Fair Work action plan 2022 and Anti-Racist Employment Strategy 2022: business and regulatory impact assessment

4. Evidence and key issues

This section provides an overview of the baseline conditions in relation to businesses and the economy in Scotland. A detailed review is provided in Appendix E.

4.1 Population

• The Scottish population was 5,479,900 in 2021^[36]. Approximately 63.8% of residents in Scotland were of working age (16 to 64 years old) compared to 62.9 in the UK.

4.2 Jobs

• In 2021, the largest employment sectors in Scotland were: the Health sector (15.3% of jobs); Retail sector (10.0% of jobs); and, Education (8.3% of jobs).

4.3 Businesses

• In 2022, there were 173,655 businesses registered in Scotland^[37]. Of these, the majority (87.8%) were classed as micro (employing 0 to 9 people).
• The sector with the largest number of registered enterprises was the professional, scientific, and technical industry, representing 15.1% of businesses.
• 0.9% of all registered businesses in Scotland were considered high growth, down from the 2021 rate of 1.2%^[38].

4.4 Labour Market

• The employment rate in Q4 2022 in Scotland was 76.6%^[39].

4.5 Productivity

• In Scotland in 2020, GVA per worker was £26,572. This figure was lower than the average GVA per worker across the UK (£29,063)^[40].
• In 2022 Q3, Scotland's onshore GDP is estimated to have fallen by 0.1% compared to the previous quarter.

4.6 Hours and Earnings

• The median gross hourly pay in Scotland in 2022 was £15.03^[41] which is a similar figure to that in the UK (£14.77).
• In Scotland, the industry with the greatest median gross hourly pay was electricity, gas, steam, and air conditioning supply, at £23.68. The industry with the lowest median gross hourly pay was accommodation and food service activities at £10.00.
• In the UK, the sector with the highest median gross hourly pay was financial and insurance activities at £21.88, and the industry paying the lowest mean gross hourly pay in the UK was accommodation and food service activities at £10.00.
• In 2022, 91.0% of all employees (18+) were paid the real Living Wage in 2022.^[42] Sectoral analysis reveals that over 80% of private sector employees were paid at least the real Living Wage and over 90% of public and third sector employees.
• Research from the Living Wage Foundation^[43] shows that 93% of Living Wage Businesses reported feeling they have benefited since accrediting

4.7 Public Sector Grants and Funding

• Grants are available from a number of sources such as Scottish Enterprise, Business Gateway, Highlands and Islands Enterprise, and South of Scotland Enterprise.
• Since 2019 Scottish Enterprise has attached Fair Work First (FWF) criteria to all large job creation grants of £100,000 plus (condition that new jobs must pay the real Living Wage); and since January 2021 has extended the principles to all grants, with a new business process going live from September 2021 across all relevant business areas.

4.8 Trade Union Membership^[44]

• In 2021, the proportion of employees who were trade union members in Scotland was 28.4%, higher than in the UK as a whole at 23.1%.
• The industry in Scotland with the highest proportion of employees who are trade union members in 2021 was electricity, gas, steam, and air conditioning supply (60.9% of workers were members). The industry with the lowest proportion of trade union members was manufacturing in which only 12.2% are members^[45].
• These trends are similar to those across the UK as a whole where the education industry contained the highest proportion of trade union members (49.4%) followed by human health and social work (39.2%) and public administration and defence (38.6%).

4.9 Benefits of Fair Work Practice

A number of research papers have sought to demonstrate how Fair Work practices can drive productivity, release untapped potential, and inspire innovation - all of which add value to jobs and to business and in turn create stronger, more sustainable and inclusive growth. These are summarised below and further detail can be found in Appendix E.

• Higher quality work, like higher pay, can serve as a spur to greater work satisfaction and motivation, thus leading to higher levels of workplace productivity^[46].
• There is evidence of positive impacts on productivity across several dimensions of Fair Work including pay and benefits; health, safety and psychosocial wellbeing; job design and the nature of work; and work-life balance.^[47]
• Financial worry and stress can reduce the effectiveness, quality, and efficiency of work undertaken by employees^[48].
• There is a strong correlation of a negative relationship between job stress and at-work productivity, and a positive relationship between job rewards and productivity.^[49]
• Employers committing to diversity and inclusion have been demonstrated to benefit in business terms.^[50] The research shows that companies in the top-quartile for ethnic/cultural diversity on executive teams were 33% more likely to have industry-leading profitability.
• Employing people with learning disabilities can have numerous benefits such as higher retention, better awareness of disability issues amongst staff, and increased reputation amongst the general public^[51].