Education and the economy

The ESRI’s John FitzGerald outlines how policy changes and investment in education has impacted on economic growth on the island of Ireland.

Discussing divergence in the education systems on the island of Ireland, which FitzGerald believes has heavily influenced the polarised economic outcomes for north and south, the academic points to a turning point roughly 30 years ago when the Republic of Ireland initiated a major change in education policy.

The ESRI Research Affiliate outlines average growth figures since 1990 which show output per head in the Republic of Ireland of 3 per cent annually compared to 1.5 per cent in the UK and roughly 0.8 per cent in Northern Ireland, stating his belief that investment in education has been a major factor in the South’s better performance.

FitzGerald believes that matching educational attainment of the population to the needs of a modern economy is vital and offers some context to the importance of education investment.

“If you look at the EU15’s labour market, there is a low elasticity of substitution between skilled and unskilled labour and it’s recognisable that a failure to match labour supply and demand leads to unemployment. Ireland and Northern Ireland are part of a much broader EU labour market.”

He outlines that EU15 figures over the previous 15 years show that, even during the recession years, the employment of graduates continues to grow and the unemployment gap remains small. This is in contrast to statistics for those who didn’t complete secondary school for the same period, which portray a recognisable decrease in employment and a big increase in the unemployment gap.

Returning to the two differing stories on the island of Ireland, FitzGerald explains that both north and south had the same system of fee paying secondary systems up until the 1920s. In 1944 the UK Education Act and subsequent Northern Ireland Education Act, 1947, provided free secondary education in Northern Ireland on the English model. In this regard, Ireland was left behind. FitzGerald himself was in the last year of fee paying secondary education in 1967 when, he says, Ireland realised it had “been asleep” in terms of the importance of education to economic performance.

In the 1980s, a series of papers established the basis that streaming of children, both within schools and between schools, was not beneficial for less talented pupils and that mixed ability teaching was important. These findings seriously influenced policy in the Republic.

In Northern Ireland, the model of grammar and secondary schools has changed little from the original model, despite a move in England in the 1960s to modify its own model. Research conducted by Borooah in 2015 showed that the selection of 40 per cent of children into grammar schools very seriously disadvantages the remaining 60 per cent.

He also highlighted that only 20 per cent of Protestant boys from a deprived background reached the requisite standard and only 33 per cent of Catholic boys from the same background did so.

The difference the change in policy made on the educational attainment levels of the Republic of Ireland compared to Northern Ireland can be tracked when put in the context of wider European performance. For those born in the early 1930s both Northern Ireland and the Republic of Ireland ranked low and behind the EU15 and EU27 averages for secondary school completions. While the early 1950s cohort had improved their levels, they still remained fairly low in the comparative rankings. However, by the early 1980s the Republic of Ireland had moved dramatically up the rankings, well above the EU15 and EU27 averages, while Northern Ireland, though still increasing their rate, had moved little by comparison.

Another comparison outlined by FitzGerald is that of education participation rates at the age of 17. Following a major policy push in the Republic of Ireland in the 1990s to reduce the number of early school leavers, Ireland ranks best alongside Scotland, the highest UK performing region. In comparison, Northern Ireland has the second lowest participation at 17 rates, higher only than Wales.

The outworkings of differing education policies is evident in a recent analysis of educational attainment levels for those aged 30-34 done in 2017. Across the UK regions and Ireland, Northern Ireland has the highest proportion of early school leavers and the lowest proportion of graduates within this age bracket. In comparison, Ireland has the lowest proportion of early school leavers and highest proportion of graduates. Outside of London, Scotland is the closest performer to Ireland in this regard.

FitzGerald says: “Scotland’s performance is no accident. The Scottish system of education involves mixed ability teaching and Government policy has given greater attention to education than much of the rest of the UK.”

FitzGerald believes that Northern Ireland’s economic problem is compounded further by the fact that almost 25 per cent of its graduates are living in England and Wales, compared to just of 8 per cent of Irish graduates doing the same.

“Northern Ireland is not producing enough graduates and, of those that there are, a large number go to the UK,” explains FitzGerald.

In 2017, 19 per cent of Northern Ireland’s first year students were in third level institutions in Great Britain and statistics suggest that two thirds of those studying in England or Scotland do not return to work in Northern Ireland.

FitzGerald says that these figures are evidence that Northern Ireland is “losing at both ends of the educational system”. Explaining this further, he says that human capital affects the economy through three key channels: productivity; labour force participation and the reduced probability of unemployment.

Highlighting a range of studies done in Ireland which all point to a major contribution to Ireland’s economy over the past 20-30 years being the upgrading of human capital, he points to one in particular by Breen and Shortall, 1992, which showed that keeping children in school so they completed the junior cert. exam, not only reduced the likelihood of unemployability, but also brought about savings to the state in reduced unemployment benefit.

FitzGerald also points to his own research paper looking at the contribution of rising educational attainment to growth between 1992-2010 which estimated that 2.5 percentage points of the annual growth in the Republic of Ireland can be attributed to the upgrading of the educational attainment of the population.

A similar study focussed on Northern Ireland by Borooah estimates that upgrading education would bring about better returns for the individual and add 0.25 percentage points to productivity growth. A 2019 study by FitzGerald estimated that if Northern Ireland was to adopt the Scottish education system, it would add 1 per cent a year to growth and another 2019 study by Siedschlag and Koecklin pointed to a significant impact of education on foreign direct Investment (FDI).

FitzGerald says: “In the Republic of Ireland investment in education has played a crucial role in growth. Inclusive education is a vital tenet of this and that does not simply mean third level education. Much of the success in recent years can be attributed to a policy focus on reducing early school leaving and that change in perception that education was important and plays a big role in growth rates.

“In terms of Northern Ireland, a failure to invest effectively in education is crucial in Northern Ireland’s poor economic performance within a UK context. The selective nature of the educational system does serious damage to the economy and society and the challenge will be how best to rapidly evolve to a more inclusive system.”

The academic believes that reform of the education system today would take some 20 to 30 years to impact on the economic performance. However, he believes there is an existing quick win measure that could take earlier effect. He suggests that Northern Ireland should make itself attractive to those young people who have emigrated, highlighting that a factor in Ireland’s success is that while over one third of all graduates leave Ireland, a large number also return, unlike Northern Ireland.

ESRI research suggests that those who return to Ireland earn 10 per cent more and increase their productivity by 10 per cent as a result of their learnings abroad.

Attracting back a large number of graduates could have a major economic impact,” he says.

FitzGerald believes that Northern Ireland needs to transform its investment in education to sustain real growth, however, he also recognises potential challenges to such a policy switch. Recognising the rise of English nationalism which is culminating in the form of Brexit, he says: “The North faces huge economic problems which will be aggravated by Brexit, however, economic problems alone are not the only challenge. Northern Ireland depends for over 20 per cent of its income on transfers from London. The rise of English nationalism may threaten the long-term future of those transfers. To that end, Northern Ireland must transition to a more productive economy, relying more on its own resources and less on transfers from London.

“Education is the sector in which I would begin this transition,” he concludes.