Globalisation, growth and welfare

Transcription

1 Employment Region Copenhagen & Zealand Globalisation, growth and welfare The challenge for East Denmark The labour market and business in East Denmark up to 2020

2 Published by: Employment Region Copenhagen & Zealand Capital Region of Denmark Region Zealand Graphic design: Kenneth Olsson Grafik Number printed: 1000 Online version: Oktober 2010

3 Globalisation, growth and welfare The challenge for East Denmark The labour market and business in East Denmark up to 2020 Employment Region Copenhagen & Zealand

4 East Denmark Capital Region of Denmark Region Zealand Total population 2.48 mill. Participation rate 80.6 % Workforce 1.63 mill. Number of employees 1.29 mill. Commuting in 22,649 Commuting out 16,126 Total population 1.66 mill. Participation rate 80.8 % Workforce 1.11 mill. Number of employees 871,100 Commuting in 112,378 Commuting out 38,580 Total population 821,200 Participation rate 80.2 % Workforce 524,500 Number of employees 417,627 Commuting in 31,317 Commuting out 98,592 4

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7 Table of Contents 8 Introduction 10 Summary the labour market and business in the next decade 12 Growth and development challenges in East Denmark up to Labour market and business developments in East Denmark up to More elderly people and less young people 16 Fewer people in the workforce more people on pensions and temporary public assistance 20 Employment will stabalize and unemployment will drop again will it be difficult to find adequate labour again? 22 The service sector will have a dominant influence in East Denmark will we be living off the service sector? 23 The age challenge is particularly great in the public sector 24 Great added value in the service sector 26 Growth in productivity has been limited, especially during the economic boom 27 Competitiveness is under pressure and this wil l affect growth opportunities for East Denmark 28 Growth and development require the right competences 32 SAM-K LINE how to understand and analyse the results 7

8 Introduction Like the rest of Denmark, East Denmark has felt the consequences of the drastic economic slowdown, which has led to a rapid surge in unemployment and has brought to light the challenges faced by enterprises when trying to cope in a competitive market. Increasing unemployment is the result of many job cuts, for instance through redundancies and relocation of production abroad. People in unskilled jobs have been hit particularly hard. The economic recession is expected to slow down during 2011, when the current increase in unemployment is expected to stop as well. Even though the economic slowdown has been abrupt, it should not divert attention from the structural developments and challenges that will face the labour market and business in the years to come. The current economic recession has made apparent a number of development trends of a more structural nature, and these are likely to continue in spite of an economic recovery. The recession has highlighted different sectors significance for the Danish economy and the demand for qualified labour. The Employment Region Copenhagen & Zealand, the Capital Region of Denmark and Region Zealand have worked together on identifying and assessing these development trends. Focus should be on the challenges for labour market and business developments in future years, because if we already start mitigating barriers and promoting opportunities today, we can help prevent the challenges we can see in the long term. This leaflet presents the most important results of this work, and identifies the future challenges for East Denmark. The Employment Region focuses on enhancing and increasing the supply of labour. Regions and Growth Fora must help create the best possible conditions for positive business development, and most importantly growth in those businesses that are to ensure a continuous high level of growth and welfare in Denmark and East Denmark. 8

9 The developments presented here are based on projections of several factors, and on how these together will play a role for the labour market and businesses in the next decade. This is an assessment of future developments, based on different assumptions. The projections are thus an expression of the all things being equal view. This means that they give an idea of how reality might look if the current situation continues and preconditions are not changed. Results may thus point to areas where developments in East Denmark could take an unwanted direction, if developments are not adjusted. Projections are based on a regional economic forecasting model, prepared by the Employment Region Copenhagen and Zealand, Capital Region of Denmark, Region Zealand and others. The results in this leaflet are based on a large documentation report, and the forecast model applied is described in more detail on page 32 in this leaflet. Information is also available (in Danish) on the websites of the three following institutions

