Forecasting Skills and Labour Market Needs Government Paper Ministry of Labour, Ms. Heli Saijets, Ph.D., Mr. Pekka Tiainen Ministry of Education, Ms. Kirsi Kangaspunta, Mr. Heikki Mäenpää Finnish National Board of Education, Mr. Matti Kimari, Mr. Ilpo Hanhijoki Ageing of population and globalisation challenge all open communities that are committed to a sustainable economic policy. The Government of Finland supports the approach of the Lisbon strategy objectives to accelerate economic growth and to boost employment, in line with the broad economic policy guidelines and employment guidelines 1. An employment guideline is to Improve matching of labour market needs (employment policy guideline 20). A tool to tackle this challenge is better anticipation of skill needs, labour market shortages and bottlenecks. This paper presents the Finnish model of anticipating skills and labour market needs in the long term. 1. Why do we anticipate the future? Challenged by globalisation and ageing of population; the Finnish baby boom cohorts were born in 1945-1950 The Finnish economy is - according to various international comparisons - reasonably competitive. The level of education in general and among young people in particular is high, investments in research and development are considerable and there is a well-functioning innovation system. The Finnish system guarantees a high standard of social protection and promotes the health of its population. Because of the nature of welfare system and the way it is funded, taxes on earned income are at a higher level than in many other countries. High unemployment is a persistent structural problem, as well as the high relative price levels, suggesting weaknesses in the operation of the labour and goods markets 2. Finland went through a deep recession in the early 1990 s when the GDP fell by 10 % and the number of jobs by 20 %. The unemployment rate peaked up to 17 % in 1994. The GDP declined in 1990-1993, but grew strongly between 1994 and 2000, slowing between 2001-2003 and picking up again in 2004. The road out of recession came about through exports, especially breakthroughs in the ICT industry. 3 The productivity has increased rapidly. The growth of employment is lagging behind the growth of GDP. The level of employment is still under the level of the year 1990. The employment rate was 68 % and the unemployment rate 8,4 % in 2005. Although the Finnish economy is in reasonably good balance and its short-term prospects are rather bright, the longer term prospects are challenged by ageing of the population and restructuring of the global economy. The Finnish population is ageing early and rapidly, compared to many European countries. This is because the baby boom cohorts were born already in 1946-1950 and they remained the biggest cohorts ever born. 1 The Lisbon Strategy for Growth and Jobs, The Finnish National Reform Programme 2005-2008, Ministry of Finance 2 The Finnish National Reform programme 2005-2008, the Lisbon strategy for growth and jobs. 3 Kiander-Romppanen: Finland s first 10 years in the European union, VATT Discussion papers 377, 2005 Helsinki 8-9 June 2006 Peer Review Forecasting Skills and Labour Market Needs, Finland 1
Since 1970 s Finland s age structure has been favourable in terms of economic growth and public finances, i.e. relatively big number of working age people in relation to the elderly and to children. The retirement of the baby boom generation will inverse this situation in less than ten years. (See the table 1.) Table 1. Population by age group 1990-2050, indexes 2005=100 Total 0-19 20-49 50-64 Over 65-15-64 1990 95 103 110 71 81 96 1995 98 106 109 75 88 97 2000 99 103 103 90 99 99 2005 100 100 100 100 100 100 2010 101 98 97 105 111 100 2015 102 95 96 100 132 97 2020 103 95 94 96 148 94 2025 104 95 93 90 161 92 2050 100 88 87 87 171 87 Source: Statistics Finland 2004 The Government seeks in all of its activities to anticipate changes in its operating environment and studies have been conducted of specific themes. A Government Forecasting Network covering all ministries was created in 2004 to coordinate all the forecasting processes of the ministries. The Government report on the future 4 listed consequences of demographic trends to Finnish society. Main challenges relate to: availability of labour force when working age population starts to decrease, employment has to be maintained with an older workforce challenging regional and professional mobility, a smaller labour force might weaken growth potential of the economy, the balance of public finances, balanced regional development and the provision and availability of services. Change also implies new opportunities: cost savings and increased efficiency, decreasing unemployment, opportunities to reform working life, narrowing regional employment and unemployment disparities new markets created by the increasing third age population and greater appreciation of culture, values, experience and community. According to the Stability programme of Finland the effects of population ageing will begin to show up in the economic development as the growth of pension expenditure accelerates and the supply of labour continues to dwindle around the turn of the decade with the retirement of the baby boom generation. The costs of health and social care provision for the elderly population will rise most steeply during the 2020s 5. 