British Journal of Industrial Relations

2412July 19860007-1080 $3.00

Education and Productivity: A

Comparison of Great Britain and the
United States
Anne Dalp’

There has been considerable interest expressed recently in Britain in the

role of education and vocational training of the workforce in promoting a
better economic performance. Schemes such as the Youth Training
Scheme, administered by the Manpower Services Commission, have the
expressed aim of improving the skills of the workforce in order to make the
British economy more internationally competitive.
The relationship between education and economic performance is
complex and a number of studies have attempted to analyse it by way of
international comparisons (see, for example, Prais ef al., 1981). Prais
(1981) and Hollenstein (1983) have compared British skill endowments
respectively with West Germany and Switzerland and found Britain
lacking, particularly in workers trained at the intermediate level with
apprenticeship qualifications. While about half of the British workforce
had no qualification beyond the minimum school leaving requirement of
having reached a particular age, this was true for only a quarter of the
German and Swiss workforce. In the comparison between Britain and
West Germany, the British deficiency in skills was linked with relatively
lower productivity and in the British/Swiss comparison, with an inferior
trading performance. This paper presents a comparison, with another
country, the United States of America, where skill formation is undertaken
in a different context. Education and vocational training tends to be
schools based in the U.S. in contrast with the German and Swiss emphasis
on work-based training.
The paper is divided into four sections. The first compares the stock
and recent output of university graduates and those with intermediate
skills in the U.S. and Britain. The second examines the training of skilled
workers in the U.S. The third considers the statistical relation between
the educational stock and economic performance in the manufacturing
sector and the final section provides a summary and draws some con-
clusions.
* Research Officer. National Institute of Economic and Social Research.
252 British Journal of Industrial Relations

1. QUALIFICATIONS OF T H E BRITISH AND UNITED

STATES WORKFORCES

1 ) The Current Stock of Education held by the workforces

In 1977-8, the U.S. population had been in full-time schooling for, on
average, 11.8 years compared with the British average of 11.0 years.* The
gap was even larger in the younger age groups. The median pupil in the U.S.
now leaves school in his nineteenth year compared with his British
counterpart who leaves soon after his sixteenth birthday, implying an extra
year of education in the U S . once the later commencement age has been
taken into account. These population differences were also apparent in the
stock of educational qualifications held by the workforce in the two
countries in the 1970s.
Table 1 divides the British and U.S. labour forces according to three
broad levels of educational attainment. These figures should not be
TABLE
1
Educational Attainment in the Labour Force in Britain (1974-8)
and the U.S. (1977-8).”

Employmenr in each Persons with stated qualification

sector as percentage levels as percentage of labour force
of total employment in each sector
University” Intermediate‘ None’
All activities G.B. 100 5.5 42.0 52.5
U.S. 100 17.7 56.7 25.6
Manufacturing G.B. 31.8 3.3 38.9 57.8
U.S. 22.8 11.0 57.1 31.9
Non- G.B. 6X.2 6.5 43.4 50. 1
Manufacturing U.S. 77.2 19.7 56.6 23.7

Sources: O.P.C.S. C h e r a l Household Survey, 1974-8, unpublished tables;

U.S. Department of Labour. Bureau of Labour Statistics. Educarionul Attuinment of Workers,
1977-8, Special Labour Force Reports Nos. 209 and 225.

NOTES
a. A further breakdown o f these figures for twelve manufacturing industries and ten non-
manufacturing industries is available in Daly (19x3).
h. Members of professional institutions with qualifications of degree standard (Census of
Population ’b’ levcl) and graduate teachers are included in the British figures. For the U . S .
it includes all who have completed four or more years of full-time college.
c. Includes for Britain, non-graduate qualifications such as H . N . C . and City and Guilds Full
Technological Certificates; O.N.C./O.N.D. apprenticeships, G.C.E. ‘A’ level, ‘0’level
and C.S.E. qualifications. For the U.S. it includes those who have completed high school
and those who have completed one to three years of full-time college education. The U.S.
data include those who have completed one or two year courses and those who started but
did not complete, a four year programme.
d. For Britain. includes those with no educational or vocational qualification. For the U . S .
includes those who have not completed high school.
 Education and Productivity 253
interpreted as representing an exact match between the education systems
of the two countries but rather to show the broad order of magnitude for
each of three groups; those who have completed university o r a four-year
college degree, those with qualifications beyond the minimum school
leaving qualifications and those without education or vocational qual-
ifications (the notes t o Table 1 give details of the coverage of each category).
The most striking feature of the summary totals is the large proportion of
the U.S. labour force in the university category, over three times the
proportion of the British labour force in the group. Part of the difference
reflects the wider range of courses covered in the U.S. by four or five-year
bachelor degrees; for example, nursing and physiotherapy are degree
courses in the U.S. but training in these occupations falls outside the full-
time education system in Britain. We are, however, unable to correct for
these differences due to the level of aggregation of the data.
Over half the U.S. workforce fell into the intermediate category. Despite
the smaller gap between the two countries at this level, there remained a
large difference in the number with no qualifications. About a quarter of the
U.S. workforce had no qualification compared with over a half of the British
workforce. This finding is in line with the earlier studies by Prais (1981) and
Hollenstein (1983) showing that the proportion of the British workforce
without any educational or vocational qualifications was about twice that of
these successful industrialised countries.

