Scotland's Labour Market Strategy

4. Delivering the Change

To achieve our vision, we need coordinated actions for the short, medium and long term which will deliver the changes we want to see. Some of these actions are new; others show how work already underway will relate to this Strategy. However the key difference is the creation of a strategic framework (page 5) through which issues facing the labour market can be addressed and progress measured and delivered in a coherent way, that will evolve and adapt over time.

We face a number of challenges, including:

• improving the quality of employment;
• improving productivity and competitiveness;
• tackling inequalities between regions and groups; and
• responding to structural shifts in the economy.

This is not an exhaustive list, none of these challenges are simple and they are inter-connected. Solutions do not lie in one place and as such, here we describe how the Scottish Government's priorities are being marshalled around our five priorities:

• Promoting the Fair Work Framework and Responsible Business;
• Employability and Skills;
• Investment;
• Innovation; and
• Internationalisation.

These priorities are the ones we see as key in setting out a coherent and wide-ranging response which can address our mutually supporting ambitions of increasing productivity and inclusion, with the promotion of fair work and the creation of good quality jobs right at the centre of this.

Our progress will be measured under a set of outcomes which are defined later in this Strategy.

Our immediate efforts are around the continuing implementation of the Economic Strategy, delivering the Enterprise and Skills Review and ensuring that people understand that Scotland is still open for business, despite the uncertain economic implications of the EU referendum decision.

EU referendum response

The decision to leave the European Union was not one endorsed by the Scottish public, nor has the uncertainty caused been welcomed by Scotland's business community. This Government has a mandate to protect Scotland's interests and ensure a continuing relationship with Europe. We will work with business, trade unions and others to maintain our strong economic performance and to pursue new business opportunities as they arise. Our overriding priority is protecting Scotland's relationship with, and place, in the European Union, and its related economic and social benefits.

We welcome the statement issued jointly by Scotland's main business organisations on 8 July, which made clear that:

• Scotland's businesses need continued access to the single market and free movement of labour;
• Scotland's businesses need information and support which is clear, relevant and up to date; and
• Scotland remains part of the EU and an attractive and stable place to do business, with a fundamentally strong economy.

Those key themes - with social protection and solidarity - will structure the Scottish Government's programme to recalibrate and reinvigorate Scotland's labour market.

Enterprise and skills review

To enable Scottish Enterprise ( SE), Highlands and Islands Enterprise ( HIE), Skills Development Scotland ( SDS) and the Scottish Funding Council ( SFC) to play a full role in supporting the delivery of the priorities in Scotland's Economic Strategy, it is important that they collaborate behind a clear and shared vision; have a common understanding of their roles, responsibilities and what services and investments to prioritise; and use their skills and tools to respond confidently and flexibly to changing economic circumstances.

The Enterprise and Skills Review has been established with three main aims:

• building on the evidence of 'what works' and national and international benchmarking to achieve the step-change needed in Scotland's economic performance;
• capturing the user journey and experience to understand what might be simplified and improved; and
• shaping which services should be prioritised and how they should best be organised and delivered.

The fundamentals of the Enterprise and Skills review are critically linked to success in the labour market. By analysing our evidence and by understanding what is working and what is holding back progress, this Labour Market Strategy will set the context for this review. This will highlight areas where we believe our delivery activity should be focused to make the step changes we want to see around better matching skills to the needs of employers and supporting innovation, productivity and growth.

Promoting the Fair Work Framework and Responsible Business

Treating people fairly in the workplace and valuing their contribution is not just the right thing to do for employees - it makes business sense. It is central to achieving the balance between inclusiveness and growth and it can be the hallmark of Scotland's distinctive approach to the labour market.

Many of the challenges we have set out illustrate that the UK Government's approach is not achieving sufficient improvements in inclusiveness and equality of opportunity within the labour market necessary to deliver inclusive growth. As we do not have the necessary powers over employment law we cannot directly enforce all of the change we would like to see. Where we have powers, or will be receiving them, we will use them to their full extent, for example to promote equality on public sector boards. We will use all the levers that we have, whether around procurement, or through our promotion of fair work, to encourage best practice in these areas.

More and more employers are recognising the benefits that the focus on balancing inclusion and growth brings, not just to the organisation and those who work within it, but to business growth and the bottom line. This is the key to tackling issues like the quality of work, ensuring effective employee voice and making workplaces more equal.

