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A skills hungry economy
Neil McCullough, Head of Local Forecasting
Oxford Economics
[email protected]
24th May 2011
Prepared for Northern Ireland Schools &
Colleges Careers Association
Overview
Skills matter
A new economic world – tough times
Which skills – areas of growth
Summary
2
Skills matter
Better chance of being employed
Employment rate by highest qualification, Northern Ireland, 2009
Degree or equivalent
GCE A level or equivalent
GCSE grade A-C or equivalent
Other qualification
No qualification
Total
2009
90%
77%
73%
70%
47%
72%
Source: LFS, Oxford Economics
Note: Working age denominator excludes inactive
Source: LFS, Oxford Economics
Note: Annual figures are 4-quarter averages.
Working age denom inator excludes inactive
students
4
The higher the
qualification, the
greater the
likelihood of
being in
employment
Greater likelihood of being in employment…
Economic activity by skill level, Northern Ireland and UK, 2010
Degree or equivalent
Higher education
GCE A Level or equiv
GCSE grades A-C or equiv
Other qualifications
No qualification
Working age population
NI (%)
UK (%)
17.6
20.4
7.7
9.4
22.2
22.0
19.8
21.8
6.7
12.2
24.9
13.3
In employment
NI (%)
UK (%)
24.2
25.5
9.7
10.7
24.2
23.4
19.3
21.2
6.5
11.1
15.0
7.1
Source: LFS
 Nearly a quarter of the working age population has no qualifications, yet this
group makes up only 15% of total employment in Northern Ireland
 However only 17.6% of the working age population has a degree level
qualification, yet they account for over 24% of total employment.
5
…and earning more…
Earnings by skill level, Northern Ireland, 2010
NI
Degree or equivalent
596
Higher educ
440
GCE A Level or equiv
319
GCSE grades A-C or equiv
337
Other qualifications
288
No qualification
233
Total
401
Note: Figures refer to average gross weekly wage
Source: LFS
6
UK
664
482
404
333
335
256
449
The higher the
qualification,
the higher the
wage
Educational attainment is on the rise…
Northern Ireland: School qualifications
% of leavers
 There were 23,276 school
leavers in 2008/09
75
3+ A-Levels
5+ GCSEs
70
65
 The number of school
leavers has fallen by 8.8%
over the period
60
55
1
50
 Yet the number of leavers
gaining 3+ A-levels has
grown by 10.4%
45
40
35
2006
Source: DENI
7
2007
2008
2009
Though some still level with no qualifications…
Northern Ireland: Leavers with no GCSEs or
formal qualifications
% of leavers
9
 The proportion of school
leavers achieving no
qualifications has fallen
by 2.5 percentage points
over the period
8
7
6
5
4
 However there were still
1,210 school leavers in
2008/09 with no
qualifications
3
2
1
0
2006
Source: DENI
8
2007
2008
2009
With many opting for further study…
Northern Ireland: School leavers destinations
% of leavers
50
45
40
 There is a
recognition that
higher level
qualifications are
important
35
30
 HE and FE likely to
rise in the short term
with employment
opportunities at a
premium
25
20
15
10
5
0
Higher
eduaction
Further
education
Training
Employment Unemployment
Source: DENI
Three quarters of school leavers
are going straight to HE and FE
9
A further 13% go into “Training”
Destination
unknown
 Less than 10% enter
the labour market!