10 Summary the labour market and business in the next decade In the future the workforce in East Denmark will consist of more young people and more elderly people, while at the same time there will be less people in the middle age group. The middle age group of year-olds will shrink from 48.2 percent to 42.6 percent of the population in Region Zealand will experience a larger percentage of elderly people in the workforce. The percentage of people over 50 years old will increase from 32 percent to 35 percent. The Capital Region of Denmark will continue to attract young people, also from other parts of East Denmark, and thereby still have a young workforce. Unless active efforts are intensified in future years, one in four citizens of working age in East Denmark will still be receiving transfer income, corresponding to 312,000 people in The Capital Region of Denmark will have full employment in In 2020 Region Zealand will have lower unemployment than today, 2.8 percent in 2020 compared to 4.4 percent today. In 2020 the private service sector in Region Zealand will be the largest single sector in the region, measured in terms of employment and value added. Employment will increase by 6.9 percent, whereas total employment in Denmark will decrease by 1.1 percent. The construction industry and agriculture will lose ground with a fall in employment of 43.1 and 16.1 percent, respectively. The manufacturing sector will experience a more limited decline in employment in Region Zealand, where employment will fall by 7.1 percent. The Capital Region of Denmark will experience additional growth in employment and value added in the already dominant private service sector. In general, the Capital Region of Denmark has a high level of productivity due to specialisation within several highly productive sectors, and due to a higher level of productivity in general within the individual sectors. Region Zealand is partly characterised by several sectors with relatively low productivity, and by a relatively low level of production in these sectors. 10

11 Productivity levels stagnated during the economic boom, as it was also difficult to find labour for value added within most sectors. This situation may arise again in the future. Due to limited growth in productivity, Denmark s competitiveness in foreign markets has already been under pressure for a long time, which has resulted in a drop in exports. The value of exports dropped by DKK 30 billion in The trend towards low productivity has put growth and development opportunities under pressure, particularly in Region Zealand. During the next decade, the largest value added, particularly within the private service sector, is expected to be based on an expansion of employment in the sector. The value added will increase by almost 22 percent. Region Zealand will experience significant value added in private services, but for the other sectors it will be more limited and below the average for East Denmark. Value added within the private service sector will increase by 29 per cent in the period. Value added will primarily be due to increased productivity in sectors such as manufacturing, transport, finance etc. Employment is expected to drop. This will particularly influence developments in the Capital Region of Denmark. There will be an increasing demand for competences, which, on the one hand, may help to increase productivity in East Denmark, and, on the other hand, may promote possibilities for expanding the private service sector. Educated labour will be necessary to replace the many people leaving the labour market due to age, especially in the public sector. There will be an increasing demand for people with further and higher education, but here the supply will continue to keep up with demand. A shortage of skilled labour of 21,000 people can be expected in The demand for skilled labour will fall, while the supply will fall even more, which will result in a serious shortage of skilled labour. Unskilled labour will still be necessary to some extent, but the demand will not have a scope that can match the large group of unskilled people in the future. A surplus of unskilled labour of 53,000 may be expected in

12 Growth and development challenges in East Denmark up to 2020 The current crisis has affected employment and unemployment significantly, and finding labour is no longer a problem, as was the case until However, this does not change the fact that in the long term, up to 2020, a situation similar to that before 2008 is likely, with widespread labour shortages. Therefore now is the time to focus on the challenges which may create barriers for labour market and business development, in order to be able to deal with the challenges that will arise, if developments continue without further intervention. The workforce will be under pressure and, in order to increase the supply of labour, further action in relation to the large group of the population receiving transfer incomes is necessary. However, this alone will not be enough; it requires initiatives to meet future demand for educated labour. This means a higher level of education in the labour force. There is a need for increased focus on how to ensure a steady increase in the level of education among young people entering the labour market, and on the possibilities to upgrade skills of people in employment, as well as the groups of working age currently without a job. Export businesses, which are important for growth in the economy and for keeping a high level of welfare, have been particularly under pressure in the current crisis, partly because these businesses have not been able to increase productivity enough to cope with the international competition. Some enterprises have therefore tried to adjust to the new conditions through cutbacks, redundancies and relocation, and will continue to do so in the future. However, part of the pressure on export businesses has been external because of the economic crisis, which has resulted in a global recession and decreasing demand. However a prerequisite for such a conversion is that it is possible to get educated labour for the changes necessary to ensure increased productivity for businesses again. 12

13 A high level of education and competences is a prerequisite for making the necessary product and process innovation at enterprises, and for implementing the necessary research and development activities, including development of new technology etc. within research environments. There are several ways to ensure high levels of qualifications in the workforce. This can be done through massive investments in educating the new group of young people, through developing the competences of the existing workforce, and finally through continuing focus on recruiting educated labour from abroad. Therefore it is relevant to increase focus on the adult education and continuing training system for upgrading the skills of unskilled labour. About one-third of unskilled people have upper secondary education as the highest education completed, and therefore the potential is great for upgrading the skills of this group of people. 13

