The high-skill high-pay economy is already on the way

A new report covering the last 20 years of the world of work suggests the UK is on a path to better pay and higher skills. David Kernohan wonders whether more graduates was the answer all along.

David Kernohan is Acting Editor of Wonkhe

You know the job market, right?

You know how the idea of a “career for life” is dead, how the internet changed everything forever, how people change industry and role multiple times and need to “upskill” and “retrain”, and how automation and technology is turning the world of work on its head and whatever “industry 4.0” is ushering in a new paradigm of employment?

Or maybe you’ve heard the one about how Britain has failed to become the “high skilled” economy, and decades of expansion in higher education has simply given us too many graduates to fill the available pool of “graduate jobs”, leaving a world of precarious work and under-employment?

Well it turns out, according to a fabulous new report from the Resolution Foundation, none of the above is actually true.

The real world of work

The pace of structural change (labour moving between industrial sectors) has slowed down remarkably since the decline of manufacturing in the Eighties. This holds for both the volume of workers employed in each industry, and the rate of worker movement between sectors (and even between jobs).

What change there has been appears – counter-intuitively – to have involved a process of upgrading. There are more workers (and in particular more women) in high paid occupations than ever before. Jobs growth has been highest in the best paid occupations – and, unlike elsewhere in the world and the UK in the 1990s, this has not been accompanied by a corresponding growth in low paid work – indeed the number of low paid jobs is actually falling.

There’s little evidence of major current changes in the scale of industrial sectors – due to automation, AI, or anything else. So this job “upgrading” appears to be happening within sectors – either improvements to existing roles or new, well paid roles, emerging. And the last major trend in sector shrinkage – manufacturing – came about mainly via lifecycle entry/exit: employers took on less new staff, and retiring staff were not replaced.

Careers for life

Job mobility rates are lower even than at the turn of the century – 2.4 per cent of workers changed job each quarter in 2019, compared to 3.2 per cent in 2000. Only 0.5 per cent of workers between 55 and 64 did so – changing career is very much a young person thing. That might be a trend that would concern us if we are looking at the agility of the labour force in the face of an aging population – and if we expected (against, to be clear, historic evidence) our skills needs to change rapidly in the next few years it would point to a growing appetite for high quality lifelong learning.

Any change in employment patterns would, of course, make for both negative and positive experiences for workers. If the high skill and high pay growth continue, many workers might be happy to change tack to seek more fulfilling employment. But if we are, indeed, staring down the barrel of 80s style structural change involuntary career shifts (job losses, in other words) would be the collateral – with a consequent drop in the utilisation of existing skills and, probably, wages.

Graduate growth rates

Graduates, it appears, would not be immune. The report found little variation between the cross-sector career mobility of graduates and non-graduates – age (as a proxy for stage of career) appears to be the determining factor. However, graduates appear to be more likely to move (hopefully upwards!) within a sector, a finding that meshes with what we already know about lifelong earnings premiums.

The report briefly examines whether the composition of the workforce has been a driver of job mobility – age is a big factor here, but the inclusion of more graduates within the workforce has been a factor in the move to higher skilled and better paid work. When graduates move roles, these tend to be into highly skilled (non-routine, analytical, cognitive roles) – but of course movement into these roles (rather than starting off in these roles) is more common in those with highest qualifications at Level 3. In other words, those entering the workforce without a degree tend to learn more on the job (stuff, perhaps, that would be covered in a degree level qualification) and use what they have learned to move into more analytical roles – narrowing the gap.

Graduate employment, even so, is far more likely to include “cognitive” and non-routine work using either personal or analytical skills. An examination of the previous jobs of job-movers between 2002 and 2020 show that graduates enter roles like this early and move to new roles in the same categories.

Despite all of this – and remember, there are many commentators that describe the last two decades as the most disruptive in history in terms of increasing technology use in employment and the all-encompassing growth of the internet – the Resolution Foundation still bets hard on a decade of huge economic change to come. There will undoubtedly be new and expanded industries and new jobs to contend with – but from the available evidence the UK’s journey to a high-skill, high-pay economy with a growing population of graduates as the engine room is well underway. My guess will be that these trends would continue without a significant policy intervention to make things worse.

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