Ambition 2020: World Class Skills and Jobs for the UK

164 Pages·2009·0.78 MB·English

The 2009 Report
Ambition 2020:
World Class Skills
and Jobs for the UK
Ambition 2020
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“O ur prosperity depends
on the success of our
economy. That depends
on the jobs we are able
to create; and having
the skilled workforce
we need to do them –
and to do them well.”
Foreword
We are living through tough times. The UK Commission for Employment and
The recession is biting deep into Skills was established to advise Government
on the policies, strategies, measures and
businesses, jobs and communities,
targets that we need as a country to achieve
but we are where we are on the back
our World Class Ambition of being one of the
of 15 years of growth, of new jobs top eight countries in the world for skills, jobs
and of growing prosperity. And we and productivity.
are perhaps a year away from One of our key tasks is to assess the UK’s
progress towards that goal. This report is the
recovery, from the current hard
first of what will be an annual assessment
times. We must work to beat the
of how well we are doing, and what we
recession but we must also prepare need to do, to achieve our ambition by
for that recovery, for the better times 2020. It monitors our progress against our
international competitors and in the context
ahead. Indeed, we must actively
of both the Leitch Ambition for 2020 and the
seek to create the conditions to
aims and priorities of the four nations of the
force sustainable recovery. We UK. It aims to provide a sound evidence base
need to commit to investing in the for advice; a baseline from which to assess
future progress; and an agenda on which
skills of our people, to be ready for
future success can be built.
the opportunities, as well as the
It provides the most thorough and
challenges, that lie ahead.
comprehensive analysis available of the
There can be little more important than challenges and opportunities we face. It
equipping the UK with the skills it needs, deserves to be made widely available to be
for the jobs it needs, today and tomorrow. read and talked about and to be used as
Our prosperity depends on the success of a basis for building effective, sustainable
our economy. That depends on the jobs we solutions. That is why we are publishing
are able to create; and having the skilled in parallel with it, a short document,
workforce we need to do them – and to do summarising its findings and drawing out the
them well. key messages, conclusions and actions we
can take to make World Class skills and jobs
more of a reality. We are also publishing at
the same time our Strategic Plan, setting out
what we, in the UK Commission, intend to
do to help employers, Government and the
people of the UK to realise their full potential
and help the UK become a World Class
country for skills and jobs, bringing prosperity
to us all.
Sir Michael Rake
Chairman, UK Commission
for Employment and Skills
UK COMMISSION FOR EMPLOYMENT AND SKILLS – AMBITION 2020 3
Contents
IN A NUTSHELL 6 3.4 Distribution of Qualification Attainment 52
3.5 Conclusions 53
INTRODUCTION 16
4 PROSPECTS TO 2020:
1 THE AGENDA: PROSPERITY, WHERE ARE WE GOING? 54
JOBS AND SKILLS 18
4.1 Introduction 54
1.1 Introduction 18 4.2 The Basis of our Forecasts 54
1.2 The UK Position 18 4.3 Projected International Position 55
1.2.1 Prosperity and Performance: 4.4 Projected Qualification Attainment 58
Levels and Growth in GDP 18
4.5 Conclusions 61
1.2.2 Other Measures of Performance 20
5.0 OTHER MEASURES OF
1.3 Routes to Prosperity:
SKILL DEVELOPMENT 62
Jobs and Productivity 21
5.1 Introduction 62
1.3.1 Productivity Trends 25
5.2 Training 62
1.3.2 Employment Rate Trends 26
5.3 Reasons for Employers not
1.3.3 The Labour Force 28 Providing Training 73
1.3.4 Measures of Inequality 31 5.4 Participation in Training 76
1.4 The Role of Skills 35 5.4.1 Patterns of Individuals’
Participation in Training 76
1.4.1 The Role of Skills in Raising
Employment and Productivity 35 5.4.2 Barriers to Individuals’ Participation 79
5.5 The UK Benchmarked Against
1.4.2 The Role of Skills in Tackling Inequality 37
EU Countries 81
1.5 Conclusions 38
5.6 An Optimal Level? 82
2 THE AMBITION: 5.7 Conclusions 83
SKILLS AND JOBS 40
6 JOBS: TODAY AND TOMORROW 84
2.1 Introduction 40
6.1 Introduction 84
2.2 The Ambition Restated 40
6.2 Recent Changes in Employer Demand 84
2.2.1 The Leitch Ambition 40
6.3 Future Employer Demand 85
2.2.2 Wider Ambitions: The Lisbon Strategy 42
6.4 Unemployment and the
2.3 Responses to the Leitch Ambition 43 Economically Inactive 93
2.4 Refreshing the Ambition 44 6.5 Progress in a Cold Climate: Jobs 96
6.6 Progress in a Cold Climate:
2.5 Qualifications and Skills 46
Skills and the Recession 100
2.6 Conclusions 47
6.7 Conclusions 102
3 PROGRESS: 48
7 MISMATCHES BETWEEN 104
HOW ARE WE DOING?
