1. Jobs, skills and unemployment in Scotland Centre for Economic & Social Inclusion September 2012 Sponsored by:

2. Contact Any questions on this research, contact: Paul Bivand, Associate Director of Statistics & Analysis, Inclusion Paul.bivand@cesi.org.uk 020 7582 7221 Acknowledgements Thanks to Wise Group and Glasgow City Council for sponsoring this work. Thanks for comments and advice from: David Coyne, Glasgow City Council; Laurie Russell, Wise Group; Jim Rafferty, Capital City Partnership; Paul de Pellette, Ingeus; Nick Young, Working Links; Matthew Crighton, Inclusion Associate. Thanks to Ingeus for research and charts in ‘Institutional and funding map’ section

3. Introduction This report gives a snapshot of Scotland’s labour market for mid-2012. Its intention is to give the facts and figures that are needed for an informed debate about: – the challenges for Scotland’s labour market – what more the Scottish and UK Government’s could do to tackle worklessness – welfare benefits and employment budgets in the independence debate. A separate short Overview report summarises the main findings and concludes with questions for the future.

4. Sources of data The data used in this report is sourced from the Office for National Statistics, Department for Work and Pensions, Scottish Government and other official sources. Some of the data and charts is based on Inclusion analysis of the Labour Force Survey and further analysis of published claimant count and Jobcentre vacancies data. The data used is prior to the September release of labour market figures Most charts show change from Jan-Mar 2008 (pre-recession) for both UK and Scotland

5. September’s labour market figures: what changed? Employment rate up 0.1 points to 71.4% - UK up 0.5 points to 71.2% Workforce jobs up 26,000 - a rise of 1.0% compared to a 0.3% rise for the UK Unemployment up 0.1 points to 8.2% - UK down 0.1 points to 8.1% Inactivity down 0.2 points to 22.1% - UK down 0.5 points to 22.4% Claimant count down 600 on July – a fall of 0.4% compared to the UK fall of 0.9% Claimant inflows down 700 or 2.6%, compared to a 1.8% fall for the UK Claimant outflows down 100 or 0.4%, compared to a rise of 2.1% for the UK Youth claimant count static at 43,700 – long term continuing to rise

6. Weathering the recession The Scottish labour market in context

7. Weathering the recession: better or worse than the UK?

8. Scotland’s recession started three months later than the UK Nearly as deep as UK – 5.7% fall in Scottish output – compared with 6.1% in UK Since Autumn 2009 output broadly parallel with UK In Q1 2012 Scotland and UK output 3.9% below pre-recession levels.... and showing few signs of recovery Recent forecasts are for further revisions downwards, both for UK and Scotland

9. The recession and jobs: better or worse than UK?

10. Employment in Scotland fell further in the recession than in the UK UK employment numbers fell 2.3%, in Scotland employment fell by 4.3%. UK employment has recovered to 0.1% below pre-recession levels, but Scotland’s employment remains 1.8% below The fall in Scottish employment is much more in line with the fall in GDP than is the case at UK level There are currently 45,000 less jobs in Scotland than before the recession

11. Employment

12. Scotland’s employment rate was up to 1.6 percentage points higher than the UK average as the recession started Scotland’s employment rate fell further, dipping below the UK line in the first half of 2010, since then Scotland has returned to a lead over the UK – but a lead only half as large If the employment changes are presented as percentage changes from the first quarter of 2008, the changes are clearer Employment in Scotland and the UK fell at the same rate until Q4 2009 – and then Scotland worsened while the UK stabilised Scotland then reduced the gap with the UK, almost returning to the Q1 2008 relationship briefly in Q2 2011, before a further gap opening up through the following period

13. Male and female employment rates

14. Male and female employment Before the recession, the main reason why the Scottish employment rate was significantly higher was a female employment rate up to 2.8 percentage points higher than the UK average Scotland’s female employment rate is still higher than the UK, but the gap has dropped to 1.6 points in the latest figures, and some months have been lower still The steep fall in female employment in 2011 coincided with reductions in public sector jobs The male employment rate for Scotland was, at the start of the recession, up to 0.8 percentage points above the UK level. The latest figure is negative at 0.4 points below.

