Summary

There is a wealth of economic literature on the links between education & skills and economic
performance. The broad consensus is that a strong positive correlation exists between the two and work
carried out by Oxford Economics for NI departments in recent years has provided confirmation of the
linkages.

From an economic modelling perspective, it is possible to include education performance and skills as a
factor in determining productivity and hence economic growth. Indeed work carried out for the Economic
Development Forum (EDF) in 2006 added workforce skill variables to the Oxford Economics Northern
Ireland sector productivity equations and forecasts.

No detailed skills modelling has been carried out at this stage for the Economic Advisory Group (EAG). It
would be possible to model the impacts of improved education outturns and workforce skills on productivity
replicating methods used for EDF. It is possible to gauge indicatively the impact on employment of an
improvement in working age skills using an “employment likelihood” method (this is done within this report).
However care must be taken when using such an assumption as this presupposes there will be sufficient
jobs to demand the skills and that the labour trained does not simple migrate out to seek employment
elsewhere.

The primary reason that modelling has not been carried out in this exercise is the lack of a discreet
policy to model. Whilst the aspiration to improve educational standards and skills is widely held, there is
no (new) approach accepted to doing so. Without any actionable policy and associated costs, modelling the
outcome of improved educational standards and skills would be aspirational and not directly comparable
with, for example, the costed options of either lower corporation tax or increased levels of R&D tax credits.

This short report draws on the recent data and research carried out by Oxford Economics to review the
current education and skills performance of NI, and sets out some illustrative forecasts. Much of this report
is drawn from the article written by Oxford Economics for the Labour Market Bulletin on behalf of DEL in
summer 2010 (and published in March 2011 in Bulletin 23).

The reader should bear in mind that formal qualification levels are used as the basis for much of the
analysis. There are limitations in the comparability and suitability of this crude measure of skills and ability.
Softer business and social skills are however not easily measured, though clearly they matter for how
productively qualifications are used in the workplace. Equally there is an argument to be made about „over
qualification‟ with anecdotal evidence suggesting many people are more qualified than is strictly required
for the job they are in.

Education and skills policy is currently receiving a significant focus of attention with ongoing debate over
selection policy, integrated education and tuition fees all issues that an economic strategy will need to be
cognisant of.

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