Europe 2020: Scotland's National Reform Programme 2019

Chapter 4: Employment

The Scottish Government has a central role to play in ensuring that people have the skills, support and opportunities to realise their full potential. In particular, the Scottish Government shares the European Commission's continued concern over youth employment and the long-term impacts that the recession has had on our young people.

This chapter sets out the action the Scottish Government is taking to boost youth employment, improve young people's skills, support labour market participation and promote fair work. These actions cover the third Country-Specific Recommendation (CSR) to the UK to address skills mismatches and provide for skills progression, including by strengthening the quality of apprenticeships.

Europe 2020 headline target:

Seventy-five per cent of the EU population aged 20-64 should be employed. Europe 2020 highlights that the improvement against this target should include greater involvement of women, older workers, and better integration of migrants into the workforce.

Current Scottish Performance

Table 2 sets out Scotland's current performance against the Europe 2020 employment target.

Table 2 - Current Scottish Performance Against Employment Indicators

Indicator	Current Level	Change Over Year	Reference Period
Employment rate (population aged 20-64)	77.3%	1.0% pt increase	2017
Female employment rate (population aged 20-64)	73.7%	0.9% pt increase	2017
Male employment rate (population aged 20-64)	81.1%	1.1% pt increase	2017

Supporting Youth Employment

The cost of youth unemployment is significant, both to young people themselves and to the wider economy. Being unemployed while young can affect future earnings as average wages remain lower throughout the person's working life, even if the person is not unemployed again. It can also increase the chances of being unemployed again. Other consequences of being unemployed when young can emerge later in life, and include lower life satisfaction and happiness, poorer health, a higher risk of depression and lower job satisfaction. The longer the initial spell of unemployment, the greater the negative effect.

Developing the Young Workforce - Scotland's Youth Employment Strategy

Developing the Young Workforce (DYW) is Scotland's youth employment strategy and through DYW, we aim to reduce youth unemployment levels by 40% by 2021.

The strategy aims to create an enhanced curriculum offer for young people in schools and colleges and to increase opportunities for employment. It does this by bringing together schools, colleges, training providers and employers to promote the pathways young people need to participate in current and future work opportunities. This includes creating new work based learning options; enabling young people to learn in a range of settings in their senior phase of school; embedding employer engagement in education; offering careers advice at an earlier point in school; and introducing new standards for career education and work placements.

The DYW Programme's headline target, to reduce youth unemployment in Scotland, excluding those in full-time education, by 40% by 2021, continues to be met, having originally been achieved in May 2017.

Although the target continues to be achieved, we are mindful of the role played by wider economic and social factors. It remains important therefore that we continue our long term plans to strengthen education and skills partnerships. This is to ensure we can better guarantee the equality of experience across Scotland and minimise any downturn in youth employment should economic conditions become less favourable.

As we develop and expand the new DYW opportunities for our young people, encouraging diversity in the workforce by removing real and perceived barriers for young people is key. We have progressed much already, and met the Wood Commission's expectation for there to be gender and equality action plans in Skills Development Scotland (SDS) and the Scottish Funding Council.

We have built on existing approaches to support equalities activity, in particular for disabled young people. We have also seen the DYW Regional Groups support disabled and care-experienced young people onto work-experience placements and employment. We know, though, that persistent barriers remain for many young people, and that they won't be tackled within DYW alone.

Recognising this, our partnership approach is critical to improving opportunities for young people and we are particularly grateful all those pursuing the DYW agenda at the local, regional and national level for their continued commitment and energy.

Looking ahead, we expect to see the skills of our young people not only increase, but that these will better match the needs of employers to further the Scottish economy. As work advances on equalities we also expect to see developments in addressing gender imbalance in work and a decrease in the disability participation gap, in addition to improved outcomes for care-experienced young people.

Actions to Support Youth Employment

In December 2018 the Scottish Government published No One Left Behind: Review of Employability Services. The Review sets out our plan to deliver more effective and joined-up employability support across Scotland, and ultimately better employment outcomes for the people. The vision for the employability system in Scotland has been shaped collaboratively with delivery partners and service users. We will continue this collaborative approach as we seek to enhance the system in the following ways:

• By developing a new local employability model managed collaboratively between Scottish Government and Local Government;
• Develop and introduce an agreed national outcomes and measurement framework that will enable a more consistent understanding success of the employability system, and support the flexible delivery of services;
• Working with SDS, Local Government and other partners to explore the feasibility of a national all-age employment support offer, developing existing digital careers and employability platforms, alongside improved alignment with health and other services;
• Building on No One Left Behind: Next Steps for Employability Support, we will continue to work at local, regional and national level to improve join up between employability services and other provision; and
• Seek to embed user-led design across the employability sector.

