Scotland’s independent think tank
Scotland’s independent think tank

How can Scotland use policy to bridge the skills gap? – University of Edinburgh Economics Society

Reform Scotland has been delighted to act as a mentor to a team of students from the University of Edinburgh Economics Society who carried out a research project into the skills gap in Scotland. The following article is a summary of the full report, which can be downloaded below. The authors of the report are: Clementine Crawford, Arran Thompson, William Hwang & Akbar Muminov.

This paper examines the skills gap in Scotland and suggests policy recommendations aimed to bridge the skills gap.

The skills gap describes the disjunction between the labour available and the skills demanded in the labour market. It is estimated that in 2018 the skills gap cost Scottish organisations approximately £352million. Furthermore it inhibits Scottish firms ability to compete on a global scale.

To understand the skills gap and evaluate the policies which will be most effective it is useful to examine Scotland’s demography. Scotland faces an ageing population. This has several consequences including the lack of workers to fill the demand for Scottish businesses and financial difficulty for the older population to support their lifestyle. Migration Minister Ben Macpherson summarised the challenge to Scotland in his statement in the official inquiry regarding the current immigration system:

“Scotland faces challenges relating to an ageing population and labour shortages, and the need to attract highly skilled labour in the knowledge economy. Brexit and the UK government are making this worse, as the UK looks increasingly insular and less attractive” (Scottish Government, 2019).

Migration is shown to have the greatest variance on population change and age structure particularly in Scotland. For this reason, migration based policies are popular in dealing with demographic crises. Immigration policy is not devolved in Scotland and therefore the responsibility of enacting immigration policy lies solely on the UK government. Suggestions of immigration policies which could be used to bridge the skills gap include – a reintroduction of the post-study  work visa, language and employability support for international students as  integration programs to retain international students.

The number of international students attending Scottish higher education institutions has increased significantly. This has a large positive impact on the Scottish economy in the form of increased revenue from university fees, accommodation costs and other consumption injected into the Scottish economy. This increasing significance of international students suggests an increasing scope for retention of young skilled workers who have much to contribute to the Scottish economy. Student retention is an area which must be examined when considering policies to bridge the skills gap. A study into the University of Edinburgh’s graduating class of 2000 found only 21% of students from out of Scotland had remained there 5 years after graduation compared to 70% of Scottish students (Bond, 2008). This further suggests that policy on student retention needs to be focused on students coming to higher education institutions from outside of Scotland. To stop university graduates from leaving the country many governments have adopted a mandatory service period after postgraduate studies/ apprenticeships.

The Scottish Government has attempted to implement migration based policy to attract a working age migrants in the past running the ‘Fresh Talent Initiative’ from the summer of 2005 to encourage student immigration and settlement. Although this scheme only ran for three years before being overruled by UK government immigration policy. One of the main goals of the fresh talent initiative was “encouraging students at Scottish universities to stay in Scotland” in order to boost Scotland’s high skilled working population

Analysis of current and past economies from around the world reveal the common nature of the problem of skills gaps. Whilst for some countries, the challenge has consisted of an ageing population and for others a brain drain, the underlying goal of governments has been largely universal and twofold. Firstly, like Scotland, governments have looked to improve the quality of their labor by increasing the skills of the labor force. Secondly, governments have aimed to increase the presence of high skilled labor in the economy through immigration of foreigners and retention of locals.

It is clear that offering education and training schemes through apprenticeship schemes and higher educational institutions is an effective way of enhancing the skills available in the labour market. One of the most successful examples of the apprenticeship schemes is Switzerland’s. Switzerland’s youth unemployment has consistently been below 4%, as the country’s apprenticeship scheme serves over two-thirds of its youth (Leybold-Johnson, 2020). Known as a dual education system, the program, in contrast to the purely academic university path, allows students to learn through a combination of work and class experiences. Scotland offers a similar system called the Modern Apprenticeship which provides youth with the opportunity to earn and learn. First implemented in the 1990s, the system has grown to serve 34,000 Modern Apprentices in Scotland. Yet still, the scheme’s success has failed to parallel that of Switzerland’s (Scottish Government, 2018). Recent 2018-2019 data shows the Scottish scheme offers less than half the number of opportunities when compared to Switzerland’s. Additionally, the employment rate post scheme is only three-fourths of Switzerland’s (Skills Development Scotland, 2019). Considering this, there is a strong case to argue that the UK economy would benefit significantly from the implementation of Swiss-style apprenticeships.

The SkillsFuture initiative of Singapore, created in 2016, is an ongoing program aimed at enhancing workers’ and businesses’ skills with the help of an online platform. Scotland could also look to harness technology in its effort to improve the skills of its population. Regardless of a person’s age, location or background, an online platform can offer a relatively effective means of reaching a large number of workers at the relatively low initial cost of establishing a virtual platform. However, unlike apprenticeships, students can’t experience a hands-on practical experience. Therefore, the platform may not be a suitable solution to a lot of professions.

The skills gap is an area which should be of utmost concern to the Scottish Government. With the changes that have come as a result of Brexit, and the potential for a second independence referendum, a strong Scottish economy has never been more crucial. The government should harness technology to reduce the costs of spreading education and look to enhance their existing apprenticeship scheme and accommodate Swiss VET characteristics. With these changes in policy, Scotland would be able to lessen the burden that the skills gap brings, and boost its economy.

Clementine Crawford, Arran Thompson, William Hwang & Akbar Muminov are members of The University of Edinburgh Economics Society, a student-run organisation which aims to enhance the student experience for students interested in Economics.