JOBS AND SKILLS
3.1 Introduction 48
7.1 Introduction 104
3.2 Our Changing International Position 48
7.2 Skills Shortages and Skill Gaps 104
3.3 The Profile and Changing Level
of Skills and Employment in the UK 52 7.2.1 Skill Shortages 105
4 UK COMMISSION FOR EMPLOYMENT AND SKILLS – AMBITION 2020
7.2.2 Skills Gaps 108 ACKNOWLEDgEMENTS
7.2.3 The Causes of Skill Shortages The lead authors of this report were Mark Spilsbury,
and Skills Gaps 110 Chief Economist at UKCES, and Professor Mike
Campbell, Director of Research and Policy at UKCES.
7.2.4 Impact of Skill Shortages and Skills Gaps 111
A number of individuals made important contributions
7.2.5 The Top Skill Shortage Occupations: to the work involved and we would particularly like to
The Work of the Migration Advisory acknowledge the assistance of the following:
Committee 112
Lesley Giles, Genna Kik and James Sloan in the
Research and Policy Team at UKCES, who input into
7.2.6 A Wider Context? 113
a range of aspects of this report;
7.3 Skills Needed Versus Skills Available:
Catherine Hodgkinson in the Research and Policy Team
Over-Skilled Or Under-Employed? 114
at UKCES, who prepared the footnotes, bibliography
7.4 Conclusions 122 and glossary;
Chris Humphries, Chief Executive and Cay Stratton,
8 RAISING EMPLOYER AMBITION 124 Special Adviser to the Chair at UKCES, as well as other
members of the Senior Leadership Team, who made
8.1 Introduction 124
substantial comments on drafts of this report;
8.2 Low Skill Equilibrium 124 Members of UKCES’ Expert Panel who commented on
an early draft of the report (membership of which is listed
8.3 Skills Utilisation 125
at www.ukces.org.uk);
8.3.1 The Benefits of Skills Utilisation 125
Professor Derek Bosworth, who worked with us on
8.3.2 HPW Practices 127 the modelling to assess the prospects of meeting
our 2020 ambition;
8.3.3 Take-up of HPW Practices 129
UKCES Commissioners who reviewed various
8.4 Management and Leadership 130 versions of the report, the headline findings and report
implications on several occasions;
8.5 Employer Ambition 137
Members of our Sponsorship Team who provided
8.5 Conclusions 138
valuable comments on a near final draft of the report.
Thanks also to Jessie Sabar for word processing and
9 SKILLS AND
organisation; and to theWorkshop who worked with us
EMPLOYMENT POLICY 140
to create, design and publish the final report.
9.1 Introduction 140 Mark Spilsbury and Mike Campbell
April 2009
9.2 The Current Landscape 140
9.3 A Framework for Policy Development 141
9.4 The Implications for Action 146
9.5 Conclusion 149
ANNEX 1: Qualification Equivalents 150
ANNEX 2: Membership of International Fora
and Organisations 151
GLOSSARY OF TERMS 152
REFERENCES 154
UK COMMISSION FOR EMPLOYMENT AND SKILLS – AMBITION 2020 5
In a Nutshell

This report assesses our progress towards making the UK a world leader in
skills, employment and productivity by 2020.
