Skills shortage will delay recovery

The Irish education and training system needs to address the current shortage of apprenticeships, writes Kyran Fitzgerald.

The recent rays of good news on the economy are more than welcome, but it is important not to get carried away.

Excessive doses of optimism can do strange things to one’s vision. There have also been a few welcome reality checks recently.

Alan Aherne, the former adviser to the late finance minister, Brian Lenihan, and a key figure in the early stages of the crisis, has warned of the need for the Government to take advantage of loan rates as low as 2% to invest in badly needed productive infrastructure while avoiding the temptation to engage in a consumption splurge.

Investment in our labour force would appear to be a particularly urgent requirement.

Activity in the labour market is rising, but choke points are already emerging at what is an early stage in the recovery cycle. Two recruitment firms — Mercer and Hays — have issued reports which point to the emergence of skills shortages across the economy, despite an official unemployment rate still standing at just over 11%. The concern is that these shortages could act as a brake, slowing growth.

Mercer’s 2015 salary survey contains some good news, with 92% of the 168 organisations surveyed planning pay increases for next year, averaging at around 2%, but with workers in hi-tech industries in line for increases of between 2.5% and 3%. At least take home pay should begin to match inflation. In some areas, including certain parts of construction, people with certain skills in short supply could do better than this, as pinch points emerge.

The problem of mismatched skills is highlighted in the Hays Global Skills Index. In its country survey, Hays concludes that, while Ireland scores highly under the headings of education and labour market flexibility, with overall wage pressure remaining low, it is suffering from a critical talent mismatch.

This, in turn, is contributing to wage pressure in high skill industries of the type we are seeking to develop, or attract. The mismatch identified is at the very top of the scale: Ireland is one of just three developed countries, including the US, with such a severe problem.

As Hays notes, many of our skilled workers have emigrated. Since 2007, there has been a fall-off in the numbers of people training for positions in construction, in particular.

It is apparent that Ireland needs to boost the number of people with intermediate skills, as opposed to those with university degrees, if current gaps in the labour market are to be filled, and the problem of long-term unemployment properly addressed.

In Ireland, youth unemployment is around 28%. Despite high rates of emigration among the under-25s, this represents a major potential long-term loss to society unless these people can be attracted back, having gained work experience overseas.

In an overall sense, Ireland scores highly. More than half of people aged 30-35 in Ireland have a third level degree. This compares with an EU average of 35% for this age group. At the same time, we lag well behind when it comes to the availability of apprentices and the supply of apprenticeships. Our education system is simply not broad enough to cater for the less academically minded or IT-oriented.

In August, the Expert Group on Future Skills Needs produced some interesting data on apprenticeships. In 2012, just 612 people served apprenticeships in construction. This is predicted to rise to between 2,195 and 3,085 a year by 2017.

In the meantime, we will have to rely on returned emigrants and on workers from eastern Europe, in the main, as the building trade ramps up. This is regrettable, given the scale of our youth unemployment and the equally pressing problem of long-term unemployment. Served apprenticeships in non-construction trades will remain modest in number rising from just over 500 in 2012 to between 535 and 555.

Contrast this situation with Germany, where there are 340 recognised occupations covered by apprenticeship schemes. In Ireland there are just 26 or 27 recognised trades.

The Government is beginning to produce some movement on this issue. The restructuring of training provision is now largely complete, with FAS having been replaced by Solas, and with 33 Vocational Educational Committees having been replaced by 16 Education & Training Boards.

In May, the first ever strategic plan for further education and training was launched by the former minister for education, Ruairi Quinn.

The plan provides for a move to year-round provision of further education programmes (up to now, provision ceased during the summer months). A learner database on the further education sector is being developed.

According to the minister, “the strategy seeks to rebuild the entire further education and training sector”.

Ibec’s Tony Donoghue, the organisation’s expert on training, anticipates that employers will be much more closely involved in determining training provision. A much greater emphasis on actual labour market outcomes is promised.

In the past, too much training was of the blunderbuss variety, being trainer led rather than trainee or economy focused. Mr Donoghue would like to see ring-fenced funding for the development of apprenticeships being provided for in the upcoming Budget.

He recalls the explicit commitment in the Programme for Government for the development of new apprenticeships reflective of the new economy now emerging. He accepts, however, that we cannot simply transpose the German model.

“Germany has a large sophisticated industrial structure. They have been doing these things for centuries,” says Mr Donoghue.

The target population needs to be made aware of the potential of non-academic training. “There is also a need for a conversation with young people and their parents. We are pushing the idea of advanced apprenticeships, complete with a pathway into higher education,” says Mr Donoghue, who believes areas such as medical devices, retail, and hospitality would benefit greatly from new apprenticeships.

Serving an apprenticeship does not involve a departure from conventional education as in the past. UCD and DIT now offer MA programmes in retailing. The UK has its problems when it comes to education provision. However, Mr Donoghue believes it is now scoring highly when it comes to the provision of engineering apprenticeships. Ironically, soaring university fees have led to an increase in the numbers applying.

The key now is to move on to the actual implementation phase. An apprenticeship council is promised. Mr Donoghue is keenly awaiting its establishment.

“The council could guide the development of the new apprenticeships, involving business organisations, such as the Irish Hotels Federation, or sector groups in Ibec.”

He believes that Skillsnet, which focuses on upskilling employees, is a good model to follow.

Richard Eardley, managing director of Hays Ireland, broadly agrees, noting that a big chunk of senior management in Germany and Switzerland were educated in technical colleges and served apprenticeships.

“Here, parents are reluctant to put their children into apprenticeships,” says Mr Eardley. “A technical education can be seen as a second-rate one.”

He also believes, that the mind-set of employers needs to shift — to one of hiring a person for their potential, that will involve a greater emphasis on in-house training.

“We are playing catch up. this is an issue that will not go away,” says Mr Eardley. “If we do not develop people with the right skills, employers will begin to question why they have set up shop in this country.”


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