By thinking more explicitly about the way jobs are designed and how people can shape their role and progress through work, we are more likely to be able to address issues around hollowing out. It is also clear that the Scottish Government and its delivery bodies can support employers by linking them to support based on the best available evidence, insight, analysis and research, such as SDS, regional and sector skills investment plans.

Through this Strategy we will put in place new activity and funding to support the promotion and implementation of the Fair Work Framework and foster responsible business by:

• working with the Fair Work Convention to develop a new remit for the second phase of their work with a focus on championing and advocacy for the adoption of the fairer working practices; supporting organisations to embrace the Fair Work Framework and developing new approaches to measuring the impacts of the framework. We will provide up to £500,000 to help support them in the delivery of these ambitions;
• working with a range of businesses through Business in the Community Scotland by providing them with £200,000 this year to support the Scottish National Action Plan for Responsible Business, in close association with the Fair Work Convention;
• working with stakeholders to help frame how we can best use our new powers around Employment Tribunals to ensure that any new system in Scotland, based on the abolition of fees, will meet the needs of employees, businesses and society; and
• continue to sponsor the Scottish Business Awards Fair Work Employer of the Year Award, which aims to recognise and raise the profile of companies that lead the way in adopting fair working practices.

Support employers to be fairer and more inclusive by:

• developing a Workplace Equality Fund which recognises that the labour market does not provide good outcomes for many equality groups. This fund will draw on the recommendations made in the Race Equality Framework for Scotland 2016-2030 and the findings of the Equal Opportunities Committee inquiry into Removing Barriers: Race, Ethnicity and Employment, published in January 2016; and
• establishing a Returner's Project focused so that women can get help updating skills and knowledge and employers can retain skilled staff after a career break.

We will respond to the recommendations in the independent poverty adviser's "Shifting the Curve" report by:

• working with the Fair Work Convention to look at broad issues around pay, including real wages, pay ratios, and gainsharing approaches;
• assessing the real economic impact of paying the Living Wage for employers and employees and promoting the benefits of the Living Wage as part of a wider approach to Fair Work and productivity; and
• continuing to tackle inequalities around pay gaps and occupational segregation in the labour market for women and for other under represented groups.

This is in addition to our existing commitments to:

• continue our support for the trade union movement, recognising the valuable role that unions have to play in delivering our ambitions. In particular we will provide:
• - £2.262 million in 2016-17 for the Scottish Union Learning Fund; and
• - continuing funding of £100,000 to the STUC in 2016-17 to build capacity around leadership and equalities.
• help more businesses recognise the benefits of paying the Living Wage. We will boost our support for the Living Wage with our commitment of £300,000 to the Poverty Alliance to increase the accreditation target to 1,000 by Summer 2017;
• provide extra resource to enable local authorities to commission adult social care services that pay care workers the real Living Wage of £8.25 per hour;
• bringing forward legislation on gender balance on public sector boards using the new competence transferred to the Scottish Parliament through the Scotland Act 2016;
• increase the number of public, private and third sector boards that are gender balanced by 2020 through our voluntary campaign ' The Partnership for Change: 50/50 by 2020' which enables organisations to signal their intention to work towards gender balance by 2020. Since its launch in 2015 over 180 organisations have signed up to the Partnership;
• establish an Advisory Council on Women and Girls to advise on issues relating to gender inequality, including in relation to the labour market;
• appoint a Commissioner for Fair Access to drive the change that will be needed across the education system and to ensure that the recommendations of the Commission on Widening Access are implemented in full;
• continue to work with the Partnership on Health and Safety Scotland;
• make it easier for supported businesses to access public sector contracts through the Procurement Reform (Scotland) Act 2014, which imposes a sustainable procurement duty on public bodies to consider, before every procurement competition valued at £50,000 or more, how they can carry out that procurement exercises in a way that facilitates the involvement of supported businesses. We have issued statutory guidance in support of that duty;
• use our statutory guidance on 'Addressing Fair Work Practices, including Living Wage, in Procurement' ^[22] to encourage public bodies to promote fair working practices for those who work on public contracts; and
• continue to support companies who sign up to the Scottish Business Pledge, which aims to encourage business to business learning in order to boost productivity, growth and the international outlook of many of Scotland's businesses.