4 The Government report on the future: demographic trends, population policy, and preparation for changes in the age structure Finland for all ages report, Prime Minister s Office: Publications 34/2004 5 Stability programme for Finland, November 2005, p.23. 8-9 June 2006 Peer Review Forecasting Skills and Labour Market Needs, Finland 2
Anticipation of labour market and needs of education since 1970 s Forecasting the employment and the labour force development has been considered as an important tool for the labour market policy in the Ministry of Labour since its establishment in 1970. Results and analyses of the forecasting process are used for policy planning in order to reach balanced labour market situation. In parallel to the labour market forecasting the Committee for the target programme for Education and Training launched a quantitative planning system of vocational/professional education and training. Anticipation of educational needs aims to provide information on quantitative needs for upper secondary vocational education and training, polytechnic education and university education. Quantitative anticipation is strongly linked to changes in occupations and skills needs and co-operation between quantitative and qualitative anticipation must be further consolidated. Anticipation of labour and educational needs in this context means analysis of the past and assessment of the future development of population by age and gender, production and productivity by industry, employment and hours worked by industry, working time by industry, labour force participation rates, labour market status of people in working age, occupational structure in each industry, labour wastage, occupational transitions and correspondence key between occupational groups and education. The analysis and calculations are prepared by comprehensive, inter-ministerial working groups, including representatives from research institutes and Statistics Finland. A long-term labour force project is launched by the Ministry of Labour at 3-5 years intervals. Currently there is the Labour Force 2025 project. The timing of the labour market project is coordinated with the quantitative educational planning. Supply of Education 2012 project by the Ministry of Education is currently going on in parallel with the labour market project. There are two models: 1) the long-term labour force model and 2) the anticipation method of the educational needs. Scenarios and sensitivity calculations are prepared including alternative development paths of GDP and productivity growth and employment. The basic scenario is the most probable development path and the target scenario is the more favourable and aimable future outlook. The scenarios are calculated year by year, but reported in terms of 5 10 15 20 ( 25) years. 2. The Long-Term Labour Force Model 6 The open, national economy is the framework for the long-term labour force-model. Scenarios of labour force and employment by industry are based on the development of both demand and supply factors of the (macro)economy. This is an important feature of the Finnish long-term labour force model. Often labour market or economic forecasts are drawn from a special point of view, for instance either looking at the supply side or 6 The Long-Term Labour Force Model was specified at the Ministry of Labour by Ph.D, Mr. Pekka Tiainen and has been in use since 1990. 8-9 June 2006 Peer Review Forecasting Skills and Labour Market Needs, Finland 3
demand side of the economy. The approach of the LT- labour force model is to assess employment impacts of the economic growth, focusing on the employability of the economic growth. There are two parts in the LT labour force model: the demand of labour and the supply of labour (see figure 1). Figure 1. Long-term labour force model CALCULATION METHOD OF THE LONG-TERM LABOUR FORCE MODEL IN FINLAND Population (15-74) -F, M - 5-years age groups Immigration Births Lifetime Students Disabled and pensioner Supply by age-groups Labour force participation rate -F, M - 5-years age groups Part-time work Persons performing domestic work Others Labour supply (as persons) Labour input (as hours) Unemployment/ labour force deficit Working time Labour input surplus/deficit Demand by industries Labour demand (as persons) Labour productivity Labour input demand (as hours) Production by industry - growth alternatives 2.1 The LT-model: the supply of labour Population data The labour calculations are based on the population forecasts by Statistics Finland. In the population projection the fertility rate is assumed to remain at the present level of 1,8 children per woman. Net migration is as- 8-9 June 2006 Peer Review Forecasting Skills and Labour Market Needs, Finland 4
