Improving the match between skills supply and labour market demand: the Welsh approach Discussion Paper. Introduction OFFICIAL PAPER

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1 Improving the match between skills supply and labour market demand: the Welsh approach Discussion Paper Welsh Assembly Government Introduction Skills are critical to the success of individuals, businesses and communities. The better qualified someone is, the more likely he or she is to be in work and to earn a higher wage. Moreover, research has shown that education is linked to other aspects of an individual s life, including health related outcomes (such as longer life expectancy) and social outcomes (such as reduced crime rates). In addition, in the modern economy people s financial security will increasingly depend on improving and updating individuals skills so that they can remain and compete in the labour market. It is therefore essential that we build a society and workforce that are adaptable, motivated and highly skilled. The Welsh Assembly Government is committed to the goal of enabling everybody to develop the skills necessary to find and remain in employment. This commitment is reflected in the Skills and Employment Action Plan (SEAP) that was launched in Although progress has been made over the years, a review of skills published in December 2006 (known as the Leitch Review of Skills ) concluded that the UK as a whole needs to set more ambitious targets on skills improvement. This is because even if current targets are met, the UK s skills base will still fall behind that of many other countries, with the consequence that British businesses will find it increasingly difficult to compete in a global economy. This paper sets out how Wales intends to address the skills and employment issues highlighted in the Leitch Review and describes the existing structures and processes that are used to improve the match between skills supply and market needs and demands. The Skills and Employment Strategy for Wales The Skills and Employment Strategy for Wales will supersede the SEAP 2005 and will address the forthcoming recommendations of the Independent Review of the Mission and Purpose of Further Education in Wales, chaired by Professor Sir Adrian Webb, and scheduled to report in the autumn. The intention is to develop a coherent strategy which covers demand and supplyside issues in a single document. When completed, the strategy will focus on the unique needs of Wales and specific priorities of the Welsh Assembly Government, most notably the low economic activity rate 1 and overall prosperity, as measured by Gross Value Added per capita 2. The long term goal is an 80% employment rate. 1 As of June 2007, Wales economic activity rate was 76.6% compared to a UK average of 78.8%. 2 In 2005, 78.1% of the UK average. This is the lowest of all parts of the UK. 1

2 The Skills and Employment Strategy will describe how the Welsh Assembly Government will support the delivery of this ambition by helping young people and adults get the skills, advice and support needed to obtain sustainable employment. In addition, the Strategy will: 1. Seek to balance and match the needs of individuals with those of the employers by, for example: targeting resources on economically valuable skills and priority sectors and businesses; strengthening employers influence in the Welsh skills system e.g. through the establishment of a Wales Employment and Skills Board; ensuring that vocational learning routes are clearly informed by the needs of employers, based on National Occupational Standards and Sector Qualification Strategies; ensuring individuals and employers have access to appropriate advice, guidance and learning opportunities; and re-focusing post-19 funding on learning which reflects demand from individuals and from the labour market. 2. Raise the demand for skills improvement and training by: supporting businesses to invest in their workforce; increasing the number of Modern Apprenticeships; and reforming funding models to encourage a greater financial contribution from business and employers, in those areas of training where they will derive substantial returns in terms of trained staff and business improvements. 3. Raise the quality of training provision by: introducing a reward system for excellent training provision; and developing training standards which meet employers criteria. A UK Commission for Employment and Skills will be set up in It will oversee the reform of Sector Skills Councils and strengthen the employer voice in the design of skills and employment policies across the UK. In Wales there will also be a Commissioner for Wales who, as well as sitting on the UK Commission, will chair a Wales Employment and Skills Board. The new Board will provide advice and guidance on issues related to skills and employment in Wales. Matching skills supply to market demand: existing structures and processes Setting Priorities The Welsh Assembly Government produces an annual National Learning and Skills Assessment (NLSA). This collects a range of statistical information including, for instance, hard-to-fill vacancies. 2