14 Labour market and business developments in East Denmark up to 2020 This leaflet describes a number of central factors for growth and development in the next decade This leaflet focuses on labour market and business developments Projections of labour market and business developments in East Denmark in the next decade point to a number of trends important for growth and development. These include achieving the best conditions for enterprises and citizens, if welfare is closely related to their opportunities on the labour market. Both the Capital Region of Denmark and Region Zealand are influenced by the central preconditions for a well-functioning business community, but this influence is expressed in different ways, because the two regions have different starting positions. This leaflet describes the development trends central for a well-functioning labour market and business community in East Denmark in the next decade, and the challenges they bring to decision-makers. Conclusions are based on the following sections, which describe in more detail the developments in East Denmark, the Capital Region of Denmark and Region Zealand. More elderly people and less young people The population in East Denmark will virtually remain unchanged until In 2008 there were 2.48 million people in East Denmark, and in 2020 the number is expected to increase to 2.55 million. However, this more or less unchanged population conceals important changes in the age composition. There will be an age-related polarisation, with more young people and more elderly people, but less people between the ages years There will be more young people in the Capital Region of Denmark and more elderly people in Region Zealand 14 Up to 2020 there will be an age-related polarisation as well as an increased movement towards a generally older population in East Denmark. There will be an increase in the number of year-olds of about 48,000, corresponding to an increase of 16.5 percent, and an increase of about 91,000 people of 60 years or more, corresponding to an increase of 16.3 percent. The Capital Region of Denmark will particularly experience an increase in the number of young people of 17.8 percent, whereas the most dramatic increase in Region Zealand will be among the 60-yearolds and above, corresponding to a growth of 22.1 percent. On the other hand, the age groups in which people are most active on the labour market, the year-olds, will shrink by almost 50,000 people. During the next decade, there will be an age-related polarisation of the population, which will reinforce the current trend in East Denmark, where the number of young people, in particular, will increase in the Capital Region of Denmark, and the number of 60-year-olds and above will increase most in Region Zealand.

15 Changes in population in different age groups, East Denmark Index 100= years years years years 60+ Capital Region of Denmark Index 100= years years years years 60+ Region Zealand Index 100= years years years years 60+ Source: Statistics Denmark and own calculations 15

16 In 2020, 2 in 5 people will be 50 years old or more Both regions are characterised by an increasing population older than 50 years, from 35.1 percent in 2008 to 39.3 percent in Such a development entails that the aging will continue beyond The development will be most pronounced in Region Zealand, where 43.9 percent of the population will be 50 years or more in In the Capital Region of Denmark the figure will be 37 percent. East Denmark Capital Region of Denmark Region Zealand 0-49 years-old 50 year or more 0-49 years-old 50 year or more 0-49 years-old 50 year or more Percentage of population younger and older than 50 years, Number of people Percent Change in % point Percent Change in % point ,611,325 1,589,577 1,549, , ,666 1,002, ,108,053 1,093,568 1,069, , , , , , , ,2 317, , , ,2 Source: Statistics Denmark and own calculations The workforce will drop by 12,000 people but in 2020 there will still be more than 300,000 people of working age receiving public assistance... this means that about one in four people of working age is and will be receiving transfer incomes Fewer people in the workforce more people on pensions and temporary public assistance If we disregard the issue about future qualification requirements, there will be slightly fewer people to fill the jobs which will be relevant for the future labour market. From 2008 to 2020, the workforce will drop by about 12,000 people. The drop in the workforce is limited, but is linked with the fact that the number of people outside the workforce will grow steadily in the next decade. There will be an increase in the age group of 60 years and more, who will be on the way of the labour market or who will already have left, and there will be an almost permanent group of 310, ,000 people of working age receiving transfer incomes, some permanently, others temporarily. This group is expected to fall in number, however only to a limited extent. About one in four of all people on public assistance is of working age and these people represent a potential to satisfy the need to expand the supply of labour, as was the case until late 2008 when the crisis set in. 16

