Scotland's Labour Market Strategy

2. Strengthening Inclusive Growth

Improving Scotland's competitiveness and inclusivity requires us to develop the human capital and productivity of our entire workforce, to invest in Scotland's infrastructure and to increase the ability of all people to participate effectively in the labour market through quality employment. This process cannot simply be left to market forces. That is why it is crucial that we have a Strategy in place that takes into account the unique opportunities and challenges for growth and inclusion, to ensure that all of Scotland can flourish.

Stimulating growth and creating jobs (labour demand)

A strong, dynamic economy that actively invests in its workforce is key to raising productivity boosting job creation and supporting wage growth.

In the short term, business confidence and consumer sentiment are key drivers of investment and employment growth, as are global economic conditions. The UK's decision to leave the European Union has created a level of uncertainty that requires a strong policy response to ensure Scotland retains the stability, jobs and investment that come from being part of the world's biggest single market.

During this period of uncertainty, the UK Government's policy of austerity continues to have a detrimental impact upon Scotland's labour market by constraining activity in the economy. The Scottish Government will do all that it can within its powers to boost competitiveness, tackle inequalities and prioritise fair work and jobs. And, we will continue to argue for greater powers to come to Scotland to help achieve higher level of sustainable, high-quality employment.

Over the medium to long term, there are a number of key areas which will help drive business growth and support the creation of employment opportunities, including:

• building on the large body of evidence that shows progressive workplace practices, like workforce engagement, taking an active role in the community and investing in innovation can benefit companies through increased productivity, enhanced employee commitment and improved reputation. We will promote the Scottish Business Pledge, the Fair Work Framework, and the ethos that underpins them, to businesses across Scotland;
• building on our extensive actions to support businesses to grow, innovate and export. This will include: ensuring that we create an enabling business environment which allows them to thrive; supporting the development of highly innovative businesses across the Scottish economy and encouraging more of Scotland's diverse business base to engage in innovation as part of their day-to-day activities; and, supporting businesses to take advantage of international opportunities;
• promoting workplace innovation, through exploring new approaches to business practices, workplace development and applying new technologies, are also key to boosting competitiveness across the sectors;
• investing in sustainable physical and digital infrastructure boosts Scotland's competitiveness through providing our businesses with access to local, national and global markets, enabling growth, innovation and creation of good quality employment opportunities;
• promoting business models which encourage employers to create sustainable and productive jobs that deliver business success; and
• supporting sectors and companies to exploit opportunities for boosting growth. We will ensure that delivery bodies, both in Scotland and internationally, work collaboratively with local authorities and sector leads to stimulate sustainable growth and create jobs.

Skills planning model

As part of their Skills Planning Model, Skills Development Scotland have been working closely with employers, sector-leads and others to develop a robust evidence base (Regional Skills Assessments) to inform Sectoral and Regional Skills Investment Plans. This is central to how we will work with employers to help them anticipate and reflect future skills needs, while also increasing our focus on supporting employers to retain their workforce and ensure workers' skills remain up to date through continued training, workplace learning and up-skilling.

Promoting a skilled, workforce and high levels of participation (labour supply)

Improving labour market participation not only improves outcomes for individuals but is also a critical driver of national economic performance over the long term.

To promote inclusive growth and to provide opportunities for all, we need to encourage a fair and inclusive jobs market and promote regional cohesion. This includes the need to remove long-standing barriers to people being able to fulfil their economic potential.

