1. Research and Understanding the need for evidence of skills gaps and shortages Reg D’Souza Research and CRM Specialist

2. Overview The following presentation covers: The need for evidence of skills gaps and shortages. Commissioning and funding of skills research. Evidence that the skills system delivers economic benefits.

3. The need for evidence of skills gaps and shortages Who requires this information? Department for Business, Innovation & Skills (BIS) and Department for Education and Skills (DfES). Trade Bodies and Associations. Sector Skills Councils. Local Enterprise Partnerships (LEPs). University Technical Colleges (UTCs). Training providers e.g. F.E Colleges, private training providers. Qualifications developers e.g. Awarding Bodies.

4. The need for evidence of skills gaps and shortages Why do they need this information? Policy development, assessing the scale of the problem, setting targets and prioritising funding: National, Regional, Sectoral, Occupational. Skills and qualifications development: Updating of qualifications already developed. Identifying specific occupations with skills gaps. Identifying new skills requirements and the demand for new qualifications.

5. The need for evidence of skills gaps and shortages What types of information are required? Demand side (employers) Numbers of establishments and employment. Current and future recruitment demand. Vacancies. Skills gaps. Skills shortages. Training undertaken. Workforce demographics.

6. The need for evidence of skills gaps and shortages What types of information are required? Supply side (training providers and qualifications available) Numbers of providers and students by subject areas. Retention and success rates. Qualifications and training undertaken. New qualifications and training courses under development.

7. The need for evidence of skills gaps and shortages Using Demand and Supply side data: The use of labour market information from the demand and supply side enables a ‘gap analysis’ to be undertaken. Policy makers can use this information to make decisions on prioritising specific interventions and allocating funding. Skills and qualifications developers can use this information to update or put together new training courses and qualifications and seek funding.

8. Commissioning and Funding of skills research UKCES is a key provider of ‘macro-level’ data utilising using their funds to produce major surveys and reports: Employer Skills Survey. Employer Perspectives Survey. Working Futures. Sector Insight Reports. UKCES also commission a range of more specific sectoral and occupational data through a tendering process.

9. Commissioning and Funding of skills research A range of ‘micro-level’ labour market information is also produced by: Sector Skills Councils. Trade Bodies and Associations. Training Providers. Other stakeholders. The focus of this research tends to be on specific sectors and occupations. This research is either self-funded or funds are sought by bidding for specific skills related funding from organisations such as UKCES.

10. Commissioning and Funding of skills research Semta undertakes research (primary and secondary) to understand skills gaps and shortages from a range of different perspectives. The majority of this work is self-funded. Some funding is available through a range of other sources. This research work is quite wide-ranging and covers: Geographical – National, Regional (LEPs), Sub-regional (County Councils) Sectoral – Manufacturing, Advanced Manufacturing and Engineering, Sub-Sectoral e.g. Aerospace and Automotive. Occupational – Broad occupations e.g. Technicians and detailed occupations e.g. Maintenance Technicians. Technologies – Higher level e.g. Cutting Equipment and detailed technologies e.g. Computer Numerical Controlled (CNC). This information is used for policy development, development of occupational standards, informing Awarding Bodies and Training Providers of potential areas for updating existing qualifications and demonstrating demand for new qualifications and training.

11. Commissioning and Funding of skills research Examples of recent skills research which Semta has been commissioned to undertake: UKCES - new technology and skills within the Aerospace and Automotive sectors (additive manufacturing, plastic electronics and composites). Essex County Council – the feasibility of a new Advanced Manufacturing Centre to meet the future needs of the Harlow Enterprise Zone. Coventry and Warwickshire Learning and Enterprise Partnership (LEP) – the demand for emerging technologies to prioritise areas for developing accredited training programmes.

12. Commissioning and Funding of skills research What actions have resulted from this funding: UKCES - New technology and skills within the Aerospace and Automotive sectors: UKCES has disseminated this research to a wide audience and Semta has circulated to sectoral bodies and employers with an interest in these technologies. Specific skills gaps highlighted within the research have informed Semta’s Standards and Frameworks team on possible areas for new qualifications development. One of the trade bodies involved in the research has used the findings as evidence for a bid for funding from AMSCI (Advanced Manufacturing Supply Chain Initiative). This bid has been successful.

13. Commissioning and Funding of skills research What actions have resulted from this funding: Essex County Council: Rather than developing a new Advanced Manufacturing Centre they will work with the existing centre at Harlow College in line with the employer demand demonstrated through the research. Employers involved in the research have committed to help design the centre, develop the curriculum, provide equipment and upskill staff at Harlow College. Essex County Council and Harlow College are using evidence from the research including employer support generated through the research process, to seek investment from European and regional funds. Based on the research methodology and findings, Essex County Council have produced a best practice guide for developing employer-led models of provision.

