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					   Future Skills Wales 2003
Generic Skills Survey: Drivers of
         skills needs

Report prepared by Experian on behalf of the
      Future Skills Wales Partnership




                August 2004
                             Future Skills Wales 2003 Generic Skills Survey: Drivers of skills needs




Introduction


The main Future Skills Wales 2003 Generic Skills Survey report touches on a number
of drivers of skills needs. On the demand side, the industrial structure of an area is key
to driving the future direction of skills needs. Many generic skills, such as
communication skills, the ability to learn and follow instructions and team working,
are required by employers in most sectors. However, other skills are more industry
specific, in particular customer-handling and IT skills. The size of firms, as well as the
markets in which they compete, will also affect the type of skills required.

On the supply side, the size and aptitude of the local population will both affect
current skill levels and drive any skills needs. The household survey also allows us to
examine the motivation of local populations and identify barriers to the improvement
of skills.

This research report examines whether issues related to the drivers of skills are on the
demand side or the supply side. Public policy over recent years has been greatly
concerned with increasing the number of people going into further and higher
education, but there is a growing debate about whether firms really require this up-
skilling. Indeed, many graduates are now employed in traditional ‘non-graduate’
roles. On the other hand, it may be the case in some parts of the country that firms’
visions about the skills they need are constrained by what is available (and also the
training they are willing to provide).


REPORT STRUCTURE

The report is broken down into three sections:

      the demand for skills;

      the supply of skills; and

      conclusions and policy implications.




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                             Future Skills Wales 2003 Generic Skills Survey: Drivers of skills needs




1. The demand for skills


The main Future Skills Wales 2003 Generic Skills Survey report examines in some
detail the demand for skills by firms in Wales. Here, given the importance of
industrial structure as a driver of the demand for skills, we look at those skills
currently required by employers in different sectors and how this may change in the
future.

We first examine future employment growth in Wales by industrial sector, identifying
which sectors have been, and which are expected to be, the key drivers of
employment growth in the country. We then look at recruitment, identifying which
firms are most likely to employ graduates and drawing a link between the type of new
recruits a firm takes on and formal skills in the workforce as a whole. Next we
examine generic skills, looking at those skills currently required by employers and
those expected to be required in the future. Here we pay particular attention to the
possible drivers that may explain why firms require certain skills and what may drive
future skills needs. Finally, we assess employers’ attitudes towards skills and
investment in skills in the form of off-the-job training.


1.1    EMPLOYMENT GROWTH IN WALES

                                           Table 1.1
                 Changing structure of employment in Wales, 2003 to 2008
                                      Employment level              Share of employment
                                            (000s)                            (%)
                                   2003            2008               2003            2008
Agriculture                       33.8            27.3               2.7             2.2
Mining and Quarrying               2.9             1.9               0.2             0.2
Manufacturing                    188.8           179.5              15.3            14.3
Energy and Water                   5.9             4.4               0.5             0.4
Construction                      91.1            85.9               7.4             6.9
Wholesale and Retail             202.7           212.0              16.5            16.9
Hotels and Restaurants            79.7            77.7               6.5             6.2
Transport and
                                  54.9            53.2               4.5             4.3
Communications
Banking and Insurance             30.1            29.4               2.4             2.4
Other Business Services          117.6           131.7               9.5            10.5
Public Admin and Defence          76.8            73.7               6.2             5.9
Education                        109.0           110.3               8.9             8.8
Health                           167.4           184.9              13.6            14.8
Other Services                    71.3            79.0               5.8             6.3
Total Employment                1,232.0         1,251.1            100.0           100.0
Note: a location quotient greater than 1 means the sector is more important in Wales than in
the UK (calculated by the sector's share of employment relative to the UK's sector share of
employment)
Source: Experian Business Strategies Forecasts, May 2003 - based on data from the Office for
National Statistics



                                                                                                  2
                             Future Skills Wales 2003 Generic Skills Survey: Drivers of skills needs




Estimates provided in the main Future Skills Wales 2003 Generic Skills Survey report
show that the largest sectors in Wales are wholesale and retail (16.5 per cent of total
employment), manufacturing (15.3 per cent) and health (13.6 per cent). Whilst the
manufacturing sector has been in long-term decline and we expect its importance to
further diminish in the future, the health sector and, to a lesser extent, wholesale and
retail, are forecast to experience healthy employment growth over the coming five
years. Other sectors expected to grow in importance in terms of employment are other
services (including leisure services) and other business services (Table 1.1).


1.2    FORMAL QUALIFICATIONS

Despite the push by UK government to increase student numbers in higher education,
the importance placed on recruiting graduates by employers in most sectors is
relatively low, with a far higher share of recruits coming straight out of school or
college. As Table 1.2 shows the share of employers recruiting graduates is far less
than the proportion recruiting school and college leavers. The main exceptions to this
are finance, insurance and other services; public administration, education & health;
and energy & water. In these industries the nature of the work is more likely to
necessitate formal higher qualifications.


                                         Table 1.2
                                   Recruits by industry
                                    (% of respondents)
                                           School       College          Graduates        None of
                                           leavers      leavers                            these
Agriculture, forestry & fishing               24           23                 12             60
Manufacturing                                 39           30                 25             47
Construction                                  39           23                 10             51
Distribution, hotels & catering               46           40                 29             42
Transport & communications                    34           35                 28             52
Finance, insurance and other services         35           39                 40             42
Public admin, education & health              37           51                 59             28
Energy & water                                40           33                 40             39
Source: Future Skills Wales 2003 Generic Skills Survey


Whilst Table 1.2 looks at the recruitment of new (higher education) graduates,
evidence from the household survey suggests a clear link between the recruitment of
new graduates and the general level of formal qualifications in the workforce. Indeed,
in public administration, education & health, and finance, insurance and other
services, 21 per cent and 15 per cent of the workforce respectively have a first degree,
compared with an average of 11 per cent. The share of the workforce in these sectors,
along side energy and water, with no formal qualifications is also significantly below
average.