The Scottish Government continues to provide support for young people trying to get into work and access apprenticeship programmes.

In 2018‑19 the Scottish Government will continue to invest in Community Jobs Scotland (CJS) by providing funding of up to £6.1 million to support 700 job training opportunities, with support for up to 12 months for 16 to 29 year olds facing the greatest barriers to employment, and continuation of support for CJS employers to pay the Living Wage.

The Scottish Government has substantially increased the number of new apprenticeships in Scotland from around 10,500 in 2008 to 28,000 in 2018‑19 and remain on track to achieve 30,000 new apprenticeship starts by 2020.

So to date, over the course of this administration, the Scottish Government has funded training for over a quarter of a million Modern Apprentices (250,033 from April 2007 - March 2018).

27,145 Modern Apprenticeship starts were delivered in 2017-18 exceeding the target of 27,000 starts. Additionally a further 278 people undertook Graduate Apprenticeships.

As well as growing the Modern Apprenticeship programme, the Scottish Government is committed to enhancing and widening our apprenticeship offering, ensuring that more people than ever before can benefit from work‑based learning. The expansion of Foundation and Graduate Apprenticeships is key to delivering this vision, as is the additional support we're offering to rural areas, and to key sectors.

Our commitment to equality of opportunity in apprenticeships is set out in SDS Apprenticeship Equalities Action Plan (EAP), which was published in December 2015. This publication makes clear the interventions we will make to increase the numbers of underrepresented groups in apprenticeships and to tackle gender segregation where it exists. SDS published its EAP Year 2 update in August 2018.

The Employability Fund (EF) remains a key element of the Scottish Government's efforts to boost employment levels in Scotland, with 9,000 EF training places being delivered in 2017-18 and another 9,000 to be delivered in 2018‑19. More than 70,000 training places have been delivered through EF since its launch in 2013, supporting individuals towards and into work.

Promoting Fair Work

Fair Work is a key driver of inclusive economic growth. The Scottish Government is committed to creating a fair and inclusive jobs market in which every individual can participate to their full potential. Building on the Economic Strategy, Scotland's Labour Market Strategy demonstrates how a labour market that is fair and inclusive, and that provides sustainable and well‑paid jobs, is key to tackling income inequality and addressing wider issues, including health, crime, deprivation and social mobility. It sets out a vision for a strong labour market that drives inclusive, sustainable economic growth characterised by growing, competitive businesses, high employment, a skilled population capable of meeting the needs of employers, and where fair work is central to improving the lives of individuals and their families.

Given powers over employment law are currently reserved, our approach to delivering fair work is built on collaboration, engagement and using our wider powers to exert strategic influence. We are working with the Fair Work Convention to drive change and to promote fair work through engaging with employers, employees and trade unions.

The Fair Work Convention produced its Fair Work Framework for Scotland in March 2016. The Framework sets out the Convention's vision and definition of Fair Work which are endorsed by the Scottish Government.

• Vision: By 2025, people in Scotland will have a world leading working life where Fair Work drives success, wellbeing and prosperity for individuals, businesses, organisations.
• Definition: Fair Work is work that offers effective voice, opportunity, security, fulfilment and respect that balances the rights and responsibilities of employers and workers and that can generate benefits for individuals organisations and society.

Regardless of size, sector or location of a business, the Fair Work Framework is an accessible guide to adopting Fair Work practices. It demonstrates that not only is Fair Work a moral imperative, but that Fair Work actually improves productivity and innovation in the workplace which will help businesses to thrive.

