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Katy Jones
Katy  Jones

How can local skills strategies help low earners? The role of increasing employer demand for skills

Authors: Katy Jones Katy Jones

11 February 2014

In the UK one in five workers are considered to be in low wage work. This is high compared to other countries and has major implications for the extent to which work offers a decent wage and opportunities for progression. Limited employer demand for skills is one major driver behind this high incidence of low wage work (which is again particularly problematic by international standards).

English skills policy has overwhelmingly focused on increasing the supply of skills, while the extent to which these skills are then being effectively used in the workplace has largely been neglected. In our new report for the Joseph Rowntree Foundation launched last week (7 February), How can local skills strategies help low earners?, we consider the relationship between employer demand for skills and low wage work, and the potential of local skills strategies to improve outcomes for low earners in England.

Weak employer demand for skills – what’s the problem?

Weak demand for skills is associated with a greater prevalence of low wage work. Limited demand not only affects wages but also impacts on the wider quality of work, the extent to which employees are able to sustain and improve their skills and progress to better paid employment. The under use of skills can be associated with the ‘atrophying’ or ‘erosion’ of an individual’s skills and can limit opportunities to grow earnings. In contrast, higher demand for skills, coupled with a strong supply, is associated with more productive and higher wage economies, and better outcomes for low earners.

Skills policy and employer demand for skills 

As part of the government’s Localism agenda, some power and funding for skills is being devolved to local areas and employers. Through this there may be more opportunities to influence employer demand for skills at a local level. However, our research casts some doubt over the extent to which local actors currently have either the powers or the ambition to influence employer demand, rather than just seek to meet it. In our interviews with stakeholders involved in developing and rolling out the skills strand of Sheffield’s City Deal, for example, interviewees felt shaping demand through local policy levers was difficult and that progress towards this aim would need to be led by employers.

But weak employer demand for skill is not inevitable. There are multiple policy levers available to stimulate employer demand for skills including formal regulation of job roles and occupations (e.g. licence to practice rules) and softer forms of influence (e.g. dissemination of good practice). As a large provider, funder, and procurer of goods and services, the public sector can also influence employers’ demand for skills.

How can local skills strategies help?

In the report we make several recommendations about what can be done to improve the current situation:

  • Local Enterprise Partnerships (LEPs) should bring together local strategies for skills with wider economic development priorities, and link these to other business support activities to seek to grow the number of good jobs locally.
  • Public sector employers should use their influence to encourage good practice among their suppliers.
  • LEPs and other local actors should seek to develop policies, such as career ladders in appropriate sectors.

The UK needs a policy which improves both the supply and demand for skills. Whilst part of the skills challenge at the local level is to support local economies to grow the number of people in employment, it is also about supporting people into jobs that enable them to develop and use their skills and progress to higher paid work. In many local economies these types of changes will require greater policy consideration of the demand for skills, but this will depend on policymakers taking a much more proactive approach to skills policy.