What drives changes in demand for skills?

Major changes in the economy – technological change, globalisation and demographic change among others – are affecting demand for skills in two ways. Firstly, they have changed the type of jobs people are doing, both in terms of job titles and the tasks they involve. Secondly, they have changed the type of skills required within existing occupations, meaning that for some occupations the job title has stayed the same but the job description has changed.

Changes in the composition of jobs have varied across the country and impacted on demand for skills

One factor that has changed demand for skills is the changing profile of jobs in the UK economy. In a manufacturing-based economy with lots of manual routine jobs in factories, demand for physical skills will be high. As the UK economy becomes increasingly service-orientated with an increase in non-manual, less routine jobs, demand for analytical and interpersonal skills will increase.

These changes in part explain changes in demand for skills in UK cities. Demand for skills has changed as the share of high-skilled, non-routine jobs has grown in the economy (see Figure 6). Between 2006 and 2016, the share of jobs in high-skilled, non-routine occupations has increased by 2 percentage points, while there has been a slight increase in the share of low-skilled non-routine occupations. In contrast, growth in more routine occupations, such as process, plant and machines operatives and skilled trade occupations, has declined by two percentage points.

Figure 6: Job composition 2016 and change over time (2006/16)

These trends have been more accentuated in the Greater South East. Professional occupations have seen the biggest growth nationally but this growth has not been evenly spread out. Between 2006 and 2016, professional occupations grew by 59 per cent in Milton Keynes and by more than 30 per cent in Reading and London. As a result, these cities are now among the cities with the highest share of professional occupations and the highest demand for analytical and interpersonal skills.

These trends are expected to continue in the future, meaning that analytical and interpersonal skills will become even more important. The shift towards a service economy will continue, with creative and media related occupations, health, education and local services occupations (such as food and hospitality and sport and fitness occupations) all likely to grow in demand in the future.4

Demand for skills is also affected by changes in skills required within occupations

Technological innovation has meant that many routine tasks are now done by machines and that some occupations, particularly those related to manufacturing, are now more orientated to overseeing and interacting with
those machines.

These changes serve as an important reminder that changing occupational and sectoral profiles will only provide a partial picture of the way in which demand for skills is changing.

Box 4: The change in skills demanded by assemblers (vehicles and metal goods)

Assembler jobs are among the ones most at risk of displacement. Overall, the total number of assemblers declined by almost 20 per cent between 2006 and 2016. Yet the nature of the skills required by assemblers has also changed across the decade.

In line with broader shifts, the requirement for assemblers to have interpersonal skills almost doubled between 2006 and 2016, while their need for physical skills declined by 46 per cent (see Figure 7). In particular, persuasion and social perceptiveness – skills that were only marginally important for assemblers in 2006 – have grown the most in importance. While operation monitoring and quality control analysis continue to be the most important skills for assemblers, they have decreased in importance over time by respectively 25 and 35 per cent.

These changes have taken place as the role of assemblers has become less about putting things together, and more focused on maintaining and interacting with machines that are assembling items.

Figure 7: Skills importance for assemblers, 2006 and 2016

Emsi, 2018

5

In fact, changes in the skills required within occupations are the main drivers of changes in demand for skills overall. Estimates suggest they account for between 80 to 90 per cent of the change in demand for analytical skills and for 90 per cent of the change in demand for interpersonal and physical skills.6

This has two important implications for policy-makers. Firstly, jobs that are considered at high risk of disappearing might not in reality disappear; rather, the skills required by these jobs will change. This suggests that jobs might be less vulnerable to automation than one would think and therefore policy should not overly focus on job losses. Secondly, it underlines the importance of analytical and interpersonal skills even in those economies where there are fewer jobs that would typically use these types of skills. Hence, interpersonal and analytical skills should sit at the core of education from the early years through to
adult education.

Footnotes

  • 4 Bakhshi et al. 2017, Future of Skills: Employment in 2030, London: Nesta and Pearson.
  • 5 Bakhshi et al. 2017, Future of Skills: Employment in 2030, London: Nesta and Pearson
  • 6 Dickerson A. and Morris D. (2017) “The changing demand for skills in the UK” Department for Economics and CVER University of Sheffield.