skill shortage uk

7/29/2019 Skill Shortage UK

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SKILL SHORTAGES IN THE UK

ISSUES, PROBLEMS ANDWAYS FORWARD

Ewart Keep

Deputy Director,

ESRC Centre on Skills, Knowledge &Organisational Performance,

University of Warwick,

Coventry, CV4 7AL,

ENGLAND

E-Mail: [email protected]


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INTRODUCTIONSkill Shortages and public policy Moral Panic about VET

Two Dimensions to Skills Shortages: Employers difficulty in obtaining skills they need

International comparisons of stocks of skills

The importance of defining what the problem really is

The changing meaning of skills

The UKs threefold policy response on skills:

Boost publicly-funded VET

Targets

Forecasting, planning and matching

Deeper tensions

The dawn of a new approachskills and what else?


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UK VET AND MORAL PANIC IN

PUBLIC POLICY

Skills as THE key to national competitiveness

Skills as THE key to performance at firm level

Skills as THE key to a host of problems:

Unemployment and social inclusion

Lack of strong sense of citizenship Poverty and welfare dependency

Crime and drug abuse

Anti-social behaviour

The current wave of UK concern started in 1976 and isongoing.

Bound up with visions of the Knowledge Driven Economy


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AND IN THE USA TOO

The surge of global competition into our labor

markets, sweeping technological change, andimpending shifts in the demographic mix of ourlabor force call for a national campaign to improvethe skills and professionalism of the Americanworkforce. We must create new learningpartnerships throughout our communities andworkplaces to sustain the jobs that provide for ourmiddle class, pay the social costs of health,education and retirement, and preserve

capabilities necessary for our nations security.

Task Force on Workforce Development, Albert Shanker Institute/NewEconomy Information Service, Learning Partnerships:StrengtheningAmerican J obs In the Global Economy, 2004:2


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SKILL SHORTAGES

TWO REASONS TO WORRY

1. Skill shortages as defined by internationalleague tables. Here the focus of concern is thatother countries appear to have workforces with ahigher stock of skills (qualifications) than your

own. The shortage is comparative.2. Skills shortages as defined by employers who

cannot recruit to fill vacancies (or who haveconcerns about the skills of their existing

workforce).In the UK these two definitions have interacted to

fuel public policy concern about skills supply andthe operation of the VET system.


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EMPLOYERS SKILL SHORTAGES

UK EXPERIENCES

New Labour come to power in 1997 and start toworry about an over-heating economy and skillshortages as a cause of inflation and a block onproductivity improvement.

The National Skills Task Force (NSTF) isappointed to investigate the scale and nature ofthe problem and to recommend what might bedone.

The NSTF was made up of VET supply managers,employers, trade unions, with a secretariat fromgovernment. It commissioned a large programmeof research.


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DEFINE YOUR PROBLEM

The NSTF swiftly concluded that vague and loose

terminology made it very hard to categorise the nature anddiscern the scale of the problems that underlay thereported skill shortages.

Their solution was to divide the problem into three differentcategories:

EXTERNAL RECRUITMENT PROBLEMS

Hard to Fill Vacancies (HtFVs)

Skill Shortage Vacancies (SSVs)

INTERNAL PROBLEMS

Skill Gaps

Clearer definition was seen as the key to better targetedpublic policy interventions. Diagnose the problemaccurately and then select an appropriate cure.


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AND THESE MEAN?

Hard to Fill Vacancies are vacancies reported

by employers to be hard to fill. Where HtFVs are due to a shortage of applicants

with the required experience, qualifications orskills, they are regarded as Skill Shortage

Vacancies. Skill gaps are defined as occurring when

employers regard some of their staff as not beingfully proficient to meet the requirements of their

job.

These definitions now operate within the UKs fournational VET systems and determine how data iscollected and policy responses are formulated.


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CLOSER DEFINTION OF THE

PROBLEM MEANS THE

PROBLEM DIMINISHES SHARPLYThe NSTFs work paid off. Once the new definitions wereapplied at a stroke about 80 per cent of the skill shortageswithin recruitment vanished.

Using large-scale surveys (the 2004 National EmployerSkill Survey covering England had a sample of 70,000 plusestablishments), we now have a very accurate picture ofHtFVs, SSVs and skill gaps, by:

Sector

Region

Locality

Occupation


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THE PICTURE IN 2004

At the time of the survey:

14% of establishments had vacancies

8% of establishments had HtFVs

4% of establishments had SSVs

Number of vacancies 766,000 Number of HtFVs 358,000

Number of SSVs 159,000

HtFVs as a % of employment were 3.7% HtFVs as a % of vacancies were 47%

SSVs as a % of employment 0.8%

SSVs as a % of vacancies 21%


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NESS 2004 CONTINUED

Skill Gaps

% of establishments with skill gaps 23%

Skill gaps as % of employment 9%

Most skill gaps are transitory. They arecaused by the arrival of new workers, whoneed training.