ii) Recent A wards of University and College Degrees

In Table 2 we compare a disaggregation by subject of study of recent
graduates in the two countries. In 1976-8, twice as many new graduates
(from full four-year courses) came onto the U.S. labour market as in Britain.

TABLE
2
Average Number of Students Receiving First Degrees from Universities
and Colleges in Britain and the U.S. in 1976-8, by Main Subject of Study.

Britain" United Statesb

'OOO 70of workforce 'OOO 70of workforce
(25.9m) (102.8111)
Engineering and technology 11.2 0.04 55.8 0.05
Medicine and health 5.9 0.02 83.6'(38.1) 0.08(0.W)
Vocational studiesd 9.0 0.03 310.5(241.3) 0.30(0.23)
Science 17.9 0.07 97.8 0.10
Education' 47.9 0.18 136.1 0.13
Social studies' 13.1 0.05 134.7 0.13
Languages and arts 19.5 0.07 168.5 0.16
TOTAL 124.5 0.48 987.0(872.3) 0.96(0.85)

Sources: Education Statistics for the United Kingdom, 1976 and 1977 (HMSO, 1979, Tables 22,
25 and 35). Digest of Education Statistics, 1980 (National Center for Education Statistics,
Washington, 1980, Tables 110 and 113).
254 British Journal of Industrial Relations

NOTES
Includes 57,049 first degrees from Universities, 12,925 degrees from CNAA. 1,446 London
external degrees and estimates in respect of 6,879 degrees from the Open University. Open
University degrees are multi-disciplinary, and no classification by main subject of study was
available, though a classification is available in respect of its student population. We have
estimated the distribution of degrees by subject in proportion to the distribution of the
student population.
Includes 920,559 bachelor’s degrees requiring four or five years at an institution for higher
education, that is either a university or a four year college. 66,581 first professional degrees
are also included (e.g. law and medicine). These degrees require a total of at least six
academic years of college work and represent the completion of the academic requirements
for practising in a particular profession.
Includes courses not usually taken at the degree level in Britain, for example, nursing and
medical record librarianship. The figure in brackets omits graduates with the following U S .
degrees: general health professions, hospital administration, nursing, occupational ther-
apy, dental hygiene, public health, medical record librarianship, speech pathology, clinical
social work and physical therapy.
Includes law, accountancy, business management, government and public administration,
architecture, library science, agriculture and veterinary science; and for America it also
includes communications (journalism and advertising) and home economics. The figure in
brackets omits graduates with the following U.S. degrees: banking and finance, insurance,
real estate, secretarial studies, communications, home economics, and law enforcement
and corrections.
Includes 46,000 teaching qualifications in Britain.
‘Excludes law, accountancy and business management (see note 5).

