With success comes a price

13th November 2009 at 00:00
Despite being sixth most successful economy in 2006, the UK has three key areas for improvement

So what's the problem? The current recession notwithstanding, the UK in general, and Scotland in particular, is still an extraordinary economic success story. Our gross national income per capita places us 11th in the world and, by GDP, we're the sixth most successful economy in 2006 after the United States, China, Japan, India and Germany.

In international trade, the UK has built the world's largest service export economy. Although the recession has taken its toll, employment is still among the world's highest (5 percentage points above the EU average) and unemployment is low - in 2008, for example, it was only 5.6 per cent compared with the European average of 7 per cent. Not bad for the world's 78th-largest nation.

Scotland fares even better - prior to the recession, the unemployment rate was a comparatively minuscule 4.2 per cent; even now, it is likely to remain low compared with other nations.

While these successes are impressive, there are three key areas in which Scotland continues to face major challenges: productivity; historical and current skills performance; regional and social disparities and gaps.

Our productivity is significantly lower than many of our major competitors, but we have a high employment rate, combined with higher than average working hours among developed countries. And the scale of productivity lag with Europe is highly variable across sectors and tends to be larger in our growth and volume sectors, such as retail, construction, hospitality and business and financial services.

Our employment rate (measured as the percentage of the working-age population in work), on the other hand, is one of the highest in the world, sitting at 71.5 per cent for the UK as a whole, compared with 65.9 per cent on average across Europe.

It is in skills that the UK's biggest weakness lies. As Sandy Leitch put it in his 2006 review, "The UK's skills base remains mediocre by international standards. In OECD comparisons of 30 countries, the UK lies 17th on low skills, 20th on intermediate and 11th on high skills. Seven million adults lack functional numeracy and five million lack functional literacy. Seventeen million adults lack Level 1 numeracy - equivalent to a low-level GCSE.

"The proportion of people with low or no qualifications is more than double that in Sweden, Japan and Canada. More than 50 per cent of people in countries such as Germany and New Zealand are qualified to intermediate level, compared to fewer than 40 per cent in the UK.

"The proportion of people with high skills is internationally average. The UK invests 1.1 per cent of GDP in higher education, compared to 2.9 per cent in the USA and 2.6 per cent in South Korea."

Not only do the UK statistics belie wide variations between sectors, they cloud a disturbing disparity in terms of productivity, employment, unemployment and skills on a geographical basis. Scotland averages internationally-high achievements at all education and training levels, but some areas - the east of Glasgow the most well-known - have unemployment rates over twice the national average, and around half of adults lack educational qualifications.

To its credit, the Scottish Government recognises these challenges, with one of its five key strategic objectives. A set of national indicators aims to increase the percentages of school leavers and graduates in positive and sustained destinations, and reduce the number of people of working age with severe literacy and numeracy problems.

The UK has to set itself the new and clear goal of being placed in the OECD top eight countries of the developed world - by 2020, on globally- accepted measures for productivity, employment and skills.

Some of that growth will occur by improving the skills of young people, but the youth cohort is set to decline significantly to 2020 and, with increased longevity, 75 per cent of the 2020 workforce is in work.

At least 16 million adults of working age are likely to have to move up at least one full skills level over the next 12 years. And if we are to move seriously towards an 80 per cent employment target, up to one million disengaged adults will need to be provided with skills and sustainable employment.

Effective employer engagement will be essential if we are to deliver skills to meet future economic and industry challenges in a timely and cost-effective way.


This is an abridged version of an article which first appeared in Holyrood magazine.

Chris Humphries is chief executive of the UK Commission for Employment and Skills.

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