A changing world
The world is experiencing a historic transformation in how people work, where they work and even why they work.
The skills we each need to enter and progress in work are changing too. As we face an unpredictable and rapidly evolving future, continuing to develop the right skills in response to this change will be critical for us all. The COVID-19 pandemic undoubtedly impacted the economy, labour market and society and new economic challenges are emerging.
In the three years since we published Skills Development Scotland’s (SDS)’s last Strategic Plan, none of us could have predicted the seismic societal and economic changes that would occur in that time – the future became now.
The climate emergency has moved from threat to a pressing reality, inequality and poverty have deepened and, against a backdrop of spiralling inflation and a cost of living crisis, economic growth will be hard fought for in the coming years.
Presently, the economic outlook for Scotland and the UK is stark. High inflation, the cost of living crisis, and fiscal upheaval all contribute to an increasingly uncertain and challenging financial position for both individual households and businesses in the coming months.
Our strategic operating context continues to be shaped by these and a wider range of interconnected drivers of change, as explored below.
As advancing technologies change how we work and the type of work people do, the skills system must be able to respond. While industrial revolutions are characterised by disruptive change, in the past jobs still remained well defined, standardised, and specific, with clear skills and tasks linked to them.
Today we are experiencing a rapid increase in the number of job types, coupled with a lack of job standardisation, making the change far more complex to predict and respond to. As technologies and jobs continue to change throughout people’s careers, workers will need to continuously develop adaptive resilience and a diverse skillset, including baseline digital skills, to remain competitive in the labour market.
The urgent need to decarbonise major industries across Scotland will also put new demands on Scotland’s skills system, as whole sections of the workforce may need support to transition into new or altered job roles. New green industries are emerging, but the green economy needs to grow faster to meet ambitions for a ‘just transition’ to net zero.
Having the right skills will help us smooth the transition to a green economy. Despite ‘green jobs’ accounting for less than 1% of 2021 hiring activity, LinkedIn highlight that recruitment in this category of the global workforce is rising faster than any other. They project that demand for green jobs will outstrip supply of adequately skilled people in just five years’ time.
Inflation and the cost of living crisis
Scotland, like the rest of the UK, is experiencing sharp increases in the cost of living. Inflation reached 10.1% in July 2022 and is expected to reach over 13% in the final quarter of 2022-23. The UK also reported negative growth in June 2022, and is projected to enter a lengthy recession.
An anticipated 600,000 people, a quarter of them children, will be pulled into poverty by the cost of living crisis. The number of children living in poverty in Scotland ranges from one in eight to almost one in three across local authorities. Provisional analysis from The Resolution Foundation estimates that, without action, relative child poverty in Scotland could reach over 29% by 2023/24, however, tackling child poverty is a clear priority across Scottish Government activity.
Pre-pandemic, Scottish productivity was recognised as being over 20% lower than the top performing countries in the OECD. While there are both short- and long-term signs of improvement, Scotland still lags other parts of the UK and international competitors in nine of the thirteen comparable productivity indicators including exporting and innovation.
NSET recognises that productivity is driven by a multitude of factors, including quality of jobs, skills, entrepreneurship, levels of investment and innovation, and quality of infrastructure and connectivity. Through collaboration, the enterprise and skills agencies can work together, and with Scottish Government, to drive progress in each of these areas, leading to greater business productivity and economic prosperity.
Population and talent supply
Scotland’s people are its greatest asset and essential to the future prosperity of the country, but the overall population is ageing and predicted to decline. As Scotland grows older, people are more likely to be working longer, with multiple employers and in multiple careers, a greater need for in-work engagement with the skills system to reskill or upskill in line with changing work demands. National Records of Scotland projections suggest that by 2045, Scotland’s population will decline to 5.39 million, with 200,000 fewer children
and 300,000 more people over the age of 65.
Employer demand for workers continues to increase while the supply of permanent and temporary workers is falling, bringing new challenges for industries and employers across Scotland. Over a third (34.9%) of businesses in Scotland report a shortage of workers. Businesses that are experiencing a shortage of workers report that it has resulted in employees working increased hours and many being unable to meet demands. In the rural areas of the South of Scotland and Highlands and Islands, which experience lower levels of population growth, higher outward-migration of young people, and a more dispersed population, this is experienced more acutely.
Poverty and inequality in the labour market
Alongside changes to the economy, and the landscape of work, social inequality is continuing to widen. The COVID-19 pandemic had an unequal effect on the population, with women, young people, lone parents, older and disabled workers, minority ethnic people and those with no or low qualifications, all disproportionately impacted.
A tight labour market, and ‘war for talent’ can provide increased opportunities for those further from the labour market. NSET contains an ambition for individuals not just to be in work, but to be aiming for rewarding careers that contribute to Scotland’s economic, social, and environmental needs.