“The future of the work and its impact on vulnerable people:

10 years of the Incorpora Program”

Future Prospects for the Labour Market

Inaugural session of the cycle of seminars in the Palau Macaya

Date: 24th February (09:15 – 12:30) Palau Macaya, Conference Hall (Passeig de Sant Joan, 108,

08037 Barcelona)

Professor Rob Wilson, Institute for Employment Research,

University of Warwick, United Kingdom

OVERVIEW

1. WHY produce employment forecasts? The value of skills projections and their limitations - What skills forecasts can and cannot achieve

2. HOW do we go about it? 3. RESULTS: Key messages from the Cedefop

Projections for the whole of the EU and for Spain

1. WHY FORECAST?

Forecasting is impossible Forecasting is unnecessary Forecasts are inaccurate and based on invalid assumptions (They are illegal ………. (at least in the UK!))

Why Not?

Act Against Conjuration, Witchcraft and Dealing with Evil Spirits

First enacted during the reign of James I, partially repealed in 1736, but nevertheless:

“prediction of the future is illegal as are any pretence to such arts and powers whereby ignorant people are frequently deluded and defrauded”

However, practitioners were no longer condemned to death:

“shall for every such offence suffer imprisonment for the space of one whole year without bail, and once every quarter of the said year shall stand openly in the pillory for the space of one hour”

However……

Fortunately for UK forecasters at least this was further amended more recently in: the Fraudulent Mediums Act, 1951

in which such activities are excused if:

“done solely for the purposes of entertainment”

Is systematic anticipation possible?

Nobody can predict the future with certainty or precision – “All forecasts are wrong!”

Everybody can prepare or plan for the future - Government, employers, educational institutions & individuals

These plans and related decision help to determine actual outcomes – such planning involves some element of forecasting: either implicitly or explicitly

In this sense not only is forecasting possible it is inevitable Comprehensive, systematic, consistent projections, based

on explicit and transparent assumptions provide useful information for all labour market participants, helping to inform all those making choices & decisions

Is Forecasting Necessary?

Rapid change, uncertainty & evidence of market failure Long lead times on investment decisions such as education

and training choices Need for a regular and systematic assessment of future

prospects to: guide & inform policy formation;

guide & inform individual decision making;

avoid future imbalances & mismatches;

need for a counterfactual to assess policy or different choices

The only meaningful questions are therefore how, by whom and with what end in mind?

So, Forecasts: Who Needs Them?

A Variety of audiences The State - planners/policy makers Education and training providers Companies/Employers

labour market pressures other reasons

Individuals: career choices Careers advisors

Aims & objectives Understanding past trends Future employment prospects:

Numbers employed by sector & occupation -job openings Education and training requirements - qualifications and skills

needed Supply/demand balances (including terms and conditions of

employment (pay)

Caveats: Implicit assumptions about the labour market Not mechanistic manpower planning Focus on the formal economy The Future is not fixed or predetermined

Ostrich approach to planning

2. HOW WE FORECAST

More systematic approaches:

• Quantitative computer models • Delphi techniques • Scenario development

Folk-lore – Crystal balls and other methods!

How to Forecast / Anticipate

Formal, quantitative models: • Extrapolation of past trends • Time series methods • Need for behavioural content

Other approaches: • quantitative & qualitative • surveys • scenario development

Key elements: • Where are we now? • What happens next?

Advantages of quantitative modelling

Natural desire to quantify, measure and evaluate: • Benefits of a formal model • Value of benchmark forecasts Technological progress and statistical infrastructure International best practice - Quantitative modelling

approaches, based on macroeconomic, multi-sectoral models

The CEDEFOP framework for skills forecasting in Europe

Developments in the labour market are crucially dependent on what happens to the economy more generally

The typical quantitative modelling approach therefore involves two key elements:

• Multi-sectoral macroeconomic model • Modules to translate the results into

implications for skills demand and supply

Overall approach – modelling framework

Module 1: Multi-sectoral macroeconomic model (E3ME)

