Investment in Skills & Productivity: German-British Forum Conference

Better training as the key to economic dynamism

Bob Bischof will be co-chairing the upcoming German-British Forum Conference on Monday 22 and Tuesday 23rd November this year.

Entitled Investment in Skills & Productivity: Better training as the key to economic dynamism, the conference will address pressing macro- and micro-economic themes around how to ensure young people are being trained in the right ways to address the future needs of modern European economies.

Investment in Skills: the German-British Forum Conference
Download the Conference Programme and Registration Form PDF

Europe as a whole recognises that a high-skill, high-productivity economy provides the most effective platform to boost competitiveness and enhance well-being.

As Peter Loescher, Chief Executive of Siemens AG, put it at the Annual Dinner of the German-British Chamber of Industry and Commerce on 9 June 2010 in London;

“We have to get the message across to our youngsters in schools and universities that we need to out-innovate the innovators all over the world.”

German Industry UK (GIUK) has been at the forefront of efforts by German businesses in the UK to attempt to provide in Britain a framework similar to the German Dual Training System.

GIUK has held constructive meetings with Ministers from both the Labour government and the new Conservative-Liberal coalition administration and has now set up a working group within the Department for Business, Innovation and Skills to determine how this can be done for England.

The new UK government has made tackling the skills gap a significant priority in its efforts to spur economic renewal. There is considerable interest in learning lessons from Germany, where equipping the workforce with competitive skills through the vaunted apprenticeship and vocational training system, in partnership with industry, has long been a centre-piece of economic policy.

The presence of a large number of German companies in the UK has added impetus. Underlining this point, Robert Bosch, BMW, EON and Siemens are all giving support to the conference.

The gathering will highlight the role of the Technician Council, a new body set up in the UK to promote a new non-academic route to technical excellence for employees in many different fields.

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Skills: The Key to Productivity

Numbers of so-called NEETS (young people Not in Employment, Education or Training) have risen to close to a million and over a million 16-19 year olds are out of work – the highest in Europe.

In the Lisbon Treaty of 2000 European leaders committed their governments among other aims to the promotion of Vocational Education and Training (VET) and expressively recognized that it has not only an economic but also a strong social dimension as Germany proves with the lowest unemployment rate among young people in Europe.

Numbers of so-called NEETS (young people Not in Employment, Education or Training) have risen to close to a million and over a million 16-19 year olds are out of work – the highest in Europe.

In the Lisbon Treaty of 2000 European leaders committed their governments among other aims to the promotion of Vocational Education and Training (VET) and expressively recognized that it has not only an economic but also a strong social dimension as Germany proves with the lowest unemployment rate among young people in Europe.

In the follow-up meetings in Copenhagen in 2002 (Copenhagen Declaration), Maastricht 2004 and Helsinki 2006, targets were set and monitored to improve and modernise vocational training by 2010 for young and old and start the process of a European Vocational Framework, which would allow more mobility between countries and recognition of each other’s certification regimes.

In the Brussels follow-up meeting in 2008 it was recognized that most of the targets set for 2010 were going to be missed, as they were too ambitious. However, as times are changing now, the problem is supposed to be addressed with renewed vigour or will it? There is some doubt that there is real energy spent on it.

GIUK Survey on Employability Reveals Confusion

German Industry UK (GIUK), an association of German businesses in this country, launched a survey of its members in 2008 regarding employability and availability of skilled people in the UK. The survey showed that German managers were confused about the diversity of offerings in vocational training and certifications and considered the general lack of young people, who would qualify for vocational training a drag on their businesses. My own experience in UK manufacturing and logistics bears this out.

In October 2008 and with some prodding from the Prime Minister, GIUK went on a 3-day fact finding tour to Germany with David Lammy, then Minister for Skills and three assistants to study the German dual apprenticeship system and visit a number of firms. The team was impressed. The minister promised to engage with GIUK, however before he could act he was promoted and handed over to Lord Young, who promised to pick up where David Lammy had left off. Three months later he was moved on.

German Industry, which employs directly and indirectly around a million people in the UK, had promised more apprenticeship places in return for involvement in the curricula and the overdue simplification and streamlining process of apprenticeships.

GIUK – speaking for its members – is clearly saying that the present system is preventing German business from being as competitive in their UK operations as elsewhere and demanding change. This is particularly important in manufacturing, however skills are important everywhere including the public sector.