The U.S. figures cover a wider range of degrees than are found in Britain,
so we have included, in brackets, U.S. figures covering only those subjects
taught in British universities for the two subject areas where these
differences were concentrated, namely medicine and health, and vocational
studies. This reduced the number of U.S. graduates in medicine and health
by a half and in vocational studies by 22 per cent; but the U.S. superiority in
these areas remained.
In the U.S. there was a wide choice of specialised practical degrees which
contrasted with the more general and academic options available in Britain.
The most striking difference was in the numbers completing courses included
in the category ‘vocational studies’ (such as accountancy, business studies and
public administration) where the output of U.S. graduates per member of the
labour force was ten times greater than the British figure. There were more
U.S. graduates per member of the labour force in the science-based subjects,
but taking a wider comparison, for engineering there were relatively more
graduates produced in Switzerland and Germany than in the U.S. The annual
output ofengineeringgraduatesaccountedfor0.054percentofthe workforce
in the US.,0.060 per cent in Germany and 0.082 per cent in Switzerland (see
Hollenstein (1983) Table 4). They, however, accounted for an even smaller
percentage (0.043) of the British workforce.

iii) Recent Awards of Associate Degrees in the U.S.and

Similar British Qualifications
Two-year colleges in the U.S., catering for those following a general
programme with the aim of transferring to a four-year college and those
 Education and Productivity 255
undertaking a two-year occupational course, have become increasingly
important in the past twenty years. In 1977-8,167,OOO two-year general arts
and science degrees and 279,000 occupational degrees were conferred in the
U.S. The colleges also provide shorter courses: in 1977-8, awards for the
completion of occupational courses of between one and two years duration
were given to 73,000 students. We have concentrated here on the recent
output of two-year occupational associate degrees to compare with the
output of qualifications which broadly cover the largest group of British
students at this level: Higher National Certificates and Diplomas, City and
Guild technician certificates, pupil nurses and two-year teaching diplomas.
The recent output of these qualifications represent 50 per cent more of the
U.S. workforce than the British workforce; the U.S. advantage was most in
evidence in health, business studies and public administration. However, it
must be noted that there were more British qualificationsper member of the
labour force in engineering and building than in the U.S.

TABLE
3
Average Number of Students Receiving Associate Degrees in America
and the Number Receiving Comparable Awards in Britain, 1976-8

Britain"' United Statesh'

'OOO % ofworkforce 'OOO 5% of workforce
Engineering and building 20.8 0.8" 51.2 0.05
Health services and paramedical 10.6 O.Wd) 68.4 0.07
technologies
Data processing and computer 1.2 0.01 9.3 0.01
studies
Science 2.4 0.01 11.6 0.01
Home economics and catering 0.8 0.w) 6.5 0.01
Business studies 10.1 0.04 94.8 0.09
Public administration and 1.6 0.01" 37.1 0.04
teaching
TOTAL 47.5 0.18 278.9 0.27

Sources: Education Staristicsfor the United Kingdom, 1976 and 1977. Tables 23 and 24. Digest
of Education Statistics. 1980, Table 125.

NOTES:
(a) Includes 11.148 students passing the Higher National Diploma and 16,600 passing the
Higher National Certificate and other awards as described in footnotes c-f.
(b) Includes awards received after completing occupational courses of at least two years but
less than four years duration.
(c) Includes 9,600 students completing City and Guilds technician certificate (Part 111).
(d) Includes the 9,500 people completing the two-year course for pupil nurses (SEN).
(e) Less than 0.001 per cent.
( f ) Includes 570 students completing a two-year teaching diploma.

