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2017 OECD Economic Surveys: United Kingdom 2017

image of OECD Economic Surveys: United Kingdom 2017

After a good performance until 2016, growth slowed in the first half of 2017. The unemployment rate has fallen to below 4.5%, but real wages are in a downward trend. Planned Brexit has raised uncertainty and dented business investment. Negotiating the closest possible EU-UK economic relationship would limit the cost of exit. The authorities should allow automatic stabilisers to work and identify in advance productivity-enhancing fiscal initiatives on investment, to be implemented rapidly were growth to weaken significantly in the run-up to Brexit, while safeguarding fiscal sustainability. Comprehensive policy packages should boost the productivity of lagging regions and cities, which requires local transport investments to foster connectivity, spending on research and development to raise innovation, housing investments to ease the matching of skills to jobs, and greater educational attainment and training tailored to business needs. Enhancing teachers’ training and other incentives, in particular in disadvantaged schools, would address teacher shortages and improve skills. Low-skilled workers participate less in lifelong learning and introducing targeted re-training programmes would boost competencies more broadly. Tax and regulatory reforms of non-standard forms of employment would offset workers’ weaker bargaining power and ensure better job quality.

SPECIAL FEATURES: REGIONAL PRODUCTIVITY; PRODUCTIVITY OF LOW-SKILLED WORKERS

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Improving productivity and job quality of low-skilled workers

More than a quarter of adults in the United Kingdom have low basic skills, which has a negative impact on career prospects, job quality and productivity growth. Furthermore, unlike most other countries, young adults do not have stronger basic skills than the generation approaching retirement. The lack of skills development starts at young ages and continues in secondary education; despite a modest reduction in recent years, the educational attainment gap between disadvantaged and non-disadvantaged students remains high. The low participation in lifelong learning of low-skilled individuals puts them at risk of falling behind in meeting the changing skill demands of the dynamic labour market. Ongoing reforms to the vocational education and training (VET) system and apprenticeship system should have a positive impact on low-skilled productivity, enabling students to gain the necessary basic skills and for workers to find quality jobs. Improving the targeting of active labour market policies, and ensuring that the ongoing increases in the national living wage are delivered in a sustainable way will also play an important role in improving job quality and reducing the high rate of youth neither employed or in education or training. Policy responses to the rise of non-standard work will also be essential in improving the job quality of the low-skilled.

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