By Mark Beatson, CIPD Chief Economist, @MarkBeatson1, #CIPDmanifesto
Today saw the launch of the CIPD Manifesto for Work: a policy programme to champion better work and working lives. The document is designed to promote discussion in the run-up to the general election about the key work-related challenges that the next government will face and the approaches that might best help to address them.
The most important challenge for economic policy is helping to create the conditions for productivity growth. Without this, it is difficult to see sustainable growth or real increases in average earnings. The productivity figures for the first quarter of 2014 – published after the CIPD Manifesto went to press – remind us that healthy growth (3% year-on-year) does not guarantee productivity growth.
Even if recent increases in the rate of business investment start to bear fruit during 2015, this is not a case of ‘problem solved’. Global competition, technological change and an ageing population mean that raising and sustaining the UK’s productivity performance is a permanent pre-occupation for governments.
If the UK is to improve its productivity performance, it needs to increase investment – both public and private, and in both tangible assets (such as plant and machinery) and intangible assets (such as people and knowledge). It also needs to raise its innovation performance to generate a higher return on these investments. But these are both policy areas where there has arguably been too much emphasis on the supply side – increasing the throughput of skilled people and research – and too little emphasis on the demand side – increasing the capability of UK organisations to realise value from these assets.
So at times we have seen skills policy become a numbers game – how quickly (and cheaply) can the system deliver X thousand people qualified to level Y to employers? Yet there is evidence from both employers and employees that the existing skills of the workforce are not put to best use, sometimes because employers do not have the people management skills to get the best from their workforce, sometimes because employers are competing in low-cost, low-value market segments and do not see any need to change their ways.
Similarly, policy makers have found it hard to move once and for all away from approaches based on a linear model of innovation where more R&D spend leads to more patenting (see here, or for a more analytical treatment, see The linear model of innovation). Inovation policy statements prepared both by this government and its predecessor have recognised the complexities of innovation systems and the important role that governments can create in shaping the demand for innovative products and services (see here or the Department for Business' Innovation and research strategy for growth). Yet the linear model keeps coming back like the zombie.
What do these demand side policies look like? Well that’s part of the problem. They are not as easy to understand or visualise as splashing the cash. They often require a degree of clarity about objectives and co-ordination between actors (within the public sector as well as outside it) that stretches the capability of our system of government. The market failures that provide a rationale for government to fund basic science and subsidise business investment in R&D and training are well understood and widely accepted. Departments may argue bitterly with the Treasury about how much should be spent, and how it should be allocated, but the legitimacy of intervention is rarely questioned. In contrast, a Minister who wants one of his/her colleagues in another Department to change the way they deliver a public service in order to provide more opportunities for innovative ideas from the private or voluntary sectors may well be asked to park their tanks somewhere else.
A report we published earlier this year on the need for better integration of skills and industrial policy emphasised the roles that regulation and public procurement can play in stimulating innovation and raising business ambitions but turning that insight into actions means confronting the (understandable) pressures on government to reduce the costs of government and to avoid unnecessary business regulation.
This is an area where it can be hard to understand the exact nature of the problem, let alone engineer workable policy solutions. That is why we are calling for a fundamental review in this area rather than providing a shopping list of specific measures.
Last year’s report by the London School of Economics, prepared in partnership with the Institute for Government, quite rightly drew attention to the importance of institutions and the way in which policies are developed and delivered. But, again, the options most likely to be effective in a UK context are not obvious.
A recurring refrain from elements of the business community, commentators and (sometimes) from politicians is the absence of a top-down vision of where the UK economy is heading (or should be heading) as this would, it is argued, help shape the expectations and behaviour of business and government (for example). Such visions were, of course, plentiful in Communist countries and have arguably had some success in small, highly specialised economies where there is either a strong degree of political consensus or political hegemony. But it is hard to see how any UK government could develop something capable of surviving a change of government and avoiding lowest-common-denominator, please-every-interest group platitudes. One reason behind the country-as-company fallacy is that companies are not democracies. Equally, high-level, ‘Council of war’-style co-ordinating bodies (preferably chaired by the Prime Minister) are unlikely to be an effective vehicle for strengthening inter-Departmental working because growth policy is a long-term problem and the energy and attention of senior Ministers are extremely scarce and easily diverted to more pressing issues.
CIPD has, nevertheless, dipped its toe in the water by calling for the creation of a Workplace Commission. The objectives here are limited and specific:
We have not provided a detailed blueprint. It is more important at this stage to be clear about the design principles on which such a body would be based and to build support for the general principle.
Shifting the balance of growth policies towards the demand side is difficult and will take time. Existing initiatives and policies working in this area, such as the Catalyst Centres or the Small Business Research Initiative, may need to be adapted or expanded. Other policies will probably need to be transformed or created from scratch. Some won’t work. Funding for some areas will need to be expanded or reallocated but money is not the only issue. Having the right people in the right place and the political strength to implement change are at least as important. So it requires money, the right people, political capital, time and patience – all things that governments tend to run out of. But we like a challenge.
To provide your thoughts on any of the policy calls contained in the CIPD Manifesto for Work, please use the comment box below.
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