Looking ahead, since other business services, health and other services are forecast to
experience above average employment growth over the coming five years, we might
expect this to drive future demand for graduates in Wales.




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                               Future Skills Wales 2003 Generic Skills Survey: Drivers of skills needs



However, whilst we might expect the recruitment of graduates to rise, reflecting
employment growth in those sectors that are most likely to employ people coming out
of universities, this does not necessarily reflect a growing need for the qualifications
per se. With graduate numbers rising, these qualifications are increasingly being used
as a screening device. Employers may recruit graduates not for the specific knowledge
they have gained on their course but for the ‘life’ or more generic skills they have
gained, such as the ability to learn, the ability to organise their own development, the
ability to follow instructions and, crucially, communication skills. Indeed,
communication skills, one of the most important generic skills required by employers,
were found to be lacking by 39 per cent of employers who recruited school/college
leavers, compared with 27 per cent of employers recruiting graduates. 1

In terms of company size, the employer survey shows that larger firms are far more
likely to recruit graduates than smaller firms. Eighty-three per cent of firms
employing more than 250 persons claimed to recruit graduates, compared with just 21
per cent of micro firms (2-4 employees). This partly reflects the sector in which firms
operate, for example firms in agriculture and construction are primarily micro. In
addition, however, it reflects the wages and opportunities that larger firms can afford
to offer graduates.

Furthermore, with the supply of graduates often outnumbering the number of graduate
positions on offer, we are increasingly seeing graduates having to take up permanent
job offers that in the past may have been suitable for a school leaver. Given the better
generic skills graduates often have, firms may prefer to employ graduates for these
positions, even though it may not be strictly necessary.

In view of this ‘under-utilisation’ of graduate level skills, recent government policy
has placed an increasing emphasis on involving employers and individuals in the
assessment of changing skill needs in their sector. Whilst it has been long recognised,
there is an increasing realisation that in order to avoid the ‘low-skills trap’ we need to
stimulate the demand for skills from employers rather than just concentrating on
supply-side strategies.


1.3     GENERIC SKILLS

Communication and customer handing skills

In terms of generic skills currently required by employers, Table 1.3 shows the mean
scores by industrial sector.2 Top of the list are the ability to understand customer
needs and communication skills. This is particularly the case in customer-facing
industries such as distribution, hotels & catering, transport & communications, the
public sector and finance and business services. Indeed, finance and business services
employers not only scored customer needs and communication skills higher than
employers in any other sector, but also far higher than any other generic skill, some of


1
 The importance of generic skills is discussed in greater detail in the next section.
2
 The mean score is calculated by multiplying the share of establishments citing each level of
skill needed and the value of each level of skill. The value of the level of skill equals 0 when
not required through to 4 when advanced.


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                                         Future Skills Wales 2003 Generic Skills Survey: Drivers of skills needs



      which (e.g. numeracy and literacy) one might expect to score very highly in this
      sector.


                                                      Table 1.3
                                    Skills currently required (all occupations)
                                                   (mean score)




                                             Manufacturing




                                                                                                           insurance and
                                                                                                           other services
                                                                                            communicatio




                                                                                                                            Public admin,
                                                             Construction




                                                                                                                            education &
                                                                            Distribution,



                                                                                            Transport &
                          Agriculture,
                          forestry &




                                                                                                                                                Energy &
                                                                                                           Finance,
                                                                            hotels &
                                                                            catering
                          fishing




                                                                                                                            health



                                                                                                                                                water
                                                                                            ns
Numeracy                     2.4      2.4         2.4                              2.4             2.2             2.5             2.1            2.3
Literacy                     2.4      2.4         2.3                              2.4             2.5             2.7             2.6            2.4
Welsh language               0.6      0.4         0.6                              0.7             0.5             0.7             1.1            0.7
Foreign language             0.3      0.3         0.1                              0.3             0.4             0.3             0.3            0.0
Problem solving              2.5      2.3         2.5                              2.2             2.2             2.5             2.4            2.3
Communication                2.5      2.5         2.6                              2.8             2.9             3.0             3.0            2.8
Ability to follow            2.7      2.8         2.9                              2.7             2.8             2.9             2.8            3.0
instructions
IT                           1.6      1.8         1.4                              1.4             1.8             2.2             1.9            2.0
Ability to learn             2.7      2.6         2.7                              2.6             2.6             2.8             2.6            2.4
Showing initiative           2.8      2.7         2.8                              2.7             2.7             2.8             2.7            2.6
Leadership/motivation        2.3      2.1         2.4                              2.2             2.2             2.3             2.4            2.3
Management                   2.2      1.8         1.8                              1.9             1.8             2.0             1.9            2.3
Organise own                 2.1      1.9         2.1                              1.9             2.0             2.3             2.3            1.9
development
Team working                 2.6      2.5         2.7                              2.7             2.7             2.8             2.8            2.6
Understanding                2.5      2.7         2.8                              3.0             3.1             3.1             3.0            2.3
customer needs
Entrepreneurial              1.4      1.5         1.4                              1.4             1.2             1.6             1.2            1.4
Adaptability/flexibility     2.7      2.8         2.8                              2.7             2.8             2.9             2.8            2.9
Source: Future Skills Wales 2003 Generic Skills Survey

      To some extent the importance of communication and customer-handling skills
      reflects changing consumer trends and the shift away from customer loyalty. Whilst in
      the past a lack of competition, or simply customer apathy, meant that we were happy
      to stick with trusted brands, firms now have to compete far more intensely to retain
      their market share, often by providing better customer service. A clear example is in
      the mortgage market, where deregulation of financial markets in the 1980s and the
      growth in internet banking has led to a far greater range of mortgages on offer, with
      consumers much happier to switch mortgage provider. A similar pattern can be seen
      in a whole range of different industries serving not just consumers but also businesses.

