Showing posts with label FAS. Show all posts
Showing posts with label FAS. Show all posts

Saturday, May 17, 2014

17/5/2014: ESRI on Education & Training in Ireland


ESRI released "Further Education and Training in Ireland: Past, Present and  Future" (http://www.esri.ie/publications/latest_publications/view/index.xml?id=3943)

Lots of sharp and interesting findings, including:


  1. Provision within the sector appears to have grown and national policy does not appear to have played any central role in determining the level, distribution or composition of Irish FET provision. In other words it is free-for-all.
 
  2. As a result, there is a substantial amount of variation in terms of …the relative emphasis on meeting labour market needs and countering social exclusion across the sector. In other words, the programmes are not really delivering on skills shortages.
 
  3. A substantial proportion of provision within the FET sector does not lead to any formal accreditation.  The lack of accreditation is more typical in programmes with a strong community or social inclusion ethos. Which might not be a problem, if real skills are delivered. Alas, this is not the case.
 
  4. The distribution of major awards across field of study does not appear to reflect strongly the structure of the vocational labour market. This is evident in the fact that the majority of key stakeholders, interviewed for the study, feel that current FET provision is only aligned ‘to some extent’ with labour market needs.
 
  5. From an international perspective, compared to the German, Dutch and Australian systems, Irish FET is much more fragmented and is much less focused around vocational labour market demand.  In terms of its composition and focus, Irish FET sector bears close similarities to provision in Scotland.  
 
  6. Data provision on Irish FET is extremely poor by international standards.
  7. The reform of provision will require that SOLAS implement a funding model that ensures that poorly performing programmes are no longer financed, with available resources directed towards areas identified as being of significant value on the basis of emerging national or regional information.  


The irony of this is that ESRI report comes out some weeks after I wrote about the deficiencies in our training programmes in the Sunday Times http://trueeconomics.blogspot.ie/2014/05/1552014-jobs-employment-lot-done-more.html and months after the OECD report covering the same.

You can read more on the topic of skills, unemployment and training here: http://trueeconomics.blogspot.ie/2014/05/1552014-innovation-employment-growth.html



15/5/2014: Innovation, Employment & Growth: Ireland's Human Capital Dilemma


This is an unedited version of my article for Sunday Times, April 06.


From jobs programmes aiming to boost employment creation to entrepreneurship strategies and to solemn promises to unlock credit supply and investment for indigenous innovation-based enterprises, Irish SMEs have been basked in the public policy sunshine.

Much of this attention is cross-linked to another public policy fad, Ireland’s long-running obsession with innovation and R&D. In 2013, amidst continued borrowing for day-to-day operations from the Troika, Irish State spent EUR773 million on supporting research and development activities in academia and industry. Of this, a good portion was targeted to fund R&D and other innovation activities linked to Irish indigenous SMEs.

There are three basic problems with all this policies activism. One, we have no idea as to what sort of financial returns this public investment generates to the taxpayers. Two, we have virtually no coherent and independently verified evidence that the innovation-focused SMEs are delivering any serious economic returns in terms of real jobs creation and income generation. Three, we have no proof the state-funded innovation is a right model for SMEs growth generation in the first place.


Enterprise innovation is a weak spot for Ireland. Indigenous patent applications reported in July last year by the Patents Office and covering full year 2012 stand at decades low. Monthly data from the New Morning IP – an Irish consultancy dealing with issues of intellectual property – shows that in 2013 indigenous patents applications fell even further, down by almost 3 percent year on year.

Back in 2006, the national strategy for science set 2013 as the target date to deliver a 'world class knowledge economy'. Since then, numbers of indigenous patents filed under the Cooperation Treaty and to the European Patent Office have declined.

And the problem reaches beyond our SMEs. For example, per IDA own figures, only 28 percent of agency clients have spent more than EUR100,000 per annum on R&D. In other words, nearly three out of four MNCs had, de facto, nil research activity here.

The university sector is the cornerstone of Irish Government's vision for delivering an innovation-focused SMEs culture. Sadly, our best universities are barely visible on the radar of international rankings. Ireland’s top university currently ranks only 61st in the QS Top University league table and 129th in the Times Higher Education (THE) rankings. Trinity ranks 55th in Arts & Humanities – an area that receives absolutely zero attention from the likes of IDA and Enterprise Ireland and is firmly placed outside our economic development policy umbrella. TCD ranks 81st in engineering and technology, 83rd in life sciences and medicine and 136th in natural sciences. All of these areas are focal points for R&D spending and feed into state enterprise supports systems. UCD is no better: ranked 139th in the world under QS criteria and 161st by the THE rankings.

