This brings us to the central theme of the report. First that by disaggregating human capital in the growth accounting model, you can see clearer links between the increasing numbers of people with higher education qualifications and increased productivity. That suggests that even though productivity has stagnated since the financial crisis – the little growth that has occurred has been driven by higher or graduate-level skills and increases in human capital.
But this still suggests two major policy issues – first, that there still isn’t enough productivity growth compared to other countries and second, that other policy drivers have even less effect. Here the issue may also be one of disaggregation – policy design and delivery is too often fragmented and siloed from other complementary factors. Different issues, whether infrastructure spending, business investment, human capital or R&D are not sufficiently aligned or joined up with each other. This lack of policy coordination means that in terms of productivity, they are less than the sum of their parts. In the UK, we can add a lack of join up between higher education policy and levelling up as a further element because high levels of regional and local inequality are a further drag on productivity and economic performance overall.
So to return to higher education, what then is our problem? First we don’t seem able to have a very sensible discussion about detailed evidence, especially about human capital and graduates – instead preferring arguments based on our own interpretations or prejudices (with highly selective use of only the evidence that confirms them).
Secondly, we don’t spend enough time thinking about how a more sensible, informed debate might improve outcomes for people, firms and places. A report last week with much less coverage came from the Royal Society showing how improved skills and R&D together can build “absorptive capacity” in local economies and sectors making a difference to firm performance, productivity and wages. Thirdly, opposition to increased participation levels makes little sense when steady progress towards higher participation levels is not just very likely (see Sam Freedman in The New Statesman), but reinforced and supported by the government’s own policy agendas in both schools and skills.