Michael Ahern (Cork East, Fianna Fail)

I am pleased to address the House on the most recent in a series of periodic reviews of future skills requirements of key sectors of the Irish economy which was produced by the expert group on future skills needs. The expert group on future skills needs, EGFSN, was set up by Government in 1997 to develop national strategies to tackle the issue of skills needs, manpower estimating and training for business and education in Ireland. The EGFSN has published many reports that have identified in a systematic way the skills needs of different sectors and advised on the actions needed to address them.

The group is composed of representatives from Government, industry, IBEC, ICTU and the enterprise development agencies. The work of the expert group has focused on bringing together the different elements of the demand side and supply side of key sectors within the labour market, particularly those sectors of major importance to the economy. Using knowledge and experience drawn from industry, State agencies, Departments, educational providers and so forth of skill shortages, the EGFSN, in its recommendations to the Ministers for Enterprise, Trade and Employment and Education and Science, has been instrumental in pointing to the need for long-term planning in education and training systems.

The fourth report of the expert group on future skills needs brings together the individual items of research undertaken by the expert group over the period 2002-03. It contains ten chapters which highlight the future skills needs of key sectors in the Irish economy, including ICT, biotechnology, construction, logistics, food processing and occupations such as engineering and financial services. The report also explores the importance of generic skills for organisational success and includes a review of the overall labour market. The sectors chosen for analysis reflect the view of the group that it is important its work continues to concentrate on areas of high value if Ireland is to pursue its strategic goal of a knowledge based economy.

The central message that can be drawn from this work is that skills are pivotal to Ireland's future economic prosperity. As other sources of competitive advantage are being eroded, skills are assuming an ever greater importance for our future economic development. Having the necessary skills in place is vital if we are to meet the challenge of ensuring our future economic prosperity against a backdrop of rising costs at home and increasing competition from abroad. Arising from the significant body of work that the EGFSN has undertaken in the area of skills and which in summary format is reflected in this fourth report, we have a better idea of where opportunities for growth are likely to arise in the future and the skill sets which will be required. The report highlights that while the workforce continued to expand during 2002, albeit at a reduced rate of 1%, problems of recruitment and retention have greatly diminished.

As well as identifying sectors which are primed for growth, such as biotechnology and engineering, the report also draws our attention to the inescapable fact that low value added manufacturing will continue to migrate from Ireland. From a policy perspective, the important message is that significant skills gaps are anticipated in the medium term. The recommendations to Government contained in the report aim to increase the proportion of highly skilled workers in the labour force by improving the quality of the vocational system to facilitate upskilling and reskilling; arresting and reversing the decline in the take up of science subjects at second level; increasing the participation rate in higher education; addressing the variation in participation and levels of attainment in education based on socio-economic background, gender and so forth; and establishing a more targeted immigration policy. A second category of recommendations addresses the need to track the evolving skills needs of the enterprise sector. Emerging skills requirements include management expertise, marketing and sales skills and generic skills, for example, communications, team working and personal effectiveness.

I intend to highlight the key findings and recommendations of the fourth skills report. With regard to the general labour market review and outlook for 2003-04, the report notes that significant changes have taken place in the economy since the publication of the third report of the expert group in 2001. In particular, the tightness in the labour market observed in previous reports has eased considerably, with rising unemployment and a slow down in employment growth. However, a limited recovery in the international environment is anticipated which should have more positive implications for Ireland thereafter. The group is of the view that policy should continue to focus on increasing participation, increasing the proportion of those attending third level and on upskilling and lifelong learning.

The analysis of the ICT sector reviews and updates the forecasts in the third report in light of the global downturn. The report suggests that the recovery in the sector is likely to be gradual and growth rates are likely to be significantly less than was experienced in the late 1990s. The main areas where skills gaps are projected are in computing and electronic engineering for degree level graduates from approximately 2006 onwards. Up to 2006, demand and supply are reasonably well balanced.

The recommendations for the ICT sector focus on continuing the ICT investment fund established following recommendations in the third report; reinstating places on ICT courses; establishing a sales training initiative, separate from third level and requiring the appointment of academic staff to specialise in teaching and research in the area; establishing critical mass of capability in the higher education sector in the management of technology enterprises; promoting interest in the study of ICT courses; addressing under performance at second level in the areas of mathematics; and increasing transfer and progression from PLC programmes to third level computing programmes.

