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Skills for Competitiveness:

The value of skills in employment and economic development

Professor Mike Campbell Director of Development, Sector Skills Development Agency Director of Research and Policy (Designate), UK Commission for Employment and Skills [email protected]

OECD LEED Annual Forum Vienna 18-19 February 2008 Challenges Economic Performance is driven by Employment and Productivity . Some countries combine both successfully . Some countries have a long way to go – on one, the other or both . Skills are a vital lever in increasing productivity … and employment Key: 1 Austria

80 2 Belgium 3 Denmark 4 Finland 75 3 5 France 14 UK 10 6 Germany 13 US16 7 Greece 70 US 8 Ireland 11 17 1 9 Italy 4 8 65 EU15 6 10 Netherlands 5 11 Portugal 12 Spain 60 12 2 13 Sweden 7 Employment Rates Employment 14 UK 9 15 EU 55 16 USA 17 Japan

50 50 60 70 80 90 100 110 120 Productivity Level

Source: Labour Market Trends (May 2005), O’Mahoney and Van Ark (2003) Local Variations in Employment and Productivity in the UK

120 Employment rate (UK=100) Orkney Isles 115 CC CC 110 Berkshire 105 , City of 100 40 60 80 100 120 140 160 180 95 South West , 90 Gwent Valleys GVA per 85 Leicester Inner London - East head 80 (UK=100) 75

70 Challenges The UK’s International Skills Gap

. 17th out of 30 OECD countries in the proportion (35%) with no/low qualifications . Many are catching up fast e.g. Ireland, Korea and Spain . 35% is more than double the proportion in the best performing countries

. 20th out of 30 OECD countries in the proportion (36%) with intermediate qualifications

. 11th out of 30 OECD countries in the proportion (29%) qualified to level 4 and above Challenges . Attainment even weaker in, for example, Italy, Spain, Portugal and Poland . Some improving ‘across the generations’ faster than others

Proportion of population attaining at least upper secondary education 25 to 34 –year-olds 45 to 54 –year-olds

Slow improvement

Source: OECD, Education at a Glance (2004) Page 53 Local Variations in Skills in the UK

200

Inner London - West 180 Edinburgh, City of Level 4 + (UK=100) 160 South 140 Inner London - East 120

100 50 70 90 110 130 150 80 and Leicester the Isles of Stoke-on-Trent Below Level 2 Scilly 60 (UK=100) 40 , City of

20 Challenges The UK’s International Skills Gap in 2020?

. On No/Low Skills … the UK improves from 17th to 15th

. On Intermediate Skills … the UK improves from 20th to 13th

. On High Level Skills … the UK deteriorates from 11th to 14th

. … Where will your country be in 2020? The Drivers of Change

Public Policy Competition

Increasing Consumers Skill Globalisation Needs

Demographics Technological Change It’s the Economy Stupid?

ECONOMY

JOBS

SKILLS Challenges The Global Playing Field is Changing Fast . The biggest restructuring of the World Economy since the rise of the USA e.g. over the next 10 years China and will double in economic size – the UK will be only 25% bigger % of 30 Global Economy 200320151980

20

10

0 UK EU 27 India China USA 1HMT (March 2005) Long Term Global Challenges Page 25 Chart 3.1 UK Skills and Qualifications to 2020 . The proportion of jobs at Level 4 and above may reach 42% of the workforce – 4.5 million more than today . The proportion of jobs with no qualifications could be as low as 2% - 2.5 million less than today

Share of employment by qualification level, 1994-2020 The Demographic Challenge in the UK

Projected change in age groups 2003-2020 (in thousands) 800

700

600

500 800 800 400 + +22% +28% 700 600 600 300 +27% +16% +16% 200. There will be a decline +3% +4% 100 200 in prime100 age workers +5% 100

15-19 20-24 25-29 30-34 35-39 40--44 45-49 50-54 55-59 60-64 65-69 70-74 AGE

100 100 300 -2% 200 -8% . Big increase in older workers 300 600 600 - -13% -14% 400 . Yet these are the people we are 500 least likely to train 600 . In fact 75% of our 2020 workforce are in work NOW

Source: Government Actuary Department Opportunities What’s the Prize? . In the UK the qualifications improvement of the last 10 years has added: . Between £30 - £50 billion to GDP . 2% points to GVA per worker . Around 200,000 jobs

. In the UK the ‘Leitch’ dividend is likely to realise: . Around £80 billion net to GDP . 15% increase in the rate of productivity growth – around £1800 per worker . 10% increase in the rate of employment growth – around 200,000 jobs Opportunities What’s the Prize? Returns from Obtaining Qualifications

