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Skills for Scotland: Accelerating the Recovery and Increasing Sustainable Economic Growth

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1. INTRODUCTION

The Scottish Government has made clear that increasing sustainable economic growth with opportunities for all of Scotland to flourish is our Purpose. Scotland's greatest asset in realising this Purpose is its people. Skills alone do not hold the key to fully maximising economic performance. It is accepted, however, that a skilled and educated workforce is essential to improving productivity and sustainable economic growth. Developing a highly skilled workforce that matches the needs of successful and growing businesses and ensuring that these skills are applied effectively is a priority.

In 2007 Skills for Scotland - A Lifelong Skills Strategy was published and set out the ambitions for the development and better use of skills across three strategic themes: focus on individual development; response to the needs of the economy and demands of employers; and the creation of cohesive structures. These ambitions and the objectives which underpin them hold true today - a smarter Scotland with more and better employment opportunities remains at the heart of everything we want to achieve.

This refreshed strategy represents a statement of how policies on skills and training will be developed within the new and highly challenging economic environment that Scotland faces. It supplements rather than replaces Skills for Scotland - recognising progress and the achievements made since 2007 but placing a renewed focus and flexibility around the skills required to accelerate economic recovery and to sustain a growing, successful country with opportunities for all of Scotland to flourish.

What are skills?

Defining skillsThis strategy continues to focus on several overlapping clusters of skills, namely:

  • personal and learning skills that enable individuals to become effective lifelong learners;
  • literacy and numeracy;
  • the five core skills of communication, numeracy, problem solving, information technology and working with others;
  • employability and career management skills that prepare individuals for employment and future career development rather than focus on a specific occupation;
  • essential skills that include all of the above; and
  • vocational skills that are specific to a particular occupation or sector.

Ensuring Scotland's people have the appropriate support to meet the essential skills criteria is fundamental to the long-term economic goals. Employers will also look for the softer skills that can be crucial to productivity and success. These can include teamwork, communication, problem solving ability, analytical skills, enterprise and entrepreneurial skills, career management skills, leadership and customer service skills as well as personal characteristics such as motivation, self-confidence, and career aspiration. This list is not exclusive and skills can be developed in many ways, whether through education and training or through cultural and social experiences.

Why do skills matter?

Skills and the Government's PurposeOur Economic Strategy set out the challenge facing Scotland. Our economic (Gross Domestic Product) growth rate over the last thirty years has lagged behind that of other comparable European countries and productivity levels and growth have been below the majority of Scotland's main competitors. The strategy identifies the channels through which growth can be driven and sets a number of high level Purpose Targets to include specific benchmarks for sustainable growth and to ensure that the benefits of growth are shared among all people across Scotland. These targets cover growth, productivity, participation, population, solidarity, cohesion and sustainability.

Productivity, participation, solidarity and cohesionTaken together the targets define the characteristics of the economic growth that we want to see - a growth that is sustainable, cohesive and which builds solidarity in all of Scotland's regions, based on our genuine, global competitive advantage. Learning, skills and well-being are strategic priorities in the Government Economic Strategy that will help support the achievement of our national outcomes. Increasing sustainable economic growth ultimately depends on successful and growing businesses that increase employment opportunities and having a skilled workforce to do these jobs well. Skills, when utilised effectively, are one of the key drivers of improvements in productivity. Skilled leaders, managers and employees create value in the workplace, stimulating the improved profitability and growth of firms and generating higher wages for workers. Improved skills levels increase the opportunities available to individuals, potentially boosting employment.

Skills and innovationSkills are also essential to innovation, a key theme of our Economic Recovery Plan and a key driver of economic growth in its own right. A better education and skills base has the potential to translate into more scientists, analysts, technicians, and inventors; working to increase the stock of knowledge via the development of new processes and technologies. This is not an abstract issue. Innovation within existing businesses is key to success in the current period of economic recovery. Innovations require problem-solving skills to spot opportunity, entrepreneurial skills to see their potential, technical skills to develop a change in a product or service and managerial and leadership skills to implement that change. Improving Scotland's skills base is crucial to ensure we are best placed to take advantage of new economic opportunities that will emerge via the creation of new enterprises or access to new supply chains. This includes the low carbon economy where around 60,000 new jobs are forecast by 2020, including 26,000 in renewables, in addition to the adaptation of many more jobs required in the transition. Improving the skills base is also crucial for the development and exploitation of new products and processes.

