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News : Innovation Last Updated: Jun 10, 2015 - 6:23 AM


Ireland: Fourth highest 25-34 year old ratio of third-level graduates in developed world: So what?
By Michael Hennigan, Finfacts founder and editor
Jun 9, 2015 - 8:22 AM

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Ireland: In 2013 Ireland at 51% had the fourth highest 25-34 year old ratio of third-level graduates to population in the developed world after South Korea at 67% and both Japan and Canada at 58% while at the other end of the spectrum, Italy was at 23% and Austria at 25%, according to the latest 'Education at a Glance' annual report compiled by the Organisation for Economic Co-operation and Development (OECD).

Education is a crucial issue in modern economies but is a high level of third level graduates necessary for sustained long-term growth of an economy?

The OECD, which includes all the 25 main developed/ advanced economies, reports a surge in the ratio of graduates among 25-64 year-olds from 22% in 2000 to 33% in 2013 when 43% of 25-64 year-olds in the United States had attained a tertiary education – the fifth largest proportion after Canada (53%), Israel (46%), Japan (47%) and the Russian Federation (53% — not an OECD member). Ireland's ratio rose from 22% to 40% similar to the levels of the UK at 41% and Finland at 40%.

Italy's ratio rose from 10% to 18% and Austria's increased from 14% to 20%. Germany was at 28% in 2013 and Sweden was at 36%.

While there is typically a pay premium for graduates, the South Korean parent obsession to get children a place in a university is a costly one.

McKinsey, the consultancy, said in 2013 that even though Koreans continue to sacrifice to prepare their children for university, "unemployment rates are higher for South Korean college graduates than for graduates of vocational high schools. And when costs are factored in, the net present value of the lifetime earnings of a privately educated college graduate is lower than those for a graduate of vocational high school."

Grade inflation and the requirement of a degree for a job that two decades ago would have only required a secondary education, has boosted third level numbers.

In Ireland the rise in graduate numbers has coincided with the inequity of the decline of the apprenticeship system, removing potential opportunities for teenagers who are not academically oriented or are from poor areas where there is not a strong tradition of attendance at third level.

Austria's economic track record with its own significant indigenous base, compared with Ireland's reliance on American investment and two boom-and-busts in a generation, is related to a strong vocational system, similar to the systems in Germany, Switzerland and Denmark.

German manufacturing wages are the highest of the world's big industrial nations and its innovation is boosted by the Fraunhofer Society which has 67 institutes and 23,000 employees in Germany as well as an international presence that includes seven US-based centres - making industry less reliant on university collaboration.

"Each institute cultivates a distinct specialization (e.g. applied polymer research, electric nanosystems, etc.) which fall under broader industries such as microelectronics, materials and components, production, surface technology and photonics, life sciences, information technology, and defense. Approximately 70% of Fraunhofer’s revenue is generated by contracts with industry and public institutions; state and federal governments contribute the remaining 30%," according to a Brookings policy briefing.

Ireland's literacy and numeracy levels do not appeared to have benefited from the surge in graduate numbers.

In 2012 around 166,000 adults aged 16-65 were surveyed in 24 countries and sub-national regions by the OECD to assess skills: 22 OECD member countries — Australia, Austria, Belgium (Flanders), Canada, the Czech Republic, Denmark, Estonia, Finland,  France, Germany, Ireland, Italy, Japan, Korea, the Netherlands, Norway, Poland, the Slovak Republic, Spain,  Sweden, the United Kingdom (England and Northern Ireland), and the United States; and two partner countries — Cyprus and the Russian Federation.

Ireland had the third highest response rate of participating countries at 72% with almost 6,000 adults (5,983).

Around 12% of tertiary-educated adults in Spain and Italy performed at the highest level of proficiency in literacy (Level 4/5) as measured by the Survey of Adult Skills. By comparison, across OECD countries, 24% of tertiary-educated adults did, while in Australia, Finland, Japan, the Netherlands and Sweden, more than 30% of tertiary-educated adults perform at that level. Meanwhile, around 10% of tertiary-educated adults in Spain perform at the highest level of proficiency in numeracy. By comparison, the average across the 24 countries and sub-national regions that participated in the survey was 26% for this level of education.

In Ireland and France 19% of graduates achieved the top literacy level compared with 37% in Finland and Japan; 36% in the Netherlands; 34% in Sweden, 24% in the US; England/Northern Ireland at 25%.

