Event Blog: Skills for the Future | IPT

The Industry and Parliament Trust hosted a Breakfast Event between parliamentarians, skills providers and industry entitled, ‘Skills for the Future: Managing the Fourth Industrial Revolution’ on Tuesday 08 March. The discussion was chaired by Lord Holmes of Richmond MBE, Lords Select Committee on Science and Technology, with guest speakers Claire Walker, Co-Executive Director, British Chambers of Commerce and Professor James Hayton, Professor of Innovation and Entrepreneurship, Warwick Business School. 

Skills for the Future

When considering the impact of technological advances on work and workers, I am reminded of Amara's Law, which states that “We tend to over-estimate the effect of a technology in the short run and underestimate the effect in the long run.”  The actual rate of adoption of new technologies which disrupt work is slower than has been implied by dramatic headlines about robots and artificial intelligence taking over our jobs.

In practice, technology adoption tends to be relatively slow for SMEs, which employ half of our workforce.  Even in large organizations, the adoption of radically transformative technology is far slower in existing establishments than we might expect. A significant factor is risk aversion on the part of employers, especially those operating in areas where the available skills in the workforce are falling short of their needs.

In such contexts, a low-cost strategy, with a low-road approach to workforce development is a more rational choice than attempting to compete on differentiation through innovation. This effect can create a negative spiral in our economy, with lower propensity to invest in technology and skills, leading to a self-fulfilling cycle of low productivity, low-wage, and further low investment in skills. According to this view, the disruption of the workforce results as much from an inability on the part of employers to survive in the long run, as it does from the rapid adoption of technology leading to job losses in the short run.  

The Warwick Working Futures forecasts of long run skills supply and demand, highlight something which many other studies have confirmed. First, the growth in highly skilled, white collar jobs, is projected to continue to reinforce demand for those with degree level qualifications – excess demand over supply further reinforces economic inequality in favour of the upper decile of the labour market.  Second, there is growing demand for health and education services, which reflects an aging population, and in business services, reflecting increasingly disaggregated and digitalized nature of service work.  Third, it is important to note that the demand to replace retiring employees outstrips demand caused by the creation of new jobs by a factor of 11:1

The key issue for policy then is our ability to continue to fill existing jobs, even as these evolve, rather than solely focusing on new types of jobs. Similar data from Burning Glass Technologies have also shown that the largest skills gaps have been found in administrative occupations; hospitality; and healthcare; But also, in metal machining trades. These data also suggest that the skills gaps for employers centre mostly on 'intermediate technical jobs.' In fact, despite often relatively attractive wages, close to 40% of vacancies in skilled trades occupations result from skills shortages. In some cases, the “skills gap” often reflects an inability to attract workers due to low wages, difficult working conditions, or perceived job insecurity. These are all features of ‘good work’ which managers must also attend to in addition to skills.

The biggest skills over-supply is forecast for: Sports and Fitness Occupations; Protective Service Occupations (such as security); and Artistic, Literary and Media Occupations. Oversupply obviously leads to a downward wage pressure, further exacerbating economic inequality. Oversupply also indicates a problem with current training provisions which may focus on the wrong skill sets.

For higher skilled jobs, the overall expansion in demand reflects to a significant degree the need for greater capacity of analysis and critical reasoning using data.  Not long ago, Hal Varian, chief economist at Google reportedly predicted that, “The sexy job in the next 10 years will be statisticians.” Today, having the title "data scientist" in your LinkedIn profile, means you will be courted by numerous employers desirous of your talents. 

Supply trails demand, which pushes salaries up in the short run. This is reflected in a growing trend in higher education: There are now more than 400 analytics degree programs across nearly 220 business schools worldwide, and countless certification programs offered by private sector employers. These reflect the inevitable trend towards a workforce which must be able to utilize data to enhance productivity.  

The growing acceptance by employers of certificates and other micro-credentials is indicative of an important trend towards flexibility. Ensuring the there is sufficient scope within Higher and Further Education to rapidly respond to changing short run market needs is an important aspect of building a high-skill, high-productivity, and high-pay workforce 

As a final observation, we have found in our own research conducted for the department for BIS, that the management and leadership skills needed to help firms adapt to changing conditions may be lacking across the population of UK SMEs.  

Management and leadership skills serve to guide and direct their firm's strategy and ensure it has a workforce which is fit to meet its strategic goals and objectives. These skill sets are unevenly spread across UK SMEs and are predictive of higher levels of performance.

SME leadership skills are the starting point in a chain which leads through the identification of needed human resources, including the effective development of the workforce, and ultimately productivity and growth.  If we wish to help firms better identify skill needs, and create good work which attracts and retains talent, then ensuring the availability of skills support for SME leaders would be a positive place to start.  

However, policy will also need to consider how to ensure adequate investment in skills, where there are significant headwinds faced by individual firms in the UK – in particular regional inconsistencies in finding a skilled workforce from which to recruit, and an absence of collective action in developing that workforce which reinforces regional differences.

Words by Professor James Hayton, PhD, FCIPD, Professor of Innovation, University of Warwick, Warwick Business School; Senior Fellow, Institute for the Future of Work