Transcript P2P IS APender

Tourism Education & Labour Productivity
A Particular Challenge for the Tourism Sector.
Brussels 27 March 2012
(P2Pstudtours 48006)
Aidan Pender
Director, Strategic Development
Fáilte Ireland – The National Tourism Development Authority of Ireland
© Fáilte Ireland
Presentation Structure
1.
Introduction: Understanding Productivity
2.
Productivity in Tourism
3.
Tourism Labour Market in Ireland
4.
Education, Productivity & Competitiveness
Introduction:
Understanding Productivity
Labour and Economic Growth
 Hours Worked
 Unemployment
 Labour Force Participation
Labour Utilisation
Economic
Growth
 Value Added/Worker/Hour
Labour Productivity
What is Productivity ?
 Productivity is defined as the ratio of outputs to all,
or part, of the resources used to produce it.
Productivity = Output / Resources Used
 Productivity growth is measured by comparing the
increase in output relative to the increase
resources used in production
∆ Productivity = ∆ Output - ∆ Resources Used
Why Measuring Productivity Matters
 Productivity gains are the basis for improvements
in living standards.
 Measurement of productivity is a key element
towards assessing standards of living and changes
in living standards.
 For example, income per person varies directly
with labour productivity. Measuring labour
productivity helps to better understand the
development of living standards.
Why Measuring Productivity Matters
 The long-term trend in productivity is useful in
assessing an economy’s underlying productive
capacity.
 Benchmarks (a) the efficiency with which
resources are used and (b) production processes.
 Tracks the role of technical change.
 Identifies scope for cost saving.
How is Productivity Measured?
1. Via single factor productivity measures to give a
partial measure
Labour is the most popular partial measure and
this presentation’s areas of interest.
2. Via multi-factor productivity (MFP) measures
which give a more rounded picture but are more
data intensive.
Common Output Measures
Gross Output
 Corresponds directly to a specific model of a
production function with ‘neutral’ or ‘outputaugmenting’ technical change
 Captures disembodied technical change via multifactor productivity measures
Value Added
 Where value added is considered a firm’s output
and only primary inputs are taken as a firm’s input.
 Reflects a sector’s capacity to contribute to
economy wide income.
Summary of Main Productivity Measures
Type of input measure
Type of
output
measure
Single Factor Productivity
Measures
Labour
Multi-factor Productivity
Measures
Capital
Capital & Labour
Labour
productivity
Gross output
(based on
gross output)
Capital
productivity
(based on gross
output)
Capital-labour MFP
(based on gross
output)
KLEMS multifactor
productivity
Labour
productivity
(based on
value added)
Capital
productivity
(based on value
added)
Capital-labour MFP
(based on value
added)
-
Value added
Source: Measuring Productivity, OECD Manual
Capital, Labour &
Intermediary Inputs
Conventional Tools?
CNC Lathe
But ........
 These are examples of labour productivity being
augmented by capital enrichment.
 These capital goods are available to all.
 Other tourism destinations will have them.
 Of themselves these productivity gains will not
represent a source of enduring competitive
advantage.
 So need to find other opportunities for productivity
gain.
Productivity
in
Tourism
Sources of Productivity Gains
1. Three processes underlying almost all productivity
gains:
1. Innovative Activity
2. Reducing Inefficiency
3. Technological Diffusion
2. Competitive conditions in an industry can
influence all three processes.
3. Nationally, policies to increase productivity often
focus on sectoral competitive conditions.
Competitive Conditions in Ireland
Context
 Irish economy in deep recession.
 By 2010 output per head fell back to 2001 levels,
with fall in output and living standards at c. 15% or
more.
 Exports will be the main driver of economic growth.
Pace of recovery in our trading partners heavily
influences domestic recovery.
Tourism & Export Led Recovery
 Ireland can leverage off the international recovery
via increased inbound tourism.
 2015 – Government Target
o 8 million international arrivals, up 25%.
o 35% growth in foreign exchange earnings.
 Labour intensive tourism will absorb excess labour
(unemployment at 14%)
Competitiveness Lost
 Significant loss in cost competitiveness since 2000
o Appreciation of €
o Relatively higher price inflation
Ireland’s Competitiveness - Falling ULCs
Annual Change in ULC
ULC Index (2005 = 100)
2
120
1
115
0
2007
2008
2009
2010
110
-1
105
-2
100
2007
-3
95
-4
Ireland
Euro area (16 countries)
OECD - Total i
2008
2009
Ireland
Euro area (16 countries)
2010
Hungary
South Korea
2009
Poland
Japan
Italy
New Zealand
Ireland GNP
Switzerland
Spain
Finland
Denmark
OECD
UK
Sweden
Ireland GDP
Germany
France
US
Netherlands
Ireland - Room to Improve Productivity
Productivity Levels, per hour output (EKS PPP$) 2009
70
2005
60
50
40
30
20
10
0
Ireland – Room to Improve Productivity
Average Annual Growth: Output per Hour Worked 2005-2009
6%
2008-2009
5%
2005-2008
4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
Netherlands
Ireland GNP
Italy
South Korea
Finland
Germany
Switzerland
Hungary
UK
Sweden
Denmark
France
Japan
New Zealand
OECD
Ireland GDP
Poland
US
Spain
-5%
Ireland - Room to Improve Productivity
Summary Innovation Index, 2009
Competitiveness Lost – Tourism Impact
 Essential that Ireland improves its competitiveness
through:
o
o
Cost reduction relative to trading partners
Productivity gains.