Employability and Skills

Employers need workers who have the skills and commitment to deliver high-quality products and services. In return, employers need to build a business model that offers all workers fair access to a job, security and flexibility, the opportunity to develop and use their skills and role within their organisation, and the understanding that their contribution is heard, respected and valued.

From 1 April 2017, employment support services in Scotland will change. New powers to provide employment support for disabled people and those at risk of long-term unemployment will be devolved to Scotland.

The Scottish Government aims to use these powers to better align employability support in Scotland, helping the unemployed find sustainable and fair work, and focusing on those who need most help to reduce inequality, ensuring the principles of fairness, dignity and respect are at the heart of our new services.

This is also an opportunity to help employers to find, employ, and retain the people they need to help them compete successfully and grow their business, building on the Skills Planning Model, the sectoral Skills Investment Plans in key and growth sectors and the Regional Skills Assessments.

Through these mechanisms, we will ensure employability support and skills provision are firmly aligned with the needs of the Scottish labour market and that industry sectors and the businesses in them, have the skilled employees they need to grow and to succeed.

Supporting long-term unemployed people into work by:

• providing up to £20 million in additional funding in 2017-18 to put in place transitional arrangements offering continuity of support towards employment for those at risk of long-term unemployment particularly those with disabilities and health conditions:
  - replacing the Department for Work and Pensions ( DWP) Work Choice services in 2017-18 with new services from current providers in Scotland and ensuring continuity of support for the disabled at a time the employment support they will receive in future through DWP is unclear; and
  - at the same time, working with SDS to replace the DWP Work Programme with a one year transitional employment service in 2017 for those with a health condition and at risk of long-term unemployment who want to enter work;
• delivering from 1 April 2018 a new devolved employment support programme with additional £20 million Scottish Government funding in each year to supplement the Fiscal Framework settlement; and
• driving a programme of alignment and integration of employability services across Scotland to ensure that support services build on the strengths we have in service delivery in Scotland. The aim will also be to ensure services are better coordinated around the needs of individuals locally, regionally and nationally.

Equipping our young people by:

• ensuring every child has the same opportunity to succeed, particularly focusing on closing the poverty-related attainment gap. To achieve this we will extend the funding available through the Scottish Attainment Challenge to £750 million over the next five years to make demonstrable progress in closing the attainment gap over the lifetime of this Parliament;
• preparing them for the labour market of the future by delivering on our seven year reform programme, ' Developing the Young Workforce', ^[23] to create a truly world class vocational education offer in Scotland working to address the wider demand for intermediate skills that meets the needs of employers;
• introducing career information, advice and guidance earlier through the Career Education Standard 3-18 which sets out the support young people can expect when considering their future career path. We will continuously improve the existing high‑quality services through external review conducted by Education Scotland and supported by SDS;
• improving delivery of our Modern Apprenticeship programme, ensuring that the opportunities our young people are given are closely aligned with key areas of growth;
• increasing the number of Modern Apprenticeship opportunities to 30,000 per year by 2020 and delivering 5,000 new Modern Apprenticeships in highly skilled areas, improving access to underrepresented groups across Scotland;
• consulting with employers on the potential use of any financial settlement we will see from the UK Apprenticeship Levy. The Apprenticeship Levy was announced by the UK Government without prior consultation, despite its status as a devolved responsibility. We have therefore been engaging with Scottish employers and launched a public consultation on our use of funds in the future. This engagement has indicated that there is clearly an opportunity to develop a distinctively Scottish approach to the use of Levy funding to both maintain our ambitious approach to the Modern Apprenticeship programme and also to support wider skills ambitions;
• encouraging and supporting more employers to engage with education and to recruit more young people through the network of industry-led DYW Regional Groups. The establishment of the Scottish Apprenticeship Advisory Board also brings much greater direct employer influence to the development of apprenticeships in Scotland;
• significantly increasing the numbers of young people getting industry experience while still at school to help them kick-start a successful career. SDS is working in partnership with schools, local authorities, colleges and employers to boost work-based learning. We are currently expanding Foundation Apprenticeships opportunities for pupils in the senior phase of Curriculum for Excellence;
• working with SDS to consider how we might best broaden opportunities for training, re-skilling, up-skilling and encouraging greater levels of work-based learning;
• continuing to develop Skills Investment Plans and Regional Skill Assessments through SDS and using them as the evidence base to inform the Regional Outcome Agreements to ensure that the provision of skills and training is geared towards the current and future needs of employers;
• continuing to build on the unique national information sharing arrangements that exist in Scotland to identify, track and monitor 16-24 year olds who need support to get back in to learning, training or work. This approach to using live information to drive service delivery is key to ensuring our resources are targeted at the individuals who need it most;
• supporting young people aged 16-24 who have been out of work for six months or more by introducing a Jobs Grant. The grant is worth £100 or £250 for those who have children. We plan to supplement this cash payment with free bus travel for a three‑month period; and
• developing a Science Technology, Engineering and Maths ( STEM) Strategy that offers young people qualifications, knowledge and training in key economic sectors with skills gaps such as engineering, digital technology, life sciences and construction. Building on the likes of the successful Digital World campaign which is raising awareness of the variety and attractiveness of careers requiring digital skills and qualifications, we will seek to ensure that, from an early age, children, and in particular girls, are alive to the opportunities that science, technology, engineering and maths can offer them.