By pretty much every possible metric, our innovation engines are not firing.


Meanwhile, enterprise formation, an area that should be a core priority for the Government that is allegedly focusing on entrepreneurship and jobs creation, is lagging. Irish start-ups rates, relative to the economy size, are low today and have been low even in the days prior to the Great Recession.

Based on the OECD statistics, despite years of booming ICT services and substantial growth in the IFSC, Ireland today shows relatively static number of enterprises trading in market services, and declines in the number of enterprises working in manufacturing and industries, excluding the construction sector.

Late last year, OECD published its Economic Survey of Ireland. The document recommended empirically founded approach to enterprise and innovation supports. OECD noted that over-proliferation of funding agencies and programmes is yet to be scaled back. Per OECD, Ireland has over 170 "separate budget lines… and 11 major funding agencies involved in disbursing the Science Budget". Meanwhile, the Government continues to add new ones, seemingly with little regard for their effectiveness. Not surprisingly, there is no evidence on systematic and independent evaluation of these programmes effectiveness. And there are no continuously reported return metrics relating to state investments in enterprise development and innovation.

Instead of real statistics, often misleading and highly aggregate numbers are being put forward as markers of success. Jobs commitments and gross jobs additions are presented as signifiers of major breakthroughs, without independent audits. Companies’ registrations rates are reported as being equivalent to start up rates and no central data reporting is provided for actual enterprise formation. Take for example a jump reported in new companies registrations in Q1 2014 when 10,741 new companies were entered into the register, marking a 6% rise year on year. This number included 3,989 limited companies - the third highest rate of new limited companies registrations for the first quarter over the last 10 years.

Sadly, these headline statistics tell us preciously little about the underlying dynamics of companies formation. For example, how many business restructurings completed in 2012-2013 are now leading to companies re-registrations? How many of the businesses launched in previous years survive? How many of businesses launched are actively trading in the real economy? We simply do not know.

Focus on top-line reporting metrics, such as aggregate numbers of companies registered, VC funds disbursed, R&D budgets spent, obscures the woeful lack of coherent policies supporting indigenous enterprises formation and growth. As the result, beyond the areas of ICT services, biotech and medical devices, we neither foster formation of micro enterprises nor help smaller companies to reach 'medium' size. And, via tax and compliance measures, we actively penalize self-employment – the source of much of the early-stage entrepreneurship.


Promoting real innovation and enterprise cultures requires supporting investment ecosystem and entrepreneurial risk-taking. These goals can only be achieved by lower taxation, especially via lower CGT and income tax, and a benign and highly efficient personal and business insolvency regime. These are not priority areas for the Government.

However, tax policies mix is a necessary, but not a sufficient condition for success. To further promote real enterprise growth, we need to stop fetishising scientific R&D-driven enterprises and ICT and refocus public funding toward more evidence-based enterprise development projects.

International research shows that ordinary and traditional sectors SMEs drive growth in jobs and income. Where traditional sectors are put onto exporting paths, these SMEs can drive exports growth as well. In contrast, high performance start-ups in ICT services, usually focused directly on exports markets, are less employment and income-intensive. ICT does contribute strongly to productivity growth and is a nice niche business to have on offer for investors, but as McKinsey recent research pointed out, tech innovation business is unlikely to fulfill the economy-wide hunger for jobs, especially jobs for the indigenous workforce.

Focusing on active training for entrepreneurship and mentoring of new companies is another necessary addition to the policies mix that is currently being sidelined in favour of populist drive for state investment and R&D funding. One key area where we are lacking in supports is access for entrepreneurs to legal, tax and financial advice. Costs of tax and legal compliance and structuring are unbearably high for younger companies and for smaller enterprises considering growth strategies. These costs crowd out funding available to companies to finance further development, hiring, as well as cap companies growth potential.

On investment side, we have a thriving culture of VCs chasing the 'next Facebook'. Over 90 percent of all VC funding extended in Ireland goes to finance ICT start-ups, with more than two-thirds of this going to ICT services companies, as opposed to physical technologies.  We also have over 75 incubators and accelerators, with the vast majority of these being state-owned and/or state-funded. These too focus almost exclusively on companies working in ICT, biotech and other lab-linked innovation sectors.