Employment (labour demand)

Labour market participation rates

Benefit rates

Economic activity

Active labour force by age and gender

Working age population by age and gender (exogenous)

Unemployment

Wage rates

Job openings by Occupation (ISCO 2 digit) Job openings by

Qualification (ISCED category)

Module 2: Employment levels and Expansion Demand by occupation (EDMOD)

Module 3: Employment levels and Expansion Demand by qualification (QUALMOD)

Module 5: Stocks of people by qualifications, 3 ISCED levels & by economic status (QUALMOD)

Numbers in the labour force by qualification ISCED category

Demand for skills

Module 6: Flows and graduate numbers by ISCED category (FLOWMOD)

Numbers in the population by Qualification ISCED category

Module 7: Imbalances & Mismatches (Supply-Demand), ISCED levels (BALMOD)

Module 4: Replacement demand by occupation / qualification (RDMOD)

Supply of skills

Role of the E3ME multi-sectoral macroeconomic model

Model the links between the labour market and the wider economy

Provide a consistent modelling framework for projecting skills demand and supply together allows analysis of imbalances (unemployment)

Take key drivers into account e.g. the impacts of the financial crisis and demographic change

Include analyses of key uncertainties develop alternative scenarios to see how these will impact on

skills in the future

3. KEY RESULTS

The future of employment – the rise of the Professionals

Key issues and drivers

Driver Demand: employment trends

Supply: labour force trends

Government spending

GDP forecast

Competitiveness & trade

Technology & innovation

Ageing population

Higher statutory retirement age

Migration

Education policy

Gender equality

Macroeconomic Impact of the 2008 financial crisis (EU)

205

210

215

220

225

230

235

240

245

2000 2005 2010 2015 2020 2025

Million jobs

No crisis scenario2010 baseline2011 baseline

Employment prospects, 2005-2030: Spain (ES)

0.00

5.00

10.00

15.00

20.00

25.00

2005 2010 2015 2020 2025 2030

Millions

Demographics, 2015-2025 (ES)

-60%

-40%

-20%

0%

20%

40%

60%

15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+

Population change Labour force change

Declining labour force (falling population) but increasingly well qualified (ES)

0.00

5.00

10.00

15.00

20.00

25.00

2005 2010 2015 2020 2025 2030

Millions Low Medium High

Slow, but significant and inexorable sectoral change (ES)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2005 2010 2015 2020 2025 2030

thousands

Primary sector& utilities

Manufacturing

Construction

Distribution &transport

Business &other services

Non-marketedservices

The Service Sector will continue to provide the main source of job growth

-10 -5 0 5

All industries

[Construction]

Rest of manufacturingEngineering

Food, drink & tobacco[Manufacturing]

Electricity, gas & waterMining & quarrying

Agriculture etc[Primary sector & utilities]

2015-2025

2005-2015

% per annum

Sectoral details, 2015-25 (ES) Continuing job losses in Primary

and manufacturing sectors

-1.5 -1 -0.5 0 0.5 1 1.5 2 2.5 3

All industries

Health and social workEducation

Public admin and defence[Non-marketed services]

Miscellaneous servicesOther business services

Banking & insurance[Business & other services]

Transport & telecommunicationsHotels and catering

Distribution[Distribution & transport]

% per annum

Austerity measures will curb employment growth in the public sector

In many countries unemployment will remain higher than pre-recession rates (EU)

Note(s): Scandinavia is Denmark, Finland, Sweden and Norway; Benelux is Belgium, Luxembourg and the Netherlands; Southern Europe is Spain, Italy, Portugal, Greece, Malta and Cyprus; CEEC is Czech Republic, Slovakia, Poland, Hungary, Latvia, Lithuania, Estonia, Bulgaria, Romania and Slovenia.

