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

The Profile of the Depression: Months from the Start of the Depression

-9%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51

GD

P : C

han

ge

from

Pea

k

1930-1934 1973-1976 1979-1983 1990-1993 2008-

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

3 months ending July 08

3 months ending July 09

Employment levelTotal (millions) 29.5 28.9Full-time (mn) 22.0 21.3

Part-time (mn) 7.5 7.6

Working-age employment rate Total (%) 74.6 72.5Men (%) 78.6 75.8

Women (%) 70.3 68.9

Working-age ILO unemployment rateTotal (%) 5.7 8.1Men (%) 6.1 9.1

Women (%) 5.2 6.9

Working-age economic inactivity rateTotal (%) 20.8 21.1Men (%) 16.2 16.6

Women (%) 25.8 26.0

Source: LFS/ONS, September 2009

Unemployment rates, analysed by age-group, mid-2008 and mid-2009

0

5

10

15

20

25

30

35

40

All aged 16 andover

16-17 18-24 25-49 50 and over

% o

f a

ge

-gro

up

Mid-2008 Mid-2009

Hours, earnings and bargaining power3 months

ending July 083 months

ending July 09Usual weekly hours of work in main job

% working less than 6 hours 1.2 1.2% working 6-15 hours 6.6 6.8

% working 16-30 hours 18 18.8% working 31-45 hours 55.7 55.7

% working over 45 hours 18.6 17.5

Average earnings (incl. bonuses)

July 08 July 09Whole economy 3.4 1.7

Private sector 3.1 1.2Public sector 3.2 3.4

Labour disputes

12 months ending July 08

12 months ending July 09

Whole economy 1115 253Private sector 1064 180Public sector 51 73

Source: ONS, September 2009

% changes year on year (3 month average)

Working days lost (thousands)

What happens to training in recessions?Potential developments:• Downward pressure on training budgets• More time available to train• Forward-thinking skills development for future

recoveryExperience 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

City-region: Birmingham Glasgow Manchester South West (GOR)

Southampton

Sector: Architectural and

engineering services

Social work

Cultural industries

Electronic, electrical and

instrument engineering

Retail Total

Size group:5-9 15 15 17 9 27 8310-24 18 38 24 16 18 11425 - 49 9 11 7 7 8 4250 - 99 2 8 3 4 1 18100 - 199 2 4 7 0 2 15200-plus 2 3 2 2 4 13

Total 48 79 60 38 60 28536% single-establishment firms, 64% part of multi-establishment firm; 89% UK-owned, 11% foreign-owned

Number of establishments

Change in sales in previous 12 months, mid-2009

0

10

20

30

40

50

60

70

80

Arch./eng.services

Social work Cultural Elect. Eng. Retail

% o

f est

ab

lish

me

nts

Rapid decline

Some decline

No change

Some growth

Rapid growth

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

0

10

20

30

40

50

60

70

80

90

Arch./eng.services

Social work Cultural Elect. Eng. Retail

% o

f est

ab

lish

me

nts

Decreased by more than 25%

Decreased by up to 25%

Stayed the same

Increased by up to 25%

Increased by more than 25%

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

All sectors% of establishments

Core employee skill gapsComputing skills 50Generic skills 74Leadership and supervisory skills 54Basic skills 24Technical and practical skills 44No skills need improvement 11

Factors driving changes in core employee skills over previous 2-3 years

Development of new goods and services 44Introduction of new working practices 47Introduction of new technologies or equipment 51New legislative or regulatory requirements 53No change in skill requirements 19

Declining intensity of core group training provision between 2008 and 2009

2008 2009

Proportion of core group receiving ON-the-job training:None 14 16Up to a third 6 30One third to two thirds 16 23Two thirds or more 64 31

Total 100 100

2008 2009

Proportion of core group receiving OFF-the-job training:None 30 46Up to a third 17 27One third to two thirds 21 14Two thirds or more 33 12

Total 100 100

% of establishments

% of establishments

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?% of establishments stating 'very likely' to

provide future training, 2008

Proportion of employees receiving ON-the-job training, 2009None 8Up to a third 29One third to two thirds 29Two thirds or more 34

Total 100(n = 167)

Proportion of employees receiving OFF-the-job training, 2009None 41Up to a third 30One third to two thirds 15Two thirds or more 14

Total 100(n = 189)

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 25-59/64 year olds, UK, 1993-2008 (Source: LFS)

5

10

15

20

25

30

35

1993 1996 1999 2002 2005 2008

% of working-age people aged 25-plus (men 25-64;

women 25-59)

Formal education, job-related training (13 weeks)and/or leisure or othereducation classes

Formal education and/orjob-related training (13weeks)

Job-related training (past 13weeks)

Job-related training (past 4weeks)

Formal education

Leisure or other educationclasses (not job-related)

Educational and economic activity status, 16-17 year olds, mid-2008 and mid-2009 (Source: LFS/ONS)

0 10 20 30 40 50 60 70 80 90

In full-time education (FTE)

Economically inactive (not in FTE)

Unemployed (not in FTE)

Employed (not in FTE)

Economically inactive (in FTE)

Unemployed (in FTE)

Employed (in FTE)

% of all 16-17 year olds

Mid-2008

Mid-2009

Educational and economic activity status, 18-24 year olds, mid-2008 and mid-2009 (Source: LFS/ONS)

0 10 20 30 40 50 60

In full-time education (FTE)

Economically inactive (not in FTE)

Unemployed (not in FTE)

Employed (not in FTE)

Economically inactive (in FTE)

Unemployed (in FTE)

Employed (in FTE)

% of all18-24 year olds

Mid-2008

Mid-2009

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