why we need a skills strategy
Scotland has a long tradition of valuing learning for the wider benefits that it can bring to the individual, to society and communities and to the economy. This Government continues to support fully the view that the years we spend in education generate a form of capital that has the potential to produce a long-term return. Skills development contributes to economic development from which we believe other benefits flow such as social justice, stronger communities and more engaged citizens.
Understanding and addressing the skills needs of our people and our economy is a complex task and is about much more than planning for the number of, for example, engineers, doctors or plumbers we have now or may need in the future.
It is about understanding how the demand and utilisation of skills can contribute to the development of the economy and support individuals to access the labour market to improve their own lives. This is particularly important for those individuals and young people who have moved away from work and learning and now need appropriate skills to re-enter. Inactivity impacts negatively both on people's lives and the economy: skills development can help change that.
What are the Particular Challenges for Scotland?
Scotland has a proud tradition of investment in skills which stands comparison with any other part of the United Kingdom.
If we look at qualification levels for example (which do not equate fully with skills but are one of the best proxies that we have) Scottish investment in education, for at least the last 30 years 1, has been higher than in the rest of the United Kingdom and this has resulted in a well qualified population. As the Leitch Review of Skills in the UK2 recently highlighted, Scotland is 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.
Scotland's skills profile has also been improving faster than that of the rest of the UK with the percentage of the working age population with a higher education qualification rising by 8% between 1997 and 2004 compared with 6% in the rest of the UK.
Scotland has not, however, matched the UK economic growth rate despite its positive skills profile. The task for all those involved in delivering, learning or using skills is in unlocking this potential and ensuring that the investment we make in skills and business growth and creating appropriate conditions for these to flourish, helps to drive the step change in economic growth to which we aspire.
Moreover this Government is committed to active participation at European level in the Lisbon agenda. Agreed in 2000, the Lisbon agenda seeks to promote economic reform in Europe to enable it to become the most competitive and dynamic knowledge-based economy in the world. A skilled and flexible Scottish workforce is critical to us contributing fully to this and in supporting emerging major initiatives that flow from this, such as the Commission's recently launched e-Skills Strategy 3 which aims to enhance the competitiveness of the ICT sector and to facilitate the efficient uptake of ICT for European enterprises in general.
Scotland will be represented on a global stage at the WorldSkills event in Japan in November 2007. WorldSkills provides a means of exchange and comparison of world-class competency standards in the industrial trades and service sectors of the global economy and reminds us that that the labour market is increasingly an international market in which Scotland is both an importer and an exporter of skills.
Figure 1: -Selected key strengths and weaknesses in relation to the Scottish labour market
Recent growth above long-term trend
Current and long-term growth still below UK and many countries
- Strong - and well qualified - labour market
- School attainment rising for most and we compare well internationally
- Compare favourably both in terms of UK and internationally in our qualification profiles - both now and in the future
- High participation in post-school education
- Positive net-migration to fill shortages
- Essential skills position more favourable than the UK
- Making opportunities available for young people currently not in education, employment or training
- Tail of under achievement remaining for some in school education
- Group of people with low essential skills
- Reports of employers having shortages/skills issues in certain areas - issues around 'softer skills' a concern
- Lower 15-19 education participation in international terms
- Pockets of inequality, poverty and economic inactivity still remain - especially in post industrial areas
- High employment/ economic activity rate
- Low unemployment
- Vast majority of employers say university and college graduates are well prepared for the world of work
- Productivity in Scotland still below UK average (although only slightly)
What do we mean by "Skills"?
For the purpose of this document we focus primarily on several overlapping clusters of skills:
- 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 skills that prepare individuals for employment rather than for a specific occupation;
- essential skills that include all of those above; and
- vocational skills that are specific to a particular occupation or sector.
Evidence from sources such as Futureskills Scotland's Employers Skill Survey 4 and the Scottish Funding Council's report Learning to Work5, show that employers expect potential employees to have skills that, in their view, they should have learned at school. There is a significant number of adults in Scotland who do not meet employers' essential skills criteria and this is a key employability focus for colleges and the Community Learning and Development sector, in particular.
Equally, employers want people with the 'softer', less definable, skills that are vital for the success of their organisation. There is no definitive list of these, which depends on type of job, level of responsibility and organisational culture, but include:
- effective time management;
- planning and organising;
- effective oral and written communication skills;
- the ability to solve problems;
- being able to undertake tasks or make submissions at short notice;
- the ability to work with others to achieve common goals;
- the ability to think critically and creatively;
- the ability to learn and to continue learning;
- the ability to take responsibility for professional development; and
- having the skills needed to manage, or be managed by, others (which draws on many of the other skills in this list); and so on.
There are many other skills that we have not included in this list, but which will also be valued highly in certain work environments. For example, some types of employment (and self-employment in particular) place a high value on enterprise skills - the skills to create ideas and make them work - including creating, networking, initiative, leadership and risk taking; and the type of employment that a graduate or post-graduate is likely to aspire to is likely to place particular emphasis on more complex 'higher level' skills, such as creative thinking and sophisticated communication and problem solving abilities.
It is important to understand what we mean when we talk about skills, but it is also important that the definition we use should not be exclusive. Skills are developed through formal and informal education and training, but also through the cultural and social experiences we go through. They are developed in work, in school, in universities and colleges and our communities.
Skills and the Economy
A skilled and educated workforce is essential to productivity and sustainable economic growth. Not only are more skilled workers potentially more productive in their own right, but the skill level of the workforce is likely to impact significantly on the effectiveness of capital investment and the ability of employers to adopt innovative work practices.
The labour market also needs enterprising people. These people still need to be effective employers or employees, but they are also the people who create ideas and have the confidence, determination and skills to translate those into positive action, for economic or social benefit. This is often associated with self employment or entrepreneurship and these characteristics are also valued within many employment environments.
