Just Transition Commission: background report

6. Skills and Skills Development Landscape

Summary of Evidence

Around 1 million jobs will require to be filled over the decade 2017-2027 - some due to overall expansion of employment, but the vast majority as a consequence of replacement demand, where employees retire, or leave a sector or occupation for other reasons.

There is a projected requirement for over 500,000 recruits with qualifications at Higher National Certificate (HNC)/Advanced Higher level or higher.

The requirement for employees without qualifications is projected at only around 80,000.

Nonetheless, projections suggest that in 2028 around 25% of employees will be in jobs requiring lower level skills, little changed from the current position.

Long-term scenarios beyond 2030

Skills Development Scotland suggest a growing need for meta-skills due to accelerating digitalisation of the economy, with additional drivers including the ageing and declining workforce, and increased demands for caring professions. They define three main broad types of meta-skills: self-management, social intelligence and innovation.

National Endowment for Science, Technology and Arts (NESTA) argue that there will be an increasing demand for:

• Interpersonal skills: social perceptiveness and coordination, and negotiation skills
• Higher–order cognitive skills: originality, fluency of ideas and active learning.
• Systems skills: judgement and decision-making, systems analysis and evaluation.

Policy Context

6.1. Scotland's Economic Strategy in 2015^[51] envisages skills development helping to drive two high-level strategic objectives:

• Increasing productivity and sustainable economic growth.
• Increasing labour market participation and reducing inequalities, to make this growth as inclusive as possible.

6.2. With rapidly rising youth unemployment from 2008, the Scottish Government committed in Developing the Young Workforce: Scotland's Youth Employment Strategy^[52] to a raft of skills measures to deal with the problem.

6.3. The Scottish Government's 2016 Labour Market Strategy^[53] set out five key labour market outcomes. Skills development has a key role in 3 - promoting a skilled and productive workforce, high employment and low unemployment, and Fair Work.

6.4. The Scottish Government has a strong policy emphasis on higher education, supported by a no fees policy for Scottish and EU students. Scotland has the highest proportion of working age tertiary graduates across the OECD.

6.5. Scotland has distinctive college system where students can be studying for either further or higher education qualifications, and where well-established pathways exist for college students to articulate with higher education in university^[54]. Additionally, a major programme of college mergers was instituted in 2013 to create a system capable of meeting more effectively both the aspirations of and outcomes for learners, and the needs of employers and the economy more generally.

6.6. There is a strong commitment to increased investment in apprenticeships. The core offering is Modern Apprenticeships (MAs), but Foundation and Graduate Apprenticeships have also been introduced. All MAs involve paid jobs with employers, with additional off the job training provided by colleges, training providers and others. This part of the skills system is more directly demand-led.

6.7. Scotland has now launched Fair Start Scotland (FSS) a 3-year employability programme targeted at people further from the labour market. Unlike previous UK government approaches, FSS is a voluntary programme.

Current Position: Skills Development Landscape

Funding

6.8. Focusing on post-school skills, excluding capital investment, and research and innovation funding going to universities, the Scottish Government funds around £1.42 billion investment in skills development per annum in universities and colleges, and work-based learning through the apprenticeship family – Modern Apprenticeships, Graduate Apprenticeships and Foundation Apprenticeships (although this last group is delivered through schools and colleges, and does not technically fall into the post-school skills system). The funding for 2018/19^[55] is divided up as follows across the broad categories:

• £737 million on higher education.
• £594 million on college education.
• £80 million on apprenticeships.

6.9. More modest levels of funding are available to support employer investment in their existing workforces, through the £10 million per annum Workforce Development Fund.

6.10. For 2017/18, the numbers for funded FTEs^[56] were as follows:

• 127,400 university students.
• 119,200 college students.
• 28,700 apprentices.

6.11. Compared to 2013/14, college FTEs were flat, publicly funded university FTEs rose by 2% and apprenticeships by 13%.

6.12. A central tension in the college and university sectors is how best to balance the curriculum to meet both the needs of employers and the economy, as well as the subject demands of individual learners. As apprenticeships are jobs, this tension is not in play.

Skills Agencies

6.13. The two key skill's agencies are the Scottish Funding Council (SFC) and Skills Development Scotland (SDS).

6.14. SFC is the body through with Scottish Government funding flows to Scotland's colleges and universities. Outcome Agreements are established with each college and university, which align the contributions of these institutions with key Scottish policy imperatives, National Outcomes and SFC's Strategic Plan. SFC then monitors the performance of the institutions in relation to the Outcome Agreements. SFC also has a significant role in funding research and innovation across the skill system.

6.15. SDS has a mix of commissioning, technical support and service functions:

• It is responsible for the management of the apprenticeship programme, which is delivered by a range of public, private and third sector contactors appointed and monitored by SDS.
• It is the principal agency involved in careers education, information, advice and guidance.
• It has developed capability in the area of skills investment planning which is now being deployed for key sectors of the Scottish economy as well regions across Scotland.
• It is the operational lead for Scotland's redundancy response service - Promoting Action for Continuing Employment (PACE).