Our approach is to persuade and influence where we cannot legislate, and we continue to make great progress using the levers which we have. For example:

• Meeting and exceeding our target of 1,000 Scotland-based living wage accredited employers (now over 1,300). Furthermore, Scotland is the best performing of all four UK countries in terms of both the proportion of the workforce paid at least the living wage and the proportion of accredited companies paying the Living Wage.
• Almost 600 Scottish Business Pledge signatories.
• Introducing Statutory Guidance on Addressing Fair Work Practices, including the real Living Wage, in Procurement and supporting Best Practice Guidance and Toolkit.
• Introducing the Workplace Equality Fund to deliver employer-led innovative solutions to overcome workforce inequality.
• Introducing the Women Returners Programme to assist women to re-enter the workforce following a career break.
• Establishing the Carer Positive scheme to encourage flexible, fair and supportive policies to support carers in the workforce.
• Promoting development of flexible workplaces through continued funding of Family Flexible Working Scotland.
• Collaborating with the Scottish Trades Union Congress (STUC) to publishing the Severe Weather Charter which sets out Fair Work principles to help employers manage severe weather situations.
• Jointly publishing the Facility Time Reporting Guidance with the STUC.
• Reaching a Fair Work Agreement between Scottish Ministers and Civil Service Trade Unions.
• We see Trade Unions as our social partners and a huge strength for our country. That is why we opposed the UK Government's Trade Union Act which is a threat to unions; to the fundamental rights of workers; and to the collaborative approach we take here in Scotland. We continue to offer support to the STUC via Scottish Union Learning and the Trade Union Fair Work Modernisation Fund,
• We support the work of Business in the Community Scotland to bring those from a background of poverty and limited opportunity closer to the workplace and to ensure access to fair employment. It has a leadership group which focuses on innovation, employability, communications and education.

The Fair Work Action Plan, published on 27 February 2019, sets out how we will deliver our ambition of becoming a world-leading Fair Work Nation by 2025. Our focus will be on: supporting employers adopt Fair Work practices, delivering Fair Work to a diverse and inclusive workforce; and, embedding Fair Work across the Scottish Government. The Action Plan was developed in consultation with the STUC, the Fair Work Convention, employers and other stakeholders and recognises that Fair Work is an iterative process where new the actions and approaches we are proposing will develop over time.

Actions set out in the Plan include:

• working with employers and partners to deliver Fair Work First - the default position to harness the financial power of the Scottish Government to, by the end of this Parliament, extend fair work criteria to as many funding streams, business support grants and public contracts as we can;
• aligning the Scottish Business Pledge to the Fair Work Framework;
• co-hosting an International Fair Work Summit with the Fair Work Convention to showcase Scotland's achievements;
• extending the Workplace Equality Fund;
• supporting trade unions to embed Fair Work in workplaces;
• increasing the number of people employed who are paid the real Living Wage;
• embedding Fair Work across Scottish Government portfolios;
• engaging with the UK Government to enhance worker's rights;
• as an employer, demonstrating our leadership by adopting Fair Work practices.

The full set of actions are available on the Fair Work Action Plan website.

The Scottish Business Pledge has grown steadily since its launch in 2015 and currently over 580 companies have made their commitment across a range of sectors.

On 22 March 2018, a review of the Scottish Business Pledge was to announced to focus on how it might evolve in order to increase scale and impact, and provide better support for our existing Pledge companies. In response to business feedback during this review, we announced in February 2019 a refresh of the Business Pledge to make it more accessible for business, to build impact and scale and ensure that business can play a greater role. We will introduce a business-led leadership group and business to business learning network to promote and in driving forward the changes, to grow the numbers making their commitment to more than the current 600 companies.

The Scottish Business Pledge

The Scottish Business Pledge is a partnership between Government and business, with the shared ambition of boosting productivity, competitiveness and inclusive growth through fair work practices, employee engagement and progressive business practices. It provides a vehicle to bring together all elements recognised in Scotland's Economic Strategy as the key drivers of sustainable inclusive economic growth, i.e. innovation, internationalisation and investment in our people.

The Pledge has nine components:

1. Paying the living wage
2. Not using zero hours contracts
3. Supporting progressive workforce engagement
4. Investing in youth
5. Making progress on diversity and gender balance
6. Committing to an innovation programme
7. Pursuing international business opportunities
8. Playing an active role in the community
9. Committing to prompt payment

Women's employment

The Scottish Government is working with the Equality and Human Rights Commission to tackle pregnancy and maternity discrimination. The Minister for Business, Fair Work and Skills is chairing a working group whose remit includes:

• improving employers' access to advice to ensure best practice;
• developing an industry‑specific communications strategy around the benefits of positive pregnancy and maternity policies;
• strengthening health and safety advice.

