Future workforce - how the Scottish Government aims to grow the skills base

Scotland’s jobs market and workforce has changed almost beyond recognition in the last 50 years. It has transitioned from an industrial nation of shipbuilding and oil drilling, to an economy largely reliant on the service sector with a host of successful but disparate industries from food to finance.

This poses a challenge for policymakers to forecast what the next 50 years will bring for those taking their first steps on the career ladder today.

With shipbuilding now mainly reliant on big British public sector contracts and the oil industry in decline, with the once thriving Brent field due for decommissioning, the great industries of the 20th century appear to be receding into the shadows.

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In 2014, the Scottish Government commissioned one of the oil industry’s most successful entrepreneurs, Sir Ian Wood, to conduct a review of Scotland’s youth employment strategy.
Its key finding was the need for Scotland’s educational institutions to align training more closely with the needs of Scottish industries.

It stated: “Colleges cannot control labour market conditions but there are a number of clear steps they can take to support their students into employment. 

“Better alignment of the college courses with labour market demands, building work experience into courses and greater support for students seeking employment are all important steps in improving the employment prospects of their students.”

That same year, the Scottish Council for Development and Industry produced a report for British Council Scotland entitled, ‘Scotland’s Future Workforce – Keeping Pace in the Global Skills Race’, that discussed how globalisation could impact on Scotland as a small nation on the periphery of Europe. 

British Council Scotland said: “Scottish businesses need a workforce, in particular, young people as new entrants to the labour market, with the skills to operate internationally. 
“These transferable skills include communication and language ability, team work and leadership, but also intercultural awareness.”

It found many young people hope to work in careers with an international dimension, with the most attractive destinations being Europe (89 per cent), North America (69 per cent) and Australasia (57 per cent).

But a British Council survey found only six per cent of Scots workers are bilingual.

Now, nearly three years on, the Brexit vote is posing even greater uncertainty for Scots workers’ foreign aspirations, as well as curbs on European workers’ opportunities in Scotland which could exacerbate skills gaps already apparent in the Scottish economy.

First Minister Nicola Sturgeon has committed to “exploring all options” to protect Scotland’s relationship with the EU – from a “compromise” position that would keep Scotland in the single market if Theresa May follows through with her plan for a ‘hard Brexit’, to preparations for a second independence referendum.

The protection of free movement of labour is a key consideration, with experts forecasting that Scotland needs thousands of additional workers to plug skills gaps and address the demographic challenges posed by an ageing population.

Protecting Scotland’s place in the single market was a key element of the Scottish Government’s latest labour market strategy, which was published in August 2016, just two months after the Brexit vote.

In his foreword, Minister for Employability and Training Jamie Hepburn said: “The outcome of the EU referendum, the difficult global conditions and the persistent underlying challenges in our labour market continue to weigh on businesses and their prospects for growth. 

“We have made clear our commitment to protecting Scotland’s relationship with the EU, and the economic prosperity, social protection and influence it provides.”

The Scottish Government is keen to safeguard core EU rights and protections for workers, including the right to paid holidays and maternity leave, limits to working hours, the right not to be discriminated against, and health and safety protections. 

The Scottish Government is also still wrestling with the after-effects of the recession at the tail end of the last decade, which dramatically changed the shape and make-up of the labour market.
Eight years on from the start of the recession, real wages and actual hours worked still remain below pre-recession levels, and the Scottish Government has become concerned about the increasing numbers of people in less stable and secure employment, and the growth of zero-hours contracts. 

It wants to equip young workers with the skills to build a career – not just a series of precarious stopgaps – and a key element of that strategy is the Modern Apprenticeships’ scheme.
For decades, a university degree was seen as the gold standard of Scottish education.

While the Scottish Government is keen to preserve the prestige of higher education with its flagship pledge to maintain free tuition fees, more young people have seen the attraction of a vocational education.

Policymakers are currently trying to give vocational courses parity of esteem with university degrees.

Modern Apprenticeships are designed to help employers to develop their workforce by training new staff, and upskilling existing employees, as celebrated last week in Scottish Apprenticeship Week 2017. 