2. THE TRAINING OF 'SKILLED' WORKERS IN THE U.S.

Given current British interest in European apprentice-based training

schemes, it seems worthwhile to examine the alternative methodsof training
256 British Journal of Industrial Relations
used in the U.S. where the apprentice system is relatively unimportant. There
are several reasons why formalised work-based training may be of less
significance. First, is the very much greater amount of formalised school-
based instruction in the U.S. leading to college degrees, often in highly
specific vocational subjects. Thissuggests that for acertainsection ofthe U.S.
labour force, full-time instruction at colleges has replaced the European
system of a mix of work and college basedinstruction. Secondly, there is much
less trade union demarcation between ‘skilled’ and ‘unskilled’ work; many
employees are in the ‘semi-skilled’ range and are able and expected to carry
out the kind of maintenance work that in Britain is confined to those who have
‘served their time’ as apprentices and are entitled to carry out ‘skilled’ work.
In addition, it has been argued that thevast size of the U.S. market, combined
with specialisation in production processes, has led to high productivity by
those with limitedskills. The remainderof thissectionillustrates thesepoints.
A comprehensive picture of the extent of vocational training undertaken at
the intermediate level in the U.S. can be obtained only by returning to a
survey of 35,000households completed twenty years ago, which asked about
the training received by those with less than three years of college e d ~ c a t i o n . ~
The high level of formal education of the U.S. labour force is reflected in that
survey. Less than half those surveyed had received formal vocational pre-
paration, but for nearly three-quarters of these the training had been under-
taken with educational institutions (i.e. high schools, special schools, techn-
ical institutes, junior or community colleges and correspondence schools).
Apprenticeships accounted for only 8 per cent of the vocational programmes
reported in the survey compared with 38 per cent undertaken in high schools.
The survey also showed that even in occupations where entry in Britain would
be normally restricted to those who had served an apprenticeship, a substan-
tial proportion in the U.S. had not received any formal training. They had
learnt their occupation either by training on-the-job or had ‘just picked it up’.
A review of more recent literature, surveys of adult education and the
relatively small number of registered apprentices, indicates that a large
proportion of workers still receive little formalised job preparation.
Table 4 compares the number of registered apprentices in Britain and the
U.S. in the mid-1970s. As a proportion of manual employees, there were
about four times as many apprentices in Britain as in the U.S. representing
2.8 per cent of the manual workforce compared with 0.62 per cent in the
U.S. In contrast to European practice, tne apprenticeship system in the U.S.
is ‘not tightly controlled by specific legislation or by detailed administrative
regulations, nor does it terminate with a compulsory final examination,
except in relatively few instance^'.^ A similar description could also be
applied to current British practice although there are plans under the
present Government’s New Training Initiative to introduce more rigorous
testing. The broad national standards set out by the U.S. Bureau of
Apprenticeship and Training for major apprenticeable trades are minimum
standards and reflect the variable quality of U.S. apprenticeship program-
mes. For example, an apprenticeship in bricklaying requires 4,500 hours of
 Education and Productivity 257

TABLE
4
Apprentices in Britain and the U.S. 19745

Occupational Title Britain United States

No. of % manual No. registered % manual
apprentices'') employees apprentices'") employees(b)
'000 (I2.9m) '000 (43.8m)
Draugh tsman'd) 3.6 0.03 1.2 0.003
Catering, cleaning, hair- 25.8 0.20 6.7 0.02
dressing and other personal
services; materials processing
(exc. metals)")
Farming, fishing and related 3.6 0.03 - -
Making and repairing 64.0 0.50 46.2 0.11
(exc. metal and electrical)'')
Electricians and electronic 21.9 0.17 39.9 0.09
workers
Processing, making and repairin 193.9 1.52 110.3 0.26
and related (exc. electricians)g)
Painters 14.6 0.11 6.7 0.02
Construction, mining and 23.0 0.18 42.9 0.10
related n.e.c.(h)
Transport operating, materials 7.7 0.06 11.7 0.03
moving and storing and related;
miscellaneous
Total 358.2 2.8 265.6 0.62
Approximate annual output(k) 72 0.56 53 0.12

Sources: U.S. Department of Labor Employment and Training Report of the President, 1977
(U.S. Government Printing Office, Washington, 1977) Tables A15 and F16. U.S. Department
of Labour, Employment and Training Administration, Dictionary of Occupational Titles (U.S.
Government Printing Office, Washington, 4th edition, 1977). For Britain, Department of
Employment New Earnings Survey 1974 (HMSO London, 1975), Tables 136 and 139.

NOTES
(a) Apprenticeship programmes registered with the Bureau of Apprenticeship and Training
must comply with certain minimum standards relating to the availability of classroom
instruction, and supervision of on-the-job training.
(b) Manual workers include blue collar, service and farm workers.
(c) The Survey results have been grossed up by a factor of 138 to cover the whole population
(see The New Earnings Survey 1974, Part A , p. A40).
(d) A non-manual occupation under the British classification but included in this table as
draughtsmen were among registered apprentices in America.
(e) Includes cooks, barbers, beauticians, butchers and bakers.
(f) Includes carpenters, bookbinders, compositors, lithographers, pattern-makers and cabinet
makers.
(g) Includes boilermakers, auto and related mechanics, machinists, millwrights, pipe fitters,
plumbers, tool and die makers and optical workers.
(h) Includes bricklayers, plasterers, roofers, cement layers, lathers, glaziers and structural
steel workers.
(k) Taken as roughly a fifth of registered apprentices (assuming that the average apprentice-
ship is for three to four years and about a quarter drop out or fail each vear).