      In addition, the importance placed on communication and customer-handling skills
      relative to other generic skills might reflect the supply of skills in the labour market.3
      With the education system placing greater emphasis on generic skills such as
      numeracy and literacy, these skills may not be such an issue for employers (although
      the survey did highlight some numeracy and literacy skills gaps among school



      3
       In relation to this, it is important to note that the level of skill cited by employers is
      subjective, therefore there may be difficulties in comparing different skills.


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                                        Future Skills Wales 2003 Generic Skills Survey: Drivers of skills needs



      leavers). 4In addition, employers in some sectors are increasingly taking on graduates
      for ‘non-graduate’ positions, which should further reduce problems with numeracy
      and literacy skills. Indeed, when employers were asked about gaps between the skills
      they required and the skills of their current employees, few employers cited numeracy
      and literacy as a problem among their workforce. By contrast, those employers
      affected by skills gaps frequently cited gaps in communication skills. This was
      greatest in key customer-facing sectors such as distribution, hotels & catering and
      transport & communications.


                                                 Table 1.4
                          Skills required in three years’ time (all occupations)
                                                            5
                                               (mean score )




                                                                                       communicati
                                                        Construction




                                                                                       education &
                                                                       Distribution,
                                         Manufacturi




                                                                                       Transport &
                         Agriculture,




                                                                                       insurance
                         forestry &




                                                                                       and other




                                                                                                                  Energy &
                                                                                       Finance,


                                                                                       services
                                                                       hotels &
                                                                       catering




                                                                                       admin,
                         fishing




                                                                                       health
                                                                                       Public




                                                                                                                  water
                                                                                       ons
                                         ng




Numeracy                     2.5      2.5         2.5                         2.6       2.3   2.6      2.3          2.4
Literacy                     2.5      2.5         2.4                         2.5       2.6   2.8      2.7          2.5
Welsh language               0.8      0.5         0.6                         0.8       0.7   0.9      1.4          0.7
Foreign language             0.4      0.5         0.2                         0.4       0.5   0.4      0.5          0.1
Problem solving              2.7      2.5         2.6                         2.4       2.4   2.6      2.6          2.3
Communication                2.7      2.6         2.7                         2.9       3.0   3.2      3.0          2.9
Ability to follow            2.8      2.9         2.9                         2.8       2.9   2.9      2.9          3.0
instructions
IT                           2.0      2.1         1.7                         1.7       2.2   2.6      2.4          2.5
Ability to learn             2.7      2.8         2.7                         2.7       2.7   3.0      2.8          2.4
Showing initiative           2.9      2.8         2.9                         2.8       2.9   3.0      2.9          2.6
Leadership/motivation        2.4      2.3         2.5                         2.3       2.4   2.5      2.5          2.5
Management                   2.3      1.9         1.9                         2.0       2.0   2.2      2.1          2.5
Organise own                 2.2      2.1         2.3                         2.1       2.2   2.4      2.6          2.0
development
Team working                 2.7      2.7         2.8                         2.8       2.8   3.0      3.0          2.6
Understanding                2.6      2.8         2.9                         3.1       3.1   3.2      3.1          2.5
customer needs
Entrepreneurial              1.5      1.6         1.5                         1.6       1.4   1.8      1.3          1.6
Adaptability/flexibility     2.7      2.9         2.9                         2.9       2.9   3.0      3.0          3.1
Source: Future Skills Wales 2003 Generic Skills Survey




      4
        However, it is necessary to stress the importance of basic skills (numeracy and literacy)
      despite the fact that employers currently place less importance on them than some other
      generic skills. Indeed, whilst using a different definition of basic skills to that use in the
      Future Skills Wales 2003 Generic Skills Survey, the Basic Skills Agency has highlighted the
      relatively large number of adults who have poor basic skills.4 Indeed, a recent survey in
      Britain found that 1 in 5 adults could not get simple information such as the date and price
      from a poster for a pop concert (see www.basic-skills.org).
      5
        The mean score is calculated by multiplying the share of establishments citing each level of
      skill needed and the value of each level of skill. The value of the level of skill equals 0 when
      not required through to 4 when advanced.



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                              Future Skills Wales 2003 Generic Skills Survey: Drivers of skills needs



The increasing need for businesses to understand their customers and provide better
customer care is expected to result in growth in the need for high-level and advanced-
level communication and customer-handling skills. This can be shown by comparing
the results in Tables 1.3 and 1.4, which show the mean scores for generic skills
required by firms now and in three years’ time. These tables also highlight the fact
that these skills are expected to increase in importance more or less across the board.

Other important generic skills

Other generic skills that firms of all sectors placed importance on were the ability to
follow instructions, the ability to learn and show initiative, team working and
adaptability/flexibility. Comparing the sectors reveals little variation in the need for
these skills. In terms of the ability to learn or follow instructions, we believe this has
always been important to employers and we expect little change in the level of its
requirement in the future (as shown by comparing Tables 1.3 and 1.4).

However, we believe that changes in the structure of firms, together with the shift
from manufacturing towards a more service-based economy, will lead to the
increasing importance of skills such as flexibility, showing initiative and team
working. In particular, cost cutting and downsizing in firms have led to employees
taking on more responsibility at work and employers requiring them to be flexible to
change. The growing use of IT at work and the fast pace of change in IT are also
increasing the need for employee flexibility. Again, the expected increase in the
importance of these skills is indicated by comparing Tables 1.3 and 1.4.

