Education, growth, and Ireland

Tom Forth, 15 July 2017.

I talk with a lot of people about how we might improve economic growth in cities. My biggest interest is in the large cities of North England. They trail comparable cities in Northern Europe by about 30%. They trail Malmo, Lyon, Barcelona, Nantes, Milan, Munich, Rotterdam. You name a similar city and they probably trail it.

In this short post I want to look at Dublin, Ireland.

The Republic of Ireland is quite similar to my home county of Yorkshire. Both between 5 and 6 million people. Both stuck out on an island off Europe. Both once, and one still, part of The United Kingdom. And the two largest cities of Ireland and Yorkshire, Dublin and Leeds, are similarly sized at somewhere between 1 and 2 million people, depending on how you measure things.

But that’s where the similarities end. Dublin’s productivity (GVA/worker) is about double that of Leeds. A 50% smaller share of its residents have no or low qualifications. A 30% larger share of its residents have a degree. Its businesses file twice as many patents per head. You can see all the stats using Centre for Cities’ great City Profiler tool.

I went to Dublin recently and the feel of the place reflects the data. Construction and growth is everywhere. The buses, trams, and metro all work well. The internet is fast, the streets are clean, the pubs are full. And the city is full of workers and visitors.

How did Dublin succeed?

It wasn't always like this. A few decades ago Ireland was economically similar to Yorkshire, and Dublin quite similar to Leeds. I like to ask people why they think that Ireland and Dublin have so massively outperformed Yorkshire and Leeds in recent decades. These are the top reasons that I hear, in no particular order,

• Ireland gradually cuts its corporation tax from one of the highest in Europe in 1985 to one of the lowest in Europe by 2002. It also changed regulations to create a more business-friendly environment, especially for foreign companies.
• Ireland opted to leave the £-zone in 1979 and re-orientate its economy towards the larger market of the EU and the €-zone.
• Dublin is the capital of an independent nation, and thus Irish investment and institutions are centred in it.
• Ireland opted to focus investment on Dublin rather than spread it around the country.

People also talk about Ireland’s strong British-style legal system, the large investment it received from the European Union when it was poor, and the fact that it is English-speaking — but of course Yorkshire has these advantages too.

All the above reasons are listed in the causes section of the Celtic Tiger page on Wikipedia.

But I think that one big reason for Ireland’s success, maybe a huge reason, is missing. I suspect that I haven’t heard because I’ve been listening to the wrong people since now that I've started looking it's clear that the Irish press and politicians are well aware of it. I just didn't hear that in the UK.

Education

In 1967 Ireland introduced free secondary education (I was shocked by how late this was too). Then in the 1990s Ireland started expanding the number of higher education places that were available. In 1996 it made tuition fees free (since increased in practice but capped at €3,000 per year).

From one of the highest rates of unskilled people and one of the lowest rates of highly-educated people, Ireland has reversed its position within Europe. The Irish participation rate in Higher Education is now one of Europe's highest. And so I’ve added to my list of likely reasons why Ireland has outperformed Yorkshire, and Dublin has outperformed Leeds. I think education might have played a big part.

What about the impacts of education and what about Yorkshire?

It takes time for investments in education to deliver results.

From 2000, thanks to Eurostat, I have comparable data on skill levels in Yorkshire and Ireland. I’ve added data for the wealthy wider-South-East of England as a comparison. I’ve also collected the data from Eurostat on the GDP/person of these three European regions since 2000.

What we see is that Ireland transitions from a Yorkshire-level economy in 2000, to a wider-South-East England-level economy today. The transition happens at the same time as the education level of the population aged 30-34 makes the same transition.

I wish that I had comparable data for education level at ages 25-29 for all three regions, but I don’t. We might reasonably expect that by this measure Ireland’s increase in education level would have led its GDP increases.

(If seeing Irish GDP data instead of GNI data upsets you, skip to the bottom.)

So what?

My first sentence in this blog post was about how we might improve economic growth in our cities. That is what I’m interested in. It’s what I want to learn from Dublin about in this blog. I've written many other blogs about how we might learn from other cities in Europe.

There are many advantages that Dublin enjoys that Leeds cannot have while remaining in the UK. Some, Leeds can emulate through the decentralisation of the UK state. But we should be realistic that a Northern English city within the UK is unlikely to match Dublin’s success.

Dublin matters because if it was skills that drove its economic miracle then the UK’s cities, and the UK government who still pull most of the strings, should worry much less about lower taxes, enterprise zones, better buses, new tram lines, agglomeration effects, or sharing out our national institutions.

Instead, as a famous man once said, they should focus on education, education, education. Like Ireland did, and it seems that the English North has not done as well at.

But what if it wasn't skills that led to Dublin's success? What if it was the infrastructure, the national institutions, and the low tax rates? And then it was simply that highly-trained people chose to stay, or move from overseas, to work in the jobs that were created as a result?

If that were the case, then the lesson would be different. Northern English cities shouldn't worry too much about education, but rather worry about retaining what skills already exist, and focus on attracting talent from elsewhere with quality jobs, quality of life, national institutions, state investment, and great infrastructure.

I don't know which of the above explanations is closer to the truth. I don't have the answer and I don't think that anyone in the UK does. Success is a blend of many factors, and undoubtedly both education and many others are at play in Dublin's success.

 

 

But Tom, Irish GDP data is crap

Irish GDP data is not very useful, I agree. It overstates the useful size of Ireland's economy by counting lots of things that don't really happen there. And so I always use GNI/capita in comparisons for that reason. But sadly there isn't a GNI/capita figure available for Yorkshire. So I couldn't use it above.

Thankfully, having shared piece, people got in touch and suggested I watch this video by Kevin O'Rourke. It's fantastic and if you skip to minutes 43 you'll see that he suggests a way for me to fix this problem of measuring and comparing Ireland's economy to Yorkshire's

We can compare the ratio of the prosperous corner of England's GVA/capita to the UK average GVA/capita (we have this data from the ONS). And we can compare Yorkshire's GVA/capita in the same way. But for Ireland we can compare the ratio of Irish GNI/capita to the UK's GNI/capita.

The correlation that we see in the GDP data on the right of my first pair of graphs is now less pronounced. It starts a few years earlier (when 30-35 year olds were 27-32 year olds), and I'm still not happy about the 2015 data for Ireland. But the correlation is still there. There's still a transition of Ireland's economy from a Yorkshire-level economy towards a South-East England level economy. And it still correlated with increases in the education level of the population that Yorkshire did not match.