With regard to the biotechnology sector, the conclusion is that Ireland is well positioned to benefit from the anticipated rapid growth in the biotechnology sector worldwide over the next seven years. However, if the sector and Ireland are to reap the maximum economic benefits from the dynamic field of biotechnology over the period 2004-10, the potential skills deficiency, particularly in the areas of science and engineering, must be addressed. The recommendations to achieve this reflect three broad themes: initiatives to increase interest in the study of science and in careers in science; measures to improve the capacity of the education system to supply suitably skilled personnel; and supporting interventions, particularly in the development of Ireland's research competency.

In engineering skills the main areas where gaps are projected are in electronic engineering and degree level telecommunications engineering, from about 2006 onwards. The main constraint identified relates to the number and quality of college applicants wishing to apply for courses and the conclusion is that the take up of engineering as a career must be promoted by all those involved, from Government to educational institutions, employers and the engineering profession. The recommendations for engineering skills focus on boosting the numbers graduating in engineering from Irish institutions through promoting the study of engineering; broader science, engineering and technology promotional initiatives; actions at third level in research space and postgraduate funding; review of mathematics and teaching methods; upskilling and lifelong learning; and immigration and overseas students.

The report signals that in the construction sector a decline in employment of approximately 11% over the period 2003-10 is forecast. Even if these forecasts were to materialise, construction employment in 2010 would still be considerably higher than it was in 1999 and almost as high as the average employment in 2000.

The main area where a gap arises is with architects and a key recommendation of the study is that the education system should provide approximately 45 additional places annually for students who wish to study architecture. No significant gaps are forecast to arise for other occupations. The recommendations focus on monitoring the situation with visa authorisation and visa schemes for certain crafts and monitoring sponsorship levels in the construction trades of plasterer, painter and decorator and bricklayer.

The report makes it clear that the food processing industry faces many challenges over the coming years and although the sector is expected to experience a decline in employment over the period to 2007, it will continue to represent a significant sector in Ireland, both as an employment provider and as a major exporter. While the EGFSN study did not find evidence to suggest that the number of places on food related third level courses needs to be increased or decreased, the focus was instead on the industry's ability to attract such graduates. This mismatch between the educational institutions' output and the food industry's take up needs to be addressed. The focus of the recommendations is on five strategically important areas: employer focused demand initiatives, such as senior management training and a graduate fast track programme; employee focused initiatives, such as a promotional campaign on the benefits of training; third level education measures, including new modules at undergraduate level, and formally defined work placements; supply side training initiatives, such as immigrant induction programmes, and the expansion of "train the trainer" model and State support or training infrastructure, including a national centralised database of accredited trainers and training programmes and the expansion of skill nets.

The group's analysis of the financial services sector suggested that major skills shortages are not projected over the medium term as the industry responds well to any changes in the labour market. However, the need for monitoring is identified as the sector is predicted to undergo change. The recommendations for this sector include the need for the group to monitor changes in the financial regulatory environment which impact on skills needs; extending the FÁS traineeship for junior financial advisers in the insurance industry to other regions in Ireland; monitoring the actuary occupation closely; and suggestions for combined skills courses at the new financial services institute at the National College of Ireland.

The inclusion of the logistics industry in the report reflects the need for improvement in the logistics and supply chain management capability of companies in Ireland. Shortages of logistics and supply chain professionals are clearly identified in the report and specific skills gaps are identified in the areas of transport, warehousing and distribution, purchasing and e-procurement. There are important barriers to successful supply chain management in Ireland which the report details. The majority of the recommendations for the logistics sector are designed specifically to increase the number of young people obtaining qualifications in logistics. Significant increases in current education and training provision in all occupations from transport and warehouse operatives to documentation specialists, involving a range of different delivery systems including full-time and part-time education and training, traineeships and in-company training, are recommended.

Soft or generic skills have until recently not been given due prominence in our education and training system. These skills are becoming increasingly important in the workplace globally and although some improvements have been made in the delivery of such skills in the education and training system in Ireland, the group is strongly of the view that more needs to be done to prevent a gap arising in the future. Among the recommendations made in the area of soft skills are the need for soft skills development to be explicitly taken into account in a national policy agenda; initiatives in transition year; the need for soft skills to be incorporated into vocational programmes; and the development of soft skills at third level.

