1. TAKING THE NEXT BIG STEP: Fresh approaches to aligning skills, economic strategies and economic development in England, Wales and Scotland Ewart Keep ESRC Centre on Skills, Knowledge & Organisational Performance, University of Cardiff

2. ARRIVING AT A FORK IN THE POLICY PATH Across the OECD skills policy is arriving (or will shortly arrive) at a fundamental choice about how, and in which direction, to proceed. New policy and systems design models are starting to emerge.

3. OLD v. NEW MODELS Old Model Building the biggest stockpile of skills or qualifications (SUPPLY) New Model Supplying the skills that are really needed; stimulating further demand for skill; and ensuring that skill, once created, gets used to maximum productive effect (SUPPLY, DEMAND & USAGE)

4. WHY THE EMERGENCE OF NEW APPROACHES? A group of countries that: Have ticked the skills supply box and are asking why the bang isnt bigger given the bucks expended. Have ticked the skills supply box and are asking why the bang isnt bigger given the bucks expended. Are heavily exposed to international economic competition. Are heavily exposed to international economic competition. Have concerns about spreading success across the whole population. Have concerns about spreading success across the whole population. PLUS - research has shown us new ways of thinking about skills in the workplace.

5. THE NEW POLICY CLUB Singapore Singapore Republic of Ireland Republic of Ireland Norway, Finland & Sweden Norway, Finland & Sweden Australia Australia New Zealand New Zealand Scotland Scotland Wales? Wales?

6. WHAT I AIM TO DO Take a look at what England, Wales and Scotland can tell/teach us. Take a look at what England, Wales and Scotland can tell/teach us. In the process, draw some links with developments in other countries that have inspired developments in Scotland. In the process, draw some links with developments in other countries that have inspired developments in Scotland.

7. A HEALTH WARNING! The development of the New Model of Skills Policy is in its early days across OECD. The development of the New Model of Skills Policy is in its early days across OECD. There are no proven winners or easy-to- copy schemes yet - there are some interesting experiments upon which to reflect. There are no proven winners or easy-to- copy schemes yet - there are some interesting experiments upon which to reflect.

8. ENGLAND - HOW NOT TO DO IT! English skills policy is stuck in a rut. Traditional skills supply-led policies prevail. In 2005/2006 The Leitch Review of Skills tried to create a UK-wide skills policy.

9. THE LEITCH REVIEW The Leitch Review chose to use crude international benchmarking of stocks of qualifications in other OECD countries as their main analytical tool. The Leitch Review chose to use crude international benchmarking of stocks of qualifications in other OECD countries as their main analytical tool. From this, Leitch concluded that the UK was not world class. From this, Leitch concluded that the UK was not world class.

10. SKILLS AS THE ANSWER TO EVERYTHING Our nations skills are not world class and we run the risk that this will undermine the UKs long-term prosperity. Productivity continues to trail many of our international competitors. Despite recent progress, the UK has serious social disparities with high levels of child poverty, poor employment rates for the disadvantaged, regional disparities and relatively high income inequality. Improving our skill levels can address all these problems - Leitch Review, 2006: 1

11. SKILLS AND LITTLE ELSE The Leitch Review also concluded, though it never explained how it reached this conclusion, that skills are THE key policy lever that government can control to improve economic performance and social equity.

12. NEW TARGETS, MORE SUBSIDY Leitch commits us to: 1. Becoming world class on qualification stocks at every level (from graduates to adult literacy and numeracy) - world class = in the top 8 in the OECD league tables. 2. Creating a demand-led E&T system, that provides employers with what they want. 3. Providing employers with more subsidy to encourage them to upskill their adult workforce.

13. TRAIN TO GAIN T2G is a subsidy-led programme that aims to get more employees to their first Level 2, 3 & 4 qualifications. T2G is a subsidy-led programme that aims to get more employees to their first Level 2, 3 & 4 qualifications. At Level 2 state subsidy is 100% At Level 2 state subsidy is 100% Evaluation suggests very high levels of deadweight – like throwing £10 notes at a wet wall and seeing which stick. Evaluation suggests very high levels of deadweight – like throwing £10 notes at a wet wall and seeing which stick. No impact on employer attitudes or capacity, as everything is outsourced to training providers. No impact on employer attitudes or capacity, as everything is outsourced to training providers.

