1. STEM agenda: An economist’s perspective Graeme Harrison Head All-Island Consultancy, Oxford Economics Engineering Careers Event 23 rd June 2009

2. Outline  Economic backdrop  NI future skill needs research  Other research  InvestNI Manufacturing statistical overview  DEL ICT high-level future skill needs  STEM demand  STEM supply  Returns to STEM  Summary Note STEM Review likely to cover some of same areas

3. Economic backdrop

4. A global recession – first since the war…

5. End of an era of UK growth …

6. A wide sectoral reach …

7. End of NI golden era …

8. NI future skill needs research

9. 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  The research is currently being updated with latest outlooks (weaker in short-run)  Demand focus but some supply-side elements  Model developed provides a consistent methodology for evaluating the quantum of future skill needs  Can be easily revisited with a weakened economic outlook, in calmer times or with a different aspirational scenario (e.g. emergence of ‘green jobs’, reshaping of financial & business services etc)  Compliments more qualitative, ‘sector by sector’ expertise in SSC Sector Skill Agreements and can be applied on a bespoke sectoral basis (e.g. SSC footprints)

10. 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”

11. Narrow ‘unspecialised’ subject focus

12. STEM concentrations

13. STEM concentrations excl medical subjects

14. Where could NI be?  If NI had same sectoral and occupation skill and subject structure …  16,000 more NQF 4/5 employed persons in work  48,000 more managers and professionals in work  7,000 more creative / art degree holders and 4,000 more STEM degree holders in work (8,000 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. 4k more STEM graduates in workforce …

16. Recession impact – over-supply in short-run Baseline Short-term outlook much weaker now

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 15,000 jobs available pa without any net increase in total jobs  Growth of 5,000-6,000 net new jobs pa is more sustainable for NI – consistent with education outturn and moderate in- migration Baseline

18. Need for a balanced supply …  Just under half of net requirement for NQF 4 and above  Still 1 in 6 available positions will require NQF 1 and below

19. Other research

20. Manufacturing – a declining sector?

21. Employment growth last decade

22. Manufacturing – a declining sector?

23. Towards export-led growth …

24. Worrying supply-side trends - ICT

25. UCAS acceptances ICT – falling quality

26. STEM demand

27. Still a +ve net requirement … Manufacturing a declining sector but large positive net requirement

28. STEM shortfalls could occur 2010-2020 annual average (000s) Potential STEM shortfall under aspirational scenario (pa):  Physical sciences: 40  Mathematics: 30  Computer Science: 200  Engineering & Technology: 300 Before even considering downward STEM enrolment trend

29. STEM supply

30. STEM degree workforce pool

31. STEM UCAS acceptances (NI HEIs)

32. Returns to STEM

33. First occupation returns

34. Wage returns

35. Summary

36. Facing a new world  The end of a debt era  Who can spend (not business, not consumer, not government?)  Not 100% true – there are opportunities to spend and some are doing  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  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  Leading not following matters (e.g. MATRIX)

37. Economist’s questions  Is the mix of skills appropriate – too general at top end?  How to future skills match – STEM demand and supply?  How to reverse STEM supply-side trends? What should the message be? Is it a demand issue?  Supplying niche skills in some STEM areas – good return but expensive – does it fit funding model?  Skills in energy sectors – how well do we know (green technology etc)?

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