ThE CURRENT ChALLENgE ThE AgENDA AND OUR AMBITION
Today, we are facing unparalleled and It is our ambition to be one of the top
unpredictable challenges. After 15 years countries in the world – for jobs, for
of continuous growth, we are in a global productivity and for skills. A World Class
recession that may be the deepest in economy, built on World Class skills,
80 years. Employment is falling and supporting World Class jobs and businesses.
unemployment is rising. The impact on the We should aim to be in the top quartile
economy and society will be far-reaching. of OECD countries in all three – jobs,
To secure economic renewal – to emerge productivity and skills – by 2020. This
from the recession stronger, more adaptable, means being in the top eight countries of the
more competitive – will demand bold and world.
concerted action. We must focus not only on
Our future prosperity depends ultimately on
how to survive the recession, but on how we
employment and productivity: how many
will thrive in the years ahead.
people are in work and how productive
The challenge for the UK employment and they are when they are in work. Skills are
skills system is formidable. We need to build essential to both. If we are to become World
a system to match the high skill, people- Class, we must raise our game to match
driven economy of the future – a system the productivity, skills and jobs of the best.
that responds well to business need while By this international standard, the UK has
opening opportunity for all people. We must some way to go. We rank 11th in the
increase the ambition and aspiration of world in productivity levels and 10th in
individuals to gain new skills – not just once, employment. While our position has been
but throughout their working lives. We must improving in productivity, our employment
transform the way that employers invest in level is deteriorating. We rank 14th on
their workforce and use the skills of their income inequality – in the gap between
employees. And we must achieve this radical the highest and lowest earners. And within
change in a way that delivers much higher the UK, there are very substantial variations
performance at lower cost. The stakes are across the nations and regions in both
high and time is short, but if we set our sights productivity and jobs. Sectoral differences are
high, adopt a common purpose and act also important.
together with determination and imagination,
We will not close the gap with our
the prize is immense. In the following
competitors unless employers and individuals
sections, we set out where we are now and
place a high value on skills. Skills are vital
what it will take to achieve our ambition for a
to both employment and productivity. They
World Class employment and skills system.
increase the likelihood of individuals being
in employment and the wages they can
earn. They increase the chance of business
survival and contribute to business growth
and productivity. They are a critical driver
of economic growth and development. In
short, a strong skills base is pivotal to jobs, to
productivity, to our national prosperity and to
recovering inequality.
6 UK COMMISSION FOR EMPLOYMENT AND SKILLS – AMBITION 2020
OUR PROgRESS: hOW ARE WE OUR PROSPECTS FOR ATTAININg
DOINg? ThE 2020 AMBITION
The aim of achieving World Class We have assessed our likely progress and
employment and skills – of becoming one of the prospects of achieving World Class
the top countries in the world at every skill standing in skills and jobs in the next
level – is highly ambitious. It means attaining decade. Our projections suggest that the
more than 20 million additional qualifications, UK’s relative international position is
equivalent to more than one for every second unlikely to improve by 2020, let alone
adult of working age, by 2020. And, because to become World Class. Indeed, overall,
current skill levels vary widely across the it may deteriorate slightly. By 2020, we are
nations, regions and industries of the UK, likely to be ranked 23rd on low level
this ambition is even more stretching in many skills (compared to 17th now); 21st on
parts of the country and in many sectors. intermediate level skills (compared
to 18th now); and 10th on high level
In international terms, our current position
skills (compared to 12th now). We
is little changed from that reported in
will, therefore, not be in the top eight
the Leitch Review in 2006: we are now
countries of the world at any skill level
ranked 17th on ‘low’ level skills, 18th
(see Table 0.1). Overall, the international
on ‘intermediate’ level skills and 12th
skills gap between the UK and the top
on ‘high’ level skills. While the overall UK
countries is widening rather than closing.
skills profile is improving over time, too many
people are in danger of being left behind: Table 0.1:
one in eight adults of working age have no The UK and World Class skills – international ranking
qualifications; more than a quarter are not
Today 2020 Ambition
qualified to Level 2; and just shy of a half are
Low level skills 17 23 Top 8
not qualified above Level 2. Moreover, other
countries are improving their skills profile too Intermediate level skills 18 21 Top 8
so our relative position has changed little. High level skills 12 10 Top 8
Indeed, many are improving faster.

