We need to talk about our labour force pipeline

If people can’t reach work because the roads are not gritted, schools and pre-school nurseries shut, as was the case last Thursday, everyone suffers. From children missing education to patients’ cancelled health appointments, public sector workers, retailers and restaurants losing out on income or footfall – in essence, the entire economy takes a productivity hit.

Northern Ireland firms adapted to last week’s sudden drop in temperatures and the mass strike action to keep on running as normal. Thankfully, technology allows for a degree of home working and meetings can carry on as normal, but not all workers can do this and some had to find alternative transport arrangements.

While the strikes are (so far) irregular events, the more permanent headache for local firms relates to labour market shortages. Businesses are still struggling to fill vacant roles; from service sector jobs in retail or hospitality to construction engineers and production operatives.

The lack of available skilled ‘talent’ on the jobs market is holding back firms’ ability to grow and expand and therefore damaging our productivity levels. Successful firms need a conveyor-belt of high-quality people to continue their success stories. This is proving hard to come by, and the problem is not going to improve. The Northern Ireland Statistics and Research Agency forecasts that the working age population in Northern Ireland will contract over the next three decades.

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In 2023, the Open University’s Business Barometer found that 68% of organisations in Northern Ireland faced skills shortages. Almost one-quarter of firms that took part in the survey said they had been prevented from filling roles due to a lack of applicants.

Some local firms have hired workers from abroad or use other short-term ‘fixes,’ such as temporary agency workers. Employers tell me that hiring international workers can be a complex process with additional paperwork, a longer recruitment process and there’s no guarantee they will stay in Northern Ireland longer-term. Other companies are offering older staff the opportunity to postpone retirement and some firms, where possible, are investing in automation for certain tasks. But not every sector can automate.

January’s labour market statistics published by the Office for National Statistics suggested the local unemployment rate was 2.4%, and employment stood at just over 72%, in the last quarter. Northern Ireland also has a relatively high inactivity rate 25.8%) – but when we remove those with caring responsibilities, students and those that are sick, that ‘potential pool of labour’ shrinks significantly.

The post-Covid drive for work-life balance saw many Northern Ireland workers, particularly employees in their fifties, reducing hours or taking early retirement. This was a phenomenon seen across advanced economies combined with increased long-term sickness levels and reduced hours due to caring responsibilities.

The global slowdown has undoubtedly resulted in the local labour market ‘softening’ slightly after orders and economic activity shrank. Northern Ireland’s tight market is because of its small population, the higher inactivity rate and the loss of around 5,000 A Level students to GB universities each year. The majority of these people do not return to work in Northern Ireland.

Local employers are infuriated when they hear that by 2030, that number will increase to 10,000 school leavers exiting the region. This exodus is fuelled by the current inadequate university funding model which educators, business and young people all want to see addressed. Without a fairly funded higher and further education system, the local economy has no chance of delivering the talent pipeline that is required for long-term economic growth.

We are the only part of the UK to export our young people. Politicians and local policy makers are not taking the problem seriously. A 10x Economic Strategy, or indeed any other economic strategy that might emerge in the coming years, will have no chance of success unless it addresses the tertiary sector funding problem.

Evidence from Ulster University’s Economic Policy Centre show that over the next decade, local employers are facing shortages of students entering the workplace with STEM qualifications in everything from engineering and technology, maths and computer sciences, and environmental sciences as well as creative arts and design. By ignoring this problem, a future economy with high levels of innovation, research and trade looks a lot less likely!

Businesses have an obligation to lean in and Northern Ireland’s employers are lagging behind other UK regions when it comes to the percentage of employed people engaging in job-related training or education. More employees need to enrol on this type of training or education courses. Upskilling and reskilling would make an important contribution to tacking the labour market crisis.

With world class universities in Queen’s University Belfast, Ulster University and local further education colleges, Northern Ireland produces some of the brightest students in the world who receive lucrative offers from firms across the UK or internationally. Ensuring students stay here, put down roots and contribute to Northern Ireland society, is a challenge that we must urgently collaborate on. It’s now time to set up a Tertiary Education Taskforce comprised of business, government and educational providers to tackle this future labour force crisis head on.

:: Angela McGowan is director of CBI Northern Ireland