Helping people in work by:

• ensuring that older workers' needs are considered in the development of new employment services, some of which will be devolved to Scotland from April 2017. Particular support requirements might include retraining and confidence building, as well as increased support for flexible working. All programmes will be fully person-centred, with support plans being tailored to individual needs;
• recognising the importance of employment for health and wellbeing. Every year in Scotland too many people of all ages leave the labour market early due to ill health or disability and this trend could increase as our working age population ages. Many of these people say they would like to continue working, and could do so with the right support. We will address this by delivering our Health Works Strategy; ^[24]
• helping those at risk of long-term sickness absence return to work through Fit for Work Scotland and Working Health Services Scotland, which provide holistic approaches to an individual's health condition and work needs to help the individual/employer and health professional work together to create a detailed return to work plan;
• continuing to fund Healthy Working Lives to support employers with measures and workplace policies that can be introduced to promote health, safety and wellbeing in the workplace; and
• working with SDS to review our Individual Learning Account offer. We will ensure the programme is aligned with the needs of individuals and the economy with a greater focus on helping those out of work make a transition into work as well as helping those in low-paid jobs gain additional qualifications to aid their progress.

Investment

To achieve inclusive growth and reduce regional inequalities across Scotland, it is essential that our national labour market strategy takes account of regional and local variations. We must provide high quality, sustainable digital and physical infrastructure to boost mobility and connectivity to enable all people across Scotland to utilise local knowledge and resources to access high-quality jobs and to realise opportunities across our cities, towns and rural areas.

Investment in education and the careers service can also ensure that our people have the confidence and knowledge to allow them to judge how to be successful in an increasingly polarised labour market and ensure they have the skills to progress.

We must also invest to ensure our regional labour markets provide the necessary skills to allow our growth sectors and sectors of strategic importance to thrive. This is why the First Minister has announced a £100 milllion Capital Acceleration Programme with a package of measures to provide immediate support to the economy and jobs in the light of the economic shocks we currently face.

Invest in our colleges and universities by:

• adding to the good progress made over recent years through our College Reform Programme, ensuring that the number of full-time equivalent college places is maintained. In 2014-15, almost 11,000 more students (both further and higher education) successfully completed full-time courses leading to recognised qualifications than in 2008-09;
• ensuring college Outcome Agreements continue to improve the progress of colleges in meeting the needs of their students and communities, providing a better service for employers, becoming stronger, more strategic, regional players as part of an efficient and effective education system;
• continuing to invest in higher education provision throughout Scotland, ensuring that access to higher education remains free for Scottish domiciled students taking their first undergraduate degree. We are continuing to support to Scottish Universities, investing over £1 billion per year since 2012-13. The Scottish Funding Council also works with universities through their Outcome Agreements to ensure that the subjects offered align with the skills needed in the labour market; and
• piloting a programme with the University of Highlands and Islands and its college partners to deliver thousands more additional funded places per year from 2012-13 to 2015-16 to address demographic imbalances in the Highlands and Islands. These additional places are aligned to regional needs, through an Outcome Agreement and from 2016-17 onwards these places are included in the University's base allocation.