The OECD said that the Survey of Adult Skills shows that in some countries actual skills levels differ markedly from what data on formal qualifications suggest. For example, Italy, Spain and the United States rank much higher internationally in the proportion of 25-34 year-olds with tertiary attainment than they do in literacy or numeracy proficiency among the same age group. Even more striking is that, on average, Japanese and Dutch 25-34 year-olds who have only completed high school easily outperform Italian or Spanish university graduates of the same age. The performance gaps observed across countries cannot be explained by the proportion of the age group attending tertiary education. In Austria and Germany, a comparatively small share of 25-34 year-olds are tertiary graduates, but that age group performs around the average on the literacy scale, while Japan has a large share of tertiary graduates who do very well. The picture is similar, albeit less pronounced, among people with less formal education."

The think tank suggests that continuing education is an important factor in maintaining an edge: "Participation rates in adult education exceed 60% in Denmark, Finland, the Netherlands, Norway and Sweden, while in Italy they remain well below half that rate."

Pay

The US pay gap between college graduates and everyone else reached a record high last year, according to the new data, which is based on an analysis of Labor Department statistics by the Economic Policy Institute in Washington. Americans with four-year college degrees made 98 percent more an hour on average in 2013 than people without a degree as reported by The New York Times. That’s up from 89% five years earlier, 85% a decade earlier and 64% in the early 1980s.

[The average hourly wage for college graduates has risen only 1% over the last decade, to about $32.60. The pay gap has grown mostly because the average wage for everyone else has fallen — 5% to about $16.50. “To me, the picture is people in almost every kind of job not being able to see their wages grow,” said  Lawrence Mishel, the institute’s president. “Wage growth essentially stopped in 2002.”]

The decline in manufacturing and the related outsourcing to China hit high school graduates hard.

A jump in the number of graduates would not necessarily boost pay in the US.

Ireland vs Finland

Ireland
Adult skills (Survey of Adult Skills, PIAAC)

"In Ireland, the mean proficiency scores of 16-65 year-olds in literacy and numeracy are significantly below the average of the OECD countries participating in the Survey of Adult Skills (PIAAC).

In literacy and numeracy, the younger adult population (16-24 year-olds) scores significantly below the average of the OECD countries participating in the Survey. In both domains, younger adults score than their older counterparts (55-65 year-olds).

In Ireland, 14.7% of the adult population (16-65 year-olds) report no prior experience with computers or lack very basic computer skills. Only 25% of the adult population score at the highest levels in problem solving in technology-rich environments, a proportion significantly below the average of the OECD countries participating in the Survey of Adult Skills (PIAAC).

In most participating countries, a significant minority have a very low level proficiency in literacy and numeracy. In Ireland, 17.4% of the adults score at the lowest levels in literacy and 25.2% in numeracy."

  • The mean literacy score for adults with tertiary education is low compared to other countries participating in the Survey of Adult Skills (PIAAC). (292 PIAAC Score, rank 16/21 );
  • The mean literacy score for adults without upper secondary education is low compared to other countries participating in the Survey of Adult Skills (PIAAC). (237 PIAAC Score, rank 16/21 );
  • The mean numeracy score for adults with tertiary education is low compared to other countries participating in the Survey of Adult Skills (PIAAC). (285 PIAAC Score, rank 18/21 );
  • The percentage of adults without upper secondary education scoring at Level 2 or 3 in problem solving in technology-rich environments is low compared to other countries participating in the Survey of Adult Skills (PIAAC). (7.9 %, rank 18/18 );
  • The percentage of adults with tertiary education scoring at Level 2 or 3 in problem solving in technology-rich environments is low compared to other countries participating in the Survey of Adult Skills (PIAAC). (45.1 %, rank 15/18 ).

Finland
Adult skills (Survey of Adult Skills, PIAAC)

"In Finland, the mean proficiency scores of 16-65 year-olds in literacy and in numeracy are both significantly above the average of the OECD countries participating in the Survey of Adult Skills (PIAAC).

In literacy and numeracy, the younger adult population (16-24 year-olds) scores significantly above the average of the OECD countries participating in the Survey. In both domains, younger adults score higher than their older counterparts (55-65 year-olds).

In Finland, only 8.7% of the adult population (16-65 year-olds) report no prior experience with computers or lack very basic computer skills. In contrast, 42% of the adult population score at the highest levels in problem solving in technology-rich environments, a proportion significantly above the average of the OECD countries participating in the Survey of Adult Skills (PIAAC).

