1. Labour Market, Skills & Talent Project Tyne & Wear City Region Economic Review Stephen Nicol and Neil Evans Economic Leads Group 6 th July 2010

2. Focus of Study Labour Market & Skills Performance Q2 Travel to work patterns Q1a Concentrations of highly skilled Q8 Demand for higher level skills Q3 Supply of skills & qualifications Q1b Patterns & trends in worklessness Population & Migration Q4 Attraction of highly skilled workers Q5 Retention & loss of the highly skilled Future Labour Market Prospects Q6 Future demand for workers and skills Q7 Meeting future skills needs Policy Implications Q9 Implications of labour market change Q10 Options to address changes

3. Recent Labour Market & Skills Performance

4. Employment Growth Strong jobs growth: +58,000 jobs 2000-08 Narrowing of employment gap up to recession 3/4s jobs growth in Newcastle, Sunderland, Gateshead & North Tyneside Employment Rate 2000-09 6% difference 3%

5. Nature of Change in Demand Strong sectoral growth in public sector (+28K) & business services (+36k) 2000-08 Strong growth in higher skilled (+32k) 2005-09 But growth in higher skilled skewed to Associate Profs & in public sector Occupational Change2005-09Sectoral Change2000-08

6. Meeting Skill Needs Population Strong working age population growth in historic terms (+34k or +3.3%)......prime age population fallen (- 1%)  student numbers one of main drivers of overall growth Change in Working Age Population, 2000-2008

7. Meeting Skill Needs Change in Economic Activity, 2000-08Change in Claimants, 2000-08 Economic Activity & Worklessness Type of jobs growth helped to drive down worklessness Largest falls in close proximity to centres of jobs growth Economic activity also driven up Some of gains lost since mid 2008 (JSA in particular)

8. Meeting Skills Needs Skill Shortages and Gaps TWCR able to meet most skill needs during expansion Fewer shortages at higher skill level Main shortages at craft, sales, admin and lower skill levels Fewer hard to fill vacancies except at lower skill levels Skills gaps amongst higher skilled are low (4% of not fully proficient, England av= 20%) Overall, good match between supply & demand in TWCR

9. TWCR’s Labour Market for Higher Skilled Workers

10. Concentrations of Highly Skilled Strong growth in KBIs in TWCR during decade concentrated amongst public sector and......lowest private sector KBI employment of all CRs Growth in demand for highest skileld greates in Assoc Prof & Tech (SOC 3) Financial services (back-office functions) and lower value business services Strong growth in demand from public sector % employment in highly skilled occupations (SOC 1-2) lags behind all comparator CRs except Sheffield TWCR making progress but gap with best not closing Percentage of Employment in SOCs 1-3, 2008 Managers & Snr Officials Professional Occs Assoc Prof & Tech Occs SOC1-3 Bristol CR 16.9%14.5%16.2%47.6% Manchester CR 15.9%12.7%13.8%42.4% Glasgow CR 13.6%13.4%15.4%42.4% Liverpool CR 13.2%12.7%15.1%41.0% Leeds CR 15.2%12.3%13.2%40.7% Nottingham CR 14.6%11.9%14.0%40.5% Tyne & Wear CR 12.9%11.5%13.8%38.2% Sheffield CR 13.9%10.4%13.1%37.4% Percentage of Employment in KBI, 2008

11. Concentrations of KBI Jobs KBIs main source of demand for higher skills Growth of KBIs relatively dispersed across TWCR, including key out of centre locations Newcastle dominates recent growth...but lower overall % than cores of most city regions North Tyneside emerged more recently – public sector dominated

12. The Higher Skilled Labour Market TWCR in middle tier in terms of numbers of highly skilled...only Leeds and Manchester have larger pools Increase of 37,000 higher skilled in TTWA between 2001-08 Whilst a degree of catch-up, TWCR persists with slightly lower density rate HMPs 2001 (Census) HMPs 2008 (APS) Density 2008 Change no Change % Change in Density (% points) Manchester CR326,800391,70028%64,90020%2.7 Leeds CR226,800286,10027%59,30026%2.6 TW CR133,300170,30025%37,00028%3 Bristol CR129,800170,70031%40,90032%3.6 Liverpool CR102,800124,10025%21,30021%2.6 Nottingham CR102,000122,50027%20,50020%1.5 Sheffield CR83,500106,20026%22,70027%3.4

13. Attraction of Highly Skilled Workers TWCR good at retaining local graduates in jobs – but under-utilisation issue In-migration to TWCR changed little 2001-08 Net out-migration of higher skilled in 2001,...but evidence suggests this may have reversed more recently (perhaps driven by returning graduates) Graduate Attraction and Retention Location of Degree Study Domicile Retention Rate 2002/032007/08 Studied in TWCR TWCR domicile 73%66% Elsewhere in UK 20%17% Attraction Rate Studied ElsewhereTWCR domicile 36%30% Elsewhere in UK 0.2% Total 1%0%

14. Future Labour Market Prospects

15. Future Demand for Workers & Skills We have drawn on recent CE forecasts for the North East 2009-2015 and 2030 Paint a picture of jobless growth; 3% fall in employment 2009 (loss of 32k) to 2015 (but 11% increase in GVA) Have attempted to apply to T&W CR by sector and then occupation Modest change in most occupations resulting from sectoral growth, bigger changes driven by occupational trends within sectors

16. Net Skills Demand Changes in demand for skills within sectors more important than sectoral change as skills driver Net growth 8k (5%) in prof./managerial occupations Substantial falls in admin. Sectors (-13%)

17. Replacement Demand But continued replacement demand......typically each occupation needs 3.5% to 4.0% of jobs to be filled every year by new entrants This demand dominates net change in all occupations 2009-15

18. Public Sector Cuts Scenario Various estimates of Impact: NE baseline forecast assumes jobs reduction of 9% (public admin), 4% education and 3% health (2009-2015) – loss of 10k jobs Work Foundation suggests 33k for NE out of UK total of 750k Applying latest OBR figure to T&W gives c.20k losses Applying 25% reduction to all public sector bar health gives c.30k losses Public sector cuts most adversely affects higher level skills and admin occupations Note: at this stage excludes knock on effects

19. Policy Implications

20. Short Term Supply likely to exceed net demand, probably at most occupational levels Actions required around labour market adjustment: Short term unemployed Redundant & vulnerable workers in public & private sectors Retaining better skilled in city region Focus on key labour markets groups (young, disadvantaged) Pursuing demand side actions: Sectors & employers with large short term expansion/replacement demand Supporting actions: In absence of RDA Response function, how will action be coordinated?

21. Medium and Longer Term  Agglomeration & density  Sizeable pool of higher skilled – potentially good proposition  But domination of public sector & thin in private KBIs  Thin at top end of higher skilled pool  Longer term transport and access issues Higher skills largely a demand side issue in TWCR  Scope to stimulate enterprise and business growth  Stimulating enterprise amongst higher skilled redundant public sector workers (‘Public Sector Co. Enterprise’)  Graduate enterprise opportunities  Continuing inward investment opportunities eg shared services centres  Smaller scale opportunities around niche sectors  But need 4-5 stellar growth KBI employers

22.  Improving skills of residents  On-going need for skilled workers at all levels  General need to push ahead in raising skills & a more demand responsive system  Quality of life and related assets  TWCR does very well in attracting/retaining students  But does it have quality of life (esp housing) offer to attract full range of higher skilled?  Necessary but not sufficient condition  Worklessness  Addressing long term legacy of recession/expenditure cuts  Accessibility between geographically dispersed pockets of high worklessness & out of centre employment locations