These international benchmarks are based If we translate our international ambition to
on qualifications. Using other measures of reach the top quartile of countries into what
skill development, notably training, we find this means for UK skill levels, we have an
that around two thirds of UK employers equally troubling picture. Our projections
provide training to their staff and the overall suggest that, with the exception of high level
volume seems high. However, this training skills, we will not achieve our objectives, as
is unevenly and unequally distributed. Low can be seen in Table 0.2.
skilled employees and those in lower status
Table 0.2:
occupations receive considerably less
The qualifications of UK adults
training. Managers also receive particularly
low levels of training, together with Today 2020 Ambition
employees in small firms and in a number of Low level skills
important sectors of the economy. (% qualified to at least Level 2) 71 77 90+
Intermediate level skills
(% qualified to at least Level 3) 51 58 68
High level skills
(% qualified to at least Level 4) 31 41 40
UK COMMISSION FOR EMPLOYMENT AND SKILLS – AMBITION 2020 7
We will not achieve the desired JOBS: TODAY AND TOMORROW
improvement at ‘low’ skill levels (we may
Increasing skill levels make sense if jobs are
achieve 77% qualified to Level 2 as against
available for individuals and employers to
a 90% plus ambition); we will not achieve
make use of these skills. Following almost 15
the desired improvement at intermediate
years of jobs growth and relatively low levels
skill levels (we may achieve 58% as against
of unemployment, economic conditions and
a 68% ambition); but we will achieve the
jobs prospects have deteriorated sharply
higher level skill ambition (41% as against
in recent months. In the last three months
a 40% ambition). Even here, because we
of 2008, 180,000 people have been made
expect other countries to improve faster than
redundant and unemployment has increased
previously anticipated, this skills improvement
by nearly 140,000. However, training levels
is not quite enough to move us into the top
remain firm.
quartile of countries.
The current difficult conditions need to be
As far as basic skills are concerned, the
placed in a longer run context. Over recent
Leitch Review proposed (and England has
years, not only has there been sustained
accepted) that 95% of UK adults should
growth in jobs (over 3 million in the last 10
have functional literacy and numeracy skills
years) but these have, on the whole, been
by 2020. Our projections indicate that 95%
higher skilled. The proportion of jobs requiring
of UK adults will, indeed, be literate by
higher levels of qualifications has been rising
2020, but that the numeracy ambition will
whilst the proportion requiring low or no
not be attained, with an expected outcome
qualifications has been declining. This trend
of between 88% and 90% of UK adults
is reflected in the substantial growth in ‘white
achieving functional numeracy. International
collar’ professional, associate professional,
comparisons are not currently available.
technical and managerial jobs.
The picture is not much more encouraging
This trend has profound implications for
for employment. Even before the recession,
vulnerable groups and people facing multiple
the UK’s comparatively strong position
barriers to employment. These individuals
in employment had begun to slip. While
are least likely to be in stable employment –
the 80% employment goal is simply an
or any employment. Those not in work are
aspiration, it was established to signal
likely to be at both ends of the age spectrum,
Government commitment to full employment.
particularly the young; they are likely to be
However, our current rate of around 74% has
low skilled; they are more likely to have a
not increased significantly since 2001 and,
disability; and they are more likely to be from
since 2003, only Portugal has performed less
an ethnic minority group.
well than the UK. The projected increase in
employment to 2020 of perhaps 2 million
jobs is expected to be slightly smaller
than that of the working age population.
Therefore, the employment rate is expected
to actually decline.
8 UK COMMISSION FOR EMPLOYMENT AND SKILLS – AMBITION 2020
Making headway on the skills and jobs The second mismatch that occurs is skill 1 Migration Advisory
agenda during the current recession will gaps, where members of the existing Committee, Skilled,
Shortage and Sensible:
be difficult. Some of the jobs that are being workforce are seen to lack the skills
The Recommended
lost will not return; some skills will become necessary to meet business needs. These
Shortage Occupation
obsolete; many industries and occupations are more significant in the UK – perhaps 10 Lists for the UK and
will experience substantial restructuring. times greater, amounting to some 1.8 million Scotland, 2008.