15. Employment rates in local authorities Employment rate - aged 16-64 North Ayrshire61.5 Glasgow City63.5 Clackmannanshire65.8 Inverclyde66.1 South Ayrshire66.4 East Ayrshire66.8 Dundee City67.2 West Dunbartonshire 67.9 Renfrewshire68.0 Dumfries and Galloway 68.2 Eilean Siar68.2 North Lanarkshire68.8 Fife70.4 Stirling70.6 Falkirk71.5 Argyll and Bute71.6 Edinburgh, City of71.6 West Lothian71.7 South Lanarkshire72.0 Scottish Borders72.1 East Renfrewshire72.5 Angus72.6 East Dunbartonshire 73.0 East Lothian73.1 Perth and Kinross74.8 Midlothian75.2 Aberdeen City76.1 Moray78.0 Aberdeenshire79.2 Highland80.0 Orkney Islands80.4 Shetland Islands81.9 Scotland70.7

16. Employment rates in local authorities The lowest employment rates are in the West of Scotland, Dundee and Clackmannanshire The highest employment rates are in Shetland, Orkney, the Highlands, Moray and Aberdeenshire The gap between the highest at lowest employment rates is 20.4 percentage points The table shows the employment rates of all the local authorities in Scotland

17. Scottish vacancies

18. Vacancies These charts show full-time vacancies ONS vacancy survey is not available for Scotland but Jobcentre vacancies are available Inclusion’s seasonally adjusted analysis shows a slow improvement in JCP vacancies in Scotland The fall in vacancies reached 44% in Scotland, compared with 37% in GB The recent improvement is nowhere near as fast as for Great Britain The Scottish improvement is more recent – GB started recovery immediately in Summer 2009 While vacancies in Scotland remained very low for 2 ½ years, GB vacancies have now reached and passed the pre-recession level Scottish vacancies have only climbed back slowly to 20% below the pre- recession level

19. Work that does not meet aspirations

20. Before the recession less than 10% of part-time workers had taken part- time work because they could not get a full-time job – in both Scotland and UK In the UK, this has been rising steadily and has now reached 18% For Scotland, the rise has been sharper, particularly since Spring 2010, and reached 19.8% in Summer 2011 Before the recession around 25% of temporary workers had only taken these jobs because permanent jobs were not available – in both Scotland and the UK In the UK, this has been rising steadily and has nearly reached 40% In Scotland, the proportion passed 40% in late 2009 and reached 50% in Winter 2011

21. Unemployment

22. Scotland’s unemployment rate (on the international standard measure) is 7.9%, 0.1% below the UK There are 214,000 unemployed people in Scotland The fall in employment has translated into higher unemployment rather than higher inactivity – the inactivity rate is now back to where it was before the recession began Pre-recession, Scotland had a lower unemployment rate than GB So, the percentage rise to now is higher in Scotland than in GB Scotland’s male unemployment rate is 8.7%, 0.2 % above the UK level Scotland’s female unemployment rate is 7.0%, 0.4% below the UK level

23. Claimant (JSA) count

24. Claimant count There are currently 144,000 JSA claimants in Scotland – this is double the pre-recession level Scotland’s claimant count rose with the recession and stayed high Scotland did not benefit from the improvement at the UK level in 2010, nor suffer so much from the later UK rise Highest proportions in Glasgow and neighbouring local authorities 34% of all the unemployed (ILO) claim JSA – this is below the UK rate of 38% The likely reasons for this are the higher levels of women in the labour market and the (marginally) higher rate of young people in learning saying they are unemployed

25. JSA in local authorities Claimant count rate North Ayrshire6.9 West Dunbartonshire6.6 Dundee City6.5 East Ayrshire6.5 Glasgow City6.1 North Lanarkshire5.8 Inverclyde5.7 Clackmannanshire5.5 Renfrewshire5.1 Fife4.7 South Lanarkshire4.7 Falkirk4.6 South Ayrshire4.5 Midlothian4.2 West Lothian3.9 Dumfries and Galloway 3.7 Angus3.4 Eilean Siar3.4 Edinburgh, City of3.3 Stirling3.3 Argyll and Bute3.2 East Lothian3.2 Scottish Borders3.0 East Dunbartonshire2.7 Highland2.7 East Renfrewshire2.5 Moray2.5 Perth and Kinross2.4 Aberdeen City2.3 Shetland Islands1.6 Orkney Islands1.5 Aberdeenshire1.4 Scotland4.3

