Introduction

This chapter examines the extent and nature of recent, and projected future, skill needs in the UK. The ongoing process of economic change drives developments in the labour market and consequent skill needs. Changes in economic structure, consequent upon changes in the level and pattern of consumer demand; developments in technology (in both processes and products); changes in the organisational structure of companies and other organisations; and the shifting pattern of national competitive advantage, all contribute to shifting the level and structure of occupations, qualifications and other skills required in the UK labour market.

It is crucial to understand the nature of the changes in skills demand being provoked by evolving skill needs so that the pattern of skills supply can be adapted, if necessary, by public policy to match the changing requirements of the labour market. Unless skills supply successfully adapts to the changes in the nature of labour and skills demanded, a range of inefficiencies, imbalances and inequalities will arise including structural unemployment, skill shortages, skill gaps and redundant skills. Moreover, economic performance will be constrained, inflationary pressures potentially provoked and the economy will operate at a lower level of capacity and growth than would otherwise be the case.

This chapter outlines the main drivers, or determinants, of change in skill needs, before examining recent developments in the sectoral, occupational and qualifications structure of employment. It then goes on to examine likely future changes in occupational and qualifications requirements including the main contours of regional variations in skills demand. It also draws attention to the importance of ‘replacing’ the skills lost through retirement and occupational mobility, and to the increasing importance attached to generic skills.

The drivers of change

There are four main drivers of change (see Figure 3.1) which are combining to increase the potential importance of skills to people, organisations, and the economy (see, for example, Thurow, 1999).

The process of globalisation is increasingly opening up local and regional economies and integrating them into the national economy, at the same time as the national economy is being integrated into the international economy.