sumed to be 6000 persons per year. 7 The population forecasts can be modified by adjusting assumptions about immigration, birth rate and mortality, which allows calculations to be made on an alternative basis. The forecasts of population include consistent data at the regional and at the municipal level. Participation rates (activity rates) The future supply of labour is the outcome of predicted labour force participation rates and populations forecasts by five-year-age-groups for men and women, covering the population of 15 74 years. Statistics and definitions are based on the labour force survey by Statistics Finland (employed, unemployed, people not in the labour force). Three kind of factors that affect labour force participation rates are taken into account: 1) Factors affecting labour force participation in specific age-groups: education, child-care, disability or early retirement. 2) Cohort-effects: the history of the population cohort with its educational, fertility and health characters. The baby boom cohorts (born in 1946-1950) are special in the Finnish population because of their big size and the avant-garde societal behaviour. The life patterns regarding working life are different for cohorts before and after them. For instance, the baby boom cohorts have been better educated than the earlier cohorts and consequently their activity rates have been at a higher level. (See figure 2.) Figure 2. Activity rates of female and male cohorts (born in 1940-44, 1945-49, 1950-54,1960-64 or 1970-74) 100 % Activity rates of male cohorts 100 % Activity rates of female cohorts 80 80 60 60 40 20 0 15-19 20-24 25-29 30-34 35-39 40-44 age 45-49 50-54 55-59 60-64 65-69 70-74 40 20 0 15-19 20-24 25-29 1940-44 1945-49 1950-54 1960-64 1970-74 30-34 35-39 40-45- 44 49 age 50-54 55-59 60-64 65-69 70-74 3) The level of labour demand affects the supply: the higher the demand, the higher the labour force participation rates. The labour supply is adjusted to the demand separately for the basic and target scenarios, as the final step of calculating the balance of labour supply and demand. The young (15-24) and the elderly (55-64) are most sensitive to economic fluctuation. The employment rate among older people (aged 55-64) has increased rapidly. The increase is explained by changes made in recent years to the pension system, by the lowered level of unemployment and by the increasing attention that has 7 Only a small proportion of the Finnish population of 5,1 million people has a foreign background. Immigration increased rapidly in 1990 s, but still the share of foreigners is only 2,5 %. Work-related immigration has so far accounted for about 10 per cent of the total immigration to Finland. 8-9 June 2006 Peer Review Forecasting Skills and Labour Market Needs, Finland 5
been paid to older workers well-being in the workplace. They are the only age group that has reached the employment level of 1990 s (see table 2.). Table 2. Employment and rate of employment by age in the years of 1990, 2000 and 2005 Age 1990 2000 2005 Change 2000-2005 Employmenment Employ- Employ- Employ- Employ- Employ- Employ- rate ment ment rate ment ment rate ment 1000 h. % 1000 h. % 1000 h. % 1000 h. 15-24 338 52,1 263 39,8 256 39,3-7 25-54 1 928 87,9 1 824 80,9 1 754 81,7-70 55-64 216 42,6 232 42,2 368 52,7 136 15-64 2 483 74,1 2 318 66,9 2 378 68,0 60 Source: Labour Force Survey, Statistics Finland To calculate the activity rates of men and women in each 5-year age group the following statistical sources are used: Time series of the labour force survey (LFS) by Statistics Finland is the basis for calculating supply of labour, i.e. concepts and definitions come from the LFS. The share of people in training and education, according to LFS. Plans, targets and estimates carried out by the Ministry of Education and the Finnish National Board of Education. The share of people performing domestic work: taken into account the impacts of birth rate, child and family allowances, conciliation of work and family life and care for dependant people. Expected share of parents on parental leave and on other kind of family policy leaves and the share of people caring elderly (dependant adults); calculations by the Ministry of Social Affairs and Health. The share of disabled people and pensioners. The calculations of the development of pensioners by the Ministry of Social affairs and Health, the Social Insurance Institution of Finland and the Finnish Centre for Pensions. Working hours and the share of part-time work has to be taken into account, both at the supply and demand of labour. The basic scenario (see table 3) shows