The recession: more higher skills needed to get out of it, say a major new report

Northern Ireland will need three times the number of highly skilled than low- or un-skilled new workers over the next ten years than it did in the last “golden era, ” but the total number of new workers required is unlikely to match 2008 levels until 2017, says a stark report by Oxford Economics for the Department of Employment and Learning. The report was posted by the lobby form Strategem on the NI Crunchtalk website.
The current economic environment could hardly be more challenging, says the Report. From more than 20,000 new jobs created in 2005, the forecast for the NI economy between 2008 and 2020 is a dramatic drop to only 5,000 new jobs net each year to 2020 but with much higher skills. Prospects for the lower skilled are grimmer than ever: “The labour market will still require workers across the skills spectrum and not just at the graduate end. The model suggests annual requirements of roughly 3,500 for workers with low qualifications over the decade ahead (compared to almost 10,000 for persons with higher level qualifications)”. Even so, skilled migrants will be needed, though 4,000 a year in future, compared to 18.000 in 2007.Making the generous assumption that growth will pick up next year, the 5,000 pa average net job creation only occurs after 2010 and only just offsets the estimated net loss of approximately 25,000 jobs during the recession. In the recovery phase, the shape of growth will be different than the past – led less by the housing and retail sectors and more by export led activities.

The weaker economic outlook relative to the past does not mean a drop in demand for higher level skills – indeed .quite the opposite, says the report .” The economy is still predicted to undergo a transformation towards more skills hungry sectors and occupations. In future therefore the NI economy will have to rely more on exports as a source of demand rather than consumers and government.”

The report draws a distinction between NI’s current economic performance and its “aspirational “level to close the gap with average UK performance. By this measure
7,300 new jobs pa compared to 5000.
• More jobs in exporting priority sectors.
• GVA ( gross value added, the value created after costs are deducted) higher by £2.7bn in 2020 (2003 prices) that is an 8 per cent larger economy.
• Relative GVA per head up from 80 per cent to 85 per cent.
• not only halving, but closing the gap .
• In summary catch up and convergence – exceptional performance, a genuine ‘stretch’ target!

This is clearly unattainable by 2020 and means that the political battle to maintain a large subvention and public sector will continue indefinitely.

On changes predicted and required in the skills base, though in the short-run job prospects for graduates will weaken (as they will across the entire skills spectrum) particularly for degree subject areas traditionally supplying sectors such as construction which are most exposed to the current downturn (though much depends on who employers recruit first from the choice of potential joiners),. graduate prospects are forecast to]recover in 2011 and 2012. And remember, a graduate in the workplace has an average salary premium of more than 100 per cent over an individual with no formal skills.

The degree subject requirement will become more skewed towards physical sciences, mathematical & computer sciences, engineering & technology, law and
creative arts & design; and less skewed towards subjects allied to medicine and education (this is part trend-based and part designed to align more closely with UK average subject patterns).
This should help to address some of the current specialisation weaknesses of the NI graduate workforce, provided the education system aligns its supply to this requirement. (But will it?)

NI skill weaknesses
? As much as this report reveals notable skill strengths of the NI economy, a number of other weaknesses are identified.

? Outside private services, graduate concentrations in agriculture, manufacturing, construction, retail and hotels & restaurants lag between 10 and 60 per cent behind the UK average.

? NI also has a relative under-representation of managerial and professional occupations. This is likely a reflection of the limited ‘upper–end’ activities located in the region (reflected in the small number of NI PLCs and the ‘small nature’ structure of the economy). Many of NI’s industrial and indeed professional services activities are not at the high end headquarter or design and strategy end of the spectrum and thus demand for managerial and professional occupations is lower.

? For the key export / potential high export sectors of manufacturing and business services, the managerial and professional gap is very evident, even compared to NI’s ‘near neighbours’ in prosperity terms – Wales and the North East.

In terms of workforce degree subjects, there appears to be limited subject specialisation within NI, with a higher concentration of general subjects (business & administration and combined degrees) and much less specialism across elements of STEM,( science, technology, engineering and mathematics) creative arts & design and arts subjects. (Arts subjects include Linguistics, Languages, Literature, History and Philosophy – (a surprise, this one; I would have thought NI was well supplied)

So that’s the challenge. Much of it is familiar but it’s made all the greater by recession as this report spells out, allowing for all the uncertainties in forecasting.

How close to meeting the even greater challenge can we come?