Measurement of skills supply and demand

• Skills measured by occupation (ISCO) and qualification (ISCED)

• Demand proxied by employment • Supply - economically active by

highest qualification (HQ,MQ, LQ)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2005 2010 2015 2020 2025 2030

thousands

Legislators, seniorofficials and managersProfessionals

Technicians andassociate professionalsClerks

Service workers and shopand market sales workersSkilled agricultural andfishery workersCraft and related tradesworkersPlant and machineoperators and assemblersElementary occupations

Significant structural change by Occupation too - but few big surprises (ES)

Replacement demands, 2015-25 (ES)

-200 200 600 1,000 1,400

Elementary occupations

Plant and machine operators and…

Craft and related trades workers

Skilled agricultural and fishery workers

Service workers and shop and market…

Clerks

Technicians and associate professionals

Professionals

Legislators, senior officials and managers

Armed forces

Total Requirement Net Change

0.02.04.06.08.0

10.012.014.016.018.020.0

Legislators, senior officials and managers

Professionals

Technicians and associate professionals

Clerks

Service workers and shop and market sales workers

Skilled agricultural and fishery workers

Craft and related trades workers

Plant and machine operators and assemblers

Elementary occupations

% of total employment

2020

2010

2000

Knowledge- and skills-intensive jobs on the increase (EU28)

And also by qualifications held, net changes 2015-2025 (ES)

-2,000 -1,000 0 1,000 2,000 3,000 4,000 5,000

Low qualification

Medium qualification

High qualification

Total job openings Replacement needs Expansion demand

…… a greater % share of jobs for the better qualified (ES)

0

5

10

15

20

25

30

35

40

45

50

2005 2010 2015 2020 2025 2030

Low

Medium

High

%Spain

Driven in no small part by supply side trends (numbers economically active, ES)

0.00

5.00

10.00

15.00

20.00

25.00

2005 2010 2015 2020 2025 2030

Low Medium HighLabour Force, Millions

0

2,000

4,000

6,000

8,000

10,000

12,000

2005 2010 2015 2020 2025 2030

thousands Spain

Low (LabourForce)

Medium (LabourForce)

High (LabourForce)

Low (DemUnconstrained)

Medium (DemUnconstrained)

High (DemUnconstrained)

Low (DemConstrained)

Medium (DemConstrained)

High (DemConstrained)

Comparison of supply and demand trends - BUT Imbalances not easy to measure

Increasing diversity, imbalances, mismatches & risks of over qualification

Increasing diversity of Higher & Further Education (HE) HE no longer a “minority sport” (participation rates >>50%) Demand for skills: crisis has accelerated changes

Fewer job opportunities for the low-qualified (but some growth) Some better qualified may need to accept lower level jobs Science, Technology, Engineering & Mathematics is a key area But Quality more important than Quantity

Skills mismatches and imbalances are a persistent phenomenon, we need to develop the right skill mix to: manage transitions & adjustments in the labour market match & anticipate knowledge- & skills-intensive jobs

On the right track ? Europe is on track to raise its qualifications profile more Europeans acquiring better qualifications fewer low-qualified Europeans younger cohorts the best qualified ever

Rising supply mirrors projected growth in demand BUT Concerns about over- qualification & mismatch: High level qualifications may no longer guarantee success Results suggest some polarisation in skills demand - many

graduates may need to find jobs in non-traditional areas Looking beyond formal qualifications – need “T-shaped”

individuals with general as well as specific core technical skills

Conclusions & Key results

Labour supply: expanding but also ageing Employment: rising slowly, constrained by supply Unemployment: falling slowly but persistent Macroeconomic uncertainties: Brexit & Trump Sectoral change: significant change (relentless shift

from primary and manufacturing towards services) Skill Supply: increasing number formally qualified Skill demands: rising demand but polarisation Replacement needs: Even where employment is falling Imbalances and mismatches: problems remain but

markets will adjust if allowed to operate freely

Contact details for further information:

Rob Wilson Institute for Employment Research, University of Warwick r.a.wilson@warwick.ac.uk Cedefop Pan-European projections: www.cedefop.europa.eu/skillsnet