Investing In People
18 Feb 2005
This article by Paul Sweeney originally appeared in the Irish Times, 18th February 2005
The role of education in economic development is recognised as being extremely important. It is of even greater importance in the knowledge economy. Investment in education and training in past decades had a vital role in the Celtic Tiger phase of rapid economic growth between 1994 and 2001. However, the narrow focus on high tech R&D investment and the apparent desire of some university heads to turn their universities into "elite universities" through privatisation detracts from a key area on which Ireland must build if its is to continue to prosper. This is the issue of life long learning and skill enhancement of the existing workforce at all levels.
The OECD has pointed out that four out of every five persons who will be at work in ten years time, in 2015, are already at work, but that most of their skills will be obsolete by then. Thus the importance of continuous up-skilling of those at work must become a major issue. While employers may see it as a cost, it is those companies which do not upskill their workforces which will not survive. There is a broad consensus on the importance life long learning here and in Europe for economic development. However, there is some difficulty in translating the goodwill into actual results. Those who get least training are those who need it most, while those with the best education, receive most.
"Investment in human capital" is what economists call investment in education, not because they are contemptuous of people, but because in the past, many economists only saw investment in plant and machinery as adding to economic growth. Growing recognition of the value of education has meant that it is now no longer perceived as a cost, but as investment in the future. It is one which will generate returns for the economy, for the firm and for individual workers.
Economists and policymakers point out that future economic development will rely heavily on knowledge and innovation. Both will depend on the skills of people and so the education system, from pre-school to post graduate level is important, but the skill enhancement of those at work is equally, if not more, important.
For the average employee, additional workplace training is useful for increasing their skills, job satisfaction and in time, their earning power. For firms, the way forward in meeting future challenges is to have the most highly skilled and motivated employees.
Better skilled workers will produce more output, will use computers, plant and machinery, more efficiently and the efficiency gains reduce unit costs, boosting productivity and competitiveness. Investment in training also increases the flexibility of the workforce and new products and processes are better used. Better trained managers make better and more informed decisions - also boosting efficiency. Better trained workers and managers can work partnership more effectively, with a better dialogue between them, with workers challenging managers in positive ways. Those employers who fear such challenges may not last too long in the knowledge-based economy where workers are better educated, demand more fulfilling employment and despise authoritarian management.
The Taoiseach, Mr Ahern, stated at Davos last year that "central to raising productivity is investment in people, skills, research and lifelong learning. Such investment is vital if we are to provide more and better employment for our citizens". Productivity is the key driver to a wealthy, growing, and employment-generating economy. Ireland's productivity has soared over the past decades, albeit from a low base.
There are many reports which emphasise the importance of education and training. The two reports from the major EU Employment Taskforce led by former Dutch Premier, Wim Kok, concluded that the adaptability of workers is one of the key challenges facing all of the European Unions' economies and that lifelong learning must be a major priority. It saw Life Long Learning as a key input in addressing rapid technological change; raising labour market participation; reducing unemployment and enabling people to work longer. It also argued for the promotion of flexibility but that this should be combined with security in the labour market.
The drive to increased productivity must be within the European Social Model. This involves the social partners, civil society and public authorities, national and local. Trade unions have been at the forefront in promoting awareness of the need for education and in both facilitating and physically providing both general and vocational training for their members.
Ireland's Enterprise Strategy Group (ESG) sees the development of education and skills as being important for business. It wants a) a strong higher education sector with high quality graduates and quality research with more entering third level, b) the existing workforce upskilled and c) to expand the workforce with the emphasis on skill-based immigration. The National Competitiveness Council also places strong emphasis on learning and on life long learning. There is no shortage of funds for the area. Yet as the European Commission said in its Employment Report on Ireland on lifelong learning, in 2003/2004, "it is difficult to see an overall coherent framework." Ireland rates well in the EU's assessment of our employment strategy simply because we have low unemployment. However, on the issues of active labour market policy, childcare and on lifelong learning, the Commission annually criticises the Irish government's ineffective action.
The economic environment for a greater drive to increased life long learning could hardly be better than it is today. There are almost 1.9m at work in Ireland - a phenomenal growth of almost 700,000 persons or 60 per cent in the ten years to the end of 2004. Unemployment is low at 4.4 per cent and there will be a need for more workers than the natural increase in the workforce will generate for several years. It is generally agreed that a major difficulty facing the Irish economy is the shortage of labour. It is estimated by some that around 60,000 immigrant workers a year will have to be welcomed into Ireland for the next five or more years. A shortage of skilled labour is also a problem. Immigration can assist with the supply of skilled workers, but so too can training and upskilling of existing workers.
Another issue is that Irish universities, funded largely from the public purse, are failing to engage with adult learners. Lip-service is paid to life long learning and little progress is being made, while the colleges vie with each other for private endowments. Those who think that they can privatise our universities and turn them into elitist colleges for the internationally wealthy, and who wish to break free from any public accountability, are dreaming. While there is a case for building a number of "intellectually elite" universities, (as opposed to socially elitist ones), simultaneously they can and must play a far greater role in preparing Irish workers for the knowledge economy by opening their doors at night and in the day to those who fund them. The government, with the benefit of low employment, has a wonderful opportunity to move from its passive, laissez-faire attitude to learning by actively addressing the issue of learning and its focus must be on the less skilled.
Paul Sweeney
Economic Advisor to Irish Congress of Trade Unions