South West Regional Skills Enterprise and Employment Analysis 2007/2008

Final Report

4.9 Higher Level Skills

4.9.1 Higher skills and productivity

The Skills in England Evidence Report(43), highlights that explanations for the observed differences between British productivity in a given sector and that in competitor countries are complex. The report concludes that productivity depends upon:

• Higher- and intermediate-level education, higher productivity being associated with more people being qualified to this level;
• More professionals in an industry, resulting in higher productivity;
• The presence of ICT occupations, which is related to higher productivity.

The results further suggest that sectoral differences are more important than national differences when looking at productivity. This suggests, given the relatively poor aggregate performance of national productivity over recent years, that there has been too much concentration in the economy as a whole on low productivity activities.

The economic performance of the key sectors and the individual organisations within the sectors is crucial to overall productivity of the South West, and indeed the UK.

The RDA’s study(44) outlined the importance of skills and human capital to economic growth of the South West. The following was highlighted:

• Analysis of business-level data confirmed that both higher level skills and lack of basic skills impact on productivity. Findings suggest that a 10% increase in the proportion of the population with higher level skills might result in an increase in output per head of the order of 0.7%. Conversely, a 10% increase in the proportion lacking basic skills might result in a 0.5% drop in productivity.
• Higher level skills thus have a slightly stronger effect than basic skills. Both were, however, found to be more important in terms of productivity in the South West than in other regions.
• Other evidence suggests that higher level skills are also important beyond their immediate effects. They are likely to increase rates of innovation including capacity to adopt new processes, new working procedures and use of ICT. Higher concentrations of higher level skills may also increase the likelihood of knowledge-exchange through local face-to-face interaction.

(43) Skills in England 2005: Research Report, Evidence Report, 2006, LSC
(44) Meeting the Productivity Challenge – Report on a study for the South West of England Regional Development Agency, April 2005. University of the West of England, Bristol and the University of Bath.