14. LONG-TERM DANGERS Conforms to John Buchanans employers whinge, state responds syndrome. Welfare dependent employers whose first and last reaction is to ask for more. Deflects attention from the wider environment in which skills are deployed and other sources of competitive advantage that need to be put in place alongside skills.

15. SKILLS AS AN ARMS RACE A generation ago, A British Prime Minister had to worry about a global arms race. Today a British Prime Minister has to worry about a global skills race…..because the nation that shows it can bring out the best in all its people will be the great success story of the coming decades. So it is time for a wake up call for young people, employees and employers….that we now summon ourselves to a new national effort and mobilisation to win the new skills race. Gordon Brown, 28/01/2008.

16. LEITCH APPROACH REFLECTS Traditional Policy Technologies: 1. International benchmarking of skill stocks 2. Subsidy and state expansion of E&T 3. Throughput Volumes and Output Volumes 4. Targets as KPIs Simple to plan, design and manage.

17. PROBLEM…… 1. Nearly all the issues this approach could deal with have been addressed. 2. Predicated on a supply push effect for which the evidence is very limited. 3. Automatic usage and efficient and effective deployment of skill is simply assumed.

18. THE FAILURE OF SUPPLY PUSH Supply Push theory suggests that if the state supplies more skills than are immediately needed, the economy and labour market will, over time, find productive uses for them, there will be spillover effects, and productivity and wages will rise as a result. In other words, in the end, the skills will be used.

19. BUT………….. SKOPE research on low wage work found many over-qualified for jobs and with little prospect of progression. There was very little evidence that employers had any interest in using the latent capabilities of their workforce, either to improve product quality or productivity.

20. OVER-QUALIFICATION Skills Survey Data for England Year Year % over-qualified 1986 198629.3% 1992 199230.2% 1997 199731.7% 2001 200135.1% 2006 200639.6%

21. SKILLS = PRODUCTIVITY IS WRONG For details, see Scotland, Canada, the Russian Federation, Israel, etc. For UK, skills accounts for one fifth of our productivity gap with Germany, one eighth with France, and about zero with the USA. We could match all of them on skill and still see a big productivity gap.

22. FRAMING THE PROBLEM DEFINES THE ANSWER Traditional Definition: Skills crisis Skills crisis Skill shortages Skill shortages Poor international benchmarking scores Poor international benchmarking scores Skills drives productivity Skills drives productivity ANSWER = Boost supply (at public expense)

23. PERHAPS THE REAL PROBLEMS ARE….. Weak investment in the other drivers of productivity (e.g. R&D, plant & equipment) Weak investment in the other drivers of productivity (e.g. R&D, plant & equipment) Product market strategies and product spec Product market strategies and product spec Weak innovation Weak innovation Poor employee relations and low paid work Poor employee relations and low paid work Poor job design and opportunities for progression. Poor job design and opportunities for progression.

24. IF THOSE ARE THE PROBLEMS…. Then a simple skills supply approach will fail. The key issues lie with underlying levels of DEMAND for skill, and POOR USAGE once it is created. This sets a difficult, messy, complex policy problem!

25. AN APPROACH NOT TO COPY Englands skills first, skills only policy approach is not one to copy. Englands skills first, skills only policy approach is not one to copy. Although Leitch was supposed to be UK- wide, Wales has rejected the Leitch targets, and Scotland has rejected just about all of the Leitch policy agenda. Although Leitch was supposed to be UK- wide, Wales has rejected the Leitch targets, and Scotland has rejected just about all of the Leitch policy agenda.

26. AND NOW FOR THE BETTER NEWS……. In Wales, Scotland and the Republic of Ireland (and also NZ) a range of new policy approaches and instruments are starting to emerge. How well they will work and with what impact it is too soon to say. However, they offer clear signs that the Ecosystems Projects are not a one-off. Others are grappling with the same issues about skills demand and usage.

27. WELSH WORKFORCE DEVELOPMENT PROGRAMME Centres on adult workforce skill enhancement as part of a wider business improvement and economic development agenda. Centres on adult workforce skill enhancement as part of a wider business improvement and economic development agenda. Not driven by volume roll-out targets. Not driven by volume roll-out targets. Not there to deliver a universal entitlement to learning. Not there to deliver a universal entitlement to learning. Not centred on qualifications – support is available for non-certified learning, though the employer has to contribute more. Not centred on qualifications – support is available for non-certified learning, though the employer has to contribute more.

