A Low Skills Equilibrium in Northern Ireland

Northern Ireland has suffered years of chronically weak skills attainment amongst its workforce. This weakness has been linked to the wider underperformance of the Northern Ireland economy relative to the rest of the United Kingdom on a range of other measures including wages and productivity.

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A Low Skills Equilibrium (LSE) posits the theory that some economies with deficient levels of skills and output suffer from a mutual causality between low skills acquisition by the workforce and low skill utilisation by firms. This paper examines the evidence of a Low Skills Equilibrium in Northern Ireland.

Despite enjoying comparatively low skills and low value-added output, Northern Ireland firms and employees appear to be well matched and this indicates that the skills problem is shared equally between supply and demand.

Furthermore, employees and employers in Northern Ireland are shown to be less inclined toward increasing skill levels compared to other EU countries and regions and there is evidence that this may be self-reinforcing.

In policy terms, a Low Skills Equilibrium must be tackled through both supply and demand measures. For economies that lack the ability to coordinate economic actors, this task is more difficult. Reform of the skills infrastructure should be favoured over boosting existing programmes. Building a culture of coordinated skills and productivity growth is a process cannot be achieved with top-down measures.

Policymakers would therefore be advised to build on micro examples of firm-employee cooperation that already exist especially in firms with collective employer-employee agreements.

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