that the ageing of the labour force has already taken place (see the age distribution). It is clear that participation rates depend heavily on the demand of labour. According to the basic scenario the labour force starts to decrease around 2010. But in the target scenario where the demand is higher, more people will be drawn into the labour force, and some decrease will happen after 2010 but after that the labour force might increase again (see the figure 4 in chapter 2.2). If we had the activity rates of the 2004 up till 2020, the labour force would decline starting already in 2006 and it would be 170 000 persons less in the labour force in 2020 than in 2005. Table 3. Labour force, basic scenario Labour Force, 1000 persons 8-9 June 2006 Peer Review Forecasting Skills and Labour Market Needs, Finland 6
Total 15-24 25-39 40-49 50-64 65-74 1990 2586 373 1046 686 459 22 1995 2481 262 965 766 473 15 2000 2589 334 901 712 625 17 2005 2621 321 857 686 738 23 2010 2601 297 855 666 758 24 2015 2581 285 888 609 753 46 2020 2559 264 898 596 743 57 2025 2516 259 873 623 699 62 Changes 1000 persons Total 15-24 25-39 40-49 50-64 65-74 1990-95 -106-111 -81 79 14-7 1995-00 108 72-65 -54 152 2 2000-05 31-13 -44-26 109 6 2005-10 -20-24 -2-20 24 1 2010-15 -20-12 33-58 -6 22 2015-20 -23-22 10-12 -9 11 2020-25 -43-5 -25 27-44 5 Age distribution 1990 2025, % Total 15-24 25-39 40-49 50-64 65-74 1990 100 14 40 27 18 1 1995 100 11 39 31 19 1 2000 100 13 35 27 24 1 2005 100 12 33 26 28 1 2010 100 11 33 26 29 1 2015 100 11 34 24 29 2 2020 100 10 35 23 29 2 2025 100 10 35 25 28 2 Labour force participation rates 1990 2025 15-64 15-24 25-39 40-49 50-64 65-74 1990 76,5 57,4 89,6 92,0 58,2 5,7 1995 72,3 41,5 86,1 90,4 58,4 3,5 2000 74,2 50,7 86,8 90,5 63,7 3,9 2004 73,8 48,0 86,1 90,3 66,1 4,4 2005 74,3 49,1 86,4 90,3 67,2 5,2 2010 73,2 45,4 87,6 91,5 65,2 4,9 2015 74,5 44,9 89,4 92,0 67,6 7,3 2020 75,6 44,4 89,8 92,7 69,5 7,9 2025 75,8 43,9 89,9 92,8 69,6 9,0 Source: Labour Force 2025 interim report, Finland, updated data 2005 2.2 The LT-model: the demand of labour 8-9 June 2006 Peer Review Forecasting Skills and Labour Market Needs, Finland 7
The LT-model uses the national accounts statistics in forecasting economic development. The data sets are the production at fixed prices, the labour productivity, the hours worked and the number of employed, all by industry. Balancing the demand and the supply of labour, adjustment is needed between employment figures drawn from the national account statistics and labour force survey. Production The development of production and productivity is projected first in the model, using the latest forecasts of economic activity and long-term evaluations at macro and branch level. Production divided by productivity of labour by branch of economic activity yields the hours worked by branch of economic activity; summing up these hours gives us the aggregate hours worked. Restrictions might emerge from the supply side: if production grows too fast in relation to the available supply of working hours, it forces a decline, while in the opposite case it allows stronger growth in production. For instance, the trend correction might be used for the year 2030, the aggregate hours worked are replaced with the number of working hours available. The employed and unemployment The employment data set of the demand side contains working time, hours worked and the employed by branch of economic activity. Working times vary by branch of economic activity. Technically, we have set the working times per employee for all branches of economic activity at the same level for the year 2030 (in national account data sets), and the working time by branch of economic activity approaches this level using the coefficient of steady change computed for each branch of economic activity. The numbers of people employed, in line with the national accounts, are copied to the data set and adjusted to agree with the Labour Force Survey. We make adjustments with the demand and supply of labour: as the unemployment decreases, the effect will be a growth in supply of labour force participation. Main results Forty-five years ago, in the 1960 s, services (tertiary industries), industry and construction (secondary industries) and primary industries (agriculture and forestry) employed roughly one third of total employment each. Nowadays services - including strongly increasing knowledge intensive services - employ 70 %, primary industries 5 % and secondary industries about 25 % of total employment. The direction of structural change has been estimated quite right. However, the change has often been more rapid than estimated and also all qualitative aspects of the changes have been difficult to foresee. In the calculations 50 sub-industries have been used. This helps to analyze the structural changes - but results are published at a more aggregated level (see figures 3 and 4). 8-9 June 2006 Peer Review Forecasting Skills and Labour Market Needs, Finland 8