work experience and 144 hours of classroom instruction. Topics for

classroom instruction include arithmetic, plan and blue-print reading and
building materials; desirable work experience includes 450 hours of stone
258 British Journal of Industrial Relations
laying. There is no mention in this national standard of any test of
competence. The apprentices practical and theoretical instruction is over-
seen by local joint committees made up of employer and trade union
representatives so there is scope for considerable variation in the standards
reached by apprentices in the same trade in different parts of the country.
Studies of training in the workplace in the U.S. do not suggest that
alternative forms of formalised work-based training to apprenticeship are
important. Promotion to skilled status usually follows informal on-the-job
training. Workers begin with the simplest tasks and are then promoted to
more complex tasks as their experience and seniority increases. The skills of
a worker, therefore, tend to be highly specific to the plant in which he learnt
them. However, as the jobs in a job-ladder are often narrowly defined,
workers can easily be transferred between tasks with little extra training.5
The present writer’s discussions with six companies manufacturing in the
U.S. (five in engineering and one in food) showed a range of practices for
filling skilled vacancies from formalised apprenticeship to informal on-the-
job training. In all cases existing employees of the company were favoured
for promotion to skilled jobs even though they would have received little
additional formal training beyond their induction training as operatives.
Most were, however, expected to hold a high school diploma. Two of the
companies offered apprenticeship programmes and had recently changed
from a system of time-serving apprenticeships, where the number of hours
required in on-the-job training and in college were laid down in the
apprenticeship contract, to a task orientated system where apprentices were
expected to reach specified standards in a range of skills. In the remaining
companies which did not operate a formal apprenticeship programme,
promotion to skilled work was based, among other things, on the range of
experience already acquired in other positions in the company. A high level
of general education (a two or four year college degree) was expected for
those working in these companies as technicians and foremen. The
experience of these companies suggests that great reliance is still placed on
school-based education in the background of skilled workers.

3. THE RELATION BETWEEN EDUCATIONAL STOCK A N D

ECONOMIC PERFORMANCE

The preceding sections of this paper have compared the ‘stocks of education’
held by the British and U.S. workforces and the recent additions to these
stocks. This section examines the effects of these differences on economic
performance as measured by net output per employee in a sample of sixty
manufacturing industries in 1967-8 (see appendix for data sources). This
cross-section approach can be used to examine the industry specific factors
affecting productivity levels but does not lend itself to the study of general
factors affecting all industries equally (for example, tax and labour laws).
 Education and Productivity 259
The equations estimated are broadly speaking of a Cobb Douglas form
but they are not true production functions (for a fuller discussion of the
theoretical justification of the model see Davies and Caves (1983)). The
dependent variable chosen was output per employee in the industry rather
than the total output of the industry, in order to standardise across industries
by taking account of such factors as differences in their absolute size. The
capital input was measured by a stock variable taken as the best approxima-
tion to the flow of capital services. It was not possible to explicitly include all
the labour input variables because of their multicollinearity (as the variables
are defined, they must sum to one hundred). We have, therefore, included
the skilled labour input, representing the stock of labour input over and
above that of the unskilled. The co-efficient on the unskilled labour input
can be calculated implicitly.
We begin by looking at the relationship between the productivity of an
industry and its level of physical and human capital input, taking each
country separately. We have measured human capital input by the
proportion of the workforce with university and intermediate qualifications;
for the latter we have adopted a more restrictive definition than that used in
Table 1 due to limitations in the data available at this level of aggregation.
We found for the U.S.:

In Y, = 1.67+ 0.27 In K, + 0.019 Ha (1)

(+ 0.09)** (+ 0.04)**(+ 0.003)**
N =60 R2 = 0.70
(Sampling errors are in brackets, ** = significant at 0.01 level, * =
significant at 0.05 level).
Where Y, = net output ($) per employees in the U.S.
K, = gross value of fixed assets ($,OW) per employee.
Ha = the percentage of the workforce who have completed four or
more years of college (H1,) and those with 1-3 years of college
education (H2,).