Future job growth will be slower than in the people.
past. But growth will come with an expected
A third way of understanding the extent
2 million new jobs between now and 2020
and nature of mismatch between the skills
and most of them will demand higher skills.
we need for jobs and the skills we have
And, because of retirements and other labour
available for them is to draw on international
market changes, a further 11 million job
comparisons, comparing the proportion
opportunities are likely to become available
of the workforce with high level skills and
over the next decade.
the proportion of the workforce in high skill
So we must prepare now for the jobs of the jobs. The UK does, indeed, have more high
future. We must ensure that people have the skill jobs than high skill people (implying
skills necessary to access the opportunities we have insufficient people with high level
that will become available post-recession and skills), but this gap is actually small relative to
that employers will be able to recruit workers most countries. Moreover, the growth in our
with the skills necessary for success. numbers of high skilled people significantly
exceeds the growth in our numbers of high
MISMATChES BETWEEN SKILLS skill jobs. The growth in high skilled jobs
AND JOBS is also occurring at a slower rate than in
other countries. This growing mismatch is
In an efficient labour market, the skills of the
also seen from research which indicates an
workforce will be sufficient to meet employer
emerging gap between the supply of and
needs and the supply of skills is aligned with
demand for graduates as well as an increase
market demand. If either supply, demand or
in the proportion of workers who are ‘over-
the matching processes are deficient, several
qualified’ for their current jobs.
types of mismatches occur. The first is skill
shortages. These arise when employers Taken together, these findings are lead
find it difficult to fill their vacancies with indicators of potential imbalances between
appropriately skilled applicants. Overall, skill the numbers of skilled jobs and skilled
shortages are actually low (around 170,000 people; between the skills available and
across the UK) though they are more those in demand – which, in turn, may result
significant in small establishments, in some in the ‘over-skilling’ or ‘under-employment’
key occupations (eg skilled trades, associate of skilled workers. So far, this has had little
professional and technical occupations), and impact on the relative earnings of those
in a number of sectors (eg construction and with higher skill levels whose wage premium
audio/visual) and localities (eg London). remains high by international standards.
Within this overall number, there are about
20 occupations, employing around 650,000
people, experiencing the most severe skill
shortages.1
UK COMMISSION FOR EMPLOYMENT AND SKILLS – AMBITION 2020 9
This potential misalignment may arise either RAISINg EMPLOYER AMBITION
because demand for skills is too low or
It is important, but not enough, just to
because supply is too great. Our view is
raise skill levels. It is important, but not
that this problem lies largely on the demand
enough, to align the skills available with
side. The relatively low level of skills in the
skill requirements. It is also necessary to
UK; the limited extent of skill shortages; and
build an economy that is internationally
the potentially relatively low demand for skills
competitive and fit for the future, an economy
relative to their supply taken together, imply
which drives a higher demand for skills.
a demand side weakness. The UK has too
few high performance workplaces, too few Higher skill levels are, of course, not the
employers producing high quality goods and only driver of employment and economic
services, too few businesses in high value development. Innovation, research, quality,
added sectors. This means that in order to high productivity and high value added
build an internationally competitive economy, goods and services are essential to sustained
the future employment and skills system competitive advantage. But innovation and
will need to invest as much effort on raising productivity will stimulate employer demand
employer ambition, on stimulating demand, for skills. So raising skill levels is both a
as it does on enhancing skills supply. In contributor to, and a consequence of, a ‘high
this way, we can create a ‘virtuous circle’ road’ economic development path. The more
of skills development, between the skills that a post-recession recovery and renewal
available and the skills required. strategy is built around higher skills, the more
likely it is to raise employer demand. In the
The fourth dimension of mismatch between
end, the demand for skills is a ‘derived’
supply and demand, is unemployment. In
demand. It depends on the shape of the
the current recessionary conditions, the
economy and level of economic activity. This
biggest ‘mismatch’ in the labour market is
is why economic and industrial policy are
between a weak overall demand for labour
crucial to achieving our 2020 employment
and the available supply of labour, creating
and skills ambitions, and why achieving
both unemployment and unused skills. Yet
those ambitions are, in turn, a key route to a
the unemployed and their skills are valuable
resources that need to be nurtured in stronger economy.
preparation for the recovery. We must use
Action is needed at the level of the individual
the recession to build the UK’s skill base to
organisation as well as at the level of the
prepare for the future.
economy too. Leaders and managers are
the key to business strategy and competitive
positioning. Organisational success depends
on their vision, capability and effectiveness.
Yet the UK has a relatively long tail of
managers who are not well qualified and do
not apply accepted management practices.
Without improving UK leadership and
management, we will struggle to improve
economic performance.
10 UK COMMISSION FOR EMPLOYMENT AND SKILLS – AMBITION 2020