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Labour market and skills
Developments in the labour market have wide-ranging impacts, for example on productivity, competitiveness and social inclusion. Although these impacts will vary across labour markets depending on industrial structure and the flexibility of the workforce, there are some common themes that emerge which have implications for employment and skills policy. The challenges policy makers face include the existence of unemployment hotspots, high rates of unemployment within disadvantaged groups such as lone parents and the long-term unemployed, high rates of part-time working (which may be an indicator of under-employment), wide intra-regional variations in average earnings and relatively high levels of hard-to-fill vacancies.
CE offers core expertise in using modelling and statistical analysis to support planning and policy analysis.
In the UK, we offer expertise in developing models of the district, regional and national economies to provide short and medium term forecasts of employment and other labour market indicators of interest. For example, CE’s Local Economy Forecasting Model (LEFM) is an efficient means of generating economic projections for the local economy. It provides a high level of sectoral disaggregation, demographic information, and substantial labour market detail covering occupations, skills and qualifications. CE’s Multisectoral Dynamic Model of the UK economy (MDM-E3) has been used to undertake analysis of regional and national labour markets.
At a European level, CE contributes to analysis of skills requirements and supply through the use of the E3ME model. E3ME is used to provide the employment projections for CEDEFOP’s forecasts of skills supply and demand, and is currently being applied to assess the labour market impacts of meeting the EU’s 2020 emission reduction targets.
Examples of recent projects undertaken in this area:
Building, broadening and deepening the UK LMI evidence base
UK Commission for Employment and Skills
This project, which produced the first annual Almanac for the UK Commission for Employment and Skills (UK Commission), was led by CE and carried out in partnership with the Institute of Employment Research (IER). The aim of the project was to develop an evidence base for labour market and skills indicators to provide an information platform for the UK Commission, and to set these data within a clear conceptual organising framework, so that the indicators could readily be given policy-relevant interpretation. The project built a comprehensive, comparable, and robust geographical and sectoral employment and skills evidence base and then investigated where the geographical and sectoral variations in the employment and skills system exist, and where these intersect. The framework was also used to assess the gaps in the UK employment and skills evidence base. The main output of the project was the publication of UK Commission’s first Almanac, a new product available online for policy practitioners and analysts.
Forecasting skill supply and demand in Europe
European Commission (CEDEFOP)
This four-year project is providing the framework for a series of studies looking in depth at the roles that skills play in shaping European labour markets. The studies are being carried out on behalf of the European Centre for the Development of Vocational Training (CEDEFOP) and the team members include the Institute of Employment Research (IER) at the University of Warwick, the Research Centre for Education and the Labour Market (ROA) (Maastricht) and Alphametrics (Brussels). CE's contributions focus on the links between labour demand and supply and the wider economy, as represented in the structure of the E3ME model.
The project framework is structured into core and additional elements. The core studies build on the initial forecasting exercises of the demand for and supply of skills in Europe carried out in an earlier study by CE, IER and ROA. The original methodologies are being assessed and, in some aspects, improved upon. More recent data are being incorporated so that revised sets of projections can be produced. The additional studies expand the area of research to assess further interactions between skills development and economic activity, and the possibility of modelling these. For example, using E3ME, CE is carrying out a study examining the links between skills and technological development.
UK Skills Assessment
Sector Skills Development Agency
This project, led by CE in collaboration with IER and SQW, presented an updated assessment of the UK skills and productivity performance for the Sector Skills Development Agency (SSDA). In addition to the overall management of the project, CE was responsible for:
- gathering data to assess recent and future progress towards the five ambitions set out in the Leitch Review;
- collating data on demographic and general economic trends and conditions, including sectoral details and productivity and performance;
- updating the basic skills model used in the Leitch Review; and
- identifying further research and analysis required to improve the quality of such assessments in future.
The report acted as preparatory work to support the UK Commission for Employment and Skills’ responsibility to assess progress towards the UK’s world class ambitions for 2020 set out in the Leitch Review.
Working Futures (1, 2, 3) Projections of Employment by Sector and Region
Sector Skills Development Agency
This major series of projects, led by the Warwick Institute of Employment Research, involved the provision of projections of employment by sector and occupation for the forthcoming decade. The projections also included a spatial dimension down to a regional and LLSC area level. CE’s role was to provide the regional and local projections for economic activity and employment by detailed sector. The forecasts were disaggregated by gender, status, industry (based on SIC2003), occupation and qualifications. In addition, CE’s Multisectoral Dynamic Model of the UK economy (MDM-E3) was extended to generate projections of demographic change, economic activity rates, labour supply and unemployment by gender and age group.