14. Evidence that the skills system delivers economic benefits Why is the skills system important for delivering economic benefits: Economic principles play a crucial role in ensuring maximum impact from the public resource devoted to skills policy. By developing the skills of the current and future workforce, these policies help to create a more prosperous and equal society.

15. Evidence that the skills system delivers economic benefits The key economic benefits of skills: Highly educated people are more productive. This is why they earn more, and are more likely to be employed. Skills policy is a key element of Government measures designed to close the productivity gap between the UK and its competitors. Unless there is an adequate supply of skilled workers, there is a danger that the economy may fall into a low-skills equilibrium, constraining potential for growth and wealth creation.

16. Evidence that the skills system delivers economic benefits The UK’s prosperity ultimately depends on the number of people employed and the value of what those workers produce: The UK is placed 10th of 30 OECD countries for its employment rate and 11th for its level of productivity. The UK’s performance is exceeded by countries such as the USA, Germany, Sweden, Norway and the Netherlands. Labour productivity growth in the UK has outpaced France and Germany in recent years and compares favourably with the US. However, average levels of labour productivity in the UK are still well below those in the US and France and (to a lesser extent) below those in Germany.

17. Evidence that the skills system delivers economic benefits Increasing the stock of skills is critical to achieving greater international competitiveness: The stock of skills inevitably sets limits on how much firms can develop capacity and also how much they will need to invest in skills relative to similar firms in other countries. The Leitch Review estimated the economic impact of the increased skills levels of the UK workforce. The qualifications improvement over the last 10 years was estimated to have raised GDP by between £30 and £50 billion over the period. This was achieved through a 2% point increase in GVA per worker and around 200,000 additional jobs.

18. Evidence that the skills system delivers economic benefits The economic impact of improving the UK’s qualifications profile 2005 - 2020 Source: The Leitch Review of Skills 2005

19. Evidence that the skills system delivers economic benefits Skills and the sectoral perspective: Haskel and Hawkes (2003) demonstrated that the ‘top performing’ firms hire workers with at least one extra qualification level compared to lesser performers. The additional skills supported innovation and more sophisticated production processes leading to higher quality products. A review of a matched plant studies by Keep, Mayhew and Corney (2002) found a clear positive relationship between skills and productivity, particularly at the intermediate skill level and for management skills. Gaps in labour productivity of up to 60% existed between the UK companies and their competitors in Europe and the US as a result of lower workforce skill levels in the UK.

20. Evidence that the skills system delivers economic benefits Skills and training: Evaluations of the experience of the Train to Gain programme reported a range of benefits, including: raised employee performance, increased competitiveness of the firm, improved productivity which allowed additional investment in equipment, improved safety at work and greater client confidence in employees (Ofsted, 2008). In terms of the benefits received by employees, 90% of employers reported benefits of improved competence, teamwork and job satisfaction which ultimately benefit the firm.

21. Evidence that the skills system delivers economic benefits Apprenticeships: One of the most significant benefits of an Apprenticeship is that it enables an organisation to strategically invest in their future workforce. Apprentices are often more motivated (Bashford, 2006) and they are more likely to adopt the values, behaviours and culture of the firm, aiding retention. ‘Home grown’ talent means that the firm is able to create the skilled workers it requires for success, reducing skill shortages and gaps. Hogarth and Hasluck (2003) suggest the net costs of apprenticeships are often lower than those of training non-apprentices and their higher productivity allows employers to recoup much of the costs involved.

22. Evidence that the skills system delivers economic benefits Difficulties that arise in measuring the economic impact of skills: Skills are often measured using proxies such as years of schooling or formal qualifications. This ignores the training provided and the workplace skills acquired which do not lead to formal qualifications. Improving skill supplies by increasing the stock of qualifications may not be successful in meeting employer skill needs if they are not at the required level, type or contain the skills required by employers. Skills can not be looked at in isolation. Skills and other production inputs may reinforce each to have greater impact e.g. combining high level skills with investment in new technology and equipment.

23. Evidence that the skills system delivers economic benefits The evidence presented shows that the potential economic gain from raising skill levels is huge. The UK aims to become world class in productivity, employment and skills and amongst the top 8 OECD countries for each. Increased international competition, technological developments and changes in consumer demand will offer both challenges and major opportunities. A key to future economic success will be investment in people and ensuring that their skills and knowledge develop to optimise business investment and secure competitive advantage on the international stage.

24. T: 0845 643 9001 E: customerservices@semta.org.uk W: www.semta.org.uk