Figure 3. Employed by industry 1960-2030 2000000 1800000 1600000 Persons Employment by Industries, Finland 1400000 1200000 1000000 800000 600000 400000 200000 0 Primary, target Secondary, target Tertiary, target Primary, base line Secondary, base line Tertiary, base line 1960 1970 1980 1990 2000 2010 2020 2030 Labour Force 2025, Finland, preliminary figures National accounts levels 8-9 June 2006 Peer Review Forecasting Skills and Labour Market Needs, Finland 9
Figure 4. Labour force and employed, basic and target scenarios Labour Force and employment, base and target lines, Finland 2700000 Persons Labour Force, target 2600000 Labour Force, base line Labour Force at lower level 2500000 Employment, target 2400000 Employment, base line 2300000 2200000 2100000 2000000 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 Labour Force 2025, Finland, intermediate report 8-9 June 2006 Peer Review Forecasting Skills and Labour Market Needs, Finland 10
3. Anticipation Method of the Educational Needs The method applied in the anticipation work carried out by the Finnish National Board of Education is an application of the labour force method. The anticipation method is divided into two sections, the first of which focuses on the needs of working life. This involves anticipation of demand for new labour, i.e. the amount of labour and the types of educational qualifications required by economic life over a certain anticipation period. The second section concerns the supply of labour. Supply of new labour mainly comes from new young age groups. The unemployed labour force also adds to supply. The method used to calculate the educational needs of working life is presented in phases in Figure 5. The anticipation method of educational needs has been programmed in the form of a calculation model, which calculates the entire process. The calculation model is a Windows-based application developed for quantitative anticipation. It is constructed so that it is possible to change a coefficient or occupational structure data, for example, in alternative calculations and to see its effect on the various phases and end results of the calculations. Normally the anticipation process consists of two alternative industrial scenarios (basic scenario, target scenario) and alternative occupational structure scenarios for both of them. Additional calculations are made by varying different coefficients etc. to analyse sensitivity of the calculations. Educational needs of working life The starting point is the forecast of demand for labour by industry. This forecast is worked out from production forecasts describing the overall development of the national economy, which allow for the combined effects of the forecast of value added in production and development in the productivity of labour. These in turn are based on factors of economic change. The forecasts drawn up as part of the Labour projects run by the Ministry of Labour take account of the long-term views of different industries. The next step is to anticipate the occupational structure in each industry. This can be done by examining the present occupational structure and previous changes to it and by anticipating future developments in occupational structures. The materials used in support of this exercise include comparisons of occupational structures, research data and views of experts in different fields on future changes. Calculations are not simply based on trend data from statistical time series describing the past; instead, changes in the occupational structure emphasise the higher level of skills among the labour force. The difference between the present and anticipated occupational structure indicates the change in the occupational structure during the forecasting period. The occupational transitions in the labour force do not alter the total volume of labour. The fields into which people move will grow, whereas those from which people move will be reduced correspondingly. The positive and negative changes by occupational group due to occupational transitions are taken into account in the structure of demand for new labour. Along with forecasts of changes in the occupational structure and occupational transitions, the analysis also includes labour wastage, i.e. the proportions of people in different occupational groups who will permanently leave the labour force due to retirement, disability or death during the forecasting period. The change in the occupational structure and natural wastage are then added up to produce the demand for new labour during the forecasting period. This means the amount of new labour by occupational group that working life is expected to need during the forecasting period, in other words, the number of jobs becoming 8-9 June 2006 Peer Review Forecasting Skills and Labour Market Needs, Finland 11
