Investment in higher level skills and the knowledge economy

The government’s University Challenge initiative aims to support investment in higher education at a local level in order to:

1: Support the development of a ‘knowledge economy’ by unlocking the talents of local people and providing the skills and knowledge transfer that enables local businesses to grow and to attract new investment to the area.

2: Make a real difference to the cultural life of our towns and cities.

Our review (PDF, 538KB) of the ‘market’ for higher education in the West Midlands, conducted at the request of Advantage West Midlands and the Higher Education Funding Council for England, highlights a range of key issues and barriers that any new investment needs to help to address.

A weak private sector ‘knowledge economy’

The West Midlands’ public sector knowledge economy is well developed relative to other regions.

Half of people working in the region’s public sector organisations were qualified to level 4 or above in 2007, which is in line with national trends.

Employers in education, health & social care and public administration account for a significant share of regional employment and play a particularly important role in some localities – notably Coventry, Wolverhampton, Newcastle-under-Lyme, Stafford, Shrewsbury and Stoke-on-Trent . They attract substantial numbers of graduates from the region’s universities, notably from subject areas such as medicine and education.

But less than 24% of those working in private sector industries in the West Midlands had higher level skills and qualifications in 2007, well below the England average of 28%. To close the gap the region’s private sector firms would need to recruit an additional 70,000 highly skilled staff.

The scale of the challenge to close the gap in a number of the region’s urban areas is particularly significant.

For example, it’s estimated that of the 70,000 private sector employees that need to be up-skilled to graduate level in the West Midlands, 80% work in the Black Country (which alone accounts for over 50% of the deficit), Birmingham and Stoke-on-Trent.

Knowledge intensive private sector industries, like IT consultancy, IT manufacturing, research & development, medical technologies, aerospace and electronics, are particularly poorly represented in the region.

Potential demand for higher skills waiting to be unlocked

Encouragingly, there is evidence that there may be additional potential demand for graduate and higher level skills from private sector employers. If this potential is to be unlocked and converted into real and tangible demand to support business growth and innovation, however, a range of issues and barriers need to be addressed:

  • Many employers feel that graduates tend to lack the business-specific and softer ’employability’ skills required
  • However, while training and development is vital to help address any skill deficiencies that graduates may have when seeking employment, relatively few employers offer such training.

Work placements are proving to be of particular value, however, in helping to address these barriers. Effective careers information, advice and guidance is also critical to ensure that graduates are well informed about the career opportunities available in the West Midlands and that employers can access the higher level skills they need.

Lack of investment in higher level skills by individuals

The pattern of participation in higher education correlates with that of economic and social disadvantage across the West Midlands. An inequality of access, with young people from the most disadvantaged communities far less likely to apply to or be admitted into university, needs to be addressed if rates of participation in higher education and attainment of higher level skills are to increase.

The proportion of working age adults that have taken the initiative and attained higher level qualifications (28% in 2007 compared with 30.5% in England as a whole) also lags behind. To close the gap with the England average, 77,000 more people of working age need to progress within the education system and attain higher level qualifications.

In some parts of the West Midlands, rates of higher level qualification attainment are above the regional average and, in some cases (notably in Shropshire, Warwickshire and Solihull), above the England average. In others, rates are much lower and the size of the challenge to close the gap with the England average in urban areas is particularly significant. For example, 26,000 more people in Sandwell, 24,000 more in Birmingham and 19,000 more in Stoke-on-Trent need to attain a level 4 or above.

In addition, the gap in attainment between poorer performing urban areas and better performing parts of the West Midlands is widening year on year as those who are already relatively well qualified continue to be most likely to improve their qualification levels, with disadvantaged areas and groups falling further behind.

These poor rates of attainment of higher level skills largely reflect a low proportion of young people from the West Midlands entering higher education, especially from urban areas. In 2000 (latest available data) only 28% of 18-19 year olds went into higher education, which compares with 31% in England as a whole. The figure was just 19% in Sandwell and 16% in Stoke-on-Trent.

Impact of social and economic disadvantage

While there is still a long way to go to eliminate these inequalities there is encouraging evidence that they are starting to be addressed.

Recent years have seen a sharp upturn in both applications from young people from the most disadvantaged communities (up by 23% between 2002 and 2006 compared with an increase of 4% overall) and in applications accepted by the region’s universities (up by 19% between 2002 and 2006 compared with an increase of 4% overall).

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