Future Skills Action Plan for Scotland: evidence and analysis annex

Executive Summary

1. Skills enable people to participate and progress in the labour market. Providing people with the opportunities to develop skills – irrespective of who they are and where they live – is a key driver of inclusive growth, which sits at the heart of the Scottish Government’s Economic and Labour Market strategies. The OECD has argued that for the UK, “Developing the right set of skills and making full use of them in the economy is a recipe for higher productivity, growth and inclusiveness”.^[1]

2. Scotland’s economy has grown in recent years despite ongoing domestic and international challenges. Scotland’s labour market has strengthened over this time, breaking records on employment and unemployment and mirroring the strength of the UK labour market. Scotland has also outperformed the UK throughout 2019 on overall unemployment and labour market outcomes for women and young people. Scotland’s skills system has played a role in these successes. Our workforce is more highly qualified than ever before and the bulk of increases in employment in the past decade have been in jobs categorised as highly skilled.

3. Looking beyond these positive headline trends there are challenges for our skills system. Skills gaps tend to be more prevalent in Scotland than the rest of the UK, there has been a steady decline in employees in Scotland receiving job related training over the past 15 years, and there are persistent sector (e.g. manufacturing) specific skills gaps affecting Scottish businesses. Despite some data pointing towards increased employment in highly skilled jobs, analysis by the OECD found that employment growth in OECD countries and the UK between 2010-2017 was driven by sectors with below average productivity and average wages.^[2] Compared with pre-recession trends and international competitors, Scotland’s economic growth has been slower and lower than the Euro area^[3] average since the Brexit referendum. This is forecast to continue.

4. In addition, there is some evidence that our labour market is changing and future labour market trends may exacerbate existing challenges, including around the quality of work, the changing structure of our labour market (hollowing out), inequalities between regions and groups and an ageing population. Brexit, technological change and the global climate emergency all have the potential to significantly impact the type of skills required in our economy with implications for our skills system.

5. Throughout this paper we refer to education, qualifications and skills. Education can be considered as the formal route to gain qualifications and skills, with qualifications being a loose proxy for skills. It is also recognised that skills applied and acquired in employment are not always reflected in formal qualifications.