For Britain we found:

In Yb = 0.117 f 0.27 In K b -I-0.020 Hb
(+ 0.07) (+ 0.039)** (+ 0.005)**
N = 60 R2 = 0.64
Where Yb = net output (S) per employee in Britain.
Kb = gross value of fixed assets (f,000) per employee.
Hb = the percentage of the workforce who have university degrees
and above o r equivalent qualifications (Hlb) and those with qual-
ifications such as H.N.D./H.N.C., O.N.D./O.N.C., and G.C.E. ‘A’
level (HZb).
260 British Journal of Industrial Relations
Our findings for the two countries are remarkably similar. The co-efficient
on the stock of physical capital implies that a one per cent increase in the
amount of capital per employee raised productivity by about 0.27 per cent in
both countries. The proportion of skilled workers in an industry also had a
positive and significant effect on the level of productivity6. In both countries
a shift of one per cent of the labour force from the unskilled to the skilled
category raised productivity by about 0.2 per cent.
It would be of interest to establish the relative contribution of the higher
and intermediate level of skills to productivity performance but it was not
possible to distinguish these effects due to the multicollinearity of the two
variables. In both countries, industries that had a large percentage of highly
skilled workers also had a large group with intermediate qualification (the
correlation across industries between the two levels of skills as here defined
was r = 0.87** for the U.S. and r = 0.83** for Britain). There were also
difficulties in measuring the input of human skills. While the ‘high’ group
was relatively easy to define, the intermediate group contained a wide
variety of qualifications. In the U.S., it included both those who had
completed a one or two year college course and those who had left before
completion, a group more likely to be employed in occupations unrelated to
their educational background. This probably made the measurement of the
influence of intermediate skills on productivity more difficult.’
Our next calculations related to an international comparison of relative
productivity. Following Caves (1980) and Davies and Caves (1983) we have
not attempted to explain the absolute productivity advantage that most U.S.
industries hold over their British counterparts but rather the differences in
productivity advantages among industries. This method does not offer any
explanation as to why U.S. manufacturing labour productivity was, on
average, three times that of Britain’s but it offers some suggestions as to why
there are variations in industry productivity ratios; for example, why was
Britain’s productivity relative to the U.S. so low in motor vehicles and
almost comparable in bricks?
We have taken as our dependent variable, output per employee in the
U S . divided by output per employee in Britain, where the U.S. dollar value
of productivity has been converted into pounds using purchasing-power
-parity rates calculated by Smith, Hitchens and Davies (1982). We
estimated equations for our sample of sixty industries using the variables
described in our single country equations. As the co-efficients on relative
physical capital per employee, the relative proportion of part-time employ-
ees and relative plant sizes were not statistically significant in any of these
equations, we shall concentrate our discussion on the results for the skill
variables.
This result does not imply that capital input is unimportant in explaining
productivity levels but it suggests that there are no differences in relative
capital input which are significantly related to differences in relative
productivity. U.S. capital input may always be greater than that in the U.K.
by a constant factor and, therefore. would not contribute to an explanation
 Education and Productivity 261
of variations in the productivity ratios. Our first result relates to the
differences between the two countries in the percentage of the workforce
with high and intermediate qualifications:

In (Ya/Yb) = 0.89 + 0.037 (Hla - Hlb) - 0.05 (H2a - H2b) (3)

(+ 0.012)** (+ 0.021)**
N = 60 R2 = 0.17

This suggests that U.S. industries performed relatively well where the
proportion of highly skilled workers exceeded that in Britain, for example,
in chemicals and radio and television equipment. However, the co-efficient
on the intermediate skill difference shows a depressing effect on relative
productivity. This may reflect the problems already discussed in defining this
variable and until better information is available about this group, it does
not seem worthwhile pursuing this result.
The relationship between education and relative economic performance
is complex and it is perhaps not surprising that this statistical analysis has left
several important questions unanswered. The conclusion that Britain’s
shortfall in ‘high’ skills had a detrimental effect on relative productivity from
Britain’s viewpoint appears to be fairly robust but the role of intermediate
skills could not be estimated here and other more general questions remain.
We have considered how the level of education in a particular industry
affects its relative productivity but not how the generally higher level of
education in the U.S. may contribute to the country’s absolute productivity
advantage over Britain, nor have we considered the influence of education
on productivity growth over time. A more educated workforce may lead to
better investment decisions, improved labour relations and greater adapt-
ability to changing economic circumstances. These effects are not taken into
account in this kind of analysis.
It is important also to consider the efficiency with which the educated
manpower is utilised. In recent years, there has been considerable discus-
sion of over-investment in education in the U.S. and there is some evidence
of a declining rate of return to investment in college education in the 1970s
(post dating the period to which our regressions relate). Many factors were
involved but among those outlined by Freeman (1975) was a lack of jobs in
fields related to the area of study. The skills acquired by those people who
have ‘over-invested’ in education may have minimal relevance to their
current occupation but they will nevertheless be included in the appropriate
educational groups in our tables. These problems also arise in the case of
education undertaken purely for its consumption benefits. Given the
relatively high level of general education in the U.S. we would expect these
problems to be of greater significance there than in Britain and they may
result in some over-estimation of the effective educational input and an
under-estimation of the effect of vocationally relevant education.
262 British Journal of Industrial Relations

