Assessing labour market and skills demand via horizon scanning and future scenarios

A horizon scan of the UK labour market identified key drivers and emerging trends, and created scenarios of what the labour market could look like in the future. Researchers found that education and training systems need to teach broad concepts and foundation skills and that digital skills are critical to the future of most jobs.

What is the issue?

To ensure effective provision of skills in the future, it is important to assess what the future labour market in the UK might look like. While quantitative projections are available, the future of the labour market is shaped by many factors, which are often characterised by great uncertainty. This can make planning effective policy intervention for skill development a challenge.

How did we help?

Researchers from RAND Europe and the Warwick Institute for Employment Research were commissioned by the Department for Education to develop five qualitative scenarios of what the labour market might look like in the future.

The purpose of these scenarios is not to predict but to help decisionmakers envisage different possible futures and assess which policy levers might be useful under which circumstance. Accordingly, scenario building can be a useful policy planning tool.

To identify the drivers and emerging trends in the labour market over the next 15-20 years we conducted an evidence review focussed on six specific sectors – construction, wholesale and retail, higher education, transport and logistics, health and social care, and energy; and further spoke with more than 20 expert interviewees and ran a scenario workshop to develop the qualitative scenarios.

What did we find?

We identified 15 key factors affecting labour market skills and demand over the next 15-20 years:

• Domestic and political environment
• Global political settings
• Economic growth
• State of public finances
• Ageing population
• Migration
• Pace of technological change
• Technology-facilitated changes to the location & organisation of work
• Climate change
• Circular economy
• Bioeconomy
• Quality of work
• Skills mismatches
• Inequality
• Changes in delivery of education and training

We developed five labour market scenarios that reflect uncertainties in the economy, the environment, technology and the wider societal, political and legal landscape in the future:

• Digital greening: Strong economic recovery and international co-operation, coupled with a high level of public spending to aid re-skilling, has led to a digital, green and more inclusive society.
• Living locally: Building on public sentiment, the UK has invested in greening its economy, leading to the return of some activities to UK shores and a more local sustainable approach to living and working.
• Protectionist slowdown: A stagnant economy and a lack of investment has led to an increase in inequalities in many parts of the UK, including a digital divide and unequal access to education.
• Continued disparity: The economy continues to focus on the south-east of England. A skills mismatch persists, and high-skilled workers benefit from lifelong learning and greater flexibility, while the low-skilled experience increasing insecurity.
• Generating generalists: While the direct economic impact of the pandemic was relatively short-lived, there has been an increased emphasis on transferable vocational skills to ensure resilience in a rapidly evolving world.

What are the key policy implications?

• ICT/digital skills are critical to the future of most jobs with the emergence of specialist skill areas. Introducing STEM subjects for longer, incorporating these skills alongside regular studies and investing earlier in digital skills in the education system would support this skills need.
• Any future vocational education and training system needs to provide clear and more flexible pathways so that workers are aware of training options and can make informed decisions about what to do and how to do it.
• More flexible, portable training with corresponding micro-credentials could be accompanied by accreditation and licensing of providers to mitigate the risk in quality of qualifications obtained in this way.
• A broad range of stakeholders should be involved in developing courses and training to meet local labour market demand.
• Education and training systems need to teach broad concepts and foundation skills, such as communication, networking, problem-solving, literacy and numeracy skills.
• Employer investment in training will be increasingly important, but employer unwillingness to train their workers will continue to be a barrier. Incentives for life-long learning, both for the employer and employee, will be increasingly important, as will information on the benefits and options outlined.

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