Skills, employment, income inequality and poverty

Enhancing skills and educational attainment for poorer households will improve access to stable employment.

UK governments aim to raise employment levels and reduce poverty, with funding aimed at reducing the size of the low-skilled/ low-waged workforce. This approach rests on assumptions that enhancing people's skills improves their employment prospects and that concentrating on those with the lowest skills will narrow the wage and income distributions.

This paper:

• explains the meaning of 'skills' and some of the theories about the relationships between skills, employment and earnings;
• investigates the likely impact on income inequality and poverty of improving the skills of the population in the UK;
• presents a new framework to assess the impact on income inequality and poverty of future changes to the distribution of skills and qualifications.

It found that:

• The general consensus from evidence is that investment in education does genuinely enhance productivity, resulting in higher employment and earnings and less exposure to low income and poverty.
• Access to stable and secure employment is also important, and enhancing skills and educational attainment among those in poorer households will improve access to stable employment.
• However, it is important to improve more generic skills associated with labour market awareness and developing social networks that may be lacking among the most disadvantaged due to prolonged unemployment or economic inactivity.