Invest in our cities and regions by:

• continuing to work with local authorities through our City and Regional Partnership Deals, which enable long-term strategic approaches to be taken to improve local and regional labour markets. The deals are bespoke to each region and give local authorities the scope to deliver on the priorities laid out within Scotland's Economic Strategy; and
• helping companies improve their productivity and provide employment within their communities by offering Regional Selective Assistance ( RSA) to aid those businesses whose projects will directly result in the creation of or safeguarding of jobs especially in areas that are suffering from below average GDP and above average unemployment rates. In 2015-16, Scottish Enterprise offered £17.1 million of RSA investment to 65 businesses, which is expected to result in the creation or safeguarding of almost 1,900 jobs and total capital investment of around £100 million. Since April 2015, all new recipients of RSA have committed to make a positive contribution to developing Scotland's young workforce.

On top of our commitments to:

• invest in broadband infrastructure through the Digital Scotland Superfast Broadband programme, which will deliver fibre broadband to 95 per cent of premises across Scotland by the end of 2017, we are committed to delivering 100 per cent superfast broadband access by 2021;
• continue to build on our world leading reputation as a supporter of social enterprises by strengthening an ecosystem of support which includes funding for intermediaries such as Social Enterprise Scotland, Social Firms Scotland, Just Enterprise and Developing Markets for Third Sector Providers contracts; and
• deliver on our Infrastructure Investment Plan 2015, ^[25] which sets out how we will deliver key transport and broader commitments including:
  - Aberdeen to Inverness Rail Improvements phase 1, scheduled to be completed by 2019 and overall programme completion by 2030.
  - The Forth Replacement Crossing, scheduled for operation by May 2017.
  - The A9 dualling programme from Perth to Inverness, scheduled to be completed by 2025.

Innovation

Having a thriving and dynamic innovation ecosystem is essential for improved productivity, competitiveness and growth. We are investing in the development and application of research, innovation and technology and supporting entrepreneurial activity - all crucial in shaping Scotland's future and helping to create sustainable economic growth. We are also recognising the increasing links between workplace innovation and increasing productivity.

Continuing to encourage and support business innovation will help create the conditions that will allow the opportunities for businesses to thrive, increase productivity and create more jobs.

Bringing academia and businesses together through:

• our eight innovation centres that allow academics and businesses to collaborate to address real world business issues;
• the Scotland CAN DO Innovation Forum will focus our efforts on maximising the contribution that innovation makes to Scotland's productivity and economic growth. The Forum which includes members from business, academia and the public sector, will propose specific actions to boost productivity through innovation; and
• increasing our investment in Interface which helps business create and develop their products, services and processes by connecting them to the right academic expertise within Scotland.

Increasing innovation in Scotland's businesses by:

• using the Fair Work Convention to identify and promote innovative and productive workplace practices;
• support Scottish Enterprise's recently launched Workplace Innovation Service which aims to support companies to increase productivity and business performance by unlocking talent and innovative new ideas from their existing staff;
• providing £110,000 to support the second year of the Fair, Innovative and Transformative Work ( FITWork) project, at the Centre for Employment Research (University of Strathclyde) which is working with businesses/employers, employees and unions to design and test innovative ways of working which are focused on improving productivity and performance while enhancing the quality of work. As part of this, they will make available their bespoke online FITwork diagnostic to Scottish Business Pledge and other businesses;
• using Scottish Enterprise's £2.9 million Open Innovation programme to support the development of an open innovation culture across Scotland, by identifying innovation projects and creating partnerships to drive them forward;
• build on our public/private sector partnership to tackle the digital skills shortage facing our economy through the delivery of the ICT and Digital Technologies Skills Investment Plan. Initiatives like the establishment of CodeClan - Scotland's first industry-led digital skills academy - and work to attract international talent to the sector are already helping to address immediate need. Complementing that, we will take a number of actions to broaden the talent pipeline over time and ensure that our education system both responds to and capitalises on the future high quality job opportunities available to young people. New opportunities to develop these skills will also be available outside school - for example, the new Digital Xtra fund is encouraging girls and other under-represented groups to join coding clubs. Increasing the number of those pursuing technical courses and qualifications across our further and higher education sectors, ensuring these courses remain relevant to industry requirements, will be another key focus (see CodeClan case study on page 38);
• helping businesses and employers to access expertise to build their skills capacity through the Skills for Growth model developed by SDS to help business to up skill or reskill their workforce and we will consider options for expanding that model in future; and
• continuing to work closely with Investors in People Scotland to promote the benefits of Investors in People as a tool for promoting more innovative leadership and management approaches.

