Scotland's Labour Market Strategy

3. Assessing Our Future Needs

Our Strategy needs to take account of the evolving economy and societal change if we are to ensure our labour market remains resilient and adaptable to the future needs of both employers and workers.

In its 2016 report on The Future of Work: Jobs and Skills in 2030, ^[19] the UK Commission for Employment and Skills identified a range of trends that would shape future jobs and skills up to 2030 such as:

Societal change:

• desire for an improved work/life balance and changing work environments, potentially leading to a further increase in flexible working arrangements, with 57 per cent of employees saying flexible working is important to them;
• changing demographics, which project a continuously ageing population, leading to workplaces becoming increasingly multi‑generational;
• growing diversity, such as women being projected to take a larger share of net job growth in the next decade and an increase in multiculturalism in the workplace; and
• growth in income uncertainty, with income not expected to return to peak (2009) levels until the next decade and inequality in income, while the proportion of national income accounted for by the highest 0.1 per cent of earners will increase from 5 per cent to 14 per cent by 2030, if trends continue.

Technology and innovation:

• converging technologies and cross-disciplinary skills, such as the increasing use of digital technology like bioinformatics in sectors such as Life Sciences;
• digitalisation of production, meaning production no longer has to be factory centralised. This de-centralisation of production could lead to increases in employment by 100,000 to 200,000 by 2023 ( UK);
• ICT Development and 'big data', with ICT development characterised by performance increases. The amount of data produced by the digital economy is ever increasing and the analysis of this data has the potential to contribute to increased business efficiency; and
• the increasing automation through technological advance in processes and services in many workplaces, especially in professional tasks, could dramatically reshape the labour market in the future. ^[20]

Business and economy:

• due to globalisation and technological change, economy and financial systems are increasingly complex. Companies will need to make their activities and value chains more resilient to cope with uncertainty;
• economic power will continue to shift to Asian countries. If current trends continue, India and China will account for 40 per cent of all young people with a degree in G20 and OECD countries - with the US and Europe accounting for just under 25 per cent. At the same time Asia presents important growth opportunities for Scottish firms as well as offering increased opportunities to develop educational links; and
• it is anticipated that collaboration across businesses will be increasingly important in future. Around 40 per cent of global CEOs expect the majority of innovation in the future to be co‑developed with partners outside the organisation.

Predicting changes in the Scottish labour market

As a small open economy, our sectors and industries continue to evolve and are shaped by global trends. Over recent decades, Scotland has undergone a period of structural transformation from a manufacturing to a service-based economy, where services now account for around 73 per cent of our economy.

Increasing international competitiveness and the mobility of both capital and labour, as well as technological change will have implications for the type of jobs in the labour market. Over the last five years, the greatest increase in employment has been in professional occupations, from 16.7 per cent of all employment in 2004 to 19.9 per cent in 2015, an increase of 107,100 jobs.

Employment in ICT and digital technology is predicted to increase substantially (84,000 to 150,000) by 2020. The profile of the current workforce is ageing and the proportion of 16 to 24 year olds working in Scotland as IT and telecoms professionals is half that of other occupations. Forecasts suggest that there could be as many as 11,000 job opportunities each year in ICT and digital technology roles presenting a major opportunity for young people. Roles include software and web development, project management and sales.

In other specialised sectors, for example, in Subsea Engineering where Scotland has world-leading capabilities largely built up by experience in the North Sea oil and gas fields, this provides development opportunities for a declining jobs market. Opportunities currently exist around research and development in global markets such as subsea mining, defence, decommissioning, renewables and aquaculture.

Public sector employment, currently accounts for around one fifth of Scotland's workforce. Our changing demographics, alongside our policies and actions to promote inclusion will have further impacts on the demand for our public sector workforce. This will require a concerted effort on workforce planning particularly around health, social care, education and early years provision (see public sector workforce planning on page 26).

Being adaptable and responsive

We recognise the need to anticipate future trends and economic or societal changes and to be able to adapt and react to them quickly. Our approach will be informed by the best evidence we collect in Scotland, but also by reflecting other international analysis, such as recent work by The University of Oxford and Citi on Technology at Work. ^[21]

We are aware that issues such as automation and digitisation will have a significant impact over the next few decades. This will mean that the demand for skills and occupations will change as businesses and sectors adapt. This Strategy, and the subsequent outcomes from the Enterprise and Skills Review, will allow us to take forward the analysis of issues like this in the future and help employers respond to them positively, with the support of the Strategic Labour Market Group.

Public sector workforce planning

The public services provide substantial employment opportunities across all parts of Scotland - both directly within the public sector and indirectly through the private and third sector. However, the nature of employment demand across the public services workforce will change in the coming years as a result of key policy commitments.

For example, the most significant new employment demand will come from the expansion of free early learning and childcare provision. This will require a considerable scaling up of the workforce in this sector, with up to an estimated 20,000 additional staff required by 2020 to deliver the commitment. In addition to the quantity of new jobs provided by the expansion it also offers, due to the geographic spread of the employment (with opportunities in all local authority areas) and the range of roles across different qualification levels, a considerable opportunity to further support our ambitions around inclusive growth.

New opportunities will also be created in health and social care through the commitments to:

• recruit an additional 500 health visitors by 2018; and
• provide further resource to enable local authorities to commission adult social care services that pay care workers the real Living Wage of £8.25 per hour.

There will also be continued demand across all parts of the public services in the coming years as new workers are required to replace retirees and movement between sectors. The nature of this replacement demand will vary across sectors reflecting, in particular, differences in the demographic profile of the workforce.

In addition, the public sector is the largest consumer in the economy and the pattern of its expenditure creates opportunities across the economy. For example, there will be increased demands on the construction sector as a result of the substantial infrastructure development required to support the expansion of early learning and childcare provision, 50,000 additional affordable homes, and the national energy efficiency infrastructure priority.

Meeting these pressures requires coordinated action across public sector delivery partners and key stakeholders to ensure alignment of supply and demand.

Maximising the impact of these new opportunities requires the public sector to attract, train and retain workers, ensuring that these opportunities are open to those in our most disadvantaged communities thereby supporting inclusive growth.