The range of issues and recommendations contained in the fourth skills report will help us to ensure we have the necessary skills in place to secure the sustainable development of our economy. It is also appropriate that I express my appreciation to the members of the EGFSN, particularly to the outgoing chairman, Dr. Daniel O'Hare, for the work and commitment which underlies the preparation and publication of this fourth report. Dr. Daniel O'Hare, who took up his appointment as chairman of this group in 1999 and relinquished it late last year, has, through his personal commitment and enthusiasm, delivered a considerable body of analysis, projections and recommendations for Government across a wide range of skills and sectors in the economy.

In addition to the fourth report which we are discussing today, the EGFSN has also published a dozen other major reports with the result that we have a key insight into the supply and demand situation for skills in the key sectors of the economy. This body of work is of considerable assistance to Government and policy makers in general as we try to match the skills of our labour force to the challenges and opportunities that lie ahead.

Looking towards the future, I am pleased to be able to tell the House that today the Tánaiste announced the appointment of Ms Anne Heraty as the new chairperson of the EGFSN in replacement of Dr. Daniel O'Hare. Changes at the helm of the EGFSN also prompted a look at the role of the group and the future focus of its activities. We need to continually keep in mind the impact of the changing business environment. In Ireland there are currently less pressures on labour supply than was experienced in recent years when the economy was operating at fuller capacity. However, intensifying global competition is leading to changes in the sectors where Ireland can complete effectively, necessitating a continued focus on changing skill needs, particularly with the diminishing availability of Irish students to participate in third level education over the coming years due to demographic changes.

Given the large number of reports produced by the EGFSN over the past two years, a key role for the incoming chairperson and the EGFSN will be to take stock of the recommendations in these reports with a view to securing ongoing commitments from responsible agencies and Departments to their implementation. There is little point in continuing to generate new reports and recommendations if insufficient attention is paid to implementation of existing recommendations. At least partly because the EGFSN has to date reported on most of the key sectors of the economy, there is now an opportunity to devote greater emphasis to implementation issues.

There are other areas where the work of the EGFSN will benefit from a new focus. In the past much of the EGFSN work has revolved around increasing the numbers participating in relevant courses. It is equally important to focus on the skills and competencies being acquired by graduates of these courses and their relationship and appropriateness to the skills required in the market place. There is an increasing need for graduates to have skills beyond their core disciplines, for example, software engineers must have business skills in addition to technology skills. Ideally the links between the enterprise sector and the educational sector should be close and mutually supportive. It may be possible in the context of some of the group's sectoral analysis that the EGFSN comment, where necessary, on the appropriateness of individual courses of study to the skills required in the market place.

Much has been said and written about the need to encourage students to take up the study of the physical sciences. The EGFSN can contribute to a greater public awareness of the importance of meeting the emerging skill gaps, such as in the area of the physical sciences, and promoting greater interest at both second and third level in careers in these sectors.

Skilled migrants in recent years have significantly enhanced Ireland's human capital base and its productive capacity. Our economic migration policy should continue to be directed at meeting the needs of our labour market. The trend towards an ageing population will have implications for the future Irish labour force if the number of new entrants every year continues to fall, while greater numbers retire from the workforce. While the accession of ten new EU member states from May 2004 will expand the pool of labour from which Irish based enterprise can freely recruit, there will be a continuing need for some level of inward migration from outside the EU to meet the need for targeted high level skills unavailable within the EU. Certain skills remain in short supply in Ireland, despite increased investment in education and that shortage, if not addressed, could hinder foreign direct investment, company expansion and market development. My Department's role is to promote the development of the economy and, more particularly, to mobilise the necessary labour supply in the quantity and quality needed to secure sustainable economic growth of the economy.

The mandate of the expert group on future skill needs makes it clear that it will provide an input to skills based immigration policy by advising on those skills requirements which cannot be met from indigenous supply and, therefore, may fall to be addressed via a skills based immigration policy. In current circumstances and with the imminent expansion of the EU the EGFSN is well placed to formulate recommendations based on identified and quantified specific skills shortages which are critical to assist the economy in moving up the value chain and which might have to be addressed as part of a more targeted economic migration policy. I expect therefore that the EGFSN's role in contributing to the development of our economic migration policy will be given greater emphasis in the future. The need to appoint a new chairperson for the EGFSN prompted a more general assessment of the work and future focus for the group as a whole. A key outcome of that process was the decision to effectively merge the role of the National Training Advisory Committee with that of the EGFSN. The Tánaiste established the National Training Advisory Committee in 2001 to provide independent, strategic advice to ensure national policies for training people in employment and for employment are forward looking and relevant to the needs of the economy.