We believe that at the heart of the problem in the UK is an at best well-intentioned and at worst spin-inspired attempt to make everybody into a “kind of academic” in the so-called “knowledge economy”.

Questioning the “Knowledge Economy”

What is the definition of the “knowledge economy” anyway? We don’t think it included in the minds of most politicians and educationalists skilled technicians, plumbers or carpenters. By going hell for leather for academia, it “devalued as an unintended consequence the craft skills and vocational training per se” – so the last but one Minister for Skills Lord Young at a German-British Apprenticeship seminar in London organised by GIUK.

The second big slogan of the Blair era was “no jobs for life”. In our view it was just as misleading and un-differentiated as the “knowledge economy”.

“No jobs for life” sounded like encouraging employees to job hop and a fig leaf for employers for a “hire and fire” culture. It is of course based on the idea of old industries versus new, on “creative destruction” and the supremacy of the service sector. There is some merit in all this, but it sits badly with youngsters starting off their careers. Why train, when I am changing jobs permanently? At Volkswagen and Vauxhall alike there are third generation of employees and they are proud of their commitment to their companies.

The new “Skills for Life” slogan and the creation of a “technical class” sound good but need substance.

GIUK can help.

Government thinking is changing – and not a moment too soon. The PM himself should re-state and clarify government policy in this area. Job hoppers do not produce quality work nor enhance productivity in companies as a rule.

The economic downturn and the crises of confidence in the present economic model present as much a problem as a rare opportunity to redraw the lines. It is safer again for politicians to look east towards Europe for values and inspiration after the disaster created by following the US lead in so many areas over the last decades.

The economy clearly needs rebalancing and Brits will have to look again to doing things themselves rather than looking for Johnny Foreigner to make the dishwashers and come over here to repair them, when they break down.

Call for Culture Shift

If apprenticeships and training are to be taken seriously and beyond political fad, there needs to be a change of culture regarding skilled employees – or human resources generally. Highly skilled jobs need to be better safeguarded during cyclical downturns.

During this recession unemployment in the US rose by over 8 million, in the UK by about 1.4 million and in Germany the jobless number rose by just 220,000, although the latter has been experiencing the biggest economic downturn since the war. Who is going to be ready and first out of the blocks, when things get back to normal? Who on the other hand has to spent £10,5bn so far in this crises alone on redundancy payments and later probably the same again in recruitment and training costs let alone the cost of the missed chances in the market place in the next upswing?

Why can German companies hang on longer to their skilled employees? The answer is simple. As they pay half the hypothecated employment insurance (2.8% of gross income), the employers are entitled by law to apply for short time work (Kurzarbeit) in a cyclical downturn. This means, if there is only work for two or three days a week, they can keep all their staff and the employees get paid for the full week. Unemployment benefit is also paid out of this pot.

During times of low unemployment and little or no short time working the hypothecated pot swells up and acts in an anti-cyclical manner in downturns. Germany’s pot was quite full, when this recession hit.

This 2.8% pot incidentally also pays for the vocational college education of apprentices and the advice they are given before, during and after their apprenticeships through the jobcentres and for their certification/examination by the Chambers of Industry and Commerce.

The cost of a proper apprenticeship training system could be recovered easily also by “social cost savings”, which could be achieved from a reduction in the hidden costs in Britain occurred through the highest youth alcoholism and drugs dependency, teenage pregnancy, young offenders and truancy rates in Europe – in other words the cost of the so-called “lost generation”.

Next Steps

To summarize what we believe is necessary –

  1. Schools have to prepare kids for a life of work depending on their varying abilities, which need to be recognised as to be in the majority non-academic
  2. There needs to be a more structured pathway for kids from schools to working life
  3. Non-academic jobs have to be valued by schools, governments and society generally more on a par with academic jobs
  4. There is a need to simplify and streamline apprenticeships, curricula, the certification process and it should be possible to take cost out massively
  5. Skilled workers’ jobs and those in training need a higher degree of protection in cyclical downturns

If we want to be serious in this country about training and social cohesion, it is our view that these points need to be addressed urgently. GIUK in conjunction with the German British Forum and German British Chambers are planning a series of conferences in Britain and Germany to further these ideas.

Bob Bischof
Chief Economic Advisor GIUK
Member of the LSC Youth Committee 2004-2008