26. JSA in local authorities The map shows how claimant count rates (as a proportion of the working age population) vary across Scotland The highest rates are in the West of Scotland, Dundee and Clackmannanshire The lowest rates are in Aberdeenshire, Orkney and Shetland

27. Vacancies and JSA claimants

28. New vacancies per new JSA claimant dropped with the recession At the low point, vacancies were less than 50% of new claimants each month This has recovered to 80% in Scotland Well below the 104% in GB – because vacancies in Scotland have been slower JSA claimants per vacancy rose along with GB to 9 – but Scotland remained around this level until Autumn 2011 while GB improved Since then, Scotland has improved to 6.8 claimants per vacancy, worse than the GB 5.3 level

29. How many on different benefits?

30. In Scotland, 57% of out of work claimants are claiming ESA or legacy incapacity benefits – compared to 52% in GB ESA/IB claimants are 8.1% of the working age population in Scotland – compared to 6.5% in GB JSA claimants are 31% of claimants in Scotland, and 32% in GB Lone parents on Income Support are 12% of claimants in Scotland and 10% in GB Before the recession and benefit changes moving lone parents into JSA, about 12% of all claimants in Scotland were lone parents (15% in GB) The proportion of all claimants on ESA/IB in Scotland has dropped by 3 percentage points since 2007

31. Inactivity rates

32. Inactivity Scotland’s inactivity was well below UK levels before the recession... and is so now Male inactivity rose well above UK levels 2009-2011, now back down to UK level Female inactivity is well below UK levels, but recent trend is rising 24.4 %of the inactive say they want to work

33. Inactivity across Scotland % who are economically inactive - aged 16-64 Glasgow City28.1 North Ayrshire28.1 South Ayrshire26.2 Dundee City26.0 Eilean Siar25.8 Clackmannanshire25.7 Renfrewshire25.4 West Dunbartonshire24.6 East Ayrshire24.5 Dumfries and Galloway 24.3 Stirling24.3 Edinburgh, City of23.9 West Lothian23.5 Scottish Borders23.2 Argyll and Bute22.9 Angus22.8 Fife22.8 Inverclyde22.8 North Lanarkshire22.8 East Renfrewshire22.6 South Lanarkshire22.1 East Dunbartonshire22.0 Falkirk22.0 East Lothian21.6 Perth and Kinross19.9 Midlothian19.5 Moray18.7 Aberdeen City18.5 Aberdeenshire17.6 Orkney Islands17.6 Highland17.0 Shetland Islands16.8 Scotland23.1

34. Inactivity across Scotland The proportion of people who are economically inactive varies across Scotland from 16.8% in Shetland to 28.1% in Glasgow and North Ayrshire The Highlands and Islands (with the exception of Eilean Siar) has the lowest inactivity rates, followed by Midlothian Economic inactivity includes students and family care as well as long- term illness or disability

35. Qualifications of Scotland’s labour force

36. Skills background

37. Working and workless by qualification

38. 43% of Scottish workers are qualified to the former SVQ Level 4 and over This compares with 39% in the UK 7% of Scottish workers have no qualifications, but 23% of the Scottish workless have no qualifications This compares with 6% of UK workers, and 20% of the UK workless having no qualifications Scotland therefore has more both employed and workless at both ends of the qualification distribution The employment rate rises by qualification in both Scotland and the UK, with a 22-23 percentage point difference between no qualifications (42% Scotland, 40% UK) and those with a Level 1 qualification. Level 2 adds a further 4 percentage points, and Level 3 a further 5 percentage points. Level 4 adds 10 percentage points to employment rates.