But we have no idea as to the effectiveness of this strategy. Numbers employed in core ‘knowledge economy’ sectors have grown by about 4,900 from the onset of the crisis through 2013. All of this growth was down solely to ICT jobs which added 9,125 new employees, while professional, scientific, and technical activities employment, excluding education sector, is down 4,225 on 2008. Adding up jobs creation reported by the MNCs from 2008 through present, it is highly likely that indigenous employment in professional, scientific, technical, and information and communication sectors has probably shrunk.

Looking at the overall landscape of enterprise formation here, we do know that with exception of Ryanair, CRH, Paddy Power and a handful of other flagship companies, no Irish SME has grown beyond the 'medium' level threshold. The magic target of exceeding EUR20 million in annual sales - set in the Enterprise Ireland 2005-2007 strategy plan has vanished, unmet.

Put simply, Irish indigenous companies are not getting smarter with billions of public funds invested in SMEs-targeting R&D activities and ventures over the years. At the same time, Irish SMEs are not growing in size either. Micro enterprises show some progression toward becoming small firms, but small firms show little dynamism upward and medium-sized companies are stuck with no capacity to break into the big firms league. The system is broken and incremental policy adjustments are not holding a promise of a solution. We need to go back to the drawing table on enterprise policy in Ireland.



Box-out: 

Recent research from the US, published by the National Bureau for Economic Research looked into sell-side equity analysts' ability to predict equity prices and the impact their predictions have on market valuations over the period of 1983-2011. Controlling for a wide variety of factors that routinely influence forecast errors, the study has found that at the times of the crises sell-side analysts forecasting accuracy deteriorates by up to 50 percent relative to normal. And just as analysts’ errors explode, their influence rises as well. In particular, forecasts that upgrade outlook for companies amidst the falling market tend to carry the greatest weight of public attention. Optimism pays, even if only for analysts’ employers. Which, of course, creates a powerful incentive for sell-siders to ‘talk up’ equities just around the time of the worst bear market. Lastly, the study found that at the time of financial crises, marketing efforts by sell-side analysts tend to increase, in part due to greater pressure on them to perform, in part due to expanded opportunities for being ‘heard’ by investors.

John Kenneth Galbraith thought that "The conventional view serves to protect us from the painful job of thinking." In the case of sell-side analysts musings on the crises, that might be not a bad alternative.




Thursday, July 4, 2013

4/7/2013: Jobs Creation by State Agencies


Per press reports today: "IRELAND'S enterprise development agencies created nearly 9,000 net jobs in 2012, new statistics outlined." The reports reference the findings of the Forfas 2012 Annual Employment Survey (linked at the bottom) which showed that "total permanent full-time employment in agency-assisted companies operating in all sectors amounted to 294,785 in 2012, a net increase of 8,975 jobs or 3.1pc."

The quoted statement above is nonsensical and should not have been made. Here's why:

