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Background Analysis to the Framework for Economic Development in Scotland
9. Responding to Demographic Change
The fact that Scotland's population is declining has become an issue of increased public attention and the Executive is responding to the challenges that this demographic trend is posing to the economy and to society.
9.1 Implications for Development
Population decline will tend to reduce economic growth if less labour is actively engaged in production. Since economic prosperity is certainly promoted by a strong and growing domestic market in which domestic enterprises can build a firm operational base, measures which seek to halt and ultimately reverse the decline in the population can have a positive impact on economic growth.
It is also important to emphasise that, apart from overall population numbers, the structure of the population and especially its age and skill profile are important determinants of the composition of the labour force and employment trends. Moreover, the labour market itself will respond to demographic changes.
Scottish Ministers' aim is to reverse the population decline and continue to maintain the necessary skills within the Scottish labour force.
Fertility rates are below replacement levels across Europe - the relative quicker decline in population numbers in Scotland is linked to a low level of net out-migration. The Fresh Talent initiative aims at attracting people to Scotland that can make a positive contribution to the economy and to society.
Population ageing lengthens the time an individual can participate in the labour market and contribute to the economy. At present, however, attitudes, habits, and institutional obstacles make it hard to realise this opportunity. To contribute effectively, workers have to engage in lifelong learning and keep their skills up to date throughout their careers, a need recognised by the Executive's commitment to a lifelong learning strategy. Ageing does not pose a fundamental problem to economic development if workers and employers seize the opportunities to meet this challenge. The responsibility to deal with this demographic trend primarily lies with the private sector, but the Executive has a role being in facilitating the transition to new patterns of work that take account of an ageing workforce, by making sure that people have access to information and learning opportunities.
Projected shifts in population density show that many rural areas will suffer further depopulation. The central belt, however, will absorb a larger number of people who are set to live there. The population forecasts are based on historic patterns of fertility and migration that in part reflect the economic fortunes of the different Scottish regions - therefore these forecasts can only provide a rough guide to future demographic trends as changes in social, regional and economic circumstances will also change demographic developments.
Overall population decline will reduce aggregate demand for public services (given age structure as well as per capita level and quality of services) but ageing will bring about a shift in the necessary composition of public services (especially increasing demand for health and care services) while changes in population density means that it will become more challenging to deliver services to a larger number of sparsely populated areas. The balancing between efficient targeting of public money to densely populated areas, where it arguably creates the largest value for money, and the fair provision of public services across Scotland will become more difficult. In devising sustainable policies for Scotland the Executive is paying heed to these long-term trends and adjusting its service commitments accordingly.
9.2 The Demand for a Skilled Workforce and Fresh Talent
A modern economy can only compete if employers have access to a skilled workforce. The projected demographic trends in Scotland mean that there will be fewer young people entering the labour force thus reducing the supply of skills. The Executive's Fresh Talent Initiative, announced in February 2003, sets out to reverse the effects of population decline through greater retention of people and in-migration.
Its objectives are:
- to attract talented individuals to consider Scotland as a relocation destination;
- to encourage people to think about coming to live and work in Scotland, as well as supporting efforts to retain in Scotland people already living in Scotland who wish to begin, or to further, their careers in Scotland;
- to help achieve the vision of Scotland as a safe, open, tolerant, society offering people an attractive lifestyle; and
- to help Scotland's economic performance and add to the diversity of its population.
The immediate targets are:
- to increase the proportion of non-Scottish students who stay on to live and work after graduation; and
- to bring our share of UK work permits into line with our share of UK population.
This initiative will take some time to take root and produce results, but when it does it will complement the Executive's efforts to promote a skilled labour force and support economic growth by increasing the labour force overall. In order to attract Fresh Talent to Scotland, we have to look at policies across the Executive, but we have to focus especially on the impact that a vibrant culture can have on making Scotland a first choice for talented people from abroad.
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