Each year, over 25,000 people start a Modern Apprenticeship (MA) – combining a qualification with on-the-job experience – which lets people work, learn and earn at the same time. 
There are over 80 such apprenticeship frameworks, from healthcare and financial services to construction and IT.

The SNP set out its aspirations to ensure that Scotland’s young people have the best opportunities – whether at university, college, vocational training or employment – in its 2016 election manifesto.

It pledged to introduce a new jobs grant to young people aged 16 to 24 who have been unemployed for six months or more, increase the number of MAs to 30,000 a year by 2020 – 5,000 of them in “highly skilled careers” – with free bus travel to all young people under 21 undertaking an apprenticeship too.

It also pledged to continue to offer a place in learning or training to every 16-19-year-old who needs one through its Opportunities for All programme.

The Scottish Government is 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. 

The labour market strategy states: “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.”

But as has been noted already, the Scottish Government does not have complete control over Scotland’s employment strategy and it is still buffeted by decisions at Westminster which it has little say over.

The UK Government will introduce the UK Apprenticeship Levy in April 2017, requiring employers across private, third and public sectors to pay 0.5 per cent of their pay bill in excess of £3m to Her Majesty’s Revenue and Customs.

The Scottish Government was incensed when the levy was announced by the UK Government in 2015 without consulting Holyrood, despite apprenticeship policy being a fully devolved matter. 

Hepburn said: “While the levy will result in a small increase in the funding we received from the UK Government previously in relation to apprenticeship activity, the fact that the public sector is required to pay will reduce Scottish ministers’ spending power by £30 million in 2017-18. 

“This is against the backdrop of wider austerity measures being imposed by the UK Government resulting in continued reductions in budgets for public services and a failure to revive the economy.”

The Scottish Government has now pledged to “develop a distinctly Scottish approach to apprenticeships and wider skills development and drive closer engagement with industry in our efforts to enhance productivity and economic growth in 2017-18 and beyond”.

The Scottish Government will receive £221m from the UK Apprenticeship Levy, but it stresses that this is not new money and “largely replaces what the Scottish Government would have previously received as a traditional share [of the] existing UK departmental apprenticeship spend”.

Ministers say they will use this funding, as part of the overall Scottish budget, to support skills, training and employment provision, including MAs.

A new rural supplement of between £250 and £1,000 for training providers has been developed in recognition of the additional costs for delivering in rural areas.

The Scottish Government has also removed public sector eligibility restrictions on MA funding, meaning from April 2017, public sector employers will have the same access as those in the private and third sector.

In addition, it pledged to increase support for apprentices aged over 25, young disabled people and those with experience of care up to the age of 30.

Employers also asked for support that would allow them to address skills gaps and the training needs of older workers where a full apprenticeship might not be appropriate.

The Scottish Government responded with a pledge to establish a new Flexible Workforce Development Fund, to be introduced in autumn 2017. 

This will be developed with the input of employers through the Scottish Apprenticeship Advisory Board and shaped by Colleges Scotland and the Scottish Funding Council. 
This new fund will provide employers with support towards workforce development training. 

The Scottish Government has singled out specific sectors for support with recruitment and training. These include digital economy skills and business support; energy, which will be supported through the government’s Transition Training Fund; social care, supported through the Voluntary Sector Development Fund; early years recruitment and training and teacher training.

It has also set out plans to empower head teachers to take the best decisions for their pupils in a major review of how schools are run in Scotland.

Schools could be handed substantial new powers, but councils would remain democratically accountable for education provision.

The Scottish Government will also offer employment support services for vulnerable people, including disabled people and those with long-term health conditions.

This will be provided ahead of a full package of employment support in April 2018, made possible through the devolution of employment services in the Scotland Act 2016.

Ministers have been given an assurance that jobseekers “will not be sanctioned” for not engaging with employment programmes, stressing that they must be seen as “an opportunity, and not a threat”.

As ever, the Scottish Government has its eye on even more powers for Scotland to address the challenges it perceives it faces.

Hepburn said: “We would undoubtedly be better able to address these challenges in a manner which would meet Scotland’s needs if we had the full set of powers around employment law, as the Scottish Trades Union Congress has called for, as well as around tax and social security.”