6.16. Each year the agencies have received detailed guidance through a ministerial letter covering what is expected of them for the year ahead by the Scottish Government. However, following the 2016 Enterprise and Skills Review, the Scottish Government introduced in 2018 a new Enterprise and Skills Strategic Board with a remit to 'through collective responsibility, ensure hard alignment between agencies to drive improvement in Scottish productivity and better support business and users of the skills system'^[57]. Specifically in relation to skills, the Board's Strategic Plan^[58] sets out to:

• Use funding to provide more agile support for employees and employers to upskill and reskill.
• Integrate and expand existing upskilling and reskilling interventions.
• Create a flexible and sustainable funding model to meet the future expansion of demand for work-based and work-integrated learning.
• Accelerate the implementation of the Learner Journey Review recommendations, particularly around duplication and speeding up of articulation routes through school, college and university - and with apprenticeships.

6.17. A key mechanism for achieving much greater alignment is through much more structured and focused joint working between SDS and SFC.

The Evidence Base: Current Position

6.18. This section reviews the current skills position, based on trends over the period 2012 to 2017.

• The percentage of Scotland's working age population with no qualifications declined from 11% to 9%, and those with qualifications at the Scottish Vocational Qualification (SVQ) Level 1 (National 1) only falling from 10% to 9%^[59].
• However, Glasgow city region^[60], with 34% of Scotland's working age population, has 44% of those with no qualifications.
• The percentages of working age people with qualifications at SVQ Level 4 (ordinary degree or graduate diploma) or above increased from 38% to 44%^[61].
• The percentage of school leavers moving into positive follow-up destinations rose from 90% to 93%^[62].
• The percentage of school leavers with qualifications at Scottish Credit and Qualifications Framework (SCQF) Level 6 (Higher or equivalent) or better rose from 56% to 61%, and with SCQF Level 7 (Advanced Higher) or better from 18% to 19%^[63].
• The percentage of employers with vacancies reporting that some of these are due to skill shortages was essentially unchanged between 2015 and 2017, rising only slightly from 31% to 32%^[64].

6.19. On the demand for skills, broken down by broad skills levels, it is estimated^[65] that:

• In 2017, 43% were employed in jobs requiring higher level skills, 31% in jobs requiring intermediate skills and 26% jobs requiring lower skills.
• The corresponding percentages in 2012 were 41%, 32% and 27%.

6.20. This indicates a modest shift towards higher skills over the period, a continuation of long-term trends. The figures are at odds with the so–called hollowing out of the labour market, but it is still the case that the UK, Germany and the USA have the highest percentage of low skilled jobs in the developed world^[66].

6.21. A persistent feature of the school, college, and university and apprenticeship systems is the highly gendered nature of study for subjects relevant to digital skills specifically and STEM subjects more generally. Currently only around 20% of jobs requiring digital skills are held by females^[67]. Unless this situation changes, substantial and persistent digital skills shortages are likely to develop.

6.22. Another key issue for the employment and skills system is the persistently high level of under-utilisation of graduate skills. The 2016 figure for graduate skills under-utilisation ranges from 40.8 of graduates (5 or more years after graduating) working in non-graduate roles based on the Annual Population Survey, compared to 28% of first degree leavers entering 'non-professional' roles based on Higher Education Statistics Agency surveys^[68].

Projections to 2027

6.23. Projections for the decade to 2027^[69] suggest the following in terms of the required qualification levels for the jobs becoming available.

• Around 1 million jobs will require to be filled within the Scottish labour market - some due to overall expansion of employment, but the vast majority as a consequence of replacement demand, where employees retire or leave work altogether due to health or reasons, move from employment to self-employment, migrate to other regions or otherwise are no longer in scope to a specific occupation or sector.
• There is a projected total requirement for over 520,000 recruits with qualifications at HNC level or higher.
• The number of jobs requiring filled by employees without qualifications is projected at only around 80,000

Figure 6.1: Expansion and Replacement Demand ('000s) by Qualification, 2017-27

	Expansion Demand	Replacement Demand	Total Requirement
Doctoral or Postgrad	12.5	50.2	62.7
HNC to Honours Degree	46.2	418.4	464.6
Higher Level + SVQ 3	-5.9	137.0	131.1
National 5 + SVQ 2	8.6	214.9	223.6
National 1-4 + SVQ 1	-8.1	47.8	39.7
No Qualification	2.6	75.2	77.8
Total	56.0	943.6	999.6

Source: Skills Development Scotland (2017). Jobs and Skills Scotland: The Evidence

6.24. Nonetheless, projections to 2028^[70] indicate that around a quarter of employees will be in jobs requiring lower level skills, with little change over the decade. This is based around the numbers of employees in sales and customer service; process, plant and machine operations; and elementary occupations.