39. Skills background The latest analysis is the 2010 Scottish Employer Skills Survey (2011 Survey is due for publication) Findings from 2010 Survey were: – Skill shortages and skill gaps are uncommon when set in the context of a labour force of around 2.5 million people. Skill gaps are perceived to have a minor impact by employers and are often transitory – There are fewer hard-to-fill vacancies than in previous surveys: in 2010, 35 per cent of vacancies were hard-to-fill, in 2008 this proportion was 50 per cent. – Most employers who have recruited someone straight from school, college or university thought that the recruit was well-prepared for work.

40. Scottish employer views on skills Almost half of employers said that they would have provided more training over the last 12 months if they had been able. Lack of funds was the most common reason Very small firms have higher rates of vacancies, hard-to-fill vacancies and skill shortages than larger firms, and are less likely to provide staff training People doing jobs that typically require lower levels of skills and qualifications are more likely to be deemed not fully proficient by their employer. They are also less likely to receive training from their employer. Where proficiency is lacking, it is mainly because of weaknesses in soft skills such as planning and organising, customer handling, problem solving and team working

41. NEET young people – More Choices, More Chances

42. More Choices, More Chances Despite Scotland having higher proportion with high qualifications Scotland still has a higher proportion unqualified than GB And Scotland has a higher proportions of its young people who are Not in Employment, Education or Training – NEET Scotland has had a higher NEET rate than England for six out of the last eight years This is the target group for More Choices, More Chances

43. Future of the Scottish labour market 2012 Working Futures Projections, UK Commission on Employment and Skills

44. Future of the Scottish Labour Market The UK Commission on Employment and Skills has recently published projections for employment for Scotland to 2020 This section presents their key findings and a small selection of charts from the report As with all forecasts – there are risks around forecast estimates The success or failure of policies and adjustments will result in the results being different from these projections

45. Working Futures 2012: Towards 2020 Employment is projected to grow only half as fast up to 2020, more slowly than for the UK The fastest rate of output growth to 2020 is projected for Business and other services, while the Primary sector and utilities will continue to contract Employment growth is projected to be fastest in Construction and private sector services and employment is projected to continue to contract in Manufacturing The Business and other services sector is projected to be the largest industry sector in Scotland in terms of employment in 2020 The broad shift in the occupational profile of employment in Scotland away from lower-skilled occupations towards higher-skilled occupations is projected to continue, with 50% of jobs to be held by people holding higher level qualifications by 2020 Vacancies from ‘replacement demand’ (replacing people who retire) are projected to be greater than vacancies from net growth in employment.

51. Who has fared better or worse?

52. Long Term Unemployed

53. Long-term unemployed JSA Long-term unemployment has grown faster in Scotland for both 18-24 and 25+ groups than in GB Scottish youth long-term unemployment has risen 423% since 2008, compared to 343% for GB – with the gap growing from the beginning of 2009 Scottish adult long-term unemployment has risen 291% since 2008, compared to 261% for GB – and this gap opened from July 2010 It has grown faster because Scotland has high levels of new claims and Scotland’s faster off-flows have not been sufficient to hold down the growth in numbers How the long term unemployed are counted changed from June 2012, when everyone joining the Work Programme remained on JSA The growth charts include the effects of Programmes that previously time-limited benefit claims

54. Scotland: Young people in education and the labour force

55. Young people Scotland has 16% of young people unemployed – or 23% of economically active young people The rest of GB has 13% of young people unemployed – an unemployment rate of 21% Scotland has lower inactivity – 4% lower in learning and 2% lower out of learning The NEET rate is 1% higher in Scotland – more unemployed and less inactive compared to GB

56. Disadvantaged groups: Employment rates

57. Disadvantaged groups in Scotland Lone parents – 57.6% employment rate, below 2009 59.6% peak – now 1.3% ahead of UK Disabled people – 46% employment rate – below 2011 peak of 49.1% - now 2.5% behind UK BME groups – 62.5% employment rate, below 2011 peak of 66.9% - now 3.8% ahead of UK No qualifications – 42.7% employment rate, up from 2010-11 – 3.1% ahead of UK