It is also necessary that our workforce continues to be dynamic and is able to adapt to emerging opportunities in the labour market as this is a key factor behind inclusive growth. In doing this there are a number of issues that need to be considered:

• addressing the challenges facing women, the young workforce, disabled people, older people and minority ethnic communities. Our aim is to enable equal access to an increased range of opportunities while challenging bias and systemic institutional barriers;
• tackling inequalities in health, wellbeing and education across Scotland, including widening access to Higher and Further Education;
• promoting gender equality in providing unpaid care and providing access to affordable early learning and childcare to support those with caring responsibilities to participate in the labour market
  (see carers positive scheme case study on page 23);
• ensuring that the workforce is adequately equipped with the skills businesses need, both now and in the future. Skills formation and development is important at all ages. Quality early learning is essential to build basic skills, as is formal education and lifelong learning. Scotland has a highly-skilled workforce, with the highest percentage of the population with tertiary education of all EU countries. However, there is evidence of both skills shortage and underuse. Addressing this requires government to work with employers to help them retain their workforce through continued training, workplace learning and up‑skilling;
• employers and industry leads are also essential in establishing their skills requirements to ensure our approach is shaped, informed by, and meets current and future employer demand;
• the growing integration of technology into jobs and workplaces across all sectors of the economy requires a workforce with a range of specialist as well as general digital skills. We must also ensure that our population is equipped with the necessary digital capabilities, qualifications and specialisms, as well as the leadership and management skills to take advantage of emerging opportunities; and
• growing the working age population plays a key role in underpinning sustainable economic growth. Despite Scotland's population currently being at record levels, we have an ageing population and levels of in-migration have been lower in Scotland than in many similar countries. Demographics have an important impact on labour market participation, and the economy as a whole, and attracting people to live and work in Scotland will be important to supporting economic growth as will supporting older people who wish to continue working, or people who wish to return to work after a career break.

Creating sustainable inclusive future gains (sharing in success)

Like many advanced economies, there has been a growing concentration of income at the very top of the income distribution in Scotland, with the highest earners experiencing the largest increases in income between 1997-98 and 2010-11. ^[17]

Scotland has the highest proportion of employees in any UK country being paid at least the Living Wage. Despite this, a significant proportion of the population still earns below the Living Wage ^[18] and too many people are in poverty.

The Scottish Government is committed to promoting the Living Wage and pays all its employees, and all those covered by our pay policy, at least the real Living Wage - as set by the Living Wage Foundation. We have partnered with the Poverty Alliance to promote it across all sectors of the economy. We are also committed to enabling all adult care workers, including in the independent and voluntary sector, to be paid the Living Wage of £8.25 per hour from October of this year.

Evidence shows that income inequality has a negative impact on the sustainability of long-term economic growth, prosperity and our ability to tackle poverty. We agree with the First Minister's Independent Advisor on Poverty and Inequality, Naomi Eisenstadt's assessment that income inequality damages economic growth and has negative consequences for wellbeing and the cohesiveness of societies. Our approach to tackling this will include:

• realising opportunities across Scotland's cities, towns and rural areas, capitalising upon local knowledge and resources to deliver more equal growth across the country;
• continuing our commitment to promoting the Living Wage;
• working to ensure that the gains from growth are distributed more evenly and raising real wages, particularly for those on the lowest incomes;
• continuing to tackle inequalities around pay gaps and occupational segregation in the labour market for women and for other equality groups; and
• exploring wider pay-related issues such as pay ratios and transparency and the negative impact of executive pay processes on investment, growth and productivity.

Carers positive scheme

Scotland's 2011 census showed that 11 per cent of over 16s in Scotland had caring responsibilities, with only 56 per cent of those with caring responsibilities also being in employment. We must do more to support those carers in Scotland who can and who want to work and who presently find their caring responsibilities a barrier to doing so.

Operated by Carers Scotland on behalf of Scottish Government, the Carers Scotland Scheme aims to 'make life better for carers' by: giving expert advice, information and support; connecting carers to each other; campaigning with carers for lasting change; and innovating to find new ways to reach and support carers.

For employers, being Carer Positive means that staff can now more easily juggle their caring and work responsibilities, leading to reduced absenteeism, reduced turnover and reduced avoidable recruitment costs. As of June 2016 over 245,000 employees have worked for employers who are recognised as being Carer Positive.