SCOTLAND’S CHANGING LABOUR MARKET: CHALLENGES AND OPPORTUNITIES FOR YOUNG PEOPLE

PRESENTATION TO DETERMINED TO SUCCEED GATHERING

26 October 2009

Professor Alan McGregor

2

PLAN OF PRESENTATION

1. Young people and recessions

2. Recent labour market developments

3. Impacts on young people

4. What future may hold

5. Implications for education sector

3

YOUNG PEOPLE AND RECESSIONS

1. Young generally fare badly because outside labour market trying to get in

• Employers cut back on recruitment

• Employees sit tight leading to many fewer turnover vacancies

2. Young people suffer most damage from unemployment

• Increases probability of future unemployment

• Reduces long-term earning power

3. Long-standing concerns about ‘lost generation’ in labour market terms

• Big issue in 1930s

• Again in late 1970s/early 1980s

4

LABOUR MARKET IN RECESSION

1. Used to long period of jobs growth (SEE CHART)

2. Since around summer of 2008 in Scotland

• Around 82,000 redundancies since April 2008

• Notified vacancies have fallen – 40% for worst 12 month period

• Employment levels have declined – hard to quantify

• Hours worked fallen on average

• Unemployment has risen – for all groups – as we will see later

3. Redundancy information less reliable but we know has hit disproportionately those traditionally most vulnerable to recession

• Manufacturing industry

• Low skilled workers

5

Total Employment, UK, 1971-2007

20,000

22,000

24,000

26,000

28,000

30,000

1971 1975 1979 1983 1987 1991 1995 1999 2003 2007

6

RECESSION AND YOUNG PEOPLE

1. Stats take too long to update (See Charts)

• Unemployment edged up in 2008 as SL ‘destination’ …

• … but MCMC numbers edged down

• 2009 SL destination data will be out soon

2. Often hard to tell impacts at early stage as previous recessions show ‘disguised unemployment’

• More stay on longer at school

• More go to college and university

3. Probably less scope for ‘disguised unemployment’ now

• School staying on rates much higher

• Proportions going to college and university much higher

7

School Leaver Destinations (% Unemployed),

2002/03 16.0

2003/04 16.4

2004/05 13.1

2005/06 13.2

2006/07 12.0

2007/08 12.4

8

16-19 Year Olds in MCMC Group (%)

2003 13.7 36,000

2004 13.3 35,000

2005 14.2 37,000

2006 12.4 32,000

2007 12.2 32,000

2008 11.9 31,000

9

RECESSION AND YOUNG PEOPLE (CONT)

4. Unemployment (Job Seeker Allowance claimants) has risen significantly (SEE CHART)

• Not much difference by age group …

• … but nonetheless now around 13,000 18/19 year olds and 25,000 20/24s unemployed …

• … and this is narrowest measure, so it’s actually worse than this

5. Long term unemployment growth much higher for under 25s

• Numbers still relatively low …

• … but we need to keep close eye on them

10

JSA Claimants: Total and 26 week + by Age Group

Sept 2008 Sept 2009 % Change

JSAClaimants

18-19 8,485 12,920 +52.3

20-24 15,750 24,940 +58.3

25 + 55,610 89,455 +60.9

JSAClaimants26 weeks +

18-19 855 2,210 +158.5

20-24 1,955 5,020 +156.8

25 + 16,990 33,170 +95.2

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RECESSION AND YOUNG PEOPLE (CONT)

6. On wider unemployment measure (people claiming DWP out of work benefits, including JSA)

• 73,000 unemployed under 25s (Almost twice JSA numbers)

• 31,000 unemployed for 6 months or more (4 times JSA numbers for long-term unemployed)

• Growth in numbers ‘only’ 27% over last full year – but 4 times rate of increase for 25+

12

THE ECONOMY: LOOKING FORWARD

1. No one knows

• Type of recovery likely

• Timescale for recovery (SEE CHART)

2. Can look to past (SEE CHARTS)

3. Looking forward, very high level of public debt

• Needs to be serviced

• Needs to be run down

• Big implications for taxation – and household spend

• Big implications for public spending

• Big implications for public sector jobs

• Big implications for sectors selling to government

13

RECOVERY SCENARIOS

1. V Shaped

2. Double Dip

3. Bumping Along

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TELLING FUTURE FROM PAST

Source: The Scottish Government

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THE ECONOMY: LOOKING FORWARD (CONT)