available in different occupational groups. The significance of labour wastage is decisive in terms of the total quantitative needs for labour and education and training. 8-9 June 2006 Peer Review Forecasting Skills and Labour Market Needs, Finland 12
Figure 5. Anticipation method of the educational needs of working life Labour demand forecasts by forecasts industry by industry -alternative forecasts forecasts Employed labour Employed force labour force - base year - data base year data Unemployed labour force force - base - year data data Forecasts on on unemployment rates Educational statistics Youth level education and training - 16-21 age group forecasts Occupational structure forecasts within industries - alternative forecasts Change in labour demand by occupational group Base year - target year Occupational transitions Natural wastage by occupational group People without vocational or higher education Educational needs by occupational group Natural wastage by occupational group Faktors of intake needs -drop out/completion rates of education -multiple education and further studies - net student flow (regional anticipation) Intake need based on age groups Demand for new labour (Job openings) Labour supply of unemployed people by occupational group Unemployment at the end of forecasting period Total demand for new labour by occupational group CORRESPONDENCE KEY BETWEEN OCCUPATIONS AND EDUCATION Needs for adult education by subfield/level of education Labour force educational needs Educational needs of working life (intake needs in education and training) INTAKE NEEDS OF YOUNG PEOPLE BY SUBFIELD/LEVEL OF EDUCATION 8-9 June 2006 Peer Review Forecasting Skills and Labour Market Needs, Finland 13
The labour supply of unemployed people taken into account in the calculations comprises the number of unemployed people in the base year minus natural wastage (Figure 5). In addition, calculations for the supply of labour also allow for the age and the level of education of unemployed people. The supply of labour by unemployed people is then subtracted from demand for labour. In terms of supply of vocationally/professionally trained labour, youth-level and adult education and training are very different. New labour mainly comes from young age groups, who enter working life upon completion of their educational qualifications. Conversely, adult education and training does not necessarily produce any new labour for the labour market; instead, it will mainly change the occupational structure and skills of the existing labour force. Vocational/professional adult education and training needs are more short-term in nature and vary according to economic fluctuations to a higher extent than quantitative needs for young people s vocationally/professionally specialised education and training. Labour market forecasts and change data produced by occupational group are converted into forecasting data conforming to the classification of subfields of education using a correspondence key between occupational groups and education specifically devised for this purpose. The correspondence key is created by assessing the different types of education providing the basic vocational/professional skills required in each occupational group. This, in turn, is based on a view of the future labour and skills needs in each occupational group. The starting point is that virtually all occupations require qualification-oriented upper secondary vocational or higher professional education and training. Attention has also been paid to the varying needs of different occupational groups to recruit vocationally/professionally trained labour. In certain occupations, standards regulating working life determine strict educational requirements for the labour force. On the other hand, there are jobs and assignments that can be performed without any vocational qualifications. In order for economic life to obtain a sufficient amount of labour with relevant educational qualifications, intake numbers (new students and available places) in education and training should exceed demand for new labour. The popularity of different programmes varies among students on the basis of the attractiveness of education. Not all subfields of education are able to fill the student places available each year, including certain technology and transport subfields. Conversely, there are other subfields where demand exceeds supply due to the attractiveness of education, such as various subfields in culture. Some students drop out of studies (cf. completion of education), whereas others complete several qualifications (multiple education and further study tracks). Not all people enter the labour market upon completion of their qualification (labour force participation rate), but remain outside the labour force to look after their families, for example. When the above-mentioned factors relating to the efficiency and effectiveness of education are taken into account, this