Wider benefitsThe enhancement of skills also has wider social benefits, particularly in less prosperous areas. There is strong evidence that a better educated and skilled population can lead to better social outcomes such as improved health, reduced crime, improved social cohesion, and increased transfer of knowledge to children. Skills policy is fundamental in helping make Scotland a better place to live, work and learn and a more prosperous and successful country.

How is Scotland performing?

Strong skills profileWhile skills development challenges remain, Scotland's investment in skills 1 has been higher relative to the United Kingdom and this investment has contributed to a highly skilled population. The UK Leitch Review of Skills highlighted Scotland as the only nation or region of the United Kingdom where the percentage of people with a Higher Education qualification outnumbers the percentage with a basic school leaving qualification. In comparison with other areas of the UK, Scotland is ranked third in terms of percentage of the population with degree level qualification or above, behind only the South East of England and London. In terms of the population with up to SCQF level 9 ( SVQ level 4) qualification or above, Scotland is ranked second only behind London.

Table 1.1: Highest qualification of working age population, UK Countries and Regions, 2009

% with degree or above

% with SVQ level 4 or above

% with mid level qualification ( SVQ level 1,2,3 or other)

% with no qualifications

North East

16.6%

24.7%

61.6%

13.7%

Yorkshire & Humberside

19.2%

27.2%

60.9%

11.9%

West Midlands

17.3%

25.6%

59.0%

15.5%

Wales

19.2%

27.9%

58.1%

14.0%

North West

19.0%

27.7%

59.4%

13.0%

East Midlands

17.9%

26.4%

61.5%

12.1%

Northern Ireland

18.7%

26.2%

52.4%

21.4%

Eastern

20.4%

28.0%

61.8%

10.3%

South West

20.4%

29.7%

62.6%

7.7%

Scotland

21.0%

34.6%

53.1%

12.3%

South East

24.4%

33.4%

58.1%

8.5%

London

34.2%

40.4%

48.2%

11.4%

UK

21.9%

30.5%

57.7%

11.8%

Source: Annual Population Survey, Jan-Dec 2009
Working age population refers to the traditional definition of females aged 16-59 and males aged 16-64

Compared to 2007 Scotland's position has strengthened on these broad measures of skill attainment. Those who have obtained a degree level qualification, up to an SCQF level 9, and a mid-level qualification have all increased. The percentage of the population without any qualifications has also fallen. Scottish Government policy since 2007 will help deliver a higher proportion of the working age population with improved skill levels, measured in terms of qualification attainment.

Table 1.2: Highest qualification of Scotland's working age population, 2008 and 2009

% with degree or above

% with SVQ level 4 or above

% with mid level qualification ( SVQ level 1,2,3 or other)

% with no qualifications

2008

20.3%

34.0%

53.2%

12.5%

2009

21.0%

34.6%

53.1%

12.3%

Source: Annual Population Survey, Jan-Dec 2008 & 2009
Working age population refers to the traditional definition of females aged 16-59 and males aged 16-64

Local variationsWhilst the national level data show a high skilled population, there are variations in performance at a local level. This refreshed skills strategy recognises that the approach to skills development and use must be flexible to address variations in economic opportunities, labour market conditions and life chances across the country.

International comparisonsOn an international basis Scotland also performs strongly. Compared to other OECD countries, Scotland is in the lowest quartile for the proportion of the population with low or no skills. On a similar basis we stand in the second quartile for both intermediate and higher qualifications. Scotland cannot expect to be an internationally-competitive economy if we do not remain competitive with the skills levels attained by other developed countries

Improving our performanceWhile this performance is encouraging, it is recognised that a number of unanswered questions persist and many challenges remain. Most notable is that the improvements to Scotland's skills profile, coupled with the strong performance of the research base of Scotland's universities, have not translated into the improved levels of productivity and economic growth at an aggregate level that might have been expected.