Skills in England
Learning and Skills Council
This project, led by the Warwick Institute for Employment Research, produced the 2006 edition of the (national) Learning and Skills Council’s annual report reviewing skills needs. The project reviewed the existing evidence for the supply of and demand for skills and identified the main areas of skill deficiency. CE’s role was to review the evidence relating to:
- 27 detailed industry sectors across the UK;
- SSC footprints across the UK; and
- the 47 local learning and skills council areas.
The analysis identified and summarised the main economic trends in sectors, regions and local areas, and extracted for policy-makers the key implications for skills needs in each case.
Evaluation of Jobpoints in Pathfinder Offices
Jobcentre Plus
This study provided an assessment of the impact of the introduction of ‘Jobpoints’ (which provide an ICT-based system for job-seekers to identify suitable opportunities) on Jobcentre Plus business in the first year of their installation. The study built upon an earlier assessment of the effectiveness of Jobpoints which examined the probability of finding employment in Pathfinder (pilot) offices and compared it with selected ‘control’ offices (where the policy was not implemented). The multivariate approach adopted in the earlier study was extended to take account of the influence of socio-demographic and economic factors on outcomes so as to present a more complete and realistic picture of the labour market and thereby to provide a more robust assessment of the contribution to improved performance made by the new policy.
Thames Gateway South Essex Economic Analysis and Baseline Study
East of England Development Agency
This project, led by KPMG LLP, reviewed the economic and property context for the development of the Thames Gateway South Essex (TGSE) and developed various scenarios for the future of the area. CE’s role was to provide a full economic baseline projection and scenarios for employment by sector and local area in the TGSE, reviewing the influence of international investment and major employers, to undertake an analysis of labour market activity and industrial establishment activity, and to project key skills gaps. Three different economic scenarios were developed in order to assess the potential growth/decline in existing sectors, suggest new sector and cluster opportunities and inform priorities for target markets for inward investment and infrastructure development. The three scenarios comprised:
- a ‘Business as Usual’ scenario based on CE’s latest regional projections (published in Regional Economic Prospects) and on the assumption of no additional regeneration activity in the Thames Gateway area;
- an ‘Enhanced Growth Scenario’ in which the East of England region was projected to move into the ‘top twenty’ EU regions by 2010, as measured by GVA per capita; and
- a ‘Regional Spatial Strategy Scenario’ which matched the planned outcomes of the policies for employment and housing in the draft East of England Plan published in December 2004.
A film was produced by HBL Media for the Local Government Channel in which the project was shown in the context of the planning needs of Thames Gateway South Essex, illustrating the importance of this kind of contribution.
Labour Market Briefing
Jobcentre Plus
The briefing provided short and medium-term forecasts of unemployment statistics at a national, regional and district level. It explored possible explanations for any recent or expected developments in the labour market, and analysed factors that may influence Jobcentre Plus progress in meeting its performance targets and wider objectives. The forecasts and analysis were presented in the form of a written briefing, capable of being understood by non-specialists involved in a wide range of activities from policy formulation to the actual delivery of help for unemployed people.
To produce the forecasts CE produced a model which tracks Jobcentre Plus clients by age, unemployment duration and region. The system not only looks at how claimants move in and out of unemployment; it also examines how unemployed clients move within the unemployed stock (ie to different age and unemployment duration categories), which helps to identify the core client base to be targeted.
The model produced quarterly forecasts based on CE’s twice-yearly regional and sectoral forecasts of the UK economy, closely matching the planning cycle of DWP.
Review of Britain’s Skills Needs
HM Treasury
The study was commissioned to contribute to the Leitch Review of Skills and was undertaken in collaboration with the Institute for Employment Research. The study examined the implications for the pattern of employment by sector, occupation and skills in a future in which productivity growth is higher as a result of greater investment in human capital. The study developed quantified projections and scenarios, and drew out the qualitative implications of these alternative futures. The methodology used built on the approach adopted for the SSDA in Working Futures by developing sectoral projections within an integrated sectoral economic model of the UK, namely Cambridge Econometrics’ Multisectoral Dynamic Model, MDM-E3 and extended the projections presented there to 2020 as a ‘baseline’ projection against which two alternative ‘high skills’ scenarios were compared. Summary results were incorporated in HM Treasury’s December 2005 Pre-Budget Report, and in the accompanying Interim Report of the Leitch Review of Skills, Skills in the UK: The long-term challenge.
For further information contact:
Rachel Beaven
Director