6.25. These projections have strengths and weaknesses.

• A strength is that the big finding that replacement demand is likely to be much more important than demand from expanding employment levels reflects the age structure of the workforce which is known in some detail. However, what is less certain is whether retirement ages will remain relatively constant over time due to big changes in employer and state pension schemes.
• Weaknesses include the inability to take account of the potential impact on the labour market of BREXIT, and the uncertainties around the pace and precise impact on the demand for skills associated with the digitalisation of employment.

Scenarios Beyond 2030

6.26. There are no projections around skills beyond 2027. However, a number of attempts have been made, largely by consulting with experts and testing scenarios, to speculate on the skills that will be increasingly valued in the future.

Skills Development Scotland

6.27. SDS work^[71] – Skills 4.0 – involved an extensive literature review, consultations with leading experts on the future of work and skills and an assessment of the existing literature on how to measure emerging skills. The study predicts the growth in importance of meta-skills. These are essentially the soft skills identified in many previous studies, but the work by SDS has concentrated on defining the skills more precisely, and indicating why they will be of increasing importance over time.

6.28. A key driver behind the growing need for meta-skills is expected to be the accelerating digitalisation of the economy, with additional drivers including the ageing of and reduction in the size of the workforce, and increased demands for caring professions. The three main broad types of meta-skills likely to be increasingly in high demand are:

• Self-management: 'Manage the now'.
• Social intelligence: 'Connect with the world'.
• Innovation: 'Create our own change.

6.29. The table below sets out the main elements in these broad skill sets.

Figure 6.2: The Elements of Meta-Skills

Self-Management	Social Intelligence	Innovation
Focussing	Communicating	Curiosity
Integrity	Feeling	Creativity
Adapting	Collaborating	Sense Making
Initiative	Leading	Critical Thinking

6.30. What is less well articulated is the mechanism by which these skills can be generated in an effective manner – and who should do this. The report recognises that this poses major challenges for the skills system, and suggests that the blending of academic and work-based learning is likely to be the key way forward.

6.31. Additionally, SDS argues that there will remain a strong requirement for 'universal' skills, more commonly referred to as 'core' skills – literacy, numeracy and digital intelligence.

National Endowment for Science, Technology and Arts (NESTA)

6.32. NESTA is well respected independent organisation whose central focus is on innovation. Their analysis^[72] generate some conclusions on changes in the nature of demand in terms of sectors and occupations. They also devised techniques for surfacing 'hypothetical occupations'.

6.33. Their contribution is in relation to skillsets which will become much more important in the future. They argue that the demand for skills will change, with a stronger emphasis on:

• Interpersonal skills, such as social perceptiveness and coordination, and negotiation skills.
• Higher–order cognitive skills, such as originality, fluency of ideas and active learning.
• Systems skills, such as judgement and decision-making, systems analysis and evaluation.

6.34. As with the work on meta-skills by SDS, the significant challenge is how to create these skills. SDS argue for blended training involving employers and educational institutions, while NESTA argue it is likely that these skills will need to be developed in the earlier years of a person's life, and will require significant investment in re-designing approaches to learning at the pre-school and school stages.

6.35. Clearly work to create these skillsets likely to be in greater demand will need to be carried out all levels, not least because digitalisation will create redundancies as well as opportunities. Skills and other packages will be needed to redeploy people into the emerging occupational areas. Compared to many of our international competitors, investment by UK employers in skilling and re-skilling their workforces, and by the UK at governmental level in active labour market programmes, is pitifully low and has been declining^[73]. However, it will be difficult and expensive for the post-school education and skills system – and employers - to carry out the necessary remedial work in the absence of a major skills investment in the early years to the develop the behaviours and skills that will become increasingly important over time.

But Digital Skills and Capabilities Will Also Become More Important

6.36. There is a danger that Scotland fails to capture the employment and productivity benefits of digitalisation due to the lack of digital skills^[74]. There are already concerns that the output of university and college graduates, apprentices, and others in digitally relevant courses and training is not keeping pace with the growth in demand^[75]. SDS has identified key skill challenges across sectors, stemming from the fact that growth in demand for digital skills is effectively a given, which include:

• Recruiting and people with the right skills who are STEM proficient.
• Keeping up with the pace of change in technical competences, including software, content development and coding.

6.37. However, Scotland needs to resolve a key issue if it is to ensure the supply of digitally skilled labour to the quality and in the volume likely to be required. Currently, digitally skilled employment as heavily gendered, with only around 20% of females involved. Some statistics from the school system show the challenge^[76]. In terms of schools, the latest statistical evidence is set out below using Computing as an example^[77]:

• In 2018, only 20% of entries for computing qualifications for the National 5 examinations were girls – and this had fallen from 24% in 2014.
• At the Higher level, only 16% of entries were girls – down from 20% in 2014.
• At the Advanced Higher level, only 14% of entries were girls, a figure which has remained static over time.