Higher levels skills linked with productivity
International: Tertiary skills and GDP per head (2007)
US$000 PPP GDP
per capita (2005
prices)
50
Norway
US
40
Austria
UK
30
20
10
Brazil
R² = 0.5158
0
0%
10%
20%
Source: OECD, Oxford Economics
10
30%
40%
Tertiary attainment % 25-64 population
50%
A new economic world: tough times
Global growth
World: GDP growth
% year
6
Forecast
5
4
3
2
1
0
-1
-2
-3
-4
1996
1998
2000
Source: Oxford Economics
2002
2004
2006
2008
2010
2012
 The recession had a
significant impact on
global growth
World emerging from recession
 Developed economies
hardest hit by recession
World GDP Growth
% Change on Previous Year
2008 2009 2010 2011 2012
US
0.0
-2.6
2.9
2.7
3.1
-1.2
-6.3
4.0
0.1
2.8
0.3
-4.1
1.7
2.0
1.7
0.7
-4.7
3.5
3.5
1.9
France
-0.2
-2.6
1.4
2.2
1.9
Italy
-1.3
-5.2
1.2
0.9
1.3
-0.1
-4.9
1.3
1.5
2.3
China
9.6
9.2
10.3
9.0
8.4
India
7.4
7.0
8.6
7.6
8.5
Other Asia
3.4
2.0
7.2
5.2
5.8
Mexico
1.5
-6.1
5.5
4.5
5.2
Brazil
5.2
-0.6
7.5
4.2
5.1
Other Latin America
4.8
-0.4
6.5
4.5
4.9
Eastern Europe
4.8
-5.6
3.3
4.2
4.5
MENA
4.5
0.4
5.1
5.2
5.0
World (PPP)
2.6
-0.8
4.8
4.2
4.5
Japan
Eurozone
of which:
Germany
UK
Source: Oxford Economics
13
 UK (and Ireland) to face a
long and difficult recovery
 Developing economies to
lead growth in GDP
The ‘new world normal’… economic power shifting East
and South
Declining share of world GDP
amongst the G7 group of
countries (e.g. UK, US,
France, Germany, etc)
1990
= 69.4%
2010
= 21.6%
2000
= 63.0%
2000
= 13.5%
2010
= 51.9%
1990
= 7.0%
Has implications for language skills,
sectoral employment growth,
distribution of wealth, knowledge of
foreign markets, etc
Economic balances
shifting towards BRIC
economies (i.e. Brazil,
Russia, India and China)
A growing world
World: Poplulation
Millions
World population is
forecast to grow at
1.1% per annum over
the next decade,
increasing by 800
million people
8000
Forecast
7500
7000
Demand for goods
and services will rise
6500
Greater competition
6000
5500
5000
1990
1994
1998
Source: Oxford Economics
15
2002
2006
2010
2014
2018
Commodity price inflation hitting hard
World: Oil, food and metals prices
 Consumer and public
sector spending were
key drivers of the
economy prerecession
160
140
120
100
80
60
40
 However… rising costs
of food and fuel eating
into people’s
disposable income
World food prices
(2007=100)
World base metal
(2007=100)
 Debt hangover
Oil price
(US$ pb)
20
F'cast
 Tax rises and public
sector spending cuts
0
1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015  Consumer confidence
Source : Oxford Economics
16
low
Employment still falling
Northern Ireland: Total Employment
000s
900
Forecast
850
Fall of 38,000 jobs,
not forecast to
recover to peak
levels before 2020
800
750
700
650
600
1990
1994
1998
Source: Oxford Economics
17
2002
2006
2010
2014
2018
High unemployment rates here to stay
ROI, NI & UK: Unemployment rate
 Unemployment will not
return to pre-recession
lows
%
18
Forecast
16
■ Subdued
employment growth
14
12
■ Welfare reforms
(push some from
inactive into
unemployment)
10
8
6
4
2
ROI
NI
UK
■ Public sector cuts
■ Growing population
0
1990
1994
1998
Source: Oxford Economics
18
2002
2006
2010
2014
2018
Rising problem of youth unemployment
Northern Ireland: Youth unemployment
000s
20
18
16
14
Rise of
12,000
claimants
aged 16-24
Youth unemployment
has more than doubled
since November 2007.
12
10
8
The youth
unemployment rate in
Limavady is the highest
in the UK at 15.8%
6
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Claimant count
19
0
High skills
20
Source: Claimant count
Elementary
Occupations
Process, Plant and
Machine Operatives
Sales and Customer
Service occupations
Personal Service
Occupations
Skilled Trades
Occupations
Administrative and
Secretarial
Occupations
Associate
Professional and
Technical
Occupations
Professional
Occupations
Managers and
Senior Officials
Less skilled more affected by recession…
Northern Ireland: On-flows by occupation
000s
25
20
15
10
5
Low skills
NI market has both short and long term problems
Labour market structure, Northern Ireland, Q4 2010
Recessionary impact
Short-term challenge
Population
16+
1,399
In
employment
773
Economically
inactive
559
Unemployed
67
Wants job
55
Sickness/
disability
84
Source: DETI, LFS
Family/home
commitments
63
Legacy of a failed past
We cannot let this be a
long term problem of
the future
Does not want
job
504
Student
83
Retired
262
The jobs challenge: 5,000 for standstill
Leavers
Net replacement demand
15,000
Cohort
Entrants from education and
in-migration
4,000
Unsuitable
2,000
17,000 – 20,000
Expansion demand to standstill
2,000 – 5,000
Source: Oxford Economics
22
Joiners
40,000
26,000
Leave to UK
55,000
Which skills – areas of growth
Sectoral outlook – private sector lead growth
Employment by sector, Northern Ireland, 1998 – 2020
Agriculture
Extraction
Manufacturing
Utilities
Construction
Distribution & retail
Hotels & restaurants
Transport & communications
Financial services
Business services
Public admin.