 More recently unit labour costs have declined.
o Productivity increased faster than earnings
o Competitiveness Improving
Tourism
Labour Market
in
Ireland
Employment - Irish Tourism Labour Market
Significance of Tourism
Tourism Industry Population
Sector
Population
Hotels
902
Guesthouses
303
Self Catering/Hostels/Caravan Camping
421
Licensed Restaurants
2,295
Non-Licensed Restaurants
1,337
Public Houses
7,843
Tourism Services & Attractions
2,681
Total
15,782
Source: Fáilte Ireland Tourism Employment & Training Survey 2009
(June 2010)
Tourism Industry Employment
Sector
1999
2006
2009
Hotels
53,900
55,800
52,300
Guesthouses
3,100
2,800
1,900
SC/H/CC
4,600
3,700
3,100
Licensed Restaurants
40,300
45,200
32,900
Non-Licensed Restaurants
15,200
16,800
16,100
Public Houses
78,300
88,000
54,000
Tourism Services /Attractions
33,900
37,100
31,400
229,300
249,400
191,700
Total
Source: Fáilte Ireland Tourism Employment & Training Survey 2009
(June 2010)
Average Earnings in Tourism
Average Weeks Earnings by Sector (Q1 2010)
Electricity, water supply and waste management (D,E)
1,113.71
Financial, insurance and real estate activities (K,L)
1,013.59
925.32
Public administration and defence; compulsory social security (O)
905.96
Information and communication (J)
Professional, scientific and technical activities (M)
856.30
Education (P)
809.24
Industry (B to E)
800.16
772.77
Manufacturing (C)
Construction (F)
726.88
Human health and social work activities (Q)
699.06
All NACE economic sectors
682.91
Transportation and storage (H)
680.15
Administrative and support service activities (N)
490.55
Wholesale and retail trade; repair of motor vehicles and motorcycles (G)
483.59
451.51
Arts, entertainment, recreation and other service activities (R,S)
316.91
Accommodation and food service activities (I)
0.00
200.00
400.00
600.00
800.00
Average Weekly Earnings €
1,000.00
1,200.00
Skills Profile in Hotels & Restaurants
Hote ls & Re s taurants
100%
3.3
3.9
5.0
4.4
71.6
75.8
6.7
6.8
78.5
78.0
80%
60%
77.3
82.3
40%
20%
19.4
23.4
19.9
15.2
14.8
1996
2000
2004
2005
13.8
0%
1988
1992
Low
Medium
High
Source: EU Klems database 2007
Output per hour worked in tourism, in selected
economies, 1980-2003 (€2003)
Source: Forfás calculations; based on Groningen Growth and Development
Centre, 60-Industry Database, October 2005, http://www.ggdc.net
50
45
EUR (2003) value added, per hour worked
40
35
30
25
20
15
10
5
0
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
EU
IRL
USA
UK
NOR
KOR
Minimum Wage
€8.65
Negotiated
at
Sector Level
Summary
 Service Industry
o Heterogeneity
o Perishability,
o Transparency
 Sticky Wages
 Labour Intensity
 Productivity Challenges
Education
Productivity
&
Competitiveness
Labour cost as a % of Total Cost
40%
Labour Content in Tourism
 Labour intensive sector – labour is a dominant
variable in the tourism production function.
 Consequently, the returns to labour form a dominant
element of value added
 Limited opportunities for productivity gains through
capital intensification.
 Increasing productivity remains a challenge.
 Focus must be on dominant input variable – labour.
Linking Learning to Competitive Advantage
€
Competitive Advantage
Productivity Gains
Innovation
Insights
Learning
Investment in Human Capital
The Learning Framework
1. 10 Colleges - €4.5m in 2012
2. 2,500 students
3. Further Education (rather than Higher)
4. Craft Skills Based
5. Earn & Learn
6. National Traineeship Model
7. Priority - Culinary, Restaurant Service, Bar
8. Links with Industry
9. Applied Research
10. Lecturer Development
Tourism Densities.
Skills & Organisational Development
 Focus on those parts of the country where there is
high tourism density.
 Emphasis on support services for small and micro
enterprises
 Strong focus on work-based learning, actionlearning, and team learning.
 Focus on customer service and customer satisfaction,
with a view to including these as key performance
metrics in systems of standards and accreditation.
Thank You