In most participating countries, a significant minority have a very low level proficiency in literacy and numeracy. This is also true for Finland, where only 10.6% of the adults score at the lowest levels in literacy and 12.8% in numeracy."

  • The mean literacy score for adults with tertiary education is high compared to other countries participating in the Survey of Adult Skills (PIAAC). (309 PIAAC Score, rank 3/21 );
  • The mean numeracy score for adults without upper secondary education is high compared to other countries participating in the Survey of Adult Skills (PIAAC). (255 PIAAC Score, rank 1/21 );
  • The mean numeracy score for adults with tertiary education is high compared to other countries participating in the Survey of Adult Skills (PIAAC). (305 PIAAC Score, rank 7/21 );
  • The percentage of adults without upper secondary education scoring at Level 2 or 3 in problem solving in technology-rich environments is high compared to other countries participating in the Survey of Adult Skills (PIAAC). (26.3 %, rank 3/18 );
  • The percentage of adults with tertiary education scoring at Level 2 or 3 in problem solving in technology-rich environments is high compared to other countries participating in the Survey of Adult Skills (PIAAC). (56.3 %, rank 5/18 ).

The OECD said in its 'Education at a Glance 2014' report that "Ireland had the third greatest annual expenditure per student in all OECD countries by public educational institutions for all services excluding research and development (R&D). In 2011, Irish educational institutions spent US$11,938 per student on average, compared with an OECD average of $9,635 and an EU21 average of $8,741. The only OECD countries with greater educational expenditure per student were Canada (US$17,006) and the United States $23,094)."

According to an Irish Government report in 2011, pay costs at third level accounted for 75% of budgets compared with about two-thirds in comparator countries.

In Ireland, the earnings premium from tertiary education is greater for women than for men: in 2011, the earnings premium for 25-64 year-olds with tertiary education (as compared to individuals with upper secondary or post-secondary non-tertiary education at a value of 100) was 169 for men and 190 for women, compared with OECD average earning premiums of 164 and 162, respectively. Of the 32 OECD countries for which these data are available in 2012, 14 countries (in addition to Ireland) reported earnings premiums of tertiary education to be higher for women than for men.

The Economist has reported that: "Better-educated older people are far more likely to work for longer. Gary Burtless of the Brookings Institution has calculated that, in America, only 32% of male high-school graduates with no further formal education are in the workforce between the ages of 62 and 74. For men with a professional degree the figure is 65% (though the overall number of such men is obviously smaller). For women the ratios are one-quarter versus one-half, with the share of highly educated women working into their 60s soaring. In Europe, where workers of all sorts are soldiering on into their 60s more than they used to, the effect is not quite as marked, but still striking. Only a quarter of the least-educated Europeans aged 60-64 still work; half of those with a degree do.

It is not a hard pattern to explain. Less-skilled workers often have manual jobs that get harder as you get older. The relative pay of the less-skilled has fallen, making retirement on a public pension more attractive; for the unemployed, who are also likely to be less skilled, retirement is a terrific option. Research by Clemens Hetschko, Andreas Knabe and Ronnie Schöb shows that people who go straight from unemployment to retirement experience a startling increase in their sense of well-being."

Higher pay and a more palatable work environment is typically the return for achieving a degree but in Ireland's case, surging graduate numbers do no always imply quality. The aspiration to be a knowledge economy remains elusive as Ireland remains a low tech base for American firms — half the jobs in the ICT sector are in administration — while most SME firms are non-exporters low payers with no obligation to provide an occupational pension.

We have also seen in Europe that graduates in the Netherlands and Finland are well ahead of their Irish counterparts when it comes to skills.

In September 2013, Ruairi Quinn, then education minister, said Ireland has a long way to go to have the kind of “world class education system that we need to have.” He said before this goal was achieved it had to be recognised that “the assertion that was so frequently trotted out in the past, but which blatantly wasn’t true, was that we had one of the best education systems in the world.”

Quinn said this was an “assertion based on no evidence whatsoever other than something of a feelgood factor that was communicated to us at home by the greater Irish diaspora who felt, for whatever reason, that it was better than what their children were experiencing in other parts of the world”— we do have a habit of believing our own propaganda.

US, Switzerland, Denmark, Sweden, Finland have best higher education systems

Education systems failing to provide students with skills for success in 21st century

German per capita standard of living highest in Europe; Ireland below EU average

Irish Export Performance: Myths and reality - Ireland is a poor exporter

UK and Irish business R&D heavily reliant on foreign-owned firms

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