IT skills

In terms of IT skills, the current level required by employers in most industrial sectors
is generally intermediate, but these skills are growing in importance to a whole range
of firms. As one might expect, the level required is relatively higher in financial and
business services and relatively lower in industries such as construction and
distribution, hotels & catering. However, despite IT being embedded in the syllabus of
UK qualifications, survey evidence suggests that growth in the demand for IT skills is
outpacing supply. Indeed, the employer survey shows that a gap in IT skills was most
commonly cited by those with skills gaps. This was particularly the case in public
administration, education & health, and financial and business services.

In all sectors the mean score for IT skills is predicted to rise, and by a greater extent
than for any other generic skill. Much of this increase is expected to come from the
lower end, as the pervasion of IT throughout all parts of a business ensures that most
staff will need at least a basic knowledge of these skills.

Looking at the different sectors, we expect to see the greatest rise in the need for IT
skills in public administration, education & health, along with energy & water. Of
these sectors, health is expected to see notable growth in employment levels over the
coming five years and, drilling down further into the employer survey, we also find
significant expected growth in IT skills needed by occupations within the industry. In
terms of health professionals and associate professionals, 35 per cent currently require
high or advanced IT skills for their job. This figure is expected to rise to 64 per cent in
three years’ time, reflecting the growing use of IT in hospitals and health practices.



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                             Future Skills Wales 2003 Generic Skills Survey: Drivers of skills needs



Even in occupations that traditionally rely on ‘personal’ skills, such as caring roles,
almost a third of employers claimed that these personnel would require high or
advanced IT skills in three years’ time, almost double the current share.

Business services are another area in which we expect notable employment growth
over the next five years. With these occupations largely office-based, IT skills are
already important, but the need for high or advanced IT skills is expected to rise over
the coming years. Indeed, the survey shows that almost three-quarters of employers
believe that secretarial roles will require this level of IT skills in three years’ time.
The relevant share for business and public service professionals and associate
professionals is 69 per cent.


1.4    BUSINESS ATTITUDES AND DEMAND FOR SKILLS

As we have discussed, changes to the business environment can have important
implications for skills, driving forward the need for specific knowledge and abilities.
However, the extent to which this is put into practice can often rely heavily on the
attitudes of firms. Employers who are aware of the benefits accrued through training
staff in new skills, rather than simply waiting for knowledge to be gained over time,
can help drive forward the skills base and increase competitiveness.

Indeed, in a shift away from past government strategy that concentrated more on
improving the supply of skills, recent changes to government policy has placed more
emphasis on stimulating employers’ demand for skills. It is believe that whilst having
a highly skilled workforce is important, unless employers require these skills and can
fully utilise them we will be unable to lift UK productivity and increase our
competitiveness in the global economy.

Table 1.5 shows that whilst almost all firms agree that having a skilled workforce is
crucial to the success of their business, a much lower share believes that investment in
skills has brought about business benefits. This suggests that there is a significant
minority of firms who believe that investment in skills has failed to feed through to
business benefits, or who simply do not invest in staff development but try to accrue
skills via other methods (i.e. recruitment or natural staff development – on-the-job
training).

By sector

Looking at the industrial sectors shows a marked difference between the attitudes to
investing in skills of service sector firms and non-service sector firms. In particular,
firms in banking, finance and other services and those in the public sector were more
likely to agree that investment in skills has brought about business benefits. To some
extent this reflects the fact that these are often large, or part of large, organisations
with formalised staff development. As shown by Table 1.2, firms in these sectors
were most likely to take on employees straight out of college or university, many of
whom enter into training programmes. In addition, these industries generally have a
more highly educated workforce, therefore they may need to provide continuous
development in order to retain staff.




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                              Future Skills Wales 2003 Generic Skills Survey: Drivers of skills needs



                                            Table 1.5
                                  Employer attitudes to skills
                                (% of establishments who agree)
                                       Having a skilled workforce       Investment in skills has
                                       is crucial to our business          brought business
                                                success                        benefits
Agriculture, forestry & fishing                     87                            71
Manufacturing                                       96                            76
Construction                                        99                            73
Distribution, hotels & catering                     92                            75
Transport & communications                          95                            74
Finance & other services                            96                            80
Public admin, health & education                    98                            84
                 *
Energy & water                                     100                           100
Total                                               95                            77
* Based on fewer than 50 responses
Source: Future Skills Wales 2003 Generic Skills Survey

In terms of other benefits gained through investing in skills, improving the ability to
compete on customer services were cited by more than a third of firms and is
particularly important throughout the service sector. As discussed earlier, customer
service is becoming increasingly important to businesses and is recognised as an area
of skills that staff often lack. Manufacturing and other non-service sector firms were
more likely to cite improved productivity and product quality as the two main benefits
accrued through investing in skills.

By product strategy

There is a growing recognition amongst policy makers that the nature of products or
services being produced is an important determinant of the demand for skills.
Therefore an organisation producing a high technology or complex output would have
a high demand for skills.

Table 1.6 shows employer attitudes to skills by product strategy. To some extent this
supports the hypothesis discussed above – those employers who were most likely to
agree that investment in skills had brought about business benefits were in R&D
organisations or those producing goods and services for businesses. By contrast,
relatively fewer organisations involved in administration or producing goods and
services for customers agreed that investment in skill brought about business benefits.

                                          Table 1.6
                                Employer attitudes to skills
                              (% of establishments who agree)
Product strategy                              Having a skilled          Investment in skills has
                                            workforce is crucial           brought business
                                              to our business                  benefits
                                                  success
Produce goods & services for customers               95                              78
Produce goods & services to other firms              96                              81
Products goods & services to other parts
of the organisation to which we belong               99                              90
We focus of research & development                   97                              89
Administration office only                           96                              79
Source: Future Skills Wales 2003 Generic Skills Survey




                                                                                                   9
                             Future Skills Wales 2003 Generic Skills Survey: Drivers of skills needs




By employer size

In terms of employer size, larger firms tend to place more importance on having a
skilled workforce, although again this could reflect the type of sector in which these
firms operate and the perception of skills within them. In particular, within agriculture
and distribution, hotels & catering, there are a relatively large number of micro
operators (restaurants, B&Bs, farms etc) and firms in these sectors generally have a
lower opinion about the importance of having a skilled workforce.