will result in educational intake needs as perceived from the perspective of working life. These are called the educational needs of working life. Co-ordinating the educational needs of working life and intake needs The labour force method is used to assess the amount of labour and the types of educational qualifications required in working life over the forecasting period (total demand for new labour). In addition, this involves estimating the number of new students required for different subfields and levels of education in order to satisfy quantitative educational needs (educational needs of working life). A key objective of Finnish education policy is to provide all young people with an opportunity to apply for upper secondary vocational education and training or higher education (polytechnics and universities). The forecast size of the relevant age groups (the average 16 21 age group for the period from 2006 to 2010 in this analysis) is then used to work out the total intake required to provide all young people with an opportunity to participate in vocationally/professionally oriented education and training. The educational needs of working life and 8-9 June 2006 Peer Review Forecasting Skills and Labour Market Needs, Finland 15
the intake needs of young people have been derived from different sources. The next stage involves coordination of these results (Figure 7). The total number of new students in vocationally/professionally oriented education and training intended for young people is divided into different subfields and levels of education in proportion to the structure of educational needs of working life. This is done even when the educational needs of working life are higher or lower than the intake required to train the relevant age group. Job openings by occupational group in 2001 2015 Numbers of job openings have been calculated in accordance with the labour force method as the sum of natural wastage and jobs (employed people) within each occupational group. When the number of jobs within an occupational group is anticipated to decrease, job openings are calculated by subtracting the change in jobs from natural wastage. According to national estimates, the number of jobs becoming available in 2001 2015 is 1,069,000 in the target development scenario. This means 71,000 jobs becoming available each year. Growth in industries creates new jobs, which can be seen in industrial forecasts. The target development scenario estimates the total growth in employment over the 15-year period to be 166,000 jobs. In addition, new jobs will be created within industries due to changes in the occupational structure. The target development scenario predicts that, in relative terms, the highest number of jobs will open up in executive and expert work in manufacturing and transport and in business and administration (figure 6). 207,000 jobs will become available in health and social work, which is the highest number within the major occupational groups, equivalent to a 70% growth on 2000. New jobs would account for 40% of all openings. The supply of jobs will be distributed evenly across the entire forecasting period. 8-9 June 2006 Peer Review Forecasting Skills and Labour Market Needs, Finland 16
Figure 6. Number of jobs becoming available in 2001 2015 in descending order by occupational group in the target development scenario Care work Manufacturing work Executive and expert work in manufacturing Service work Executive and expert work in business and administration Educational and cultural work Office work Construction work Transport work Agricultural and forestry work Rescue and security work Job openings Natural wastage Change, 2001 2015-50,000 0 50,000 100,000 150,000 200,000 250,000 The total number of jobs in several occupational groups will either remain at 2000 levels or decrease, while jobs will open up due to natural wastage. Natural wastage in large occupational groups, such as manufacturing work and service work, will be high due to the age structure of the labour force. In addition, agricultural and forestry work and office work will also require new labour, even though more than 20% of these jobs will disappear. Intake targets for young people When anticipating young people s education and training, educational needs derived from demand for labour are adjusted to the size of the age group being trained. This project aimed to anticipate intake needs in the latter half of the current decade. The calculation was based on the average 16 21 age group (65,300 people). The intake number required to provide the whole age group with upper secondary vocational education and training and higher education was calculated on the basis of the average size of the age group and target efficiency indicators for education and training. Calculation results suggest that this objective can be achieved in the latter half of this decade with an intake of about 91,000 entrants, provided that the targets set for the efficiency of education and training in the Development Plan for Education and Research are also achieved at the same time. When all fields of education are taken into account, intake both in upper secondary vocational education and training and in university education needs to be reduced. Polytechnic intake needs appear to remain at the current level. Upper secondary vocational education and training is expected to cover half of total intake 8-9 June 2006 Peer Review Forecasting Skills and Labour Market Needs, Finland 17
