Long-term trends and strategic challenges
Improving skills to meet changing demand
One of the principal drivers of economic performance is skills. Evidence reveals that the East of England workforce has relatively poor skills attainment in terms of higher-level (NVQ3 and NVQ4+) qualifications. There are two potential reasons for this. One is that there may be a lack of supply of skills, caused by out-migration, out-commuting, lack of demand from individual learners, or a lack of capacity in further and higher education provision. There may also be a lack of demand for these skills by employers. Demand for higher-level skills will increase dramatically over the next 20 years.
It will be vitally important that people in the region are encouraged and supported to progress up the 'skills escalator'. Improving skills levels and training have major impacts on business productivity and earnings.
For example:
- raising the proportion of workers trained in a given industry by 5 per cent can be associated with a 4 per cent increase in value added, and a 1.6 per cent increase in wages
- skills shortages can often act as a barrier to the take-up of new technologies and innovations. Research has shown that a 10 per cent increase in the number of firms reporting skilled labour shortages in an industry will lead to a permanent 10 per cent reduction in its fixed capital investment and a temporary 4 per cent reduction in its R&D expenditure.
In common with the rest of the UK, the bulk of skills deficiencies reported by employers are in soft skills such as communication, team-working and customer-handling skills. These types of skills are also often essential in getting unemployed or inactive residents back into work. Over the next 20 years (see Figure 6), workplaces will become increasingly dense in their use of technology - across all sectors and occupational levels. The challenge is to equip young people with the skills for this new environment and constantly upgrade the existing workforce.
Evidence suggests that employers in the region have particular deficiencies in management skills. In the most recent Learning and Skills Council (LSC) Employer Skills Survey, employers reported that 30 per cent of employees with skills gaps lacked management skills - the joint highest of the English regions. International comparative studies suggest that management skills are a major driver in the productivity advantage of leading economies over the UK.
The skills challenges are to increase employer demand for and utilisation of high-level skills; better tailor skills and educational provision to employer needs and ensure adequate access to education and skills development in parts of the region that have lower levels of attainment than average. The region also needs to match other leading economies in developing an active approach to managing migration. This is essential for attracting highly skilled workers and researchers, enabling potential entrepreneurs to stay and maintaining networks with those that leave, so as to realise international trade and collaboration opportunities.
RES toolbox
Demand for higher-level skills will increase dramatically over the next 20 years.