  1. These jobs were created by companies working with the agencies, not by agencies themselves. In simple terms, "Ireland's enterprise development agencies" have not created any of these jobs, although they might have been helpful in bringing these jobs to Ireland or helping companies in developing activities that resulted in these jobs creation. 
  2. In some instances, working with the agency involves not much more than obtaining an investment from an agency-supported fund that is not actively administered or managed by the agency. In this case, a company 'client' of the agency does not have much of an engagement with the agency at all. In a sense, such jobs creation by the agency amounts to the jobs creation by the financial investors - they provide funds for jobs that are to be created - with or without them, sometimes - but they do not actively 'create' jobs.
  3. Net jobs created claim relates to gross increase in total employment during 2012 over 2011 final figure. This increase in its entirety does not accrue to the company activities with the agencies. For example, a mature enterprise can be engaged with an agency in developing new markets for exports. The enterprise might hire new workers for work totally unrelated to its engagement with the agency. Should the credit for these jobs additions go to the agency? Let's put this differently: suppose you broker a deal between companies 1 & 2 to purchase good X by 1 from 2. Should you get credit for company 1 buying from company 2 good A as well? 
  4. Net jobs creation on the year 2011 assumes that these are new jobs added. This is also not true. It might be a job that replaces a layoff or redundancy that took place in 2011, but was not filled for 3-4 (or longer) months and thus hiring took place in 2012. What happens? Level of 2011 employment that serves as a base decreases by 1 job, level of employment in 2012 increases by 1. New jobs created = zero, yet Forfas study reports a net jobs creation of 1.
  5. The survey includes Ireland-based MNCs, which have multi-annual jobs rolls, so the point (4) above applies to their activities even more significantly than for domestic enterprises. 5,747 of the 8,975 jobs were 'created' in foreign-owned MNCs
  6. The survey also includes a number of larger internationally-trading Irish firms. Some of the jobs added could have been created and announced before the company was engaged with the state agency, but their filling was delayed until 2012 when the company was engaged with the agency.
  7.  Many of the firms covered in the survey are mature and established firms and are no longer 'assisted' in any meaningful way by the state agencies, since they have long-term established operations in Ireland. A standard practice in business is when a broker of a deal gets a commission for the deal. The broker usually ceases to be compensated for any future deals signed by the two companies engaged in the original transaction once the original transaction is over. In the case of the Irish state agencies, the credit seems to flow unabated regardless of whether their work does directly contribute to the jobs creation or not.
  8. In some cases, 'net jobs created' by agencies-assisted companies can be actually poorly accounted jobs rotations within the economy. Example: an agency providing outsourcing service to, say, Nama moves into the country assisted by one of the international FDI agencies in the state. It creates 100 jobs that are counted as new. Yet it takes on 100 staff from the previously closed domestic agency that was not assisted by the agency. Net jobs creation in state agencies assisted companies +100. Net jobs creation in Irish economy = 0.

These are at least some of the reasons why both the 8,975 jobs additions can be questioned and why in general none of these jobs were 'created' by the state agencies and not all of these jobs relate to the activities with which the state agencies are engaged.

There is also a reason to question the very word 'permanent' jobs. If they are permanent, then why has the employment levels in agencies-assisted firms still running below 2006 peak? Permanent is permanent, right?

And it really is not needed to make silly statements of this sort - some of the agencies - e.g. EI and IDA - are doing excellent work in many areas and are wanting in other. This is natural for any agency and any enterprise. The point is not to brow-beat them for the latter nor to ignore it, and it is also not to over-praise them for the former. What is needed is more precise and more transparent accounting and reporting. Alas, Forfas doesn't really deliver on that and never did. Instead we have a report full of chart, numbers and tables that offer little deep insight and even less real analysis.

Full Forfas report is here: http://www.forfas.ie/media/04072013-Annual_Employment_Survey_2012-Publication.pdf

Friday, April 16, 2010

Economics 20/04/2010: Fas training for ex-Dell workers

Last week, media report (Silicon Republic, 16/04/10, 300 out of 1,900 former Dell workers received FAS training) provided some evidence that was supposed to show us just how effective Fas training systems can be.

"The Steering Committee responsible for advising on the implementation of the European Globalisation Adjustment Fund (EGF) for the 1,900 former Dell workers in Limerick has revealed that 300 have received FAS training so far... The committee ...is chaired by Oliver Egan, assistant director general in FAS. Another meeting is scheduled for towards the end of this month."

So hold on - so far, we know, there were meetings. And more meetings will happen.

"The Minister for Labour Affairs, Dara Calleary TD, commented: “There is a lot which has been done already and is being done with EGF support in the mid-west and which is perhaps only now starting to become visible”."

What is Minister on about here? (italics are mine): "In relation to concrete measures the Minister highlighted:
  • The guidance service FAS provided to more than 1,900 former workers to date with some 300 persons receiving training in 2009 [note: this is a standard practice for large scale layoffs. How many of these 'graduates' actually found a job?]
  • That in the first quarter of 2010, training and educational activity has increased with more than 200 EGF clients currently enrolled in evening classes, more than 250 EGF clients are registered with the Limerick City Adult Education Service [is that registration a pre-condition for some additional unemployment or other financial support?];
  • That both Limerick Institute of Technology and University of Limerick have implemented a broad range of educational programmes for EGF clients [how many are enrolled? what types of programmes? what is the expected completion date?];
  • That more than 150 clients having availed of EGF training support grant administered by FAS to date [so we have 1,900 workers laid off enrolled total, 300 completed Fas training, 150 are receiving a special subsidy, 100 more are 'registered'];
  • That Fas runs a community-based initiative for more than 100 EGF clients [community-based initiatives rarely lead to gainful employment];
  • That some 225 clients are registered with the City and County Enterprise Boards and are undertaking start-your-own-business programmes [Who administers these programmes? What are graduation rates and what are the success rates for new entrepreneurs?];
  • The commencement of a dedicated EGF internship programme in partnership with the medical devices sector which will see more than 80 clients attending a series of workshops in April with successful candidates progressing into the full internship programme in June 2010 [This is perhaps the closest that Fas would ever come to giving these workers real hope of a gainful employment].
So, over 6 months after the layoffs, there are absolutely no hard numbers Minister Calleary can supply to show any success in progressing the former Dell workers into gainful employment. Surely, this is disturbing, given that Fas work does not come cheap and given that Minister has managed to set up a score of various schemes and taskforces - none of which are free to the taxpayers.