We have delivered on our commitment for a Returner's Programme to assist women to re‑enter the workforce following a career break. We approved seven projects to date with a total value above £235,000. These projects helped to address the under‑ representation of women in the science, technology, engineering, mathematics (STEM), finance, security and manufacturing sectors; increase business start‑up rates for women and the number of women in senior positions and also encourage men into childcare which will help to change the perception of caring as a 'women's role'. One project specifically supported black and minority ethnic women back into the workplace.

As part of the Programme for Government 2018-19 there will be a commitment to take forward a range of actions to support women to return to work including investing an additional £5 million over the next three years to support around 2,000 women to return to work.

The Scottish Government has supported the Workplace Equality Fund which will deliver employer led innovative solutions to overcome workforce & workplace inequality. The Fund will have a key focus on supporting women, older workers, disabled people, and those from a minority ethnic background. There are in total 22 projects, involving a range of employers, receiving funding through the £750,000 Workplace Equality Fund.

On 8 March 2019, A Fairer Scotland For Women: Gender Pay Gap Action Plan was published. The aim of the Action Plan is to bring together a cross-Government approach to support action on tackling the causes of women's inequality in the labour market. It will form part of a number of Plans, including the Disability Delivery Plan, the Fair Work Action Plan and the Future Skills Action Plan, being developed to support the implementation of the Labour Market Strategy. The Action Plan sets out actions that will be taken over the coming years in order to further reduce the gender pay gap for workers in Scotland. It will address labour market inequalities faced by women, particularly disabled women; minority ethnic women; women from poorer socio economic backgrounds; and women with caring responsibilities.

Delivering more integrated and aligned employment support to meet the needs of those facing the greatest barriers

The Scotland Act 2016 devolved employment support powers to Scotland, which are now being delivered from April 2018 through Fair Start Scotland (FSS). FSS is a voluntary service focused on people who are further removed from the labour market, and has core values of treating people with fairness, dignity and respect. FSS is an important first step towards the Scottish Government's vision of joined-up, flexible and responsive employability support in Scotland. Delivering devolved employability services on an ongoing basis is now a cornerstone of employability support in Scotland.

In April 2018, we published 'No One Left Behind - Next Steps for the Integration and Alignment of Employability Support in Scotland' ('No One Left Behind'). It contains a range of activity that we will collectively take to deliver more effective and joined-up employability support across Scotland. It has a specific focus on integrating employability support with health, justice, and housing services, as these areas are critical to continue to help those people who are further from the labour market.

One of the activities in No One Left Behind was to undertake a review of the employability landscape and Scottish Government investment in employability services, with the aim of developing a more joined-up, flexible system that is more responsive to the needs and capabilities of users. In December 2018, we published the conclusions of that review setting out a range of proposals we will take forward with partners, including plans for a new local employability delivery model, to be managed collaboratively between Scottish Government and Local Government from April 2019.

Over 2017-18 - 2018-19, we have been testing new innovative approaches for organisations to collaborate and deliver innovative proposals that join up employability support with health and social care, justice and housing services. Learning from these projects will feed into our wider work on developing an employability system that is more flexible and responsive to the needs of Scotland's labour market.

A Fairer Scotland for Disabled People - Employment Action Plan

In December 2016 the Scottish Government committed in its Disability Action Plan to at least halve the disability employment gap. This action plan included also a commitment to consult with public sector bodies on whether or not to set targets for the public sector, and other measures to improve disability employment in the public sector.

In December 2018, following a period of extensive stakeholder engagement including disabled people and disabled people's organisations, the Scottish Government published A Fairer Scotland for Disabled People: Employment Action Plan.

This sets out actions the Scottish Government will take towards halving the disability employment gap by 2038, focussing on three key areas: support for employers and supporting people who are in employment; supporting people into fair work; and focussing on youth transitions. Specifically - in addition to the up to £96 million we are already in investing in our newly devolved employment service, Fair Start Scotland, we will invest:

• £6 million to support more disabled parents towards and into work in areas with the highest levels of child poverty and lowest disability employment rates.
• Up to £1 million to support employers through a new Public Social Partnership and working with enterprise companies to develop pilots aimed at ensuring that employers have the support they need to attract, recruit and retain talented disabled staff.
• Up to £500,000 to test the provision of support, similar to Access to Work, for disabled people undertaking work experience and work trials.

We will also, following the consultation around public sector targets, set targets for the Scottish government's own workforce, and explore how we can share our learning and encourage other public sector bodies to consider this as well.