58. Where has fared better or worse?

59. Out of work claimants in Scotland Out of work benefit rate Glasgow City21.1 Inverclyde20.3 West Dunbartonshire20.2 North Ayrshire19.1 Dundee City18.7 North Lanarkshire18.3 East Ayrshire17.5 Clackmannanshire17.4 Renfrewshire16.4 South Lanarkshire15.4 South Ayrshire14.8 Falkirk14.4 Fife14.2 West Lothian14.0 Midlothian13.7 Dumfries and Galloway13.1 Argyll and Bute11.7 East Lothian11.7 Eilean Siar11.5 Angus11.4 Highland11.4 Stirling11.3 Edinburgh, City of10.7 Scottish Borders10.7 Moray10.1 Aberdeen City9.7 Perth and Kinross9.4 East Dunbartonshire9.0 East Renfrewshire8.8 Orkney Islands8.0 Shetland Islands7.5 Aberdeenshire7.0 Scotland14.2

60. Out of work claimants in Scotland The map shows that the proportion of the working age population claiming benefits is highest in the West of Scotland, Dundee and Clackmannanshire The area with the lowest proportion claiming benefits are Orkney, Shetland and Aberdeenshire

61. Claimant count gaps rising

62. Authorities with highest unemployment had worst impact

63. Local Authorities Authorities with the highest JSA before the recession were worst hit Unemployment gaps between local authorities in Scotland have been widening

64. Effectiveness of support to the unemployed

65. How has Jobcentre Plus performed in Scotland?

66. How has Jobcentre Plus performed? Jobcentre Plus performance – measured by the success in preventing people becoming long-term unemployed Scotland slightly better than GB, currently 16.1% of JSA starters become long term unemployed compared to 16.3% in GB This is substantially worse than pre-recession when 8.7% became long term unemployed But still more successful than last recession when 22% became long term unemployed

67. Off-flow rates

68. Off-flow rates measure the success of JCP in moving people off benefit in each three-month period Young people – worsened with recession – recent improvement but could still be blip Older people – performance for those approaching Work Programme has worsened JSA claimants stay on benefits for a shorter period than UK claimants: 18-24s = GB 17.3 weeks, Scotland 14.8 weeks; 25+ = GB 26.8 weeks, Scotland 25.9 weeks

69. JSA Sanctions/disallowals

70. Sanctions/disallowals Figures are adverse sanction decisions as a percentage of JSA claimants Sanction rates dipped in late 2010 and rose again in 2012 Scotland sanction rates have been typically lower than GB rates but Q2 2012 was slightly above

71. New Deal Job Starts

72. Scotland New Deal job entry rates weren above those for GB from 2002 onwards Peak performance for job entries were 70% for 18-24s and 50% of 25+ Job entry rates fell with the recession Figures not available for 2010-11 (last New Deal participants finished September 2011)

73. Employment Zones & Flexible New Deal Job Starts

74. Employment Zones & Flexible New Deal Job entry performance of the Glasgow Employment Zone better than that for all EZs in GB At start, Glasgow had referrals at 12 months, later scaled back to 18 months The 12-month Zone had 10 percentage point higher job entries But 18 month performance reached similar levels in 2004 Flexible New Deal (FND) was increasing performance but South Scotland (only FND area in Scotland) was increasing at a slower rate

75. What we know about Work Programme (WP) so far No performance data is yet available for the Work Programme – the first release is due in November 2012 Prime contractors DWP published contract values: – Ingeus – value £141,761,075 – Working Links – value £165,049,395 Difference in values is because of discount and performance offer – referral volumes same Referrals 19% over ITT volumes – for nine months rather than a full year – JSA up and ESA down (as GB)

76. What we know about WP to date – referrals 19% higher than ITT

77. WP claimant off-flows in Scotland

78. Off-flows from claimant count have been falling over the Work Programme period But these have been flattening off in latest months Scottish off-flows are, in the latest figures, worse than those for GB These figures cannot be used as a performance measure but is an indicator of the chances of long-term unemployed people getting a job Reduced off-flows will mostly be a reflection of the wider jobs market

79. Fairness indicator for long- term unemployed

80. Fairness indicator The ‘fairness indicator’ is a comparison of the rates at which the short and long term unemployed leave JSA The wider economy will affect the rate at which groups leave JSA, and so will the performance of Jobcentre Plus and programmes for the long-term unemployed If conditions for the long-term unemployed are improving compared to the short-term unemployed – the gap will close Recently, short-term off-flow has been improving while long-term unemployed off-flows have been flat or worsening – leading to a widening gap The fairness gaps are close to the largest on record (data goes back to 1985)

