September has arrived and summer is over. Here in the UK, the children have gone back to school and many of those who graduated from universities will be making their first tentative steps into the world of work.
RGL have had a graduate scheme for over 20 years and our latest graduates started this month. Every year, I find myself commenting on how young they look, which is clearly a reflection of my own advancing years, while at the same time marvelling at the opportunities that are available to them.
The economy is doing relatively well and unemployment is down, so when I read media reports quoting the Archbishop of Canterbury, Justin Welby, as saying that “Britain’s economic model is broken”, it got me thinking.
Rev Welby’s comments are part of a report published by the Institute for Public Policy Research (“IPPR”), the main points of whose research are:
- The UK economy no longer translates economic growth into rising earnings, with gains going into profits rather than wages;
- The UK is the most geographically unbalanced economy in Europe, with 40% of output produced in London and the south-east; and
- The labour market is increasingly casualised with more workers on low pay than 10 years ago, 3% on zero hours contracts and more employees overqualified for their jobs than anywhere else in the EU.
The report continues and calls for public debate on a number of reforms related to the tax system that would encourage investment behaviour that is good for the economy and society, as well as achieving a more even distribution of wealth around the country.
While the report is right in wanting to instigate a debate on these topics, I do wonder if it is missing something with regard to its conclusions on the labour market and, in particular, the impact of the education system on jobs and the economy and vice versa.
Every year, the government publishes GCSE and A-Level results. Starting with GCSE’s, the number of students achieving 5 GCSE’s with a grade of A* to C, including English and Maths, has increased from 35.2% in 1996 to a peak of 59.2% in 2013, reducing slightly to 52.8% in 2016, the last year before the grading system changed. As for A-Levels, the number of candidates achieving a grade of A* to C increased from 53.9% in 1998 to 78.3% in 2016.
If it is the goal of education to create an environment where students can achieve their academic potential, encourage them to pursue their ambitions and prepare them for the world of work, then the exam result statistics make for encouraging reading. These would appear to suggest that our schools are producing increasingly more able students which ought to translate into a stronger economy.
However, this appears to be contradicted by the IPPR report. If the education system is working properly, as the exam results would indicate that it is, then why does the UK have more employees overqualified for their job than anywhere else in the EU? Is it the case that current academic qualifications are not what they used to be or is there a fundamental problem with the UK economy in that we are not creating the right jobs for our graduates?
It is often said that to get to the true root cause of a problem, the question “why?” needs to be asked five times. While this runs the risk of making us all sound like 3-year olds, it is critical in allowing us to be able to both fully understand the problem as well as formulate the correct solution(s).
The tax system is complicated as it is, so, rather than messing around with it perhaps we should be considering the following questions:
- Do we educate our children in the right way?
- Are we developing the right skill sets in our children that prepare them for the world of work?
- Does the UK economy have the right incentives to encourage and promote entrepreneurial behaviour that will create valuable jobs for our children?
- Do schools coach our children in the right way to develop an entrepreneurial spirit that will then create jobs in the future?
- Are our children becoming academically more accomplished year by year as suggested by exam results?
If the answer to any, or all, of the above is “no”, then the next step in the root cause analysis has to be to ask why? This will likely result in a number of further questions and hypotheses that will need to be analysed and tested.
Which then brings me back to the opportunities currently available to our graduates – given the questions raised by the IPPR, maybe there is a need for forensic accountants to critically analyse this type of economic data in future to ensure that we are asking the right questions when instigating a public debate before we start to consider the solutions?