Between 2001 and 2004,The level of SSVs stayed static.

HtFVs increased by over 50%

f


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Table A: Density of Recruitment

Problems by OccupationVacancies Vacancies as

%employment inoccupation

HtFVs as %age of

all vacancies

SSVs as %age of

all vacancies

Managers 35,237 1.3 34.5 18.2

Professionals 51,835 1.7 37.1 24.3

Associate

Professionals

81,142 4.4 38.8 23.6

Admin. &

Secretarial

84,010 2.9 23.2 11.1

Skilled Trades 63,391 3.3 62.5 39

Personal

Services

74,169 6.1 51.4 23.7

Sales, CustomerService

116,662 3.4 32 12.4

Operatives 57,740 3.4 50.3 27

Elementary

Occupations

107,393 3.5 40.3 14

All Occupations 679,072 3.1 40 19.9

Source: IFF/IER National Employers Skills Survey, 2003 (LSC 2004) Base: Employee-Weighted


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Skill Shortages as %age of Vacancies


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GAPS MAY BE A GOOD SIGN

Research (Mason, Zwick) suggests that skill gaps areassociated with organisations that are seeking to:

improve their productivity

expand their product range

upgrade product or service quality

introduce new equipment (e.g. ICT)

develop new markets

An economy with few skill gaps may be an economy with a

lot of path dependent firms who are not responding tocompetitive pressures very well.

As long as the gaps are transitory, they are probably agood sign.


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THE CHANGING MEANING OF SKILL

A RISE OF GENERIC & SOFT SKILLS

Survey and case study data suggests that many SSVsoccur because of problems with soft/interpersonal andgeneric skills. This is particularly so in the service sector.

There are many facets to this development as they impacton the ability of the VET system to respond:

Rise of generic skills, such as problem solving. Some ofthese generic skills may be less generic than assumed.

Also the issue of where they are best created educationor the workplace in which they will be applied.

Rise of personal attributes (self-discipline, loyalty,punctuality, motivation) which may not be skills per se, andwhich may reflect employee relations conditions in theworkplace.

Rise of aesthetic labour looking right and sounding right!


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SOFT AND GENERIC SKILLS

FURTHER CHALLENGES FOR VET

Challenges for certification systems in the UK,where the demands of rigorous publicexamination mean that soft key skills gouncertified.

Aesthetic skills are not traditionally part of VET.They pose a large challenge. Ensuring thatcandidates present themselves for interview in anhotel or fashion boutique as being, passionate,

stylish, confident, tasty, clever, successful andwell-travelled (Warhurst and Nixon, 2001) istricky.

Quite a lot of these new skills appear to be proxies

for middleclassness.


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HOW HAS POLICY TRIED TO RESPOND

ON LABOUR SHORTAGES AND HtFVs?

Boosting already relatively high participation inemployment:

Return to work for those on disability benefit

New Deals for the long-term unemployed

In work tax breaks to make low paid work pay

Migrant labour (especially from New EU states)

Illegal immigrants Treasury not too worried

TENSIONS: Department for Work and Pensionswork first, any

work

Department for Trade Industry some jobs may not be

worth having


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LABOUR FLOW DIAGRAM

TheEducation System

The Labour Market

5% Blue Chip jobs

20% Professional/

Managerial10% Associate Professional

15% Craft/Technician

35% Clerical/Retail/Production

15% Awful Jobs


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HOW HAS POLICY TRIED TO

RESPOND ON SKILL?Given:

Beliefs about the role of skills in internationalcompetitiveness

International comparisons of skill stocks that showed theUK in a poor comparative light at some skill levels.

Modest levels of skills shortages and gaps in the economyHow have the four UK national governments driven policy on

skill?

ANSWER: A threefold policy response on skills:

Boost publicly-funded VET Targets

Forecasting, planning and matching

England is the most extreme example of planning,

Scotland of spending and supply.


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BOOSTING SUPPLY TO MATCH

OVERSEAS COMPETITORS

Over the last 25 years England has:

Massively expanded post-compulsory participation amongthe 16-19 age-group.

Massively expanded its higher education system

Increased government support for employer training,through apprenticeships and now through schemes foradult workforce.

