Stronger, fairer, greener Wales: a plan for employability and skills

Cabinet is asked to agree:

• the publication and communication of the new Plan for Employability and Skills, and
• to ensure the principles are embedded in cross-government policy and delivery.

1. The Programme for Government (PfG) sets clear ambitions to create a Wales where individuals of all ages can receive a high quality education, with jobs for all, where businesses can thrive in a net zero economy that champions fairness and equality.

2. The Plan for Employability and Skills puts the PfG at the heart of everything we do – to ensure nobody is left behind, nobody held back, through a shared commitment to changing people's lives for the better.

3. Scheduled for publication on 8 March 2022, the new plan will signal clear policy and investment priorities, sharpen our delivery focus and the activity of partners, on actions over this Government term that will leave a positive legacy for future generations.

4. It reaffirms our longer term goals to accelerate progress across the first set of National Milestones laid in December 2021, and drive a collective response across all public bodies subject to the Wellbeing of Future Generations Act.

5. The Plan for Employability and Skills seeks to:

• promote shared understanding of labour market impacts, trends and progress to date
• set out Welsh Government actions and investments to shift and change policy and delivery to respond to the current and future needs of the labour market and reductions in EU funding.
• identify areas where we need collectively to accelerate progress, and expectations around accelerating action on  National Milestones and shared responsibility for progressing a fairer Wales.

6. The current Employability Plan was published in 2018 setting out our ambitions to reduce unemployment and economic inactivity, respond to skills gaps, prepare people for the future world of work, whilst also improving employer responsibility for fair work.

7. 10-year targets run until 2028, and whilst the targets and ambitions of the plan are still relevant, the delivery, funding and economic context has changed significantly.

8. Wales has seen significant labour market improvement since the Employability Plan was produced in 2018. We reached our target of closing the unemployment gap with the UK at several points, and unemployment levels in Wales remain lower than the UK. The proportion of people aged 18-64 with no qualifications has fallen from 8.4% in 2018 to 7.3% in 2020, those with higher education qualifications has increased from 37.8% to 41.4%. The gender pay gap in Wales, based on median full-time hourly earnings, has fallen from 7.3% to 5% and is now at its lowest rate ever recorded. For part-time employees the gender pay gap has been closed.

9. There were more people in employment in Wales in the three months to October than before the pandemic. The unemployment rate, at 3.7%, was below the UK rate of 4.2%. A strong rebound in hiring has occurred, resulting in what is the lowest ever ratio of unemployment to vacancies in the UK.

10. Whilst there is currently a sense of cautious optimism about the labour market and economic prospects in Wales, there are a number of risks. This is because of shortages of some key workers, supply chain bottlenecks, higher energy prices and inflation rates of up to 7%, a rate not seen in 30 years. Progress could well be derailed by higher inflation eroding incomes and spending power. There are also significant disparities between groups within this, in particular for Black, Asian and Minority Ethnic people, disabled people and single parents. 

11. One important legacy of Covid is the likelihood of worsened employment prospects for those young people, disproportionately from disadvantaged backgrounds, who have suffered the greatest disruption to their education. Wales and the UK already had relatively high rates of youth unemployment compared to many other countries.

12. Meanwhile, economic inactivity, instances of poor quality, low paid and precarious work remain a concern. Disabled people, Black, Asian and Minority Ethnic people and those with health conditions continue to be significantly underrepresented in the labour market, with any improvement stalling. The consultation on the Race Equality Action Plan also highlighted barriers to progression within employment for Black, Asian and Minority Ethnic people and there is similar evidence in relation to disabled people. Enduring pay gaps for disabled people (9.9%), women (5%) and ethnic minority employees (1.4%) compared to the general population in Wales.

13. The pandemic has seen an increase in inactivity for reasons of ill health and/or early retirement for those over 50, and, for those aged over 65 in particular, more women than men have left the labour market. It is unclear whether “long Covid” is a contributing factor, but this could present an increasing problem.