needs, whereas the remaining half should be covered by higher education (30% by polytechnics and 20% by universities). Figure 7 below shows the current situation, calculation results and decisions made on the basis of these (Development Plan targets for 2008) by field of education. The results of anticipation calculations have been taken into account such that the figures of the Development Plan are in line with trends revealed by the calculations. Compared with the current status of educational provision, the changes set out in the Development Plan are not as dramatic as the results of the anticipation calculations would suggest. Figure 7. Number of young people who started education and/or training in 2000 2002, average intake needs in 2006 2010 and Development Plan targets for 2008 Technology and transport Business and administration Health and social services Tourism, catering and home economics Natural resources Humanities and education Culture New students 2000 2002 (yearly average) Whole country, target development 2006 2010 (yearly average) Development Plan for Education and Research 2003 2008, target for 2008 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 The results calculated for the whole country by field of education do not differ much between the two alternative assessments, namely, the basic and target development scenarios. The target development scenario places more emphasis on education and training in technology and transport, which is mainly due to the fact that the industrial occupational structure forecasts emphasise a high level of skills in research, planning and other expert assignments within the technical field. In order to achieve the target development scenario, the population currently outside the labour force should be activated to participate in the labour market, while retirement should be delayed and immigration should be increased. The combined regional anticipation results can be read in the publication Education, training and demand for labour by 2015 in Finland. The difference between regional and national calculation results can be attributed to regional industrial and occupational structure forecasts. Development of quantitative anticipation In 2004, the Finnish National Board of Education launched a project to develop a quantitative method and regional co-operation for anticipation of educational needs with funding from the Ministry of Education and the European Union. The project aims to further develop anticipation methods and co-operation. It also develops 8-9 June 2006 Peer Review Forecasting Skills and Labour Market Needs, Finland 18
anticipation of adult education and training as part of anticipation of educational needs based on demand for labour. A further objective is to reinforce regional competence resources in anticipation and increase cooperation in anticipation and decision-making concerning vocationally/professionally oriented education and training. The project will end in December 2006. The significance of national and regional co-operation in anticipation will be emphasised in particular when setting objectives for the next Development Plan for Education and Research (2007 2012). These need to pay attention to steering the shrinking young age groups as well as adults to those educational and occupational fields with demand on the labour market in the future. 4. Experiences and further questions Conclusions that can be drawn on the basis of experiences of forecasting skills and labour market needs: In general, average economic trends are reasonable easy to forecast in mid term, but an amplitude of an economic cycle is difficult to anticipate. Trends of structural changes can be foreseen, but the strength and the speed of the change is difficult to anticipate. During the last decades the net immigration has always exceeded the assumed level of the population forecast. Regional migration is highly affected by the economic cycle. Questions to be discussed: Is the model of forecasting skills and labour market needs transferable to other situations and other countries? What would be the most appropriate framework to be used for this kind of anticipation? What would be the relevant role of the EU when forecasting skills and labour market needs in the EU? 8-9 June 2006 Peer Review Forecasting Skills and Labour Market Needs, Finland 19