"I have committed to reviewing the overall programme in June to ensure that we are maximising the reach of the programme and to identify any additional or innovative measures that might be further considered,” Mr Calleary said. Really? So far, there are no indications that the review is going to be effective in assessing Fas' effectiveness in designing, administering and deploying these programmes.

Friday, October 16, 2009

Economics 16/10/2009: FAS - rotten outcomes on top of rotten culture?

Here is an interesting illustration of how ineffective was (and is) FAS is addressing the issue of long-term unemployment.
Of course, the tricky thing is: if FAS premise to up-skill and up-tool workers to match the future needs of our labour force holds any water, then we should expect FAS to be able to have a positive effect on reducing long-term unemployment. Of course, as the graph above shows, they never managed to do this, with long-term unemployment remaining at persistently high levels relative to overall unemployment through 2007. Only an onset of rapidly rising new unemployment since the inception of labour market crisis in Q1 2008 has changed long-term unemployment share in total joblessness. As newly unemployed multiplied in numbers, the overall weight of long-term unemployment in total unemployment temporarily has fallen.

So there you go - reforming FAS must take radical forms!

Oh, and on personal note of response to Denis O'Brien's comment today about 99% of economists who did not predict this crisis and 1% who predicted it long before it happened:

Per Irish Economy blog: "RTE reports the following comments from billionaire businessman Denis O’Brien while speaking at a Dublin Chamber of Commerce: Mr O’Brien also said the country’s third level sector supported 250 academic economists whom he accused of ‘writing blogs, twittering and taking out ads to stop NAMA’. He said they generally made a nuisance of themselves - which would be fine if 99% of them had not failed to predict the economic meltdown facing the country. He said the other 1% predicted doom all the time. ‘I have a sense that all these economists need to come and work for real businesses to really understand how the economy works and see the actual stress and strain of running a business… only then will they have something to contribute,’ he said.

Point 1 for Mr O'Brien: I work for real businesses - both in this country and abroad. In fact, I also run my own business.

Point 2 for Mr O'Brien: last week I lectured Mon-Friday each day for 6 hours in TCD, Wed-Fri for additional 2 hours in UCD, and on Saturday - for 3 hours at TCD again. In between, apart from Twittering and blogging, I also wrote several press articles, worked on two research papers and had a number of business meetings. I also worked on a long-term private sector research project and advised my clients in the US.

Point 3 for Mr O'Brien: in 2004-2007 I warned repeatedly that Ireland is facing a crisis in public spending, housing markets and private sectors debt. I did so from various platforms, including his own Newstalk106 and TodayFM. In 2008 I was at the fore front of private sector economists who were pointing at the depth of developing crisis. I also made a point of always offering a potential solution to every problem I was able to identify. Not that I called everything right in my life, but Mr O'Brien's statement is a bit rich.

Point 4 for Mr O'Brien: it is precisely
  • because we are seeing real businesses being squeezed by the banks in anticipation of Nama,
  • because we are seeing people sliding into perpetual dependency on the dole,
  • because we are seeing the depth of the crisis,
  • because we are seeing the taxpayers of this country being destroyed by wrong policies,
  • because we are seeing people losing their entire retirement savings to the same ideas and policies that now back Nama,
that we are warning about the risks that Nama and other Government policies have.

Mr O'Brien might not see it this way - and it is his right to disagree - but throwing about silly statements in an attempt to ingratiate oneself with those in power is a strange position for a successful entrepreneur and businessman like Mr O'Brien.