Scots have the skills - but not the pay

SCOTS have more skills than workers elsewhere in Britain but are paid less, according to a comprehensive study of the Scottish economy.

Local Futures, an economic think-tank, says skill levels are higher than the rest of Britain in almost every part of Scotland and the country’s "skills profile" matches that of the south-east of England.

The problem is this has not been translated into wages, with the average take-home pay in Scotland of 326 a week 6 per cent below the UK average.

The report for Scottish Enterprise identifies pockets of success in Scotland, particularly in Edinburgh, but says a dependence on the public sector and a narrow band of industries, such as tourism, are holding back the economy. It calls for better transport links with the rest of the UK, and more diversity in business.

The report represents a warning that ministers need to help the economy adapt and develop.

Local Futures states that Scotland has a "low-value bias" combined with a "large public service sector" and this is hindering growth.

The researchers say Edinburgh is the only place in Scotland able to act as a strong magnet for migrants and that the whole of the country, except Glasgow, needs better transport links with the rest of the UK.

Edinburgh and Aberdeen are praised as areas of growth but other areas are not seen in such a good light. South-west Scotland is said to "struggle" with an unskilled workforce, the Highlands has a narrow industrial base and low earnings, while Dundee has a "high dependence on the public sector".

Allan Hogarth, from the Scottish CBI, said the report showed the mixed picture of the Scottish economy.

However, he added: "As far as earnings are concerned, the cost of living is substantially less and the quality of life substantially higher in Scotland than the south-east of England. The real challenge is for both the public and the private sectors to create the business environment which will attract people to Scotland, creating new firms and, subsequently, jobs."

Murdo Fraser, for the Tories, said the economy would benefit from better transport links, lower business rates and a "lower cost base" for businesses. "Scots are paying higher levels of charges than elsewhere - the sort of costs which are preventing higher salaries."

Jim Mather, for the SNP, said: "As long as we remain a branch economy whose centre is in the south-east of England we will fail to use the high-quality skills of our people."

WHY WAGES ARE LOWER ACROSS THE BOARD

WHY do Scotland’s superior skills not translate into higher average earnings?

One major reason is the higher proportion of Scots in public-sector jobs, where wages tend to be less than in the private sector, certainly for low-skilled occupations. Scotland’s public sector grew by 6 per cent in the four years following the establishment of the Scottish Parliament, rising by nearly 30,000 employees. There are now more than 612,000 public-sector employees out of a total workforce of 2.2 million.

Another factor is the low wage rates of women. Women in Scotland earn consistently less than their counterparts in the rest of the UK. For instance, female managers and senior officials earned an average of 517 per week in 2003, while for the UK the figure was 578. This suggests that women in managerial grades in Scotland are farther down the promotion ladder than in the south. However, even taking all this into account, every kind of job in Scotland - public or private - commands lower average weekly earnings than the rest of the UK. Even managers working north of the Border get only 87.9 per cent of the UK rate, while plant workers get 97.9 per cent.

Partly this reflects the loss of HQ functions from Scotland, as Scottish firms are taken over. Another explanation is the London weighting allowance. It is not the fact that Scottish wages are low, rather London earnings are artificially boosted.

Even public-sector workers get additional payments for working in London. Soldiers at Chelsea barracks qualify for an extra 3 a day. And to add insult to injury, while tax inspectors outside London are paid on a scale between 19,000 and 31,000, their colleagues working in Westminster are on a scale between 21,700 and 35,300.

GEORGE KEREVAN