Larger firms were also more likely to agree that investment in skills brought about
business benefits, particularly with regards to improving their ability to compete on
customer service, increase productivity and raise profits. This difference in the
attitudes of firms is likely to reflect the cost of investment in skills (in terms of both
the cost of the training itself and the cost of staff having time off) and the type of
industry in which firms operate. Indeed, all firms cited cost as the single largest
constraint to training (the largest firms were more likely to cite this than smaller
ones). However, whilst the belief that training is not relevant to their business was the
second most cited constrain, this was more likely to be reported by smaller firms.

                                         Table 1.7
                               Employer attitudes to skills
                             (% of establishments who agree)
Size of firm                        Having a skilled workforce         Investment in skills has
(number of employees)               is crucial to our business            brought business
                                             success                          benefits
2-4                                              94                              73
5-9                                              95                              77
10-24                                            96                              83
25-49                                            97                              87
50-99                                            98                              90
100-249                                          98                              95
     *
250+                                             99                              93
Note: * Based on fewer than 50 responses
Source: Future Skills Wales 2003 Generic Skills Survey


1.5    BUSINESS ATTITUDES TO SKILLS AND TRAINING

Whilst the majority of employers recognise the importance of having a skilled
workforce a smaller share believe that investment in skills has brought about business
benefits. As we have discussed, some of these employers may simply not have ever
invested in formal training and the view that it can bring about business benefits may
be a perceived view rather than one based on experience. We can examine this further
by looking at how many employers who recognise the importance of skills actually
invest in training.

Of those employers who agreed that investment in skills had brought about business
benefits, a third had not funded off-the-job training in the past year. Looking at this
issue in a different way, of those employers who had not funded or arranged any off-
the-job training, 68 per cent agreed that training was important. Therefore, the survey
clearly indicates that there are a significant number of employers who recognise the
importance of investing in skills but do not offer formal training.


                                                                                                 10
                                              Future Skills Wales 2003 Generic Skills Survey: Drivers of skills needs




Of course one reason as to why employers may not invest in training is that they feel
their workforce is already skilled enough. However, of those employers who did not
feel that their employees had sufficient skills to meet their business needs, only 58 per
cent had funded any off-the-job training over the past 12 months, compared with 52
per cent of employers who had a more positive view about their employees’ skills.
Supporting this were the relative shares who had/had not funded training related to
those employers reporting skills gaps and those not – only 59 per cent of employers
who had skills gaps had invested in off-the-job training over the past year.

Looking back over a longer time period, nearly a third of employers had increased
their funding of off-the-job training per employees over the past three years, with this
more prevalent amongst those currently reporting skills gaps and those who felt their
employees did not have sufficient skills to meet their business needs.

                                                         Figure 1.1
                             Do you invest more, same or less per employee on off-the-job
                                          training than you did 3 years ago?
                      50
                      45
                      40
                      35
      % respondents




                      30
                                                                                 Skills gaps
                      25
                                                                                 No skills gaps
                      20
                      15
                      10
                       5
                       0
                                     More                       Same                       Less
                      Source: Future Skills Wales, 2003 Generic Skills Survey




1.6               REGIONAL IMPLICATIONS

Regional differences in the demand for qualifications and skills largely reflect
differences in industrial structure. We can compare the relative importance of
different industrial sectors in the regions (compared with Wales as a whole) by
looking at the location quotient, that is whether the region has a relatively higher share
of each sector than the country as a whole.

Table 1.8 shows the location quotients for the Welsh regions in 2008 to allow us to
look at expected regional implications for skills. Looking ahead, only North Wales is
not expected to have a relative advantage in one of the high graduate
employability/high employment growth sectors we identified earlier (health is
relatively more important in South West Wales, other services in Mid Wales and
business services in South East Wales).



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                              Future Skills Wales 2003 Generic Skills Survey: Drivers of skills needs



                                        Table 1.8
                                 Location quotients, 2008
                                           Mid        North          South       South West
                                                                      East
Agriculture                                  4.3         1.2           0.3             1.4
Mining and Quarrying                         2.2         1.1           0.7             1.2
Manufacturing                                0.7         1.2           1.1             0.7
Energy and Water                             0.4         1.9           1.0             0.0
Construction                                 1.2         0.9           0.9             1.3
Wholesale and Retail                         0.9         1.1           0.9             1.1
Hotels and Restaurants                       1.5         1.1           0.9             1.0
Transport and Communications                 0.7         0.9           1.1             1.0
Banking and Insurance                        0.4         0.5           1.3             1.1
Other Business Services                      0.6         0.8           1.1             1.0
Public Admin and Defence                     0.8         0.8           1.0             1.2
Education                                    1.3         0.9           1.0             0.9
Health                                       1.0         0.9           1.0             1.1
Other Services                               1.2         1.0           1.0             0.8
Note: A location quotient greater than 1 mean that the sector is more important in the region
than in Wales as a whole, 1 mean it is equally important and less than 1 means it is less
important.
Source: Experian


By contrast, North Wales has a relatively higher share of employment in wholesale
and retail, suggesting that employment in the region is generally skewed towards
lower-level qualifications.6 This largely reflects the current position where only 31 per
cent of employers in the North claimed they employed graduates, compared with 34
per cent in the other regions. Conversely, a higher share of employers in North Wales
recruited school leavers.