The establishment of the committee complied with a statutory requirement under section 7 of the National Training Act 2000 which requires the Tánaiste from time to time to consult with employee and employer representatives with respect to her functions under this section of the Act. As well as carrying out an advisory role on issues of national training strategy generally, the National Training Advisory Committee provided the forum for the fulfilment of this provision. The terms of reference given to the committee were to advise the Minister for Enterprise, Trade and Employment on the overall strategy for enterprise training in Ireland; to identify best practice on enterprise training and its application to public policy; to advise the Minister for Enterprise, Trade and Employment on the priority training needs of the enterprise sector with a view to raising the skills of people in employment; and to advise the Minister for Enterprise, Trade and Employment on relevant aspects of the National Training Fund, as set out in section 7 of the National Training Fund Act 2000.

The potential synergies between the work of the EGFSN and the National Training Advisory Council prompted the decision that the National Training Advisory Committee be subsumed into the EGFSN and that the mandate of the EGFSN be broadened to incorporate the existing terms of reference of the committee. With the agreement of the Minister for Education and Science, the mandate of the EGFSN has now been expanded to incorporate fully the role discharged heretofore by the National Training Advisory Committee. The consultative role required under the National Training Fund Act is capable of being fully discharged by the new EGFSN including as it does representatives from employers and trade unions on the group.

We stand at a crossroads in our economic development. We have had very rapid economic growth and this has resulted in the numbers at work increasing by 500,000 in less than ten years. Despite the slowdown in the world economy our labour market has been very resilient with unemployment remaining stable. While some sectors have experienced job losses, these are being offset by employment opportunities in other sectors and it is predicted that this will continue to be the pattern into the foreseeable future. Over a quarter of employees in manufacturing work in high-tech industries, and this puts us in a stronger position than most other EU countries. However, about 40% of manufacturing employees work in low-tech areas and they are very vulnerable to lower-cost competition. When EU enlargement takes place in May, lower-end Irish manufacturing companies will face increasing competition from the accession states. We can also expect increased competition from these countries for foreign direct investment. It will be more difficult for us to compete successfully in certain sectors. We are entering a new stage of development where competitiveness must be addressed through the efficiency of the economy based on high quality, value-added products and services. Education and training are central to achieving this vision.

Labour market policy for most of the recent decades was dominated by issues of unemployment and long-term unemployment, and at the height of the boom by labour shortages. For the future, the main emphasis needs to be on the quality of the workforce as growth will rely on our ability to attract and retain higher value activities and higher skills with an emphasis on design and innovation. This involves moving from technology importing based development to innovation based development which leaves the country less vulnerable to competition from lower cost economies. Successful transition to this knowledge economy requires an increasing focus on the development of our human capital, through increasing the numbers of skilled school leavers, graduates and researchers.

Investing in education at first, second, and third levels, together with investing in our research capacity at fourth level, is crucial to achieving this transition. A key strength of Irish education in the past has been its relevance to wider social and economic needs. In a changing society and a rapidly evolving economy, education is continually challenged to remain relevant and responsive. This demands a deeper connection between education policy and national development needs. The EGFSN provides a key forum for employers, educationalists, trade union representatives, civil and public servants and members of the industrial promotion agencies to achieve a common understanding of these challenges and to agree on integrated strategies to meet them. Education-enterprise collaboration is founded on strong two-way communication. The EGFSN provides an important means for this and has resulted in several skills initiatives based on expert group reports to date.

There has been a dramatic change and acceleration in the growth in educational achievement in the past 20 years with the proportion of the youth cohort reaching leaving certificate level increasing and those proceeding to third level also increasing significantly. These are very important factors as there is a strong correlation between educational level and employability. In the future people will have more need to up-skill and re-skill throughout their working life than they did in the past and will therefore need basic abilities, self-confidence and learning skills. The fourth report of the EGFSN points the way to delivery on the education and training of our workforce through the formal educational establishment as well as through organisations such as FÁS, Fáilte Ireland, Teagasc and the VEC system working with employer and employee representatives.