4. DISCUSSION AND CONCLUSIONS

Comparisons of educational systems of different countries are not easy but

taking a narrow economic perspective some clear contrasts emerge from this
paper which seem relevant to the current debate on education and
vocational training in Britain. While there would be high resource costs for
Britain if it attempted to duplicate the U.S. system with its long period of
full-time schooling, there are strengths in its market-oriented approach to
education and training which should be considered by British policy-
makers.
One of the most striking contrasts between Britain and the U.S. is in the
greater number of years of general education completed by the U.S.
workforce beyond the minimum school-leaving requirements. In the mid-
1970s, 18 per cent of the U.S. workforce had completed four or more years
of college, compared with 6 per cent of the British workforce with university
degrees or equivalent professional qualifications. A further 57 per cent had a
high school diploma (roughly equivalent to G.C.E. ‘0’ level standard) or
some other intermediate qualification (including two-year associate deg-
rees) compared with 42 per cent of the British workforce in this category.
The remainder without qualifications, or with qualifications below the
‘intermediate’ level, accounted for over half of the British workforce but
only a quarter of the U.S. workforce. A similar contrast emerged from
earlier comparisons of Britain with both Germany and Switzerland. In other
words, the British workforce had neither the large proportion of workers
with university qualifications found in the U.S. nor the large proportion with
intermediate qualifications found in Germany and Switzerland.
The U.S. school-based approach to the development of ‘high’ and
‘intermediate’ skills offers an alternative model for consideration in the
British debate on education and training to the work-based models of
European countries such as West Germany and Switzerland. A number of
issues raised by these differences need to be considered in greater detail than
was possible here. Among the more specific are the following:

1. An important factor in encouraging the efficient allocation of skilled

manpower is flexibility in manning practices. In the U.S. there are fewer
demarcation problems between crafts, between ‘skilled’ and ‘unskilled’
workers; and there are fewer restraints on entry to a craft, for example,
there are rarely age restraints on apprenticeship entry. The benefits of
increasing the human capital invested in British industry will be reduced if
traditional manning practices d o not permit similar flexibility.
2. The largest gap in the recent output of college and university graduates
was in vocational studies, especially management and business studies. The
economic consequences of this deserve further investigation, particu-
larly in the light of Caves’ (1980) result that Britain lagged in ‘management
intensive’ industries.
 Education and Productivity 263
3. School-based and work-based qualifications are undoubtedly substitutes
for each other to some degree but the question as to which route offers the
most efficient method for developing a skilled workforce able to produce
internationally competitive products remains unanswered. As the present
British Government is investing large amounts of money in vocational
education and training, this question remains of great importance.

APPENDIX

The Relationship Between Productivity and the

Education of the Labour-Force
The regressions outlined in section 3 relate to the period 1967-8 to 1971. In
this appendix we shall list the sources for each of the variables and comment
on some additional results.
Data on the educational attainment of the U.S. workforce were taken
from the 1970 Census of Population subject report Zndustrial Characteristics
(PC(n)-7B) Table 3 published by the U.S. Department of Commerce. We
calculated the proportion of the workforce in an industry which fell into two
skill groups; those who had completed 4 or more years of college and those
who had completed 1-3 years of college. The educational attainment of the
British workforce was calculated from an unpublished table, ‘Persons in
employment, 18 years of age and over, by educational attainment, sex, age
and industry’. This was produced by the Office of Population Censuses and
Surveys from the 1971 Census of Population for Great Britain as a
supplement to the published Qualified Manpower Tables. The qualifications
included in the two groups we have identified were as follows:-

