Achieving an educated workforce is a long-term strategy

Graduates have done well in the European Union job market over the last 20 years, but getting a job has been much more challenging for those who never made it beyond Junior Cert or equivalent. Partly as a result of globalisation, goods and services traditionally produced in the EU by less well educated workers have increasingly been sourced from countries such as such as India, Bangladesh and China. Although much of the production of such goods, such as textiles and clothing, has already moved to less developed economies, there is still no sign of this movement of jobs abating.

Figure 1 shows that employment in the EU 15 of people who only had a lower secondary education fell continuously from the mid-1990s until 2008, despite growing economies. However, since the crisis began in 2008, that fall in employment has accelerated. Although there are now fewer people in the labour force who hadn’t progressed beyond a lower secondary education, nevertheless the number of unemployed has risen.

For graduates, employment opportunities have grown continuously over the last 20 years, as shown in Figure 1. While the rate of growth slowed since the crisis began in 2008, nonetheless graduate employment has risen continuously through the crisis years.

It is a major challenge for EU governments to develop policies to eliminate unemployment among those with lower skills and education, or to improve the demand for less skilled labour to match its supply. It is not a realistic proposition to make relatively unskilled jobs in manufacturing more competitive by cutting wage rates. The scale of the cut in unskilled wages that might restore competitiveness would be both impossible to achieve and unacceptable to EU citizens.

Only feasible strategy

Instead, the only feasible strategy for returning the wider EU economy to full employment involves improvements to the education system to reduce the number of students who do not complete second-level education. This is particularly important for countries with few graduates, such as Portugal.

Raising the skill levels of the workforce through improvements in educational attainment takes time to make an impact. The introduction of free second-level education in Ireland in the late 1960s, and increased participation in third level from the 1980s, have taken until now to result in a well-educated workforce. Speaking to European colleagues recently, they were concerned that a policy of raising educational attainment would take 20 years to mature. In that case, the sooner it gets under way the better. It is hard to see an alternative strategy that will produce full employment in a sustainable manner.

The effect of 30 years’ investment in education in Ireland has been to dramatically reduce the numbers leaving school early and to raise the proportion of young people going on to third-level education to more than 50 per cent. While, before the 2008 crisis, participation in third-level education had been much higher among girls, the gap between boys and girls has been somewhat reduced since then. Now more than half of boys are also going on to third-level education. It would appear that the fall in job opportunities in the construction sector has greatly reduced the incentive for boys to leave school early. Hopefully there is also a greater recognition of the importance of education in improving life opportunities.

Figure 2 shows the educational attainment of the unemployed in Ireland over the last 25 years. Unemployment in the recent great recession peaked at 14.6 per cent, which was slightly lower than the peak in the 1980s of more than 16 per cent. By 1993 the unemployment rate was still more than 15.5 per cent and, while the economy began to grow very rapidly in 1994, it was not until 2000 that the economy reached full employment. One of the features that made progress in reducing unemployment painfully slow in the 1990s was the high proportion of the unemployed who had low levels of education, and who were among the last to be hired.

Return to work

This time round, when the unemployment rate peaked in 2012 at just over 14.5 per cent, the vast majority of those unemployed had at least completed their Leaving Certificate. This should make the return to work somewhat speedier in a growing economy looking for educated workers. Since the middle of 2012, employment has risen, and the unemployment rate has fallen in each successive quarter. If progress was to continue at the current rate we could see a return to full employment before the end of the decade.

However, there remain concerns that some of those with good qualifications find themselves in unskilled jobs. Further growth should see a better matching of skills to employment needs. Also, even with employment growth, those with the lowest qualifications may find themselves still locked out of the labour market.*

This highlights the need for suitably targeted training and education. Doing a training course in 2010 when there were no jobs was demoralising but, today, with employment steadily increasing, the returns to successful training or education programmes could be significant, especially if the programmes are adjusted to meet the needs of the unemployed.

* http://www.izajoels.com/content/4/1/9