In terms of generic skills, there is little variation in the type of skills required by
employers, despite differences in the industrial profiles of the Welsh regions. The
main differences lie in terms of Welsh language skills, which score higher in Mid and
North Wales, and also leadership/motivational and management skills, which score
lower in Mid Wales. The latter might reflect the relatively high share of micro (often
one person or family) establishments in Mid Wales, where management (people
management) and leadership skills will be less of an issue.

In all regions the need for IT skills is expected to rise faster than any other generic
skill. However, due to the type of industries in Mid Wales (for example, agriculture is
one of the major employers in the area), we do not expect the importance of IT to
increase by as much in this region as in the others.




6
 Wholesale and retail is expected to see relatively higher employment growth but is a
relatively low-skilled sector.


                                                                                                  12
                             Future Skills Wales 2003 Generic Skills Survey: Drivers of skills needs




2. The supply of skills


The main Future Skills Wales 2003 Generic Skills Survey report examines the supply
of skills in the country as a whole. Here, we look at the regional distribution of skills
and qualifications in the labour market and attitudes towards training.

We first examine the demographic profile of the four Welsh regions in order to
highlight changes in the supply of labour in these areas. We then look at the supply of
skills, both skills in terms of formal qualifications and more generic skills. Finally, we
examine the attitude of residents to furthering their skills and any barriers to this.


2.1    DEMOGRAPHIC CHANGES

Understanding the demographics of an area is the first step in understanding the
supply of skills and the potential demand for skills by individuals. Projections for
Wales suggest that population growth will be weaker than in the UK as a whole. Only
Mid Wales is expected to see a notable rise in its population, with the South West
forecast to see a population decline and the other two regions projected to see below
average rises. This primarily reflects the relative number of people leaving the area in
order to find employment elsewhere.


                                          Table 2.1
                            Population estimates and projections
                                   (% of Welsh population)
                                                1998           2003                     2008
Mid Wales                                        6.8            7.0                      7.2
North Wales                                     22.7           22.9                     22.9
South East Wales                                48.2           47.9                     48.0
South West Wales                                22.2           22.1                     21.9
All Wales (‘000)                               2896.1         2932.0                   2954.4
Source: National Statistics, Experian

In terms of skills, a falling working age population is likely to lead to a drain of
available skills from an area either through people leaving or retiring. For example,
the area may experience a ‘brain-drain’ with the most skilled people leaving.


2.2    FORMAL QUALIFICATIONS

In terms of formal qualifications, Table 2.2 shows the level of qualifications in the
Welsh regions. In general, South East Wales has a weaker profile of qualifications
than the other parts of the country, with both a lower share of the population with
NVQ level 4 and 5 (or equivalent) and a generally higher share with either no or low
levels of qualifications. This largely reflects its industrial profile – manufacturing is
the dominant employer in the area, particularly fairly low-skilled assembly
manufacturing – but in addition it is reflective of the type of occupations people in the
area are employed in (this is explored in more detail in the Occupational Analysis


                                                                                                 13
                               Future Skills Wales 2003 Generic Skills Survey: Drivers of skills needs



report). Simply looking at whether workers in the area feel that formal qualifications
are required for their current job shows that this is less common in the South East:
only 30 per cent of working respondents in the South East felt that formal
qualifications were needed in their job (the Welsh average was 32 per cent).

By contrast, Mid Wales has a higher qualification profile than the other regions, with
both a slightly higher share of the population qualified to NVQ level 4 and 5 and a
notably lower share with no qualifications. This is perhaps surprising given the
industrial profile, which is heavily skewed towards agriculture, but when asked about
the extent to which formal qualifications were needed in their job, a higher than
average share of workers in Mid Wales said that they needed either high-level or
advanced-level qualifications.


                                          Table 2.2
                      Qualification profile – NVQ level or equivalent
                                    (% of respondents)
                                    None      Level 1    Level 2 Level 3               Level 4 & 5
All Wales                            21          16          21       17                      25
Mid Wales                            15          15          22       21                      27
North Wales                          17          18          22       17                      26
South East Wales                     23          17          20       16                      24
South West Wales                     23          13          22       16                      26
Note: row percentages may not sum to 100 due to rounding
Base = all respondents
Source: Future Skills Wales 2003 Generic Skills Survey


2.3     GENERIC SKILLS

The supply of generic skills around the country can be gauged by looking at the mean
scores for the level of skills residents claim they currently have (Table 2.3).7

Those skills that residents claim to have and those that they actually have may diverge
either due to self-promotion or differences in grading skills, particularly between
workers and employers. However, assuming this is equally spread across the country
we can use Table 2.1 to compare generic skills in the four Welsh regions. In general
we can say that there is little regional variation in generic skills, the one exception
being Welsh language skills, which are notably higher in Mid and North Wales.




7
 The mean score is calculated by multiplying the share of establishments citing each level of
skill needed and the value of each level of skill. The value of the level of skill equals 0 when
not required through to 4 when advanced.



                                                                                                   14
                              Future Skills Wales 2003 Generic Skills Survey: Drivers of skills needs




                                            Table 2.3
                       The level of generic skills residents currently have
                                          mean scores
                                         Mid       North      South      South          All Wales
                                                               East       West
Numeracy                                 2.6        2.7         2.7        2.6              2.7
Literacy                                 2.9        2.8         2.9        2.9              2.9
Welsh language                           1.2        1.1         0.4        0.8              0.7
Foreign language                         0.5        0.4         0.4        0.4              0.4
Problem solving                          2.8        2.8         2.9        2.8              2.8
Communication                            3.2        3.1         3.2        3.2              3.2
Ability to follow instructions           3.1        3.0         3.1        3.2              3.1
IT                                       1.8        1.8         1.9        1.9              1.9
Ability to learn                         2.9        2.8         2.9        2.9              2.9
Showing initiative                       3.0        3.0         3.1        3.1              3.1
Leadership/motivation                    2.6        2.5         2.7        2.7              2.6
Management                               2.2        2.0         2.1        2.1              2.1
Organise own development                 2.5        2.4         2.6        2.5              2.5
Team working                             2.9        3.0         3.1        3.1              3.1
Understanding customer needs             3.1        3.1         3.2        3.1              3.1
Entrepreneurial                          1.6        1.4         1.5        1.5              1.5
Adaptability/flexibility                 3.2        3.0         3.1        3.1              3.1
Source: Future Skills Wales 2003 Generic Skills Survey


2.4     DRIVING THE SUPPLY OF SKILLS

In order to assess whether the supply of skills is improving in the Welsh regions, we
can look at whether residents’ skills have improved and whether they will be given
the opportunity to improve their skills further in the future.

