20 June 2007

Jim Murphy MP

Minister of State for Employment and Welfare Reform

The Skills Challenge

Vedior's seminar, Cass Business School

Wednesday 20th June 2007

[Check against delivery]

The skills challenge cuts across every aspect of our society; from individuals and families, to communities, business and the economy as a whole. The analysis published today provides a valuable contribution to our understanding of the nature of business and their skills needs now and in the years ahead.

Any discussion on skills cannot ignore the impact of globalisation. We have entered an era of a global labour market – for the first time, workers are not just competing with those in the same town or even country; but in a world wide labour market.

We know that the freeing up of the global workforce has huge benefits for our economy – accounting for up to a fifth of economic growth between 2001 and 2005. Meanwhile, independent research has shown that migrants are contributing to our economy – resulting in a net gain to the exchequer. They play a significant role in filling some of our vacancies, as the report today recognises.

But this should not lead us to the false conclusion advocated by some that migrants are stealing so called ‘British’ jobs.  There are still a high number of vacancies across sectors, regions, occupations and skills levels - indeed, a higher number of vacancies than on the date of the A8 accession to the EU.

So rather than focusing on migration, we should focus on why UK citizens who remain unemployed cannot or do not fill the many vacancies that are out there.

The report by Sandy Leitch published last year, set out the wider context of the skills challenge toward 2020. It recognises that the UK is in a strong position, with a stable and growing economy and world leading employment rates. Yet as the demand for skills continues to grow exponentially; we lag behind some of our competitors on skills levels, and if this doesn’t change we run the risk of undermining our future prosperity.

The report made recommendations to the Government on how to meet this challenge, and we will be responding later this summer. But we are already taking action.

A new Employment and Skills Board - led by Sir Michael Rake – will be critical in making the crucial connection between skills and the needs of the labour market, establishing a real and lasting integration between the employment and skills agenda through strengthening the employer’s voice. The Employer Skills Pledge, launched last week, made by over 150 leading employers reflects a commitment to train all their staff to at least level two.

And the fact that the most popular initiative cited by employers in this report to cope with pressures that they are facing is to invest in staff retention; is very positive. Many employers of course do this already; but it is important that all fulfil their responsibility towards their employees who deserve to be supported in progressing in the workplace.

But its not just about increasing the skills of our current workforce; we also must utilise the skills and potential that already exists within our working age population; that is yet untapped.

There are three areas where I believe this is the case and where both business and government must play a role in ensuring that the potential is not left to waste.

Firstly, those identified in the report – making more use of family friendly policies and older workers.

It is my strong belief that this should be done anyway; regardless of any pressures we may be facing. But there are significant pressures we all need to take into account.

In the first year of the Queen’s reign, she sent around 200 birthday cards to people who reached their 100th birthday. By last year, that number had increased more than twenty fold, with over 4,600 birthday cards issued and a further 500 sent to those who reached 105.

This has a huge effect on our society. In 1950, there were ten people working for every pensioner; today there just under four. In ten years time, on current trends this will reduce to three, and by 2050 there will be just two

So in this context of an aging population, there is an added impetus, and a strong economic gain for business to invest in these initiatives. Women who have had a career break to have children; lone parents who have talent but need the support of flexible hours and quality childcare; older workers who have a wealth of experience which would benefit any business – all of these people should be supported in the workplace

Government is doing more by committing to ensuring childcare for all by 2010. But together we must ensure that the concept of flexible working is not just an aspiration but a reality.  And training must be available to all. As stated in a recent National Audit Office report, the shelf-life of skills has reduced from seven or eight years to just three to five – particularly pertinent in the argument for investing in the training of older workers who some employers may fear will leave work sooner than some of their colleagues. 

Secondly, the employment of more people who have a health condition or disability; but who have just as good skills and potential as anyone else.

There are three times as many people on our main disability benefits as there are on unemployment benefit. Our recent welfare reforms seek to reduce the number by a million over a decade. This is founded on the principle that no-one should be written off; and that the vast majority of those with disabilities and health conditions can make a valuable contribution to the labour market.

There are some great examples of business working together with Government - through our new Local Employment Partnerships for example - to expand the opportunities for those who are disabled or suffer from a health condition. But we need to go much further.  

According to a survey by the Chartered Institute of Personnel and Development – [ who you will be hearing from shortly], 1 in 3 UK employers exclude people with a history of long-term incapacity when recruiting staff. The survey shows that what concerns employers is that they may lack up to date skills and experience, or may have lost their work habit, rather than the state of their health.

But our research published last year shows that employers of those who have been on incapacity benefit actually cite numerous benefits - including access to a wider pool of skills, improved morale, as well as better retention rates.

So much more needs to be done to engender a culture shift to ensure that those benefits identified are recognised more widely; so that the skills that this set of individuals have are not excluded - leaving people unable to fulfil their potential and business missing out. 

And thirdly, we must ensure that ethnic minorities have access to the right training, skills and job opportunities to close the ethnic minority employment gap.

Again, this is something that Government and business must tackle together. The Business Commission is looking at this issue and will be reporting during the summer, making recommendations for how this issue can be addressed. But when 75% of the workforce growth in London in the next twenty years will be within ethnic minority communities, we simply cannot afford to let progress continue at its current rate – given that on current trends it will take 45 years to close the gap.

The reasons for this gap are multi-faceted. But one area is skills. Around fifteen percent of unemployed ethnic minorities themselves cite language difficulties as a barrier to work. And an additional 120,000 inactive people also include cite the same reason as a barrier to work.

That’s why I asked the National Employment Panel to review the current situation and come forward with proposals on how to tackle the issue.

They will be finalising their report shortly. But the findings so far epitomise the approach we need to take to skills across the Board. They include:

• earlier intervention – as the longer a migrant lives in the UK without learning English, the slower their progress when they do take up language training;
• tailored courses to suit individual needs;
• and importantly, employment focused training in partnership with business – ensuring that people can learn within a business environment to link the training to the work they are aspiring towards.

So the Government is taking the skills challenge very seriously, and we are making real progress in working towards some of the recommendations of Leitch. This includes building in systems so that business can have a greater role both in influencing course content and in up-skilling today’s workforce.

But on top of that, I believe we also need to ensure that the skills that currently exist within our labour market are being utilised, and that no-one is being left behind.

It used to be said by a previous Government that mass unemployment was a price worth paying. My view is that full employment is a prize worth investing in.