In the fourth part of our series, we look at how universities that are seeking to be truly civic institutions can use localised LMI to really understand demand in their local economy, particularly graduate skills demand. The first three parts can be found here, here and here.
Understanding the economic impact your university has on its local economy and stakeholders provides a good starting point for developing a more strategic approach to the civic agenda. However, if your institution is looking to become “truly civic”, the next step is to understand that local economy in more depth, in order to know how best to respond to its needs. The simplest and most methodical way of doing this is through the use of local Labour Market Insight, as we hope to demonstrate in this part.
We can begin by looking at some high level employment data for a specific region, including demand for graduate labour, in order to get a feel for how it has been growing over the past few years, and how it is projected to grow in the next few. In the graphic below, and throughout this piece, we have focused on the Coventry & Warwickshire LEP area, but the same kinds of insights can be gleaned for any area of the country, down to local authority level.
Of particular interest here is the data for graduate demand. The first dial shows that there are currently around 132,800 jobs in the LEP region requiring a degree or above. This works out as 28.3% of total employment in the area, which is below the proportion of graduate jobs across Britain as a whole (29.9%). However, not only has growth in graduate jobs in the region been faster than the national average between 2013-2018 (12.3% versus 10.3%), this trend is also projected to continue in the coming years, with the Coventry and Warwickshire LEP region set to see growth in graduate jobs of around 3.2%, whilst Britain as a whole is projected to see 2.6% growth.
Which sectors are driving our local economy?
For a university seeking to know its local economy better, gaining a good understanding of which industries are driving it, and which mark it out as different in comparison to other areas, should be of primary importance.
In order to make this as simple as possible, our economists have undertaken the exercise of grouping the 586 4-digit Standard Industry Classifications (SIC), as defined by the Office for National Statistics, into just 49 “coherent industry clusters”, based on shared characteristics, such as supply chain, a tendency to co-locate in the same areas, and a similar workforce. What this means is not only that the process of understanding the data is made far easier than trying to make sense of all 586 industry classifications, but because the clusters are based on economic similarities, it is much easier to get clarity on key sectors in the local economy.
When looking at the 49 industry clusters, there are a number of metrics we can use to get a feel for what is driving the local economy, but one of the most important is Location Quotient (LQ). This is the proportion that an occupation or industry makes up within a local labour market, compared with the proportion the same occupation or industry makes up in the national economy. The nation is given a benchmark of 1.0, and so any occupation or industry with an LQ over about 1.2 can be seen as a regional specialism.
In the following chart, we have identified the Top 10 of the 49 industry clusters in Coventry & Warwickshire, in terms of LQ, but also with a number of other metrics, including current job numbers; projected job growth over the next few years; Gross Value Added (GVA); and average wage. As you can see, the area has a specialism in Vehicle and defence technology, with an LQ of 5.40.
A closer look at local industry clusters
Having identified that the area has a regional specialism in Vehicle and defence technology, what we can then do is lift the lid on the cluster to find out more about its underlying industries. In total, there are 11 industries within the cluster. However, three of them have no presence at all in the Coventry and Warwickshire area, and so in the table below, we have included the eight that are in the region, identifying the same metrics for each of them as we have done for the cluster as a whole.
As the data shows, by far the biggest employing industry within the cluster is Manufacture of motor vehicles, with over 18,600 jobs. It is clearly hugely important for the region, since with an LQ of 14.08, there are over 14 times more people employed in the sector as a proportion of the region’s total workforce, than are employed in the sector throughout the country as a proportion of the nation’s total workforce. Such insight can prove to be really helpful to a university, both in terms of their seeking to better understand what is driving the local economy, and from the point of view of helping them identify which industries they should be looking to support.
However, looking at the industries alone does not in itself help the university understand the actual demand for graduate labour. To do this, we need to run a Staffing Pattern to identify occupational demand. In the table below, we have done this for the Vehicle and defence technology cluster as a whole, but — crucially for a university — only including those jobs that require a degree-level education.
One of the most important things to note from this table is the breadth of occupations. Whilst jobs such as Mechanical engineers and Design and development engineers are the sorts of occupations that might readily spring to mind when thinking about Vehicle and defence technology, there are a good many other graduate jobs which are far more general, but which are nevertheless important to the cluster, such as Sales accounts and business development managers, Quality assurance and regulatory professionals and Chartered and certified accountants. This indicates that there are more opportunities for a university in the area to support the sector than may appear to be the case at first glance.
Identifying in-demand skills
As well as understanding the occupational make up of the industry, we can use Job Postings Analytics to dig even further to uncover the skills that employers in the region are looking for. For instance, if we look at job postings for Production managers and directors in manufacturing, we can identify the hard skills that employers are looking for. The graphic below shows the top 15, in terms of the percentage of job postings that each particular skill appeared in between August 2018 to July 2019 (NB. this includes postings for all Production managers and directors in manufacturing jobs, not just those within the Vehicle and defence technology cluster):
Along with a number of generic skills, such as management and training, there are also some more specific ones, such as lean manufacturing and Six Sigma. This sort of detail is sure to be of interest to a university seeking to better understand the needs of its local economy, both from the point of view of the potential to feed into course design, but also in terms of being far better prepared to engage regional employers.
Comparisons with other areas
One final element of knowing your area’s economy is the ability to compare it with other areas. In the chart below we have identified the Top 10 LEP areas in the country for the Vehicle and defence technology cluster in terms of Location Quotient, job numbers and projected job growth. Whilst it is clear that Coventry and Warwickshire has by far the highest comparative advantage in the cluster, as well as the highest projected growth, the real interest here lies in seeing which adjacent areas also have a strong presence. So the fact that Greater Birmingham and Solihull, G-First, and Oxfordshire all border Coventry and Warwickshire and all have a comparative advantage in the cluster, is bound to be of interest to a university in the area.
In the final part of this series, we’ll look at how this data can be used to inform a truly civic strategy. If you would like to discuss any aspect of this series, get in touch.