Created a state of permanent revolution in the institutional

structures that control, manage, fund, inspect and deliverVET.

Centralised the control of the VET system in the hands ofcentral government and its agencies.


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WEAKNESSES REMAIN

Relatively low participation post-17.

Reflects structure of youth labour market

and labour market regulation (e.g. licence to

practice).

Adult literacy and numeracy (basic skills)

problem are quite extensive.


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TARGETS FOR EVERYTHING

- NOT A HAPPY STORY The English VET system is now managed via a range of

national targets. Some are set by central government,others by the Learning and Skills Council (LSC).

The central government Public Service Agreement(PSA) targets are set without any consultation with

external actors or users of the Vet system. The LSCs National Learning Targets (NLTs) are

supposed to have secured buy-in from employers andothers.

The PSA targets over-ride the NLTs in terms of priorityfor funding and other public resources.

It is far from clear that the PSA targets relate in any wayto future projections of need for skills or qualifications.They appear to be driven (as are the NLTs) byinternational comparisons of skill stocks.


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PROBLEMS WITH THE NLTsThe NLTs are supposed to be minimum international

benchmark standards that must be met to ensureeconomic success. The NLTs have a long history offailure:

Of the 8 targets set by the Confederation of BritishIndustry in 1991 for achievement in 1997, just 2 were

met. Of the 6 targets set by NACETT in 1994 for

achievement in 2000, only 1 was met.

Of NACETTs second set of 4 targets to be achieved in2002, only 1 was met.

Of the 5 NLTs set by the LSC for achievement in 2004,only 1 was met in full, despite the fact that the 2004NLTs were less ambitious than those set by NACETTfor achievement in 2000.

No new NLTs have yet been set.


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AN EXAMPLE OF TARGET

VERSUS NEED

One of the governments key VET targets is one set by thePrime Minister himself that England achieve 50%participation in HE by the 18-30 cohort.

This target was established without reference to need inthe economy for graduate level skills.

Given achievement patterns in England, this means thatthe vast bulk of those with intermediate level qualifications,academic and vocational, need to enter HE to meet thetarget.

Sectors like engineering, that still need substantialnumbers of young people to train as apprentices andtechnicians, and to fill intermediate level skill jobs, arefaced with the prospect of big skill shortages. Employerscomplain the target is dangerous.

RE ENTER THE DRAGON


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RE-ENTER THE DRAGON:

THE RETURN OF MANPOWER

PLANNING (BIGGER, BOLDER ANDMORE POINTLESS THAN EVER)Manpower planning was very briefly and mildly in vogue in the mid tolate 1970s. Thereafter the fashion was for a training market.

In 1999/2000 some members of the NSTF decided that the best way toavoid skills shortages was to establish an elaborate system that linked:

Labour market forecasting (based on economic modelling)

Employers views about future skill needs

Funding of the VET system

The Learning and Skills Council (LSC) was set up to do this. Itsmission was to engage in manpower planning on a grand scale, andat a high level of detail.

The aim is to match supply with demand.


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TOP DOWN, BOTTOM UP, AND

SIDEWAYS

Besides the LSC, there are many otherplayers in the new system:

9 Regional Development Agencies (RDAs) 30 Sector Skills Councils

Sector Skills Development Agency (covers sectorswith no SSC for planning purposes)

And it operates at sectoral and regionallevels as well.


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WILL THEY ALL MEET IN THE

MIDDLE? Treasury/DfES PSA targets

National LSC plan and targets

47 LLSCs plans and targets

9 RDA Regional Economic Strategies (RES), which thenplan the skills component via 9 Regional SkillsPartnerships (RSPs). These include input from the SSCsand the relevant LLSCs.

30 SSCs, (plus SSDA) each producing over the coming

years its Sector Skills Agreement (SSA), which projectsectoral needs and to which public funding of VET is meantto be tied.

Are all these plans liable to meet up in the middle? Earlyindications suggest contests for scarce resources

talented people and the money to train them.


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PROBLEMS WITH PLANNINGPlanning is only as good as the data being entered.

UK employers have no history of, or capacity for planningin detail within their own companies. Projected employerviews on skill demand are guesses.

Most projections rely on modelling of changing sectoraland occupational structures and sizes.

Industry data is weak because: It does not take account of outsourcing

Industry structures are changing rapidly

Multi-nationals add complexity

Occupational data is weak because: Occupations are getting fuzzy

Many skills are now cross-sectoral

Measures job numbers not earnings

Job/occupation titles now cover a wide range of skill levels(e.g. manager)

MORE PROBLEMS WITH


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MORE PROBLEMS WITH

PLANNING

Generic and soft skills are not covered very wellby UK qualifications, so much skill demand in the

service sector cannot be specified and planned for

by recourse to qualifications. Within publicly-

funded VET, funding is normally dependent on thedelivery of whole, officially approved qualifications.