14. Over the longer term, the key economic challenge remains historically weak productivity growth in Wales and the UK, resulting in very sluggish growth in pay, in living standards and the tax base upon which public services depend. In addition, structural changes associated with:

1. the transition to new trading relations with the EU and other countries
2. the transition to a low/zero carbon economy
3. an increase in remote working and other remote activity, and
4. technological change more generally

will combine to pose a variety of challenges. Precise implications for skills and employability are uncertain, but policy will need to adapt flexibly to rapidly changing circumstances and remain applicable across a wide range of scenarios.

15. UK government is exerting greater influence over this area of service delivery, through a significant Department for Work and Pensions (DWP) Jobs and Skills response to respond to pandemic impacts, and the plans set out in the Levelling Up White Paper.

However, UK Shared Prosperity Fund guidance indicates that the plans of local authorities and other partners should take account of the wider funding landscape, including other national or local employment and skills schemes.

16. Welsh Government is set to lose the significant funding we have received from Europe for this agenda. The system is at risk of becoming more fragmented with gaps emerging, particularly for those further from the labour market, who were already disadvantaged prior to the pandemic.

17. In the face of less funding and less decision making autonomy, we seek to add value rather than duplicate the DWP employment offer and focus on a cross government approach to furthering our goals for a Fairer Wales.

18. Promoting youth participation, progression and employment

Delivering a Young Person’s Guarantee - giving everyone under 25 the offer of work, education, training, or self-employment.

19. Tackling economic inequality

A focus on improving labour market outcomes for Black, Asian, and Minority Ethnic communities, women, disabled people and those with low skills.

20. Promoting Fair Work for all

By encouraging employers to make work better, fairer and more secure; promoting the role of trade unions; empowering responsible businesses; improving the quality of employment; increasing workforce diversity; and enhancing physical and mental health prevention.

21. Supporting people with a long term health condition to work

By preventing people falling out of employment through health prevention, early intervention, healthy workplaces and maximising the role of the health service as an anchor employer.

22. Raising skill and qualification levels, and mobility of the workforce

By expanding the system of flexible and personal learning to develop adaptable skills to increase workforce resilience, and for everyone who needs help to progress, improve their skills, find work or retrain.

23. Prioritising and consolidating Welsh Government led, national employability support to target young people, those under-represented in the labour market and those in and out of work with long term health conditions to find work and progress in employment.

24. Pursuing a strengthened concordat with DWP to improve early engagement and joint planning in Wales on design and deployment of interventions to optimise national provision for mutual benefit.

25. Championing Fair Work to improve the offer for workers, including driving improvement in pay and working conditions, particularly in those sectors experiencing labour shortages and which have a reputation for low paid, precarious and insecure work.

26. Increased provision for career switchers and older workers through mid -Careers Reviews, and Personal Learning Accounts to support workers to upskill or reskill to access a wider range of job opportunities.

27. A new focus on the health system as a key player in this agenda was outlined in A Healthier Wales: Our Plan for Health and Social Care and our long term future vision of a whole system approach to health and social care. The plan contains actions to strengthen the core role of local health boards in prevention and early intervention, through social prescribing, and increased employability and occupational therapy support for people in and out of work with mental ill-health and long term health conditions.

28. Promoting collective responsibility for advancing the plan through the Social Partnership and Public Procurement (Wales) Bill, whole system approach to the Young Persons Guarantee, establishing the Commission for Tertiary Education and Research (CTER), strengthening social value of Welsh Government and Health and Social Care investment, and progressing a placed-based approach to economic development.

29. The plan draws together 29 cross government PfG commitments that underpin employability policy. Significant work is already underway to progress the Young Persons Guarantee, review of the Youth Engagement Progression Framework, Apprenticeships, Personal Learning Accounts for career switchers and expansion of the early years and Childcare Offer.

30. The remaining actions outline policy changes to influence the necessary shifts to progress the Programme for Government commitments to race equality, eradicating disabled people’s employment gap, pay equality and Fair Work. In addition to acting to further the objectives of the Socio Economic Duty and deliver better outcomes for those who experience socio-economic disadvantage.

31. Many of the programmes that underpin the plan are already in place and operating currently, with Jobs Growth Wales Plus due to be launched in April 2022. This will replace JGW and Traineeships. Work is in train to evolve and enhance the Business Wales service and develop new Community Employability operating models beyond the European funding period.