3 This evidence is then combined with further information gathered from discussions with businesses, training providers, employer and sector specific bodies to help identify those areas that could benefit from improving the skills of the workforce. Based on the analysis of all the information received, the NLSA formulates a Statement of Priorities which informs the Welsh Assembly Government s National Planning and Funding System (NPFS) 3. The same information is also used to inform learning providers, such as colleges, to design and deliver courses for those skills most needed in the different parts of Wales. Gathering Information: Future Skills Wales and the Observatory The Future Skills Wales Partnership comprises a number of organisations which provide advice and guidance on the information needs of their organisation and its end users. The partnership includes, for instance, Higher Education Funding Council for Wales, the Confederation of British Industry in Wales, the National Council for Education and Training for Wales, Jobcentre Plus, the Welsh Assembly Government and many other partner agencies. In 1998, the first Future Skills Wales survey was undertaken in order to establish the current and future generic skills needs throughout Wales. The work was so well received that a dedicated Future Skills Wales Unit was set up in June 2000 to maintain and develop the research and dissemination programme. Further surveys were conducted in 2003 and These provide reliable information on skills deficiencies (including soft skills such as communication, as well as sector-specific skills) encountered by businesses and by individuals. Surveys have been completed with employers and householders: The survey of employers collects information on the drivers of future skill needs, details of the current workforce, recruitment practices and difficulties, skills shortages and skills gaps and the current and future importance of skills and learning to business in Wales. The household survey collects information on employment status and attitudes to employment, skills use and the current and future importance of skills and training/learning. Results from both surveys and forecasting data are used to feed into occupational and skills forecasts. One practical way this information is used is through Job Outlooks. These are on-line, interactive guides to over 150 different occupations. They are aimed at helping individuals make informed decisions about jobs in Wales, average pay rates for different occupations, and the learning choices linked to these jobs. In addition, all the information gathered in Wales can be interrogated and searched by government planners, schools, colleges, employers and other organisations via the Learning and Skills Observatory (LSO), which is the vehicle through which Wales presents the collected data. Users are able to search the resource database by key words or conduct thematic searches. 3 The NPFS sets financial allocations for post-16 training provision and as a result is able to shape the types and levels of training available for 16+ year olds in each region of Wales, responding to demands of individuals and the labour market. 3

4 Employers engagement: the role of Sector Skills Councils Sector Skills Councils (SSCs) are employer-led organisations that cover specific sectors across the UK e.g. constructions, automotive (retail automotive industry), e-skills (information technology and telecommunication), financial services and so forth. Their main role is to engage with employers and identify the skills and productivity needs that are relevant to the different sectors. In Wales this activity complements the role of the Welsh Assembly Government and Future Skills Wales (FSW). SSCs also play a key role in securing employers engagement in upskilling the workforce and prompting joint action with the public sector. The key goals of SSCs can be summarised as follows: to reduce skills gaps and shortages; to improve productivity, business and public service performance; to increase opportunities to boost the skills and productivity of everyone in the sector's workforce; and to improve learning supply including apprenticeships, higher education and National Occupational Standards (NOS). A network of 25 licensed 4 SSCs is now in place. They operate across the UK and also have dedicated personnel supporting Wales. All SSCs are required to draw up Sector Skills Agreements (SSAs), including Action Plans, in collaboration with a range of Welsh partners such as the Welsh Assembly Government, the Higher Education Funding Council for Wales (HEFCW), Jobcentre Plus and the Trade Union Congress (TUC). These SSAs can be considered as the most authoritative analysis of the needs of the sectors represented and provide a basis for action by employers and the public sector to address such needs. There are 16 SSAs currently in place in Wales and it is envisaged that the 9 remaining SSAs will be in finalised by March The main benefits that are expected from SSAs are: the delivery of learning that is relevant to the needs of the businesses; increased collaboration between employers and partner organisations; increased learning opportunities for the workforce; and increased career development opportunities for the workforce in areas of market demand. 4 All SSCs are licensed by the Secretary of State for Education and Skills, in consultation with Ministers in Scotland, Wales and Northern Ireland but they are independent employer led companies, limited by guarantee. 4

5 Conclusion This paper has highlighted the importance and commitment of the Welsh Assembly Government and its partners to achieve the long term ambition of developing skills that will maximise economic prosperity, productivity and social justice. In particular, this paper has described the basic principles of the forthcoming Skills and Employment Strategy for Wales and the structures and procedures used to improve the match between skills supply and market needs and demands. We are keen to hear about the views of our European colleagues with the intent of sharing best practice and learning from each other s experiences. 5