Introduction

Are skills valuable? Do increasing skill levels benefit the people, organisations and communities who acquire them? Do they increase peoples’ employment opportunities? Do they increase peoples’ earnings potential? Do they enhance organisational effectiveness and profitability? Do they stimulate the economic performance of communities and the economy as a whole? In previous chapters we have examined the current supply of skills, and the deficiencies that exist in the skills base we possess. We have also assessed the pattern of evolving skill needs: the skills that are required to meet the changing needs of the economy and labour market. We would expect from this assessment that improvements in skills supply are necessary to meet, and to keep pace with, the pattern of skills demand. The market for skills is ‘signalling’ that more people with higher level skills are needed and that there are insufficient skills available. Market failures also mean that insufficient skills are developed to meet actual and potential skill needs. We would expect to find, therefore, that skills are indeed valuable.

It is important to assess the value of skills not only because this will provide an evidential base for assessing the economic significance of skill formation, but also because the evidence can be utilised in pursuit of the encouragement of skill acquisition. In a real, material sense, people, organisations and communities need to be convinced of the economic benefits that can accrue from raising skill levels in order for them to be persuaded so to do. The ‘incentive’ to acquire skills, if it exists, needs to be identified and effectively communicated so that individuals, employers, learning providers and public agencies can respond to the signals being provided.

The first part of the chapter considers the benefits of skills acquisition for individuals. The second part examines the benefits to companies. Finally, we consider the wider benefits to the overall economy and its constituent communities.

Individuals

There is a strong relationship between the qualifications people possess and their earnings (see Figure 4.1). The chart shows the average earnings of people qualified to different levels in England. Overall, the more highly qualified people are the higher their earnings are.