81. Apprenticeships and skills programmes performance Scottish Government commitment to 25,000 new Modern Apprenticeship opportunities each year In 2011-12 this was over-achieved – 26,427 starts Achievement of a qualification was 75% of leavers In March 2012, there were 35,262 Modern Apprentices in training

82. How does this compare with England? Scotland has a slightly higher target proportionally than the equivalent English target Scottish Government has maintained employed status requirement throughout England moved away from employed status to Programme-led Apprenticeships when former NVQ Training re-badged as apprenticeships England now has some Apprenticeship Training Organisations employing apprentices – Scotland has not promoted this model

83. What do the numbers show? Scotland – 18,212 achievements in qualifications in 2011/12 – 52% of Modern Apprentice numbers – 75% success rate for leavers in 2011/12 England – 200,300 achievements in 2010/11 – 30% of Apprentice numbers – 76% success claimed – 66% are at Intermediate level qualifications

84. Spending on welfare benefits in Scotland

85. Spending in Scotland by DWP + HMRC Tax Credits £7.7bn

86. Spending in Scotland by DWP and HMRC (Tax Credits) Two biggest groups: – sickness and disability and – HMRC for Tax Credits Sickness and disability - 40% of spending HMRC child and working tax credits - 29% of spending Unemployment benefits - 8% of spending DWP Programmes and administration – 4% of spending

87. £1,345 benefit/tax credit cost per capita to Scottish population

88. Cost per capita to Scottish population Benefits and tax credits in Scotland cost £1,345 per head – excluding State Pension and Pension Credit Roughly in line with GB average Well below northern England, Wales and London Above South and East of England

89. The cost of Benefits in Scotland Total cost £7.7bn 8.8% of Scotland’s family income - Gross Domestic Household Income Just above GB level Benefits counted: – Tax Credits, – Jobseeker’s Allowance – Employment and Support Allowance and legacy Incapacity Benefits – Income Support, – Disability Living Allowance, – Housing Benefit, – Council Tax Benefit

90. Different types of benefits and spend

91. Jobseeker’s Allowance - £0.5bn Employment and Support Allowance, Incapacity Benefit, Income Support - £1.5bn Disability Living Allowance - £0.76bn Housing Benefit - £1.7bn – includes pensioners Council Tax Benefit - £0.4bn – includes pensioners

92. Tax credit cost

93. Working and Child Tax Credit cost In-work Tax Credits £1.6bn Out of work tax credits (child) £0.5bn For both, Scotland cost per head below the GB average Likely to be due to Scotland’s higher female employment rate than in the rest of the UK

94. Earnings in work in Scotland Median pay for full time 2011 – £25,538 3.1% below GB level Part-time pay median – £8,845 2.8% above GB level – for hours only 0.5% more

95. Welfare Reform

96. Impact of Universal Credit Scottish Government impact analysis: – based on IFS analysis, approximately 140,000 households in Scotland will lose out from the introduction of Universal Credit, particularly lone parents – DWP policy model suggests, around 200,000 households in Scotland will have higher benefit entitlements (£25 more per week on average) under Universal Credit, while around 170,000 households would receive less (£19 less per week - on average) – individuals covered by transitional protection

97. Impact of Universal Credit Bigger impacts likely from non-financial effects Digital by default – internet claims and changes in circumstances Housing element paid directly to tenant Four-weekly payment Impact of HMRC real-time employer income information on changes in circumstances UK Government promotion of mini-jobs

98. Impact of other welfare reform Council Tax benefit localisation: Funds devolved to Scottish Government. SG to make up the 10% cut for allocation to local authorities Housing Benefit: 60,000 tenants in Scotland to lose on average £40 per month – HB set at 30 th percentile level – Over-occupation penalties to affect over 94,000 social tenants, losing about £11 per week Other changes – Tax credits, childcare

99. The institutional and funding map for Scotland Research and charts courtesy of Ingeus

100. Overview

101. UK Government programmes

102. SDS programmes

103. Scottish local authorities