The Leitch Review

Today saw the publication of the interim report from the Leitch Review.

Sandy Leitch is chairman of the National Employment Panel and formerly a chief executive of Zurich Financial Services, and he was commissioned by the Government to "identify the UK’s optimal skills mix in 2020 to maximise economic growth, productivity and social justice, and to consider the policy implications of achieving the level of change required."

The report states that if the Government meets its current skills targets, by 2020, the proportion of working age adults with a degree will have risen from 27% to 38%, and the result will be an increase in productivity growth by 0.2% per year - or about £3bn a year.

Whilst much of the report is concerned with the challenge of imparting skills to low-skilled workers, Leitch makes a number of interesting points about the graduate issue. He points out that the US, Canada and Japan all have a higher proportion of working age adults with degrees than the UK, and that China and India produce, between them, 4,000,000 graduates a year, compared to our 250,000.
He cites research from the US that suggests that the presence of people with university degrees in an area results in an increase in average salaries of people without degree. The clear conclusion is that it is vital for the UK's long-term economic health that we continue to produce more graduates - and Leitch makes the point that the increased supply of graduates has not had a detrimental effect on their salaries - therefore the market is not, as is often claimed, saturated with degree-holders.

There's also a good deal of interesting information about productivity (we're less productive per hour than France or Germany, and only stay ahead on productivity measures by working longer), and about the demographic slump we will enjoy in a few years, when the number of people between 20 and 35 will drop. Another very interesting point is that we have the most unequal regional wealth distribution in western Europe, with the exception of Belgium - and it constrains economic growth by denying some people the opportunity to contribute effectively to the economy.

The Leitch Review will deliver the final report in 2006.