1. Why STEM is important for the future growth of NI economy? Graeme Harrison Head All-Island Consultancy, Oxford Economics Education & Library Board Careers Event – Greenmount College 9 th October 2009

2. Outline  Economic backdrop  NI future skill needs research  Why STEM matters?  STEM challenges  STEM demand  STEM supply  Returns to STEM  Summary

3. Economic backdrop

4. Global reach of recession … Real GDP growth outlooks (summer 2009)

5. Sectoral reach …

6. Recession nearing end but legacy impact …  Some modestly positive economic news is coming through in early summer 2009 with business confidence indicators, housing transactions, house prices and unemployment all showing either slight improvement, or in the case of unemployment a slow down in the rate of decline  This is however not yet sufficiently sustained or corroborated by other key labour market or output data to suggest the recession is over  While it may not be long before the recession bottoms out in terms of the scale of output and employment contraction, attention should turn towards the short, medium and long-term legacy impacts the recession may leave, several of which are ‘personal’:  Excess demand for education & training (but funding constraints?) and excess supply of education & training outputs (which will increase recruitment competition today and tomorrow)  Unemployment legacy  Public finances squeeze (recessionary impact will be felt for longer in public sector)

7. End of NI ‘golden era’ …  The last decade was a spectacular period of economic performance (albeit partly ‘debt- led’) which would have been difficult to repeat even before the onset of recession  The severity of the recession is such (in net job loss terms) that the NI economy is not projected to return to its 2008 peak employment level until 2017  In other words it will take a considerable period for the economy to create the quantum of jobs lost during the recession even if the economy is officially out of recession later this year / early next year

8. … unemployment legacy  Unemployment no longer forecast to return to its recent historic low 1.Insufficient pace of employment growth during recovery 2.Mis-match of skills of the unemployed versus business / economy needs 3.Only a limited out-migration response to rising local unemployment (as migrant origin economies are similarly struggling with recession)

9. NI future skill needs research

10. Scope of research  Empirical assessment of future skill needs (by NQF and NVQ level) and degree subject demand of NI economy, including for priority sectors (ICT, life sciences, hi-tech manufacturing and financial services)  Baseline (EDF Sept 08) and aspirational scenario  Has very recently been updated to incorporate latest summer 2009 economic outlooks  Demand focus but some supply-side elements

11. Evidence from consultations …  STEM graduates are and will continue to be in high demand  Though concern that the number and quality of graduates within science and engineering has been dropping at an alarming rate  The quality of degrees is becoming a weakness, with sectors such as the manufacturing being less impressed with today’s graduates, many of which it terms as ‘broad brush’ graduates  Under-supply of graduates in some sectors exists due to the lack of awareness of career opportunities  “The quality of personnel over the last decade in NI has been reducing. Lower entry requirements at universities is one of the major factors contributing to this trend”

12. Narrow ‘unspecialised’ subject focus

13. STEM concentrations NI ranks last if exclude medical degrees

14. Where could NI be?  If NI had same sectoral and occupation skill and subject structure …  9,000 more NQF 4-8 employed persons in work  49,000 more managers and professionals in work  7,000 more creative / art degree holders and 3,000 more STEM degree holders in work (9,000 less with Business and Administration in work)  But not easy for NI to quickly attract or create jobs genuinely requiring more graduates, managers, STEM degrees etc  High share of these jobs locate in Greater South East  It is a demand and supply issue!

15. 3k more STEM graduates in workforce

16. Recession impact – over-supply in short-run Baseline

17. Recovery – still a significant demand for labour  Even without a return to growth of the past decade still a significant demand for labour  On average 16,000 jobs available pa without any net increase in total jobs  Growth of 7,000 net new jobs pa is more sustainable for NI – consistent with education outturn and moderate in- migration  But not just about flows – non- employed stock from recession era? Baseline

18. Need for a balanced supply …  Two-fifths of net requirement for NQF 4 and above  Still almost 1 in 4 available positions will require NQF 1 and below (not to confuse flows with stocks!)

19. Why STEM matters?

20. Manufacturing – a declining sector?

21. Productivity driver

22. Out-performing UK Employment growth last decade

23. Towards export-led growth …

24. STEM Review supporting arguments  STEM in education – application and problem-solving skills  STEM in society – equipping people to adapt to new technologies  STEM in economy  Link to productivity (and thereby Government PSA targets)  Attract FDI  Support realisation of MATRIX vision  Advances engineering (transport)  Advanced materials  Agri-food  ICT  Life & health sciences  Solutions to today’s global problems  Climate change  GM food  Renewable energy

25. STEM challenges

26. Headlines from STEM Review  Young people disengaged from STEM  High STEM drop out rates at local universities  One-quarter of NI-domiciled STEM graduates at UK HEIs choose not to live and work in NI  Recognition of STEM importance and policy response only catching up with ROI and GB now  Rise in STEM education and science research spending in emerging economies is growing at a staggering rate – risk of being left behind if not proactive

27. STEM demand

28. Still a positive net requirement … Manufacturing a declining sector but large positive net requirement

29. STEM shortfalls could occur Potential STEM shortfall under aspirational scenario (pa):  Physical sciences: 100  Mathematics: 40  Computer Science: 220  Engineering & Technology: 290 … Before even considering downward STEM enrolment trend

30. STEM supply

31. STEM degree workforce pool

32. STEM UCAS acceptances (NI HEIs)

33. Returns to STEM

34. First occupation returns

35. Wage returns

36. Summary

37. Facing a new world  The end of a debt era  Who can spend (not business, not consumer, not government?)  Tomorrow will have to be export-led not debt-led – manufacturing of growing importance?  Economies need to diversify  UK over-dependent on financial services  NI over-dependent on public sector / too small a private sector  Growing international competition – STEM skills build up in India and China  Could industrial production return to the UK as production and transportation costs rise elsewhere?  The environment will be ever more global - skills will therefore be even more crucial – NI not competing on cost  Leading not following matters (e.g. MATRIX)

38. Economist’s questions  Is the mix of skills appropriate – too general at top end?  How to future skills match – STEM demand and supply? Important to avoid ‘boom bust’ situation as has occurred for ICT – what is being done to avert this?  How to reverse STEM supply-side trends? What should the message be? Is it a demand issue? Would bursaries work – how generous would they need to be? More UCAS points for STEM subjects?  International best practice – US National Defence Education Act 1958 at start of ‘space race’  Key not to shield future generations from the growing challenge posed by emerging economies  Supplying niche skills in some STEM areas – good return but expensive – does it fit funding model in schools, FE and HE?  Skills in energy sectors – how well do we know (green technology etc)?

39. Contact: Graeme Harrison Head All-Island Consultancy, Oxford Economics Tel: 028 9266 0669 Email: gharrison@oxfordeconomics.comgharrison@oxfordeconomics.com