Performance on both these key indicators has been steady and while there has been improvement across individual sectors, Scotland continues to trail behind the UK and a number of key international competitors. There are a number of reasons for this spanning all individual components of productivity and growth. However, not only is the effective use of skills itself a key driver of productivity, it also underpins the other drivers of productivity.

It is clear that Scotland has the potential to better realise the full benefits of significant investment in skills and research by ensuring people are equipped with the right skills, that are economically valuable, improving their use and the contribution they make to the economy. Analysis by the UKCES2 shows that "Scotland's most critical skill shortage areas across many sectors of the economy are likely to be at skilled technician and associate professional level (intermediate level skills at SVQ Levels 3-4, SCQF Levels 6-8 equivalent) together with essential skills". This is consistent with results from the 2008 Scottish Employers Skills Survey.

Supporting economic recovery

Strengthening education and skillsOur Economic Recovery Plan is centred on three key themes: supporting jobs in our communities; strengthening education and skills; and investing in innovation and industries of the future. This recognises that a key task for the Scottish Government, local government, NHS and other key public sector organisations is to maintain a flexible, responsive approach to changing economic conditions. Through the alignment of activities, and by maintaining the focus on those key sectors that best exploit Scotland's global competitive advantages (financial and business services, energy, tourism, life sciences, food and drink, the creative industries and universities), a supportive framework for sustained improvement in future economic growth can be created. These ambitions are also reflected in the four priority areas of this skills strategy - empowering individuals, supporting employers, simplifying the skills system and strengthening partnerships - all aimed at improving the employment opportunities for individuals, the productivity of businesses, and the quality of public services.

Tightening public financesIt is clear that public spending in Scotland will be subject to a long period of significant constraint in the years ahead. Recent analysis 3 suggests that it could take until 2025-26 for the Scottish Government Budget to return to 2009-10 levels - a total adjustment period of 16 years with a cumultative loss in resources of approximately £42 billion. The report of Scotland's Independent Budget Review set out a series of options for consideration in the face of the most challenging public spending environment since the Second World War. The Review findings will help inform the Scottish Government Spending Review process and help to determine spending priorities for 2011-12 and beyond. In the context of skills policy, the challenge is to continue to develop a highly skilled workforce as efficiently as possible from available resources and fully exploiting this talent to ensure maximum return. Even within this period of fiscal austerity the education and skills base in Scotland will continue to provide a platform for new employment opportunities, helping Scotland to generate high value-added jobs and pulling us ahead of competitors.

Review of Post 16 education and vocational trainingThe current economic climate and public spending pressures will be central to the Review of Post 16 Education and Vocational Training provision across Scotland, which has been commissioned by the Scottish Government. The Review will look at options for more effective approaches to workforce development and support for the unemployed and young people seeking work for the first time. The Review will also look at better aligning post 16 education and vocational training provision to the National Performance Framework and Curriculum for Excellence, and will examine options to achieve better value for money and faster progress on national economic targets. The Review will be led by the Chair of Skills Development Scotland, Willy Roe, and will report to Ministers by March 2011.

Demographic changeSignificant demographic changes are expected in Scotland over the next 20 years with more people entering retirement and a reduction in the working age population. As the population ages the demand for certain services is also likely to change, for instance it is expected that there will be an increased demand for heath care, and some sectors will see greater demand for replacement labour as more employees reach retirement age. A flexible skills system is required to respond to these challenges and ensure there is the right mix of skills in the workforce to respond to labour market demands and support economic growth.

Strategic supportAs the recovery phase moves forward it is critical that the Scottish Government, local government and other public sector bodies continue to provide strategic support that generates new knowledge, accelerates economic growth and creates and sustains employment. As the global economy adjusts to the new economic landscape, there will be opportunities for Scottish businesses to develop new markets and grow existing ones, both domestically and internationally. The transition to a low carbon economy provides one of the primary opportunities for Scotland, and will lead to the development of major new industries, new employment and the wholesale decarbonisation of existing businesses and sectors. Other opportunities like this will emerge and the skills system must be positioned to respond effectively and, where appropriate, to drive opportunity in a global market.