Working futures and skills challenge

Summary
Introduction
Skills in the UK today
Employment and skills projection
'Run to stand still'
Setting more ambitious targets
References

Summary

The Leitch Review was commissioned by the government to identify the optimal skills mix in 2020. This article summarises the key points from the Review, and in addition looks at employment trends in the decade to 2014, including regional analysis, as forecast in the Working Futures series.

Introduction

A team led by Lord Leitch was commissioned by the government to examine the future skill needs of the UK economy in order to maximise economic prosperity and productivity and to improve social justice. The interim report, Skills in the UK: the long-term challenge, was published in December 2005 [1]. Meanwhile, early this year, the Warwick Institute for Employment Research (IER) published a series of reports under the title of Working Futures 2004-2014, on detailed employment projections over the next decade [2]. Together, these two reports identify the areas and key challenges in skills development over the next ten to 15 years.

Skills in the UK today

According to the Leitch Review, although the UK has a strong economy and high employment levels, the nation’s skills are not world class. Over a third of adults in the UK do not have a basic school-leaving qualification - double the proportion of Canada and Germany - and five million people have no qualifications at all. One in six adults do not have the literacy skills expected of an 11 year old and almost half do not have these levels of functional numeracy.

Over the last decade, although the proportion of adults in the UK with degree or equivalent level qualification has increased from 19% to 26% in 2004, our higher education participation rates still lag behind many other developed countries. In Canada and the US, for example, around two-fifths of adults are educated to this level.

The good news is that despite the rising number of graduates in the UK, the wage returns associated with a degree have remained relatively stable, suggesting that employers do not see the value of a degree as being diminished. It is also thought that when graduates enter previously non-graduate roles they are able to change the nature of that job, making it more productive.

Employment and skills projection

According to the IER study, employment is expected to continue to rise during the period 2004-2014, with 1.3 million additional jobs being created [2]. Managers and senior officials, professional occupations, associate professional & technical occupations, and sales & customer service occupations are expected to show significant growth, whilst losses are expected in administrative, clerical & secretarial occupations, skilled trades occupations, machine & transport operatives and elementary occupations. This ties in with the projection from the Leitch Review, which estimated that by 2014, two-thirds of jobs will require at least intermediate level skills and by 2020, more than 40% of jobs could be filled by graduates, up from 30% in 2004.

The IER research also forecast employment trends to 2014 by industry sector, revealing that:

Employment in business & other services is forecast to increase by just under a million by 2014, with other business services (including computing services) showing the fastest growth.
Employment in education, health & social work, distribution and retailing is forecast to increase, while construction and public administration & defence will see a slight fall.
Manufacturing and the primary & utilities sector are expected to see more job losses.

In addition, forecast by region has suggested that:

London, the South East and East of England will be the fastest growing regions in the next decade, in terms of employment and output.
The South West is expected to see rates of growth in employment similar to the UK average. The region will also have a larger than average share of part-time and self-employed workers.
Yorkshire and the Humber is projected to see employment growth at the same rate as the UK average, but with a smaller than average share of professional and associate professional occupations. Contrary to the UK trend, a modest increase in administrative, clerical & secretarial occupations is expected in the region.
Employment in Wales is also expected to grow at the same rate as the UK average. However, the region is forecast to see the fastest rate of growth in the UK for male part-time employees.
North West and Northern Ireland are forecast to see rise in employment slower than the UK average.
Some of the fastest rates of job losses will be in the East Midlands and West Midlands, owing to the decline in manufacturing. However, an increase in employment in services in these regions is expected.
The slowest employment growth in the next decade is forecast in Scotland and the North East.

'Run to stand still'

The Leitch Review shows that if the current government’s target on skills are met, the proportion of the UK working age population with degree or equivalent qualifications will reach 31% by 2010, 35% by 2015 and 38% by 2020. Although the improved skills base will see a corresponding productivity growth of 3%, UK will continue to be ‘an average performer’ as we will continue to have smaller proportions of intermediate and higher-level skills than key comparator countries such as France and the US. As the Review says, we will have managed only to ‘run to stand still’.

Continued improvement in young people’s skills will also not be sufficient to match the skills requirement in 2020. Half of the working age population in 2020 is already over 25 years old and the proportion of older people in the labour market will continue to increase. Further improvements to the overall UK skills profile must, therefore, be made to the skills of adults.

Setting more ambitious targets

The Leitch Review has called for more ambitious skills targets to be set and looked at several scenarios for 2020. These include: tackling the stock of low skilled adults without qualifications, basic literacy and numeracy; investing more in intermediate skills; and further increasing the proportion of adults holding a degree, raising the attainment rate of 19-30 year olds to 65%.

Focusing on improving high-level skills is seen to have the biggest positive impact on productivity compared with the other two scenarios. However, this is also the most expensive. The Review, therefore, suggests that overall the three scenarios each give similar ‘value for money’.

The final report of the Leitch Review will be published later in 2006.

References

1. Skills in the UK: The long-term challenge (interim report), Leitch Review of Skills, December 2005. HM Treasury

2. Working Futures 2004-2014, Institute for Employment Research, University of Warwick, January 2006. The series of reports covering national, sectoral and regional analyses are available at The Alliance of Sector Skills Councils.

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