For individual Scots the benefits of being better qualified are improvements in both their chances of being employed and in the wages they receive. More highly qualified people are more likely to be in work than the less well qualified and they are also on average better paid. Recent work carried out for Futureskills Scotland 6 looked at the average return to increasing qualification levels.
There is a clear pattern. Earnings rise with qualification level. This effect is in addition to the employment effect. At every level, on average, the labour market rewards academic qualifications more highly than vocational qualifications.
Similarly, the economic cost of low skills cannot be ignored. Not being in education, employment or training has a personal cost to the adults and young people affected and to the economy and society as a whole. A study by the DfES published in 2002 7 estimated that the present value 8 of the additional resource cost associated with an individual not being in education, employment or training amounted to Â£45,000 9. The resource cost represents the cost to the economy as a whole of failing to help a 16 to 18 year old out of this grouping and attempts to place a value on additional costs of unemployment, under-employment, crime, poor health, substance abuse, premature death and early motherhood 10.
It is important to remember that the outcomes in the labour market are driven both by the supply of appropriate qualifications and the demand for those qualifications from employers. Focussing on either alone is likely to limit the benefits that can be derived from our investment. Furthermore, employers' demand for skills is based on what, where and how they choose to do business: Professor Ewart Keep of the Centre for Skills Knowledge and Occupational Performance ( SKOPE), based at Oxford and Cardiff Universities, has suggested that "if raising demand for skill is a policy goal, policy needs to find ways to encourage employers to raise their game in terms of their product market strategies".11
"Productivity growth isn't everything, but in the long run it is nearly everything."
The Age of Diminished Expectations
Productivity matters. Improvements in productivity over time drive changes in our material standard of living. Productivity growth is what lets us enjoy goods and services which our parents and grandparents would have regarded as luxuries.
Scottish productivity, per hour worked, trails that of the UK as a whole and the UK figures trail those of key international competitors. Scottish productivity per hour worked is about 98% of the UK level and the UK is about 11% behind the G7 average and 27% behind the US12.
International benchmarking work carried out by Futureskills Scotland suggests that while on most indicators our labour quality is in the top tier of comparator countries, our economic performance is below average 13. In particular evidence produced for the Leitch Review of Skills highlighted that there is a disconnection between the Scottish skills profile which, overall, is better than the UK and our economic performance, which is poorer.
Skills and Business
Employers and in particular businesses in the private sector, are the key link between the skills of the population and economic performance. If we are to meet our economic growth goals then we must ensure that the skills businesses require are available and that the best possible use is made of those skills.
There are few more frustrating experiences for business than identifying profitable opportunities for growth which they cannot take advantage of because they have difficulty recruiting staff. Where this occurs as a result of skills shortages, opportunities are not only lost for the business concerned, but for the community as a whole and in particular for those who cannot take advantage of job opportunities as a result of not having the required skills.
Futureskills Scotland undertake a biennial survey of businesses in Scotland (The Scottish Employer Skills Survey) to monitor the scale of this problem. This is the largest survey of its type in Scotland and last year surveyed around 6,300 employers.
In general, when viewed at a national level, the labour market appears to work well in matching individuals and their qualifications to employers and their needs. To put the figures in context approximately 375,000 people moved between jobs and into employment in 2006.
The report found that 8% of workplaces have vacancies that they cannot fill because applicants lack the necessary skills, qualifications or experience. This accounts for about 1.1% of total employee jobs.
However, it is important to note that this impact is not evenly spread. For example, skills shortages impact disproportionately on micro businesses (one to four employees). The results also vary by industry with, for example, the construction industry regularly reporting skills shortages. So clearly, notwithstanding a generally healthy national picture, there are particular issues that need to be addressed.
As well as considering the supply of skills we also need to consider how we can help businesses to make best use of the skills available to them.
Recent research 14 suggests that jobs are not necessarily being redesigned in order to make best use of improvements in qualification levels amongst employees. For example more skilled jobs typically require a higher level of individual decision-making over tasks. The rise in qualification levels has not, however, been accompanied by an increase in the control employees can exercise over their jobs.
The same research indicates that whilst the amount of formal training time has remained static in the last 20 years, this may suggest that the rate of skills acquisition whilst at work is increasing. Even though jobs in the current decade are still becoming more complex and hence requiring more skill, it seems workers are being expected to become more competent in the greater complexities in the same time as before. If this interpretation is correct it follows that the importance of work-based learning is becoming more central to upskilling the workforce.
Furthermore, it seems that the emphasis must shift from designing and delivering effective top-down instruction in the training room to crafting interventions that support, accelerate and direct individual learning 15.
There is also evidence that organisational structures and the decisions employers make can have important implications for the extent to which skills are fully utilised and productivity is improved 16. Other countries, notably in Scandinavia, have well established programmes aimed at workplace and work organisation development 17 but even there, with the support of the state, this is a lengthy and complex process.
We know that there are differences in the improvements in productivity that firms extract from capital investment, in, for example, computers 18, so it should come as no surprise that there are similar issues around the more difficult issue of skills and job design.
Simply adding more skills to the workforce will not secure the full benefit for our economy unless employers and individuals maximise the benefits that they can derive from these skills. Furthermore, how skills interacts with the other drivers of productivity, such as capital investment and innovation, is crucial. Equally, investment in capital and innovation will be most productive when it is supported by a well trained workforce.
We need to move beyond a focus on meeting the current demand for skills and tackle the issues which underlie and drive demand. We need the skills to facilitate sustainable economic growth but we also need our firms to be ambitious and demanding users of skills.
Achieving this balance requires a partnership between employers, the individual and Government.