History shows that major changes in the economy, resulting from the introduction of new technologies and the evolution of global supply chains, for example, play out differently across the country. Cities Outlook 20182 highlighted that some cities are more vulnerable in the face of these changes, whereas others are better placed to attract high-skilled jobs. The ability of cities to adapt to change is reflected in their economic performance: while the employment rate is at its highest level nationally, there is significant variation across cities.
Most of the public debate on the future of work has focused on the impact of automation and globalisation on jobs: which roles are likely to be lost and which ones might be created. Less emphasis has been put on the skills required for the jobs of the future. These skills have a fundamental impact on the ability of individuals – and cities – to adapt in the changing economy.
In recent years, the Government has introduced a number of reforms in the education sector, spanning from early years, through to schools and GCSE reform, T-levels, apprenticeships and Further Education. Similarly, skills are a key priority for the metro mayors and for Combined Authorities and Local Enterprise Partnerships (LEPs) in the development of their local industrial strategies. The Department for Education has promised to devolve the Adult Education Budget to Combined Authorities, Skills Advisory Panels are being set up across the country and area-based reviews for Further Education have been carried out.
Given the number of reforms underway at the moment, it is crucial to ensure they reflect the skills changes taking place in the labour market. As people become less and less likely to stay in the same job for their entire careers, this means ensuring training is as relevant for current roles as for future ones, endowing individuals with transferable skills.
Yet to date there has been limited research on how skills demand and supply is changing across the country. This report aims to fill this gap. It looks at the types of skills that are going to be needed in the future labour market, how cities are responding, and what more they need to do to ensure individuals have the skills to succeed. It first sets out how demand for skills is changing in cities. It secondly explores the factors behind these changes. Thirdly, it explores the extent to which the supply of skills in different cities reflects these changes and the implications for national and local policymakers.
Box 1: Mapping changing demand for skills
Data from the labour market analytics company, Emsi, was used to build a detailed picture of change in city labour markets between 2006 and 2016.
Changing demand for skills is measured using skills data from the O*NET database from the United States. O*NET is a comprehensive system for collecting and disseminating information on occupational and worker requirements and includes data on the importance of 35 different skills for almost 1,000 occupations covering the entire US economy.
Data from the O*NET is then mapped on to UK city labour markets in several steps:
- O*NET data is converted between the US Standard Occupational Classification (SOC) system and UK SOC at the 4-digit level.
- Detailed occupational data (4-digit level) was constructed by combining job data within industries from the Business Register for Employment Survey with occupational data from the Annual Population Survey using a staffing pattern constructed using the Labour Force Survey.
- A vector for each of the 35 skills was created by aggregating the value of the skills importance of that skill in each occupation, weighted by the relative share of that occupation in the city labour market (following the methodology used by Dickerson and Morris ). This provided an overall measure of the demand for each skill in each city.
Due to changes in the way skills were measured in O*NET over the time period for the analysis, adjustments were made to the 2006 version of the survey to ensure it was comparable to the 2016 version. While skills measures for all occupations in the 2016 survey were provided by job analysts, some were provided by people doing particular jobs (job incumbents) in the 2006 survey. The ‘incumbent-effect’ was then calculated and subtracted from the skills measure to produce consistent measures across the time period.
For the purpose of this research, the 35 skills were then aggregated into three indices: analytical (or cognitive), interpersonal and physical (or manual) skills. See Appendix 1 for a complete list of skills for each index.