Table 2.4 shows that over three-quarters of residents believe their skills have
improved over the past three years, with the largest increase being in South West
Wales. In part this may reflect changes in industrial structure, which will necessitate
the need for new skills. One example of this has been the shift away from
manufacturing to services, which has been particularly notable in the South West. In
addition, it reflects upgrading of skills. Indeed, whilst no timescale is given, Table 2.4
shows that 50% of people now need greater skills to do their current job than they
used to.8

                                          Table 2.4
                                Workers’ attitudes to skills
                             (% of establishments who agree)
Size of firm                   I needed greater skills to do my          I’m more skilled than I
(number of employees)           current job than I used to need             was 3 years ago
Mid Wales                                      55                                  77
North Wales                                    49                                  74
South East Wales                               48                                  77
South West Wales                               51                                  79
All Wales                                      50                                  77
Source: Future Skills Wales 2003 Generic Skills Survey


8
 This question also does not specify whether these residents are in exactly the same job as
previously or whether they have been promoted, a factor that will also require them to have
more skills.


                                                                                                  15
                             Future Skills Wales 2003 Generic Skills Survey: Drivers of skills needs




In terms of being given the opportunity to develop skills, the willingness of employers
to give workers the opportunity to develop skills needed for their current job exceeds
their willingness to offer employees opportunities to develop skills needed for
possible future jobs. This is unsurprising, although it is reassuring to see that the gap
is not excessive (Table 2.5).

The household survey shows that working residents in the South West and Mid Wales
were given the most opportunity to develop skills for their current job. Those in the
South West were given the most opportunity to develop skills possibly needed for
future work, although the differences between the regions are slight.

In the South East region, workers felt they were given the least opportunity to develop
skills needed for future work. This may reflect the type of jobs in the region, which if
already relatively low-skilled may not necessitate the need for employers to encourage
their employees to up-skill for the future. It may also reflect the attitude of employers
with respect to staff turnover – they may feel that their workers will simply leave if
given the opportunity to develop the skills needed for future work.


                                         Table 2.5
                                Workers’ attitudes to skills
                             (% of establishments who agree)
Size of firm                 My employer gives me          My employer gives me enough
(number of                   enough opportunity to          opportunity to develop skills I
employees)                develop skills relevant to my       may need for future jobs
                                   current job
Mid Wales                              66                                 50
North Wales                            63                                 50
South East Wales                       61                                 48
South West Wales                       66                                 52
All Wales                              63                                 50
Source: Future Skills Wales 2003 Generic Skills Survey



However, employers not giving workers enough opportunity to develop their skills is
often not as big an obstacle to skills improvement as peoples’ own motivation. Indeed,
the household survey shows that a third of Welsh residents would not like to be
involved in any form of learning. Ironically, this share is highest in South West Wales
(36 per cent), the region where employers give workers the most opportunity to
develop their future skills.




                                                                                                 16
                                      Future Skills Wales 2003 Generic Skills Survey: Drivers of skills needs



                                                  Figure 2.1

                            I would not like to be involved in learning
                       40

                       35

                       30
      % of residents




                       25

                       20

                       15

                       10

                        5

                        0
                            Mid         North       South East     South West      All Wales

              Source: Future Skills Wales, 2003 Generic Skills Survey




On the flip side, the supply of skills is most likely to be driven forward by residents in
Mid Wales, which has the highest share of residents who would like to be involved in
learning (Figure 2.1). In particular, compared with residents of other parts of the
country, Mid Wales residents were especially enthusiastic about studying for
qualifications or learning new skills that might be used in a job.

However, despite this high level of potential motivation in the region, residents here
were most likely to report barriers preventing them from studying. Indeed, 70 per cent
of residents in Mid Wales reported barriers to learning compared with an average of
56 per cent in Wales as a whole. A lack of time was the biggest constraint, reported by
30 per cent of residents in the region compared with a Welsh average of 19 per cent.
This may reflect a relatively high number of self-employed in the region (17 per cent
of current or former workers in the region are/were self-employed compared with a
Welsh average of 9 per cent), or those working in agriculture, where irregular and
long hours may make it difficult to find time to study. Course availability/awareness
was also cited as a barrier disproportionately affecting the region.

Fewest barriers to learning were cited in the South East (53 per cent of residents
claimed that barriers prevented them from training). The issues here, in terms of
improving the future supply of skills, appear to be related to residents’ own self-
motivation and employers being encouraged to give their workers the opportunity to
improve their skills.




                                                                                                          17
                             Future Skills Wales 2003 Generic Skills Survey: Drivers of skills needs




3. Conclusions and policy implications

This report has assessed the key drivers of skills development from both a demand
side and supply side perspective, using the 2003 Generic Skills Survey. Here, we pull
together our main conclusions and draw out some policy implications.

Drivers of skill needs

Our analysis has shown that in terms of industrial sector, the largest recruiters of
graduates are public administration, education and health; finance, insurance and
other services; and energy and water. In order to fully utilise higher education skills in
Wales, and also prevent graduates leaving the country to look for relevant work
elsewhere, policy should focus on attracting employers within these sectors.