28. HOW IT WORKS 1. Company contacts Welsh government 2. HRD advisor undertakes diagnostic and helps formulate a business plan and workforce development plan 3. Support targeted at priority sectors. 4. Access to a range of financial support that aims to leverage employer contribution.

29. THE THINKING BEHIND THE WDP The drive for higher skills has to be promoted on the back of wider efforts towards business improvement to help organisations move up market and stimulate demand for skills through adopting higher specification product strategies and better quality jobs. This suggests we give as much attention to business support services, innovation, management and entrepreneurship strategies, as to improving the supply of training and learning provision and qualifications. WAG Skills and Employment Strategy, 2005: 27

30. WEAKNESSES The WDP is small in scale compared to the funding being given to conventional skills supply through the mainstream E&T system. Expanding the existing network of 100 HRD advisors is not proving easy, and relations between them as contractors and government are sometimes fraught!

31. SCOTLAND Scotland has a minority nationalist government, who have been willing to embrace some radical policy thinking. They want to do it both different and better than England.

32. LOTS OF BUCKS, RELATIVELY FEW BANGS! A key issue for Scotland is that it has spent proportionally far more on education than England, and has a better qualified workforce as a result. The problem is that this has not translated into higher wages or enhanced relative productivity. Policy makers started to ask what more they had to do to get a proper return on this investment.

33. THE RESULT A new Scottish Economic Strategy that benchmarks Scotland against the arc of prosperity (Ireland, Iceland and the Nordic countries). The aim is to join their elite, high wage, high productivity club. A new Skills Strategy that aims to develop the means to improve the supply of skills, stimulate underlying demand for skill, and improve skill usage.

34. THE SKILLS STRATEGY Is just that – a statement of strategic intent. The development of policy instruments to bring about the desired changes is currently under way. Much attention is focused on the Irish Republics National Centre for Partnership and Performance, and its National Workplace Strategy. One of the Irish models key components is to try and tie state funding/grants (e.g. for R&D) to wider workplace innovation criteria.

35. LOOKING NORTH Scotland is also looking at Scandinavian programmes centred around work reorganisation, job redesign and workplace innovation. These programmes have been around for 30 years, and SKOPE has looked at their successes and limitations. You can compare and contrast our findings with experiences generated by the Ecosystems projects

36. WHAT DOES OUR RESEARCH SAY? Work reorganisation and job redesign need to be viewed as the response to wider issues in the organisation: Problems with service or product quality Problems with service or product quality Lack of innovation Lack of innovation Weak productivity Weak productivity High labour turnover/low morale High labour turnover/low morale

37. LESSON 2 Programmes need to be locally focused - developing interventions which work with the willing (open minded managers and employees) and always start from the specific challenges and problems they are seeking to grapple with.

38. LESSON 3 Top-down, expert-driven organisational engineering does not work. Avoid grand theory and attempts to transplant/diffuse innovative and successful practice, which may work well in one context, but not in another.

39. LESSON 4 Over time the intervention needs to go beyond the individual organisation - building learning networks, clusters or modules of organisation (in a particular sector, region or supply chain) who are experimenting with innovation and can learn from (rather than copy) each others experience.

40. LESSON 5 This kind of activity is time consuming, resource intensive and does not always generate quick wins. Programmes need to be adequately resourced and given time to bed down and work. The balance between public support and what the subject organisation(s) put in needs to be thought through to avoid deadweight.

41. LESSON 6 Key to success is the development of a cadre of researchers and experts who can go into organisations and support and facilitate a process of change. The research-based approaches in Scandinavia could be a useful starting point.

42. LESSON 7 Aim to help firms, and collective employer and industry bodies to do more to help themselves. Public support is there to get the ball rolling.

43. NEXT STEPS……? The old model of skills supply and supply alone will soldier on, costing more and achieving less and less. The emergence of new models, policy instruments, interventions and institutions to address skills demand and usage (and new ways of dealing with supply) represents a huge task.

44. SUCCESS IS NOT ASSURED, BUT WHATS THE ALTERNATIVE? The success of efforts to develop and pilot new policy approaches is not guaranteed. However, the only way to make progress is to try, see what happens and learn from it. If new approaches are hard and risky, what is the alternative? The most likely answer is more of the same old skills supply interventions, which waste money and create big problems.