Enterprise and Skills Strategic Board

Following the conclusion of the Enterprise and Skills Review in 2017 we have established an Enterprise and Skills Strategic Board. The Board will align and co‑ordinate the activities of Scotland's enterprise and skills agencies, in order to maximise the impact of the collective investment that Scotland makes in enterprise and skills development, and to create the conditions that are conducive to delivering inclusive and sustainable growth. The Board's membership reflects a wealth of business and public experience, encompassing a broad range of sectors, sizes and locations. In October 2018 the Board published its full strategic plan, outlining a series of actions for Scotland's enterprise and skills agencies aimed at driving productivity and inclusive growth.

National Retraining Partnership & Future Skills Action Plan

The Scottish Government's 2018-19 Programme for Government sets out that in 2019 we will establish a National Retraining Partnership. Working together in collaboration with employer groups and trade unions, the partnership will establish how employers and businesses can best support the upskilling and development of their workforce, and provides the opportunity to better understand the upskilling and reskilling needs of the existing workforce more broadly. In addition we are also committed to developing and publishing a Future Skills Action Plan in 2019. The plan will set out how the skills system in Scotland should be orientated against a future context of greater economic uncertainty, technological and workplace change, and changing workforce demographics, so that it can continue to provide the skills that the economy demands and requires.

Brexit: What's at stake for employment in Scotland?

The progress made by the European Single Market in dismantling the obstacles to trade in goods and services has been a key driver of growth and employment in Scotland and across the UK. Young people in particular have benefited enormously from the opportunities to study and work abroad, as well as, openness and dynamism of the Scottish economy provided by membership to the EU. The UK's decision to leave the EU, European Single and Customs Union may impact the labour market and job opportunities in the following ways:

European Single Market and Trade: Attracting less foreign investment: Foreign Direct Investment (FDI) is a key feature of the contemporary global economy and one from which Scotland has derived considerable benefits. Foreign companies investing in Scotland help to create jobs and stimulate economic activity. Presently EU owned firms employ about 122,000 people in Scotland.^[4] The current uncertainty, and a changed future relationship with the EU, creates the risk that potential new investors will re-evaluate their investment projects and future flows of FDI will move elsewhere, thereby potentially harming job creation and productivity of firms.

Losing opportunities in sectors reliant on trade: The EU is the largest single market for Scotland's international exports, with exports worth £12.7 billion in 2016 supporting directly and indirectly hundreds of thousands of jobs across Scotland. If the UK leaves the European Single Market and Customs Union, that is, becoming a third country outside the EU, trade is likely to become subject to much more restrictive trade agreements with the introduction of tariff and non-tariff barriers to trade. This negative impact will be felt across all sectors of the Scottish economy - in our trade in goods but also in our exports of services to the EU.

Losing opportunities at home and abroad for young people: Under EU rules Scots can study, work or retire in any EU country. Many young people in Scotland have taken advantage of this, studying abroad on the Erasmus Plus programme or seeking job opportunities in another EU country. Participation in Erasmus Plus programme has also brought considerable benefits to other sectors beyond higher education. It has been vital in equipping children and young people of all ages with the skills and competencies they need to thrive in an increasingly globalised world. All these benefits are put at risk by the prospect of the UK's withdrawal from the EU.

These examples illustrate why the Scottish Government believes that the best option to protect jobs and maximise employment opportunities in the future, is through continued membership to the European Single Market.

Free Movement of People: Scotland's economy and society have benefitted enormously from the arrival of EU citizens through the freedom of movement of persons. Scotland's economy and public services are particularly dependent on the contribution of EU citizens. Migrants who come to Scotland tend to be well educated and highly skilled, help raise productivity and contribute to government revenue. Scottish Government analysis found that the average EU citizen in Scotland adds £10,400 to government revenue and £34,400 to GDP each year.

Scottish Government modelling also indicates that by 2040, lower migration alone would result in Scotland's real Gross Domestic Product (GDP) being 4.5% lower than continued full EU membership - equivalent to a long run impact of almost £5 billion a year. Across the rest of the UK, GDP would be 3.7% lower, demonstrating the Scottish economy's greater reliance on migration. In a 'worst case scenario' where migration is reduced to tens of thousands, the cost to the Scottish economy could be £10 billion per year by 2040. Brexit threatens continuation of freedom of movement which is essential for maintaining Scotland's population growth, which in turn underpins future economic growth and the sustainability of public services.