Upper/Post Secondary University Level Degree Non Tertiary (ICSED 3/4) (ICSED 5/6) Males % Females % Males % Females % Belgium 14.3 11.9 10.7 15.2 Denmark (1) (1) 8.3 8.1 Finland (1) (1) 16.7 16.0 Hungary 9.7 11.3 22.6 15.0 Korea 13.5 6.6 12.2 14.9 New Zealand 14.1 16.2 9.3 12.9 Norway (1) (1) 12.1 15.7 Sweden (1) (1) 8.9 8.2 Switzerland 7.9 8.3 10.0 9.8 25.1 29.9 16.8 19.6 United States (1) (1) 14.3 13.1

From: OECD (2006) Education at a Glance – Tables A9.5/A9.6, Pages 150-151 Economically Valuable Skills: The Benefits of Skills Development

Economy e.g. Productivity/Competitiveness Employment/Reduced Economic Inactivity Business Performance/Profitability

Individuals Employers e.g. Job entry Skills e.g. Productivity Wage Return Business performance Strategy Job Quality/Satisfaction

Society e.g. Health improvements Participation Social cohesion Implications for Action: What Should Partners Do?

Provision Employability

Qualifications

Ambition & Policy and Skill Aspiration Institutional Utilisation ‘Glue’ Implications for Action: Partners

The Learning Market The Labour Market The Product Market SKILLS JOBS ECONOMY

SUPPLY DEMAND SUPPLY DEMAND SUPPLY DEMAND Providers Learners Workers Employers Producers Consumers

IAG Services Trade Unions Employer Local/ Employers’ * Providers Bodies/ Regional Federations -Schools Chambers -Colleges Development -Universities Agencies -Training Providers

* Funders Employment Service * Inspectors Intermediaries /Brokers * Standards, Equalities Qualifications, Bodies Examining and Awarding Bodies Implications for Action: So What?

. Skills are valuable! . Skills should connect to (lead?! ) employment and economic development . A ‘Demand led’ approach is needed … but, work on demand for skills as well as supply (availability) of skills . Identify priorities; design action plan; measure performance . Partnership membership should reflect the Skills Strategy The West Regional Skills Partnership . Partners . Employers Public Agencies . Providers Others . Priorities . Information and analysis . Meet employer needs . Encourage enable employers individuals to improve performance through investing in skills . Performance measurement . Supply, demand and ‘balance’ . High level; the partnership; workstreams . Benchmarking and estimating scale/distance to travel . Action plan and milestones The Regional Skills Partnership

. Influence . Partners (including Development Agency) . Regional economic strategy

. For more information/contact: . wmskillspartnership.org.uk . wmro.org (skills research, ‘Skills index’)

Skills and Productivity at the Local Level in the UK

180 GVA per head Swindon160 (UK=100) Berkshire Edinburgh, City of Inner London - East 140 , City of

Surrey Level 4 + (UK=100) 120 Leicester Birmingham 100 30 50 70 90 110 130 150 170 190 Kingston upon Hull, City of Perth & Kinross and Stoke-on- 80 Trent South Nottinghamshire 60 East and West Gwent Dunbartonshire Valleys 40 Skills and Employment at the Local Level in the UK

130 Employment rate (UK=100) 120

Shetland Islands Buckinghamshire Hampshire CC 110 CC Level 4 + (UK=100) Essex CC Surrey

Thurrock Edinburgh, City of 100 30 50 70 90 110 130 150 170 190

Stoke-on-Trent Outer London - West and North West 90 Inner London - Kingston upon Glasgow, City of West Hull, City of Leicester Birmingham Inner London - Liverpool East 80 Implications for Action (2) The Skills and Economic Performance Agenda

Economic Growth

Non Skill Non Skill Productivity Employment Rate Drivers Drivers

Macro Level: Welfare Labour Market Skills Skills Skill To Demand Acquisition Utilisation Work Micro Level: (See next Workplace Slide)

Low Training Skills Qualifications (Non ‘Traps’ Accredited)

Micro: Macro: Economically Business Innovation Valuable Strategy Policy etc Skills Business Development Sustainable Work .Inward Investment .Skills and Qualifications .Business Support .Sites/Premises .Post Employment Support .Innovation

Job WELFARE TO Generation WORK (Demand) (Supply)

Workforce Development Bridges to Work .Skills .Job Search – inc. advice, .Entrepreneurship matching and brokerage .Equal Opportunities .Recruitment Practices of Employers – inc. job guarantees

Social Inclusion Employability Employability .Health Those distant from Those close to Labour .Housing Labour Market Market .Childcare .Recovery Measures .Skills acquisition .Transport .Basic Skills .Activation .Work Experience .Prevention