32. The plan sets out our intent to create the necessary operational shifts to achieve greater integration, collaborative working and system flexibility to make best use of resources in future. In particular, to drive a pivot of existing delivery and resources to target the groups that need support the most, whilst maintaining flexibility to respond to change in labour market, policy and funding shifts in future.

33. As such, work is underway to improve integration and client pathways across Working Wales, Community Employability Programmes, ReAct and Employability Skills Programme. This will enable collaborative, joined up working at a local and regional level, previously difficult within ESF regulations.

34. The plan reflects our approach for reform of the post-compulsory education and training (PCET) sector, and establishment of a Commission for Tertiary Education and Research (CTER). It also includes development in train for a forthcoming Net Zero Wales Skills Action Plan in Autumn 2022, which will consider and set out shifts to policy and delivery to ensure the skills system can support out journey to Net Zero.

35. Independent assurance has recently been sought on the best approach to implementation of the plan, and this will inform developments in how we manage employability activity in the future to maximise benefit realisation, particularly to respond to the next stage of planning for ESF rundown.

36. The plan sets out how Welsh Government will focus on working in social partnership to progress the National Milestones for Wales. The milestones are likely to add an additional level of scrutiny over our progress in tackling employment levels of underrepresented groups, fair pay, raising qualification levels and fair work.

37. Technical Annex B sets out the current trajectory, areas to accelerate progress, and monitoring and reporting arrangements for the Plan for Employability and Skills.

38. The plan will launch via an Oral Statement in Plenary on Tuesday 8 March 2022.

39. The paper should be published 6 weeks after the respective meeting.

Vaughan Gething, Minister for Economy
February 2022

Statutory, finance, legal and governance matters

Statutory requirements

This essence of the Plan and Cabinet Paper is to align employability policy with the PfG and new National Milestones for Wales, to further the Wellbeing Goals for Wales.

In the analysis presented in the paper, and subsequent analysis and impact assessment, the unequal labour market participation and specific Covid impacts have particular regard for those who are economically or otherwise disadvantaged, especially by age, gender, disability or other protected characteristic.

Finance requirements and governance implications

The Cabinet paper and Plan does not seek any additional financial commitment from Cabinet. The plan is based on funding levels set out in the December 2021 Draft Budget.

There are some risks and challenges in relation to resource issues impacting a number of key skills interventions, however these will be managed to ensure commitments are delivered this government term.

It should be noted that the labour market and economic context, and level and scope of UK government spending on SPF and DWP provision remains uncertain. However, the actions outlined in the plan anticipate a level of uncertainty and attempt to deliver a level of flexibility in policy and intervention to respond to a change in circumstances.

The Cabinet paper and Plan do not give rise to any immediate legal issues. However, officials will obtain advice on specific projects on a case by case basis to ensure that those projects are delivered in a legally-compliant manner. In particular, Legal Services will be engaged to assess new projects from a vires perspective, and proposed funding arrangements, grants or incentives will be assessed for compliance with the subsidy control rules prior to implementation.

Financial approvals:

• Budget and Government Division: BGB0315/6
• Skills Higher Education and Lifelong Learning: SHELL/MFE/130/21
• Education and Public Services - EPS/VG/2/22
• Health and Social Services: NJ 8293/2022
• Knowledge & Analytical services- Research or statistics: 04/2022

Loss of EU Structural Funds

With the loss of EU Structural Funds beyond the end of 2023 and the failure of the UK government to provide a for-like replacement with a co-decision-making role for the Welsh Government, we anticipate a significant shortfall of funding to deliver some economic investment priorities. This will create financial pressures for a wide range of sectors, especially Higher Education/Further Education, business and third sectors, as well as for the Welsh Government’s delivery with partners of pan-Wales schemes. Welsh Government pan-Wales projects which are currently funded by EU Structural Funds and focus on Employability include:

• Business Wales (including Digital Support)
• Third Sector funding through the WCVA
• ReAct
• Apprenticeships and Traineeships
• Parents Childcare and Employment (PaCE), and
• Communities for Work (CfW). 

If the UK had remained in the EU, Wales would have access to receipts from the current EU programmes for commitments already made to projects, as well as access to new allocations averaging at least £375 million annually. The CRF and future SPF allocations represent a significant reduction to the funding available to Welsh organisations for the purposes of economic investment.