Lead times are lengthy. Setting up new provision

and putting students through it at intermediate andhigher skill levels means a 3 to 4 year lag.

Economic volatility (in the whole economy and

sectors) can throw plans out very quickly.

EVEN MORE PROBLEMS WITH


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EVENMORE PROBLEMS WITH

PLANNING

The matching model assumes:1. Simple, linear one-off career choice, which research

suggests this does not happen

2. Supply and demand can be kept in balance without a clashof interests. An appropriate number of prospectivestudents, not too few, not too many, can be persuaded toopt for a given course in a given locality. The examples ofmedia studies and hairdressing. A problem for the LSC,which is supposed to be:

Student-centred

BUT Employer-led

3. Employers want supply to match demand. They dont.They rationally want an excess of supply, it drives downwages and it gives them choice when recruiting.

DEEPER TENSIONS


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DEEPER TENSIONSIn a voluntary system, how do you get employers to playtheir part, and how do the various players decide exactlywhat their part is?

It would be a mistake to treat the currentdemands of employers and individuals forskills as coterminous with the needs of theeconomy.it cannot be assumed that these(employer and individual demand) necessarilyreflect the wider needs of the economy foreconomic growth and stability

National Skills Task Force, 1998: 3.

Whilst we accept that a greater proportion of

people with full vocational qualifications maybenefit the economy as a whole, this is not themain concern of individual companies.

British Chamber of Commerce 1998

Problem identified, but what to do about it?

THE NEEDS OF EMPLOYERS


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THE NEEDS OF EMPLOYERS

EQUAL NEEDS OF EMPLOYMENT

The UK is unusual, at least in a European context,in choosing to define the needs of the labourmarket solely in terms of the needs of employers.

In other countries the norm is for socialpartnership arrangements, and the activeinvolvement of worker representatives in themanagement of the VET system, to ensure thatsuch needs are conceptualised in terms of the

wider needs of employment and employabilityrather than the immediate skill requirements ofemployers alone.

VOLUNTARY BUT CLOSELY


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VOLUNTARY BUT CLOSELY

PLANNED - MATCHING SUPPLY

WITH DEMAND IS HARD Interests and needs of different players do not

coincide.

One persons demand is different from anothers

demand. Employers are in competition for certain types of

talent. If one lot win, another lot lose (andcomplain)

Individuals want different outcomes fromemployers (e.g. broader qualifications)

The LSC and others are left to try and mediate.


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Squaring the Triangles

Employers

Individual

Learner

Needs ofSociety/Eco

nomy


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Qualifications Demand & Supply 2001

DD: Highest Qualification

Required (000s of jobs)

SS: Highest Qualification

Held (000s of jobs)

Level 4 or Above

Degree

Non-Degree

7,122

4,220

2,903

7,359

4,774

2,585

Level 3 3.976 6,379

Level 2 3,878 5,302

Level 1 2,951 3,549

No Qualifications 6,464 2,881

Percentages of Over-qualified &


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Percentages of Over-qualified &

Under-qualified - 1986-20011986 1992 1997 2001

The Under-

Qualified

20.5 16.5 19.8 17.6

The Over-

Qualified

30.0 31.2 33.0 37.0

Level 4 plusDegree

Non-Degree

27.930.2

32.1

25.329.7

28.4

25.831.6

29.8

28.033.9

33.9

Level 3 47.7 41.5 52.0 48.1

Level 2 42.4 42.7 40.8 50.0

Level 1 54.3 48.9 42.5 43.2

NB: An under-qualified individual has a highest qualification at a lower level than that currently required to get the

job he/she now holds

An over-qualified individual has a qualification at a higher level than that currently required to getthe job he/she now holds.


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PROBLEMS WITH DEMAND

FOR SKILLS

There has been a gradual dawning that, in part, our relatively low levelsof VET vis--vis other developed nations may reflect the fact thatdemand for skill in the UK economy is relatively limited.

Finegold, Soskice and the Low Skills Equilibrium

Mason and Low Skills Trajectories

Significant parts of the economy appear locked in to producingrelatively low specification, lower quality goods and servicesthat do not require high levels of skill to deliver them.