i) ‘high’ skills (Census groups A and B) included those with university and
CNAA degrees and post graduate qualifications, in addition to those with
equivalent professional qualifications.
ii) ‘intermediate’ skills (Census groups C and D) included those with Higher
National Diplomas and Certificates, Ordinary National Diplomas and
Certificates, City and Guilds Advanced Qualifications and G.C.E. ‘A’ level
and their Scottish equivalents.
Physical capital per worker in the U.S. industries in 1967 was taken from
the 1972 Census of Manufactures published by the U.S. Department of
Commerce, Bureau of the Census. The capital stock was measured by the
gross value of fixed assets. In order to have a comparable measure of the
capital stock for Britain, the estimates made by Ian Elliot, Disaggregation of
1968 Gross Fixed Capital Stock Data to M L H Level-Revision and Testing of
Estimates (NEDO, London), for 1968were used. Median plant size, defined
so that half the employees in the industry were in larger plants and half in
plants that were smaller, was calculated from the U.S. Census of Manufac-
264 British Journal of Industrial Relations
tures and the British Census of Production. The proportion of workers who
were part time, those working less than thirty hours a week, were taken
from the U.S. Census of Population Industrial Characteristics Table 38,
and for Britain from the Census of Population, Economic Activity Tables,
Table 26.
Output per worker for the individual country equations was calculated
from the Census of Production. The productivity ratio for the U.S. and
British industries, which necessitated the conversion of national currencies
into a common currency, was taken from Smith, Hitchens and Davies
(1982) Table 10.1. The results reported have as the dependent variable the
ratios taken directly from that table but further trial calculations were
made with adjusted ratios. Our first adjustment was to substitute the
average price-ratio for the industrial order to those Minimum List Head-
ings given a low reliability assessment (3 or 4) by Smith, Hitchens, and
Davies. This tended to reduce the variability in the productivity ratio. Our
results using this adjusted productivity ratio for 54 industries, were of a
similar nature to those reported in the text but the co-efficient on the
difference between the stock of intermediately qualified workers in the two
countries became insignificant. Secondly, using the unadjusted produc-
tivity ratios, we omitted six miscellaneous industries; this made little
difference to the size of the co-efficients and none to their significance.
An alternative set of regression results were estimated using the more
extensive range of independent ‘control’ variables used by Davies and
Caves in their study of relative productivity performance (such as R and D
expenditure, the proportion of females and the strike-proneness of the
industry). We took their sample of 74 industries and replaced their
education variable, average years of schooling of the industry’s workforce,
with the two education variables we had calculated, the difference in ‘high’
skills and the difference in ‘intermediate’ skills. Neither of these education
variables were statistically significant in this wider analysis but there was a
positive correlation between each of these variables and relative produc-
tivity performance. This contrasted with the highly significant and positive
effect of education (measured by average years of schooling) on relative
productivity found by Davies and Caves.

NOTES

1 . The research reported in this paper which is an abridged version of a longer

N.I.E.S.R. discussion paper (no. 63). was undertaken whilst the author was a
research officer at the National Institute of Economic and Social Research and
received the support of the E.S.R.C. I would like to thank my colleagues,
especially Professor S. J . Prais, and the Journal’s anonymous referee for his
helpful comments. Any remaining errors are mine.
2. O.P.C.S. Gmertil Hoiisrhold Survey, 1977-8; Bureau of the Census, Current
Population Reports, Erfucationul Attainment in the U . S . (1977).
 Education und Productivity 265
3. U.S. Department of Labour, Formal Occupational Training of Adult Workers,
(Government Printing Office, Washington, 1964).
4. U.S. Department of Labour, Apprenticeship Training in the 1970s: Report of a
Conference (Manpower Research Monograph No. 37, 1974, p. 5 ) .
5. Studies of work-based training in the U.S. summarised here include Doeringer
and Piore (1971); U.S. Department of Labour, Bureau of Labour Statistics
(1969), (1970), (1978); Ryan (1980); N.E.D.O., The Chemical E.D.C. (1967),
The Clothing E.D.C. (1972); The Mechanical and Electrical Engineering
Construction E.D.C. (1976); Construction Equipment and Mobile Cranes
S.W.P. (1979).
6. In the estimation, logarithms were not taken for this final variable. It was already
expressed in percentage terms; and it would not have been possible to take
logarithms in the further calculations based on difference of this variable
between countries as some of those differences were negative.
7. In addition to calculations reported here, we also calculated equations for each
country which included the proportion of workers in the industry who worked
less than 30 hours a week, and the median plant-size of the industry. These
variables were intended to take into account the effect of part time working, and
economies of scale. The estimated co-efficients were not significant for either
country.

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