Education
Health
Other personal services
Total
1998 - 2008
000s
%
-11.1
-24.1
0.3
18.3
-24.1
-20.7
-1.2
-32.9
27.6
56.6
35.3
30.7
7.3
18.9
6.8
22.7
6.6
45.2
47.9
101.1
0.5
0.8
7.6
11.5
25.1
25.5
10.9
34.1
128.9
17.5
Source: Oxford Economics
24
Most private sectors
experienced job loss
2008 - 2012
000s
%
4.3
12.4
-0.6
-27.3
-8.6
-9.3
-0.7
-29.6
-16.7
-21.9
-11.9
-7.9
4.0
8.8
2.4
6.6
-1.0
-4.8
-6.2
-6.5
-3.6
-6.0
2.1
2.8
-0.6
-0.5
1.7
3.9
-37.3
-4.3
2012 - 2020
000s
%
-3.3
-8.3
-0.4
-26.7
-8.1
-9.6
-0.2
-11.0
6.3
10.5
10.2
7.4
4.5
9.1
3.9
10.1
-0.2
-0.9
20.6
23.1
-6.1
-10.9
-4.0
-5.3
-0.5
-0.4
5.8
13.1
28.7
3.5
Sectoral outlook – business services to dominate
Employment by sector, Northern Ireland, 2012 – 2020
Agriculture
Extraction
Manufacturing
Utilities
Construction
Distribution & retail
Hotels & restaurants
Transport & communications
Financial services
Business services
Public admin.
Education
Health
Other personal services
Total
Source: Oxford Economics
25
2012 - 2020
000s
%
-3.3
-8.3
-0.4
-26.7
-8.1
-9.6
-0.2
-11.0
6.3
10.5
10.2
7.4
4.5
9.1
3.9
10.1
-0.2
-0.9
20.6
23.1
-6.1
-10.9
-4.0
-5.3
-0.5
-0.4
5.8
13.1
28.7
3.5
 Business services includes a
variety of activities including
engineering, architects,
economists, accountants,
consultancy, labour
recruitment, real estate, R&D,
technical testing, call centres,
industrial cleaning, etc
 Public sector, manufacturing,
agriculture set to contract over
the next 10 years (but all will
still require replacements)
And outlooks could differ
NI: Agriculture & manufacturing employment
000s
170
Forecast
160
150
Scenario
Baseline
140
130
120
110
1990
1994
1998
2002
2006
2010
Source: Oxford Economics
•Welfare reform?
•Will we work for less?
26
•Will we have the skills?
2014
2018
Under this
scenario,
there are
19,000
additional
jobs in these
sectors
Areas likely to encourage growth
Northern Ireland: Total visitor spend
 Tourism
£mn
600
 Care for elderly
550
Forecast
500
450
 Enviro-tech
400
350
300
 Management / leadership
250
200
150
 Advanced engineering
1990
1994
1998
2002
2006
2010
2014
2018
Source: NITB/Oxford Economics
Northern Ireland - Population aged 65+
 Food science
000s
340
 And yes – core support; skills
Forecast
320
300
280
260
240
220
200
1990
1994
Source: NISRA
27
1998
2002
2006
2010
2014
2018
Too few STEM graduates, too many ‘generalists’
UK regions: Business and Administration degrees in
employment (2007)
% total degrees
UK regions: STEM degrees (narrow definition) in employment
% total degrees
in employment
(3-year ma
2006-2008)
in employment
(3-year ma)
28%
16%
26%
14%
24%
12%
22%
10%
20%
8%
18%
6%
SC
EM
SO
EN
Source: LFS, Oxf ord Economics
28
SW
UK
NW WM WW
NE
YH
GL
NI
NI
GL
WM
SC
Source: LFS, Oxford Economics
NE
SO
UK
WW
YH
EN
SW
EM
NW
With better returns in certain subjects
STEM
Non-STEM
% total first destination
Managers &
professionals
Sales, custom er
service, process
and elem entary
(H2) Civil engineering
(H3) Mechanical
engineering
82%
5%
66%
(G6) Softw are engineering
(H4) Aerospace
engineering
(F1) Chemistry
(G3) Statistics
(H6) Electronic & electrical
engineering
(F3) Physics
(G1) Mathematics
(G4) Computer science
Source: HESA
29
% total first destination
Managers &
professionals
Sales, custom er
service, process
and elem entary
(N1) Business studies
30%
16%
13%
(R1) French studies
30%
13%
61%
12%
(L2) Politics
29%
16%
60%
13%
(L4) Social policy
28%
16%
53%
51%
12%
10%
(C8) Psychology
(V5) Philosophy
28%
25%
16%
22%
51%
16%
(C6) Sports science
24%
18%
50%
47%
46%
14%
12%
16%
(N5) Marketing
(W4) Drama
(P5) Journalism
22%
17%
11%
17%
25%
13%
Source: HESA
Sizing the Chinese trade opportunity
 Currently ROI sells $3.3bn worth of merchandise goods exports to China,
which is 0.24% of total Chinese goods imports. NI sells $0.7bn* (0.05% of
Chinese imports)