Foster the entrepreneurial spirit by:

• implementing Scotland CAN DO SCALE, an education programme aimed at developing entrepreneurial skills and innovative ideas.

Alongside our existing commitments to:

• build on our participation in wider networks including in new European partnerships such as the Vanguard Initiative, and through organisations such as the Big Innovation Centre;
• continue to support research and innovation in Scotland's Universities by implementing the Innovation Scotland Forum Action Plan to boost academic and business collaboration;
• help our key industries remain competitive by helping them improve their productivity:
  - Scottish Government, SDS, Scotland Food and Drink and Scottish Bakers are due to launch a Productivity Action Plan for the food and drink industry in Autumn.
  - our Manufacturing Action Plan sets out our ambition to work with industry to develop concrete initiatives to boost productivity within the industry;
  - develop the approach to raising productivity through Skills Investment Plans in sectors such as Tourism and Food & Drink; and
  - make the manufacturing sector more attractive as a career choice for our young people;
• trial new types of business innovation support through Scottish Enterprise by piloting three place-based productivity projects; digital in Edinburgh, Health and Wellbeing in the Highlands and Islands and Manufacturing in the West of Scotland.

Developing our digital skills - CodeClan; Scotland's first digital skills academy

Scotland's digital sector requires around 11,000 new entrants each year to meet demand for growth as well as replace those leaving the labour market. As a response to this shortage, the Scottish Government, along with public sector partners and industry, has been delivering the recommendations set out in the ICT and Digital Technologies Skills Investment Plan ( SIP).

These actions are designed to address and reduce the digital skills shortage facing both the digital sector and, increasingly, all other areas of the Scottish economy. The SIP was designed in partnership with industry, and its recommendations are grouped under four different themes. A key action, under the immediate need theme, was the establishment of Scotland's first industry-led digital skills academy called CodeClan in October 2015.

CodeClan is also the first skills academy worldwide to provide its students with a professional developmental qualification ( SCQF level 8). Designed to complement Scotland's further and higher education systems, CodeClan's employer-partner model allows students direct access to employers during their time at the academy.

CodeClan's curriculum is designed with input from industry representatives who advise of their immediate and short-term needs on a rolling basis. This approach enables employers to gain access to the right talent required to allow their business to grow whilst ensuring those entering the sector's workforce have the skills necessary to help them embrace the opportunities of the digital revolution.

CodeClan is also committed to playing its part in reversing the prevalent gender imbalance in digital jobs, with a target to reach at least a 60 : 40 male-female student ratio once fully established. Within the next two years, CodeClan aims to open locations in Glasgow and northern Scotland to help maximise access to work-ready software developers for industry.

Internationalisation

Internationalisation is key for creating sustainable economic growth and boosting employment within Scotland. Increasing Scotland's international competitiveness and accessing overseas markets is vital to growing our exports and creating sustainable employment opportunities. Equally, attracting foreign direct investment ( FDI) brings in employment and investment to Scotland.

As well as direct employment, FDI brings other benefits in terms of wider employment impacts, increased productivity and the transfer of knowledge, skills, technology and innovation to Scotland; investor companies tend to pay higher wages, be more productive than average and generate around 70 per cent of Scotland's Business Enterprise Research and Development expenditure ( BERD).

Scotland's Trade and Investment Strategy (2016-2021) aims to support more businesses to sell more goods and services to a wider range of international markets. It also seeks to attract significant inward, capital and risk investment to Scotland by:

• continuing work to increase the value of Scottish exports and the number of exporters, both to traditional markets in the EU and US, and to growth economies in Asia and the Middle East;
• piloting innovation and investment hubs at key global locations including Dublin, London and Brussels;
• continuing to promote Scotland's global outlook and positioning us as a country which values fairness and progressive people practices; and
• supporting Scottish Development International, in their aims to attract new foreign direct investment and further engage with existing investors whose presence will strengthen and sustain Scotland's growth sectors and supply chains.