Skilled workforce 'is no economic panacea'

IMPROVING the skills of the workforce might be at the top of the Government's jobs agenda, but it is no panacea for improving Britain's economic performance. That will also depend on companies aiming to sell higher quality goods and services, according to a new report from the Employment Policy Institute.

Many British businesses opt for what the authors identify as the "Gerald Ratner strategy" of competing on the basis of low price and low quality.

When the former head of the bargain jewellery chain described its products as "crap", he might have been foolish but he was honest, according to Ewart Keep of Warwick Business School and Ken Mayhew of Pembroke College, Oxford.

Their research suggests that many British companies opt for this strategy rather than developing high-quality products that require skilled labour.

This can make sense for businesses that do not have a wealthy customer base or do not have the internal organisation to move upmarket.

Given this pattern, improved workforce skills will not by itself guarantee a more competitive UK economy.

Mr Keep said: "For many British companies, competitiveness lies not in upskilling workers to make quality products but through price. Providing companies with more highly skilled workers can only increase levels of dissatisfaction when those workersare employed in poor quality, low-paid jobs."

The paper, "Was Ratner Right?" recommends a dual policy of encouraging businesses to opt for the high-value strategy at the same time as improving standards of education and training.

Companies would also have to switch to patterns of work organisation that allowed employees to use their skills, and improve employee relations to improve trust and motivation.

It concludes that this "poses a major challenge to policy-makers for whom upskilling has for too long been a convenient 'magic bullet' solution".