Skills in Context

The Centre for Enterprise (CFE) produced Skills in Context 1.01 to stimulate a conversation around public policy in the area of skills, enterprise and economic development. When Skills in Context 1.0 was drawn to our attention, we were impressed by
the extent of the research it drew upon, its logical approach and its challenging, but tactful, presentation. We felt that the issues it raised and the conversations it sought to stimulate should be discussed in a Scottish context. Our Expert Briefing series provides the vehicle to share and debate this work.

We asked Michael Davis and his colleagues from CFE to update Skills in Context in two ways; to incorporate the outcomes of the Leitch Review and to include more Scottish-specific evidence. CFE’s paper starts with a restatement of the importance of skills. Skills matter. But the focus quickly moves to the discussion on ‘How much do skills matter and where do they matter most?’

The paper reviews the importance of skills in terms of explaining the moderate productivity performance of the UK. A number of crucial points are made along the way:

• productivity performance is not determined by skills level alone. Indeed, much of the UK’s productivity gap with America, France and Germany is for reasons other than skills
• skills are often a lower-order concern in company decision-making, behind product market strategy and the organisation of the production process
• a purely demand-led approach might not lead to the Government’s stated desire for a highly skilled workforce. Some employers can choose a low-skill route which is profitable for their business

The paper takes a pragmatic approach. The demand for improved skills is driven by the existence of an economic opportunity or the fulfilment of a personal or social goal. In Scotland, we are well-placed to understand these drivers, as the Scottish Executive’s Lifelong Learning Strategy highlights that learning and skills have value outside the economic arena.

With reference to the recent UK policy debate on skills, the point is made that taking the economic evidence out of context can lead to oversimplified policy recommendations. CFE’s technique of ‘fishing in the footnotes’ reveals how simplified headlines in the skills debate mask the complexities and nuances of the underlying analysis. In summary, overly-simplistic headlines and any resultant policies can be counter-productive as they seem far-removed from our understanding of how the labour market works.

We need to adopt a forward-looking approach. Yet looking to the future is a difficult business. The perils of forecasting are spelled out in the paper and we can empathise with these, perhaps more than most. The future is uncertain and to pretend otherwise in public policy risks much. But this must not be an excuse for inaction. The paper concludes that we cannot plan in detail for an uncertain future, but we can ensure that any system we design is inherently adaptive to changing conditions.

So, what might we do? The paper concludes with a restatement of the importance of skills in personal, social and economic terms. It suggests that any strategy for skills needs to ensure that the supply of skills is capable of adapting and  responding to demand; it also highlights the importance of creating the conditions which encourage employers to demand more highly-skilled workers.

Michael and his colleagues have produced a challenging analysis, placing skills in context. The paper is a strong stimulus to the ongoing debate in Scotland, suitably referenced to allow interested readers to delve further into the source. The paper should be warmly welcomed by all those with an interest in a thorough and well-evidenced debate on Scotland’s skills and labour market performance.