Filling the gap. Engineering skills shortage in the UK.

Sir James Dyson, CEO and founder of Dyson James Group is always down our necks about skills shortages in engineering in the UK. In 2010 he started a high-profile recruitment drive and despite thousands of applicants, only 100 people were hired. The reasoning? British engineers don’t possess the necessary skills and the numbers graduating from university have remained stagnant (non-growing) for a number of years.

Why is this, and what can we do about it?

  • There are less engineering applicants due to the high appeal of the service sector.

With the current service sector growth we are experiencing a vast movement of jobs from manufacturing to service industries, a process called Deindustrialisation. With wages in investment banks exceeding five figures it is no surprise that some of the brightest minds are moving from traditional manufacturing based jobs, such as engineering, to investment banking and finance.

One possible solution to this dilemma is for the Government or private sector to step in and increase the wages of engineers, and as a result demand for jobs in the sector will rise. The extent to which this will work will rely on the level of increase in wages; will they still be significantly lower then the service sector?

  • Lack of information

An engineering degree can be deemed a merit good. This is an item that is under-consumed by the public due to lack of information about its benefits to wider society. In this case engineering may be in lack of demand because students applying to university are unaware of the benefits received from taking an engineering degree as opposed to a medical or arts related degree.

To ‘cure’ a merit good it is often the government’s role to step it. At the moment Vince Cable is under-taking an ‘engineering roadshow’ to try and educate pupils in sixth-form about their career opportunities – especially engineering (article here). The extent to which this will affect demand for engineering degrees remains to be seen.

  • There are some people calling for a change in the way tuition fees are paid.

If we have a skill shortage in Engineering, then surely a great way to get more people to study the subject is to make it free?

If we look overseas to America and Australia they already employ a similar system in their higher education systems. The result? Well America happens to have the strongest technology sector in the world (in the form of Silicon valley). However there are other factors that affect the demand for an engineering degree. Regardless of whether the degree is free or not. Students will not study it if the potential earnings in the industry are poor. Furthermore we also have to look at who will be paying for the degree; it is likely to be subsidised by the government, we must therefore investigate the opportunity cost of such a move. The total cost, if the Government had fully subsided engineering degrees for UK citizens in 2012, would have been £1,054,989,000 (117,221 applicants at £9,000 tuition fees, Data from UCAS), that’s just over £1 billion.

Would the money be better spent curing the information failure for a degree in engineering? Or maybe the money could be used on healthcare and cheaper public transport – both merit goods and both would benefit society.

What do we do then?

  • One answer could be just to forget about homegrown talent and import skills from abroad. We already see this in The City, where ‘the industry is so diverse that it has – in proportion – seven times as many Hindus, five times as many Indians… then the rest of the country’ (via Spectator Blogs). This doesn’t seem a problem at all, The City is the most successful economic powerhouse in the UK (although debatable after 2007..) so maybe it’s worth employing the same recruitment tactics into the engineering sector.
  • A subsidy in tuitions fees could help. Rather then going full out and making the degree free, there is definitely scope to increase demand by reducing the price of an engineering degree. We’ve seen benefits in the US, so the same should be applicable here.

It will be interesting to see what happens in the UK economy, but its good to see with the Vince Cable roadshow that the current government is being pro-active to solve this problem.

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