not only does it improve children’s education performance, but it also plays a vital role in their emotional, social, and overall wellbeing. Increasing adult skill levels can also enhance productivity. Higher education in the UK is strong, but non-graduates face challenges. Reforming the adult skills programmes, vocational training, and apprenticeships can increase skill levels and decrease inequality.

UK employers are falling behind their international counterparts in terms of investing in staff training, and the situation is getting worse. The growing trend of blended workforces, combining in-house workers and outsourced freelancers, could discourage employers from providing training to their employees. Both employers and the government should invest in training, with the government offering increased financial incentives to businesses for providing training.

There are enormous challenges ahead for the new UK Government. There is no question that some surprises may lie ahead. Nonetheless, with a bit of luck they will not be worse than the uncertainty surrounding Brexit, Covid-19, the war in Ukraine, and the cost-of-living crisis. With reduced uncertainty, we can expect greater investment from government and businesses in areas that improve productivity and people’s living standards.

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