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measuring Scotland's progress towards A SMART, SUCCESSFUL SCOTLAND
improving the operation of the Scottish labour market
LEAD INDICATOR
10A - PROPORTION OF THE WORKING AGE POPULATION IN EMPLOYMENT
Why this measure?
The percentage of the working age population in employment is an indicator of how successfully the benefits of Scotland's economic growth and prosperity are being shared across the workforce. Full employment on this measure will not be possible because those who are not actively seeking work, by undergoing education and training for instance, are still included, so the supplementary indicators help determine Scotland's performance.
How does Scotland perform?
Employment rate (2001)
Scotland is 11th in a 31-country OECD sample, placing it in the second quartile. A figure for Scotland comparable with the OECD data was not available due to differences in the definition of the working age population, so instead the figure for Scotland from the Labour Force Survey was used to scale Scotland relative to the UK. This gives Scotland an employment rate of 70.3% against the UK figure of 71.3% - the LFS rates being 73.4% and 74.4% respectively. Alongside Scotland and the UK in the second quartile are Australia and Japan.
Employment rate (1993-2002)
There is very little difference in the employment rate between Scotland and Great Britain. Though while the employment rate for both has increased over the past 10 years with the gap between them decreasing to less than 2% this still amounts to around 20,000 jobs and serves to indicate how relatively small percentage gaps equate to large absolute numbers of jobs.
What does this mean for Scotland?
Scotland's international performance is creditable. The second quartile performance may indicate the relatively high number of part-time workers in the Scottish labour market. It could also be the case, however, that Scotland's mid-ranking position reflects comparative inefficiencies in the breadth of the product and labour markets that limit take-up of available labour resources.
10B - SKILL SHORTAGES
Why this measure?
There will be skill shortages where the demand for a particular skill outstrips its supply. One measure of the efficiency of a labour market is its ability to balance these forces and allow the market to return to equilibrium. Firms' growth will be constrained by skill shortages and a labour market that effectively signals where shortages lie and allows workers to see where there are employment opportunities will be an attractive one to businesses.
How does Scotland perform?
Skill shortage vacancies as a percentage of employment, by sector (2002)
No international data are available, but from a report by Future Skills Scotland it is possible to compare vacancies due to skills shortages 13 as a percentage of employment as between Scotland and England, with a higher number indicating higher skills shortages. Only in the Manufacturing and Public Administration sectors does England have a lower number of vacancies as a percentage of employment than Scotland.
What does this mean for Scotland?
Skill shortages are relatively uncommon in both Scotland and England. The survey found that skill shortages were more likely to occur in establishments where there were high levels of part-time employment, seasonal employment and within small businesses. Given the very small absolute numbers of vacancies that are hard to fill because of skill shortages, Scotland seems well placed to match jobs with those able to fill them. However, the generally lower level of skill shortages in Scotland may reflect a weaker demand by companies for such skills. Further research is necessary to develop a better understanding of the nature of skill shortages in Scotland.
10C - RATIO OF UNEMPLOYED TO UNFILLED VACANCIES
Why this measure?
A well functioning labour market should provide the correct signals to ensure that those individuals with the skills to do a particular job are able to find a job demanding those skills. A high ratio of unemployment to unfilled vacancies would indicate that these signals are not being communicated clearly, either in signalling what skills workers need to equip themselves with or where the unfilled jobs are to be found. The ratio will also vary inversely with the pressure of aggregate demand in the economy. Slack demand conditions would see the ratio higher than in periods of strong demand.
How does Scotland perform?
Internationally comparable data were not available so a comparison was possible only with Great Britain - consistent data for Northern Ireland were unavailable. Data were used from Jobcentre Plus, though it is worth remembering that not all vacancies go through job centres. Scotland performs almost identically to Great Britain with a ratio of around 3.2 unemployed people to every unfilled vacancy. Due to a change in the measurement method employed, data were only available between June and October 2002 on a consistent basis. Past trends indicate that Scotland has had a higher ratio of unemployed to unfilled vacancies for some time but that the ratio has come down significantly in recent years.
What does this mean for Scotland?
Scotland performs similarly to Great Britain. This could well reflect the unitary UK labour market where it is reasonably easy to move in order to find employment. This measure will then give an indication of the structural unemployment in the economy where the skills people possess are not matched to those employers require.
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