 Doubling these shares over 10 years, and assuming Oxford Economics’
forecast for Chinese goods import demand, this would mean:
 In ROI, $21bn worth of additional exports to China compared to today (equivalent to
6.5% of additional GDP)
 NI $4.2bn worth of additional exports to China compared to today (equivalent to 5.3%
of additional GDP)
*Includes all of Asia
30
31
Source: Fortune
Shanghai
Rome
Hong Kong
Frankfurt
Dusseldorf
Brussels
Mumbai
Atlanta
Amsterdam
Zurich
Taipei
Munich
Moscow
Madrid
Houston
Toronto
Osaka
Seoul
London
New York
Paris
Beijing
Tokyo
Number of companies
Asian companies increasingly important
Top 500 global companies, headquarters, 2010
60
50
40
30
20
10
0
Beware boom and bust
 Yes the economy has changed but boom and bust stories can be hurtful
 Remember that all sectors (even those in contraction) will need a steady supply of
skills and labour to replace those lost each year (primarily through retirement)
 Growth may be driven by the service sector, but there is still a place for manufacturing
 Successful business in developed world will compete on quality, skills and value added
(no longer possible to compete on cost – China, India, etc will win)
 The economy will become increasingly skills hungry in every sector
 Attainment levels have been rising in NI, but we produce too many generalists and not
enough specialists
 STEM subjects are in short supply
32
Summary
What will the ‘new normal’ feel like for new entrants into
the Northern Ireland labour market?.…
 Fewer jobs – more competition
 Wages bid down – it may take longer save for deposits for homes
 More have to leave for GB or further afield (already seeing this in some sectors) – how
many of our young people could work in the BRICs?
 Fewer opportunities in traditional sectors – civil service, education, health – too many
doctors, nurses, teachers – will this come as a shock? It should not
 Risk of under-employment
 Frustration if students feel they have not been given good career advice or have been
‘failed’ by education system
 Still high employer demand for areas NI good at – ICT, medical research, finance –
and decent wage returns in these sectors – but interest in ICT has fallen sharply
 And demand across the skills spectrum
 Risk of skill supply shortages in niche areas NI could be good at – environmental
technologies, computer gaming – lost investments
34
Not what it was like for the ‘baby boom’ generation
 Very different from the ‘baby boom’ generation of the past
■ Baby boomers collectively own close to £500bn of the UK's assets, which is fourfifths of the entire nation's wealth.
■ On average, young people owe £9,016 in personal debts excluding mortgages or
their share of the national debt, which is currently £2.2 trillion.
■ As young adults, baby boomers had a fantastic start in life, with free education,
paid apprenticeships, good pension provision and work contracts that lasted an
average of 10.4 years.
■ Today's youngsters become adults with an average of £20,000 in student debt and
struggle to find jobs that last an average of 15 months.
35
Key messages
 Be the best at whatever you do!
 Core, transferable skills are key
 Beware, boom, busts and ‘trends’
 International business will be key
■ Languages, markets, selling, interaction skills
 Specialism vs generalist
 Do not stigmatise courses (computer games, agri, and elderly care are
examples)
36
Contact Details:
Oxford Economics
Lagan House
Sackville Street
Lisburn
County Antrim
BT27 4AB
UK
Tel: 028 92660 669
Fax: 028 92670 895
[email protected]
Increasing importance of STEM degrees
UK sub-national: STEM workforce degree holders
% employment
10%
South
9%
Periphery
8%
North
Midlands
7%
6%
5%
2004
2005
2006
Source: LFS, ONS, DETI, Oxford Economics
38
2007
2008
2009
2010