The UK has a productivity problem - and we know from research into Britain’s economic performance in the decade prior to the recession that this problem is long-term and entrenched. In fact, we were already experiencing a productivity problem in 2007.
In its international benchmarking study, the Department for Business, Innovation and Skills (BIS) found that the UK’s science and innovation system is let down by gaps in its talent base. As well as low basic skills (numeracy, literacy, ICT), the report highlighted a problem of insufficient STEM (Science, Technology, Engineering and Mathematics) talent to exploit potential innovations.
To help address this, successive British governments have focused on plugging these gaps by trying to grow STEM skills in the workforce. Crucially the value of STEM jobs is supported by evidence that they enhance growth, and are high productivity jobs. Consistent with this, there is a high wage premium for STE (Science, Technology and Engineering) jobs in particular: workers in these occupations tend to earn around 19 per cent more than their non-STE counterparts . STEM jobs therefore have an important role to play in addressing the productivity problem, since they make a disproportionate contribution to GVA.
A new report for Nesta produced by researchers at Sussex University suggests this might be the case. In particular, the report finds that firms that deploy STEM and art and design skills (STEAM) experience faster employment and sales growth than STEM firms. And, other things being equal, they are more innovative. This supports findings from the OECD, World Bank and The Council of Canadian Academies, who suggest that STEM skills are necessary for many types of innovation, as well as productivity and growth, but they are not sufficient on their own. Importantly, other skills such as leadership, creativity, adaptability, and entrepreneurial ability are required to maximise the positive impact of STEM skills on economic performance.
Fortunately, a large number of UK businesses seem to get this, even if the government does not. In 2011, it turns out, STEAM businesses employed over 3.5 million people in the UK and generated £500 billion turnover. And these businesses punch above their weight - they make up only 11 per cent of the population of non-micro firms, but generate 22 per cent of employment and 22 per cent of turnover.
The strong financial performance of STEAM businesses holds true across the economy. While these firms are widely perceived to be present in ‘high-tech’ and creative industries, the report finds them to be common in ‘low-tech’ and ‘mid-tech’ industries too. These findings are also consistent with the comparative strength of the UK's creative economy (which counts employment of creative workers outside the creative industries across different sectors as well as those working in the creative industries).
The Fusion Effect therefore begs the question: how much of an uplift in UK productivity could we see if the government emphasises STEAM as much as it does STEM skills to businesses, and removes some of the impediments that exist towards STEAM education in recent years?
 Greenwood, C., Harrison, M., and Vignoles, A. (2011) The labour market value of STEM qualifications and occupations. London: Institute of Education / Royal Academy of Engineering.