4. Long run higher sensitivity to risk for global investors

• Higher interest rates in the long term

• Lower growth rates

• Lower employment growth

• Underlying productivity growth around 2.0% - so economy

needs to grow above this to create extra jobs

• Last 5 years averaged only 2.3% growth

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EMPLOYMENT: LOOKING FORWARD

1. Employment levels forecast to be slow to grow (See Chart)

• May not start rising till 2012

• 2008 employment levels not expected to be achieved until

2016/2017

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Source: Scottish Enterprise

Employment in Scotland 2008-2019

2,560,000

2,580,000

2,600,000

2,620,000

2,640,000

2,660,000

2,680,000

2,700,000

2,720,000

2,740,000

2,760,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Nu

mb

er

em

plo

ye

d

EMPLOYMENT FORECAST TO INCREASE, FROM 2012

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TOMORROW’S INDUSTRIES

1. Bear in mind currently 67% of Scottish 16-19s work in only 4 sectors• Hotels and restaurants• Wholesale and retail• Other community, social and personal services• Construction

2. National projections – assumes future same as past• Decline of manufacturing• Growth of services

3. Scotland’s priority sectors? (SEE CHARTS)• Numbers in some of priority industries relatively small

4. ‘Green Jobs’ – around 880,000 in UK• Environment (21%)• Renewable energy (29%)• Emerging low carbon (50%)• Pre-recession forecasting approx. 50% growth over 5 years for UK

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GOVERNMENT ECONOMIC STRATEGY - OUR SECTOR FOCUS

GES – Our sector focus

Aerospace,

Defence &

Marine

Chemical

Sciences

Forest

IndustriesTextiles

Other Growth Sectors

Key Sectors

Tourism(Destinations,

Products)

Life Sciences(Stem Cells,

Translational Medicine)

Food + Drink

Financial &

Business Services

Energy(Renewables, Oil & Gas

Thermal Generation)

Creative Industries(Digital Markets)

Enabling Technologies

Enabling Technologies

Construction

Source: Scottish Enterprise

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EMPLOYMENT IN KEY AND OTHER GROWTH SECTORS (2006)

Industry Employees

Tourism 206,600

Construction 126,100

Financial and Business Services 90,389

Creative Industries 46,700

Food & Drink 46,000

Energy 44,700

Life Sciences 27,400

Chemical Sciences 14,100

Textiles 10,400

Forest Industries 3,300

Source: Scotish Enterprise

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TOMORROW’S INDUSTRIES (CONT)

5. New Industry, New Jobs - UK industry strategy. Get in behind growth potential of:

− Low carbon

− Digital markets

− Life Science and pharmaceuticals

− Advanced manufacturing

− Professional and financial services

− Engineering construction

− Services and products for ageing society

6. Public sector …… ?

• Around 23% of Scotland’s jobs – approx 572,000

• Cuts a certainty, size of cuts unknown (10-30%?)

• … although many of jobs still need to be done

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TOMORROW’S OCCUPATIONS

1. Groups expected to show the most significant net increases at UK level:

• managers & senior officials (+ 872k, 1.7% pa)

• professional occupations (+ 643k, 1.5% pa)

• associate professional & technical occupations (+ 654k, 1.4% pa)

2. Declines projected for:

• administrative, clerical & secretarial

• skilled manual & electrical trades

• other skilled trades

3. Replacement demand will still mean many vacancies in declining areas

Source: UKCES

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DEMOGRAPHIC CHANGE

1. Young people (16-19) currently at peak levels (SEE CHART)

2. Decline in absolute and proportionate terms through next decade (SEE CHART)

3. Should make labour market entry easier

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16 to 19 Year Olds in Scotland, 2008 to 2028

160,000

180,000

200,000

220,000

240,000

260,000

280,000

300,000

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

25

Change in16-19 and 16-64 Year Olds (2008 = 100)

70

75

80

85

90

95

100

105

1102

008

20

10

20

12

20

14

20

16

20

18

20

20

20

22

20

24

20

26

20

28

16-19s 16-64s

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SOME CONCLUSIONS

1. Growing unemployment for young people with particular concerns around

• More rapid growth of long term unemployment

• High percentage on IB and IS

2. Employment levels likely to be depressed for some time – probably at least 3/4 years

3. Scotland’s biggest sector – public sector – likely to take big cuts

4. What employers looking for not likely to change – basic and core/soft skills

5. Demographic trends favour younger age group over next decade

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MESSAGES FOR EDUCATION

1. Better understanding of credit and finance!!

• Risks and returns

2. Better understanding of how economy changing

• What are new industries and jobs?

• What does these actually mean – ‘green jobs’!!

• What education and skills needed to access them?

• Many traditional industries and occupations will continue to be there

3. Need flexible system on vocational skills

• Continuing demand for more traditional skills (e.g. construction)

• Which specific demands will grow most quickly out of recession - hard to call …

• … so need to identify emerging trends quickly and respond quickly

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MESSAGES FOR EDUCATION (CONT)

4. Building strong base of transferable skills – fit needs of all employers, and indeed life in general

• Basic skills

• Core/soft skills

5. Opportunity to create more enterprising attitudes and behaviours – build Scotland’s business base

• Correcting for population Scotland has only around 85% of the businesses, and new business starts compared to UK

6. Generally create more resourceful young people – which I think Determined to Succeed is all about