Of these ‘high graduate employment’ sectors we are forecasting above average
employment growth in health, other services and other business services, which
suggests future demand for graduates in Wales is likely to increase over the next five
year.

However, in terms of what is actually driving the demand for graduates, there are
issues as to whether this is growth in actual ‘graduate jobs’, or whether employers are
increasingly taking on graduates for traditional ‘school leaver jobs’ because of an
excess supply of people with high level qualifications. We believe this is probably
relevant in health, other services and other business services. Government policy
therefore needs to focus on encouraging employers to fully utilise the skills of
graduates in order to help increase productivity.

In most sectors, a higher share of recruiting employers take on school and college
leavers rather than graduates. The Future Skills Wales 2003 Generic Skills Survey has
identified a number of skills employers have found lacking of these school/college
leavers, including communication skills, showing initiative, motivation as well as
numeracy and literacy. This may result in employers recruiting graduates for
traditionally non-graduate roles. Policy should concentrate on ensuring that school
and college leavers’ skills are up to the standards required by employers.

Which skills are critical?

Communications and customer handling skills were found to be amongst the most
important generic skills to employers and an area where there were often gaps
between the level required by employers and the current level of the workforce.

A notably high share of employers (39 per cent) also found communication skills to
be lacking in school and college leavers applying for jobs. Amongst those recruiting
graduates, the share was less (27 per cent), although in terms of skills lacking,
communication skills were still the most significant issue.

The importance of communication and customer handling skills has increased as
competitive forces have lead firms to use customer service as a way of gaining


                                                                                                 18
                              Future Skills Wales 2003 Generic Skills Survey: Drivers of skills needs



competitive advantage. The Employers Survey suggests that the importance of these
skills will continue to strengthen, with more employers looking for high or advanced
customer handling skills in a wide range of occupations. Policy needs to increasingly
focus on improving communication skills of school and college leavers and, to a
lesser extent, graduates. It should also address the gap in communication skills in the
current adult workforce.

The growing use of IT in businesses has increased the requirement for these skills.
However, whilst IT is embedded in the syllabus of UK qualifications, the employer
survey suggests that growth in the demand for IT skills is outpacing supply.

Further growth in the need for IT skills is expected, particularly at the lower end, with
all employees expected to need at least basic IT knowledge. As a result we believe
that policy needs to focus more on bring the whole of the labour force up to a
minimum level of IT know how rather than concentrate too much on higher level IK
skills.

There is also an increased need for skills such as adaptability, team working and
initiative. This is partly the result of the growing importance of IT (and changes in
technology), as well as the shift from manufacturing to a more service-driven
economy. It is also due to the pace of economic and occupational change and a shift
away from the jobs-for-life-culture. Changes in the structure of businesses as a result
of cost cutting have also seen employees taking on more responsibility.

3.3    ATTITUDES TO SKILLS AND TRAINING

Whilst almost all firms recognise the importance of having a skilled workforce to their
business’s success, a notably smaller number agree that investment in skills has
brought about business benefits.

This is particularly true amongst micro firms and those in construction and transport
and communication. This primarily relates to the cost of training and policy needs to
encourage and help these employers improve their investment in skills through
recognising the business benefits.

Of those employers who recognise the business benefits accrued through investing in
skills, many simply rely on on-the-job training rather than funding off-the-job training
programmes. Again, this will largely relate to the cost of off-the-job training and
policy needs to address ways of making this more accessible and affordable,
particularly to micro and small businesses.

3.4    REGIONAL VARIATIONS

In terms of the Welsh regions, there is little variation in the need for generic skills,
despite differences in their industrial structures. The main exceptions are Welsh
language skills, which are required more in North and Mid Wales.

Comparing the generic skills firms require and those workers claim to have, shows
that in all regions they closely match; if anything, the latter exceeds the former.
However, due to self-promotion, or simply differences between these two groups’



                                                                                                  19
                             Future Skills Wales 2003 Generic Skills Survey: Drivers of skills needs



views regarding skills, it is not really possible to compare the two. Indeed, the
employer survey identifies areas of notable skills gaps.

In terms of formal qualifications, only the North does not have a competitive
advantage in an industrial sector that both employs a high share of graduates and is
expected to benefit from above average employment growth. The lower demand for
graduates in this part of the country is a reflection of this.

However, on the supply side, the household survey suggests that North Wales has a
relatively high supply of formal qualifications – behind Mid Wales, it has the second-
lowest share of population with no formal qualifications. Furthermore, also behind
Mid Wales, residents in the North are enthusiastic about learning. In the case of North
Wales, we conclude that there is a possible mismatch between factors driving the
demand for and the supply of formal qualifications. In this region, policy specifically
needs to encourage firms to fully utilise the skills of the local labour force. It should
also aim to encourage more high graduate employment sectors into the area in view of
its relatively beneficial skills base.

Mid Wales has the highest level of qualifications in the country and also the highest
enthusiasm for learning. Matching this, on the demand side, the industrial structure of
the region suggests that the recruitment of graduates, and other higher qualified
personnel, is likely to increase.

However, this report has highlighted significant barriers to people furthering their
skills (both formal and generic skills) in the Mid Wales region. Whilst time
constraints were the major barrier cited, the availability and awareness of courses in
the local area was also a notable constraint. Policy may need to address the
accessibility of training establishments and promote remote learning..

The South East of Wales has a higher than average share of people with no formal
qualifications. However, in this region, workers were also most likely to feel that their
employers did not give them the opportunity to develop their skills. Policy in this area
should be aimed at encouraging employers to recognise the importance of developing
their employees’ skills and the benefits this can bring to businesses and the economy
as a whole.




                                                                                                 20

				
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