Hogarth and Wilson and the DTI study

SKOPE and the Employers Perspectives Survey

RESEARCH CONCLUSION: higher product or servicespecification/quality is positively associated with the need for higherlevels of skill. The link is not always simple and direct, and may impacton different parts of workforce with varying force.


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PROBLEMS WITH SKILL USAGE

Two main issues:

Gradually rising levels of over-qualification

Slow (now stalled), and very patchy spread ofHigh Performance Work Organisation (HPWO),high involvement work practices, etc. Workorganisation and job design is often impoverished,produces many highly routines jobs and limits the

discretion, creativity and ability to utilise skill ofmuch of the workforce.

SKILLS ALONE ARE NOT


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SKILLS ALONE ARE NOT

ENOUGHRealisation that although skills are important, andsupplying more of them is a prerequisite for progress,

skills produce results in combination with other factors.

Thus recent thinking on the UKs patchy record onproductivity now acknowledges that there are other

weaknesses that must be tackled: Poor record on R&D

Very poor record on investment in plant andequipment over many decades

Low levels of innovation

Poor public infrastructure (e.g. transport)

The challenge covers the need to move to a

new model of competitive advantage.

THE PORTER REPORT


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THE PORTER REPORTMichael Porter and colleagues were

commissioned to report on the health of the UKeconomy. They concluded:

The UK currently faces a transition to a new phaseof economic development. The old approach to

economic development is reaching the limits of itseffectiveness, and government, companies andother institutions need to rethink their policypriorities..We find the competitiveness agendafacing UK leaders in government and business

reflects the challenges of moving from a locationcompeting on relatively low costs of doing businessto a location competing on unique value andinnovation.

(Porter and Ketels, 2003: 5)

THE PIU WORKFORCE


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THE PIU WORKFORCE

DEVELOPMENT PROJECT

The Prime Minister commissioned the Cabinet Offices Performanceand Innovation Unit (PIU) to undertake a follow-up to the NSTF.

Its aim was to address some of the fundamental issues left

hanging by the NSTF.

The PIUs inquiry reached conclusions that changed the fundamentaldirection of VET policy. It argued that:

Weak demand for skill was as much a problem as poor supply.

Besides possible market failure, there was also systems failureunderpinning a partial Low Skills Equilibrium in the economy.

Skills are a derived demand derived from and driven bybusiness need. The key for policy was to impact on businessstrategy:

Workforce development needs to be addressedin the wider context of government and businessstrategies towards product strategy, innovation,market positioning, IT, human resources policies

andso on.

A DAWNING REALISATION THAT


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A DAWNING REALISATION THAT

SKILLS ARE THE EASY BIT..

THE BAD NEWS IS: up-skilling is the easy bit.

If a government is willing to spend taxpayersmoney on a large enough scale, a much more

highly qualified workforce is achievable, as the UKhas proved.

Deriving benefit from this is the hard part.Ensuring that higher levels of skill are really

needed and get used to maximum productiveeffect is the new challenge. One for which Anglo-Saxon style public policy is poorly prepared.

SKILLS CRISIS AS A RHETORICAL


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SKILLS CRISIS AS A RHETORICAL

DEVICE IS STARTING TO LOOK TIRED

Skills shortages are modest and concentrated incertain sectors and occupations

Skills gaps are mainly transitory

Over, not under, qualification is becoming a

problem Massive increases in skill supply have not solved

our problems with relatively low levels ofproductivity.

Increasingly, the question for policy makers is:Skills in combination with what else, makes thedifference?

SKILLS AND WHAT ELSE MAKE


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SKILLS AND WHAT ELSE MAKE

THE DIFFERENCE?

Highly sophisticated and demanding customers (at home & overseas)with income levels that allow them to purchase high spec, high value-added goods and services.

High levels of R&D (public and private) and innovation

Investment in new technology, plant and communications

Patient and knowledgeable capital

Legal, social and cultural infrastructure that encourage networkingbetween firms

High levels of social cohesion and stability

An efficient, responsive and adequately resourced skills supply systemin which ability and achievement, rather than social background andmode and place of study determine labour market outcomes.

An open and efficient labour market High performance workplaces, competing on the basis of quality,

paying high wages and offering as much job security as possible,within which employee relations systems and practices encouragepartnership, high trust relationships and skills development.

THIS SETS THE SCALE OF CHALLENGE FOR PUBLIC POLICY

O G S


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FINAL THOUGHTS

The foregoing does not mean we canneglect our skills supply system, but it

does mean that it is now pointless to

pretend that supplying more skills will, of

itself, solve our economic and social

problems.

Policy needs to embrace the supply,demand and usage of skill if it is to make

further progress.

skill shortage uk

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