The UK labour market in recession: what is happening to employer- provided training? Geoff Mason National Institute of Economic and Social Research, London ESRC / HM Treasury Public Policy Seminar on ‘Labour market, recession and social impacts’, 29 September 2009

Overview of presentation Macroeconomic background Recent labour market trends Training in previous recessions Recent survey of employer-provided training: two data points in mid-08 and mid-09 Impacts of recession on employer-provided training The balance between adult training and labour market entry training

UK monthly GDP estimates

Weak recovery under way? NIESR forecasts (September 09): Economy to contract by 4.3% in 2009 Growth in real GDP of 1% in 2010 and 1.8% in 2011 GDP forecast to return to its 2008-Q1 peak in 2012-Q3 Unemployment expected to continue to rise, peaking at around 3 million in 2011

Employment, unemployment and inactivity

Hours, earnings and bargaining power

What happens to training in recessions? Potential developments: Downward pressure on training budgets More time available to train Forward-thinking skills development for future recovery Experience in past recessions: Early 80s – apprenticeship training hit hard Early 90s: Loss of skilled jobs more serious than reduction in training Employer-provided training cut in some sectors between 1990 and 1992 but maintained in others, partly as result of regulatory requirements and (in some cases) as response to intensified market competition (Felstead and Green, 1996)

Early evidence on current recession CIPD surveys of 892 member firms (Winter 08-09): 32% of firms report cuts in training budgets in recent months 24% have increased staff training CFE/ICM on-line survey of 505 businesses in England (June 09): 16% of firms have increased staff training 63% no change 16% reduction 5% don’t know

LLAKES-NIESR longitudinal survey of adult training, mid-2008 and mid-2009

Change in sales in previous 12 months, mid-2009

Change in training expenditure in previous 12 months, mid-2009

Focussing on training for ‘core employees’ Detailed questions about training asked about ‘core employees’ in both 2008 and 2009 surveys Core employees defined as those ‘whose skills and knowledge make the greatest contribution to the success of your business’ (excluding managers) For establishments with under 10 employees, training questions were asked about All Employees Main core groups were: –professionals in arch./eng. services –personal care providers in social work –advisers in cultural sectors –operators in electronics and related engineering –sales workers in retail

Core employee skills in need of updating or improvement, 2008

Declining intensity of core group training provision between 2008 and 2009

Multivariate analysis of intensity of off-the- job training provision Off-the-job training for core employees is significantly and positively related to sector characteristics (highest in social work), union presence and change in sales in previous 12 months Controls in place for sector, size of establishment, core group qualifications, age of firm, single establishments, foreign ownership, geographical market focus, union presence and recent innovations Decline in training intensity in 2009 is most likely to occur in establishments reporting declining sales, especially large establishments where sales have fallen In 2008 off-the-job training intensity was significantly and positively related to skill updating and improvement needs – but this was no longer the case in 2009

Training plans blown off course?

Assessment Reported increases in training by some firms closely related to above-average sales performance Similarly, reductions in training provision in other firms linked to decline in sales Training in hardest hit firms is not cut altogether but is greatly reduced in intensity Off-the-job training in these firms has declined much more steeply than on-the-job training In-depth qualitative research in progress to find out how much this matters in terms of unmet skill improvement needs for adult workers Policy issues regarding balance of public sector support for adult upskilling and reskilling as compared with education and training provision for labour market entrants

Education and training participation by /64 year olds, UK, (Source: LFS)

Policy issues Strong case for allocating scarce resources towards younger age groups most vulnerable to unemployment and inactivity during recession BUT: many downsides to continued reduction in adult education and training participation: –Productivity suffers from adult skills not being updated or improved to required levels –Loss of vocational training capacity in colleges and training providers –Reduced scope for health benefits and improvements in well-being and civic involvement associated with adult participation in learning activities