17 People of working age outside the workforce, Number of people 780, , , , , , ,000 80, All of Denmark East Denmark Capital Region of Denmark Region Zealand Number of people Change in % Number of people Change in % All of Denmark 664, , , East Denmark 316, , , Capital Region of Denmark 212, , , Region Zealand 103, , , Source: LINE/SAM-K, basic version, October 2009 Note: Final figures -2006; Preliminary figures ; Model 2009 Note: The age group 20 to 69 years has been applied as people of working age In 2020 the workforce will constitute a smaller proportion of the population than today While the number of people in the workforce will remain virtually unchanged until 2020, the part of the population that is not part of the workforce will be increasing. In 2020 the workforce in the Capital Region of Denmark will be at a slightly higher level than the population outside the workforce (about 90,000 people more). On the other hand, the workforce in Region Zealand will be overtaken by the population outside the workforce already within about one year from now, and in 2020 the workforce will be about 25,000 people less than the number of people outside the workforce. The part of the population not included in the workforce comprises everyone outside the workforce, i.e. people on public assistance, voluntary early retirement, state retirement pensions and the various types of transfer incomes for people of working age as well as children and young people. 17

18 Number of people in and outside the workforce, East Denmark 1,400,000 Number of people 1,350,000 1,300,000 1,250,000 1,200,000 1,150,000 1,100,000 1,050,000 1,000, In the workforce Outside the workforce Capital Region of Denmark 1,000, ,000 Number of people 900, , , , , , , In the workforce Outside the workforce Region Zealand 500, ,000 Number of people 440, , , , , , , , In the workforce Outside the workforce Source: LINE/SAM-K, basic version, October 2009 Note: Final figures -2006; Preliminary figures ; Model

19 More young people and more elderly people in the workforce Like the population, the workforce will generally be characterised by an increasing age-related polarisation in the next decade, with an increase of young people between years, and with an even higher increase of elderly people. This already applies for people of 50 years and more, where there is a clear increase. In Region Zealand one in four in the workforce is between 50 and 59 years, and in the Capital Region of Denmark one in five is in this age group. Age composition of the workforce in percent, Number of people Percent Change in % points Percent 2020 Change in % points Under 20 year 77,975 83,970 86, years 232, , , East Denmark years 311, , , years 322, , , years 254, , , Over 60 year 116, , , All 1,315,394 1,294,506 1,303, Under 20 year 48,688 52,289 53, Capital Region of Denmark years 176, , , years 220, , , years 212, , , years 160, , , Over 60 year 75,649 76,135 75, Alle 894, , , Under 20 year 29,287 31,682 33, years 56,347 58,355 61, Region Zealand years 91,062 80,033 77, years 109, ,140 99, years 93,678 96, , Over 60 year 40,610 41,648 41, Alle 420, , , Source: LINE/SAM-K, basic version, October 2009 Note: 2008 preliminary figures, 2014 and 2020 forecast 19

20 Levels of employment will stabilise and unemployment will drop again will it be difficult to find adequate labour again? Up to 2020, East Denmark will move towards a situation resembling the economic boom which ended in 2008, provided that there are no other development trends limiting growth, such as a serious shortage of the right competences and qualifications. After a temporary drop in the period, employment will reach almost the same level in 2020 as in 2008, corresponding to a level of about 1,280,000. In 2008 about 1,290,000 people were employed. The Capital Region of Denmark will experience a slight increase in employment of 0.2 percent, and Region Zealand will experience a drop of 2.5 percent, corresponding to about 9,500 people. Changes in employment, Number of people Change in % Number of people Change in % All of Denmark 2,852,524 2,737, ,759, East Denmark 1,290,398 1,261, ,281, Capital Region of Denmark 876, , , Region Zealand 413, , , Source: LINE/SAM-K, basic version, October 2009 In 2020 unemployment is expected to fall to 23,000 people, corresponding to an unemployment rate of slightly less than 2 percent. This is similar to the level of the recent economic boom, and therefore indicates that a similar pressure to the one in 2008 can be expected on the labour market and on demand.demand. Changes in unemployment, Number of people Change in % Number of people Change in % All of Denmark 135, , , East Denmark 60,366 34, , Capital Region of Denmark 40,718 16, , Region Zealand 19,648 17, , Source: LINE/SAM-K, basic version, October 2009 Note: 2010 preliminary figures, 2014 and 2020 forecast Note: The unemployment figures shown are based on Statistics Denmark RAS data and are not directly comparable to the monthly statements from this data. Note: 2010 has been used as a starting point when calculating changes in unemployment, because of the atypical unemployment situation in 2008.

21 In 2020 the Capital Region of Denmark will experience an unemployment rate of 1.3 percent. Region Zealand will experience an unemployment rate of 2.8 percent Unemployment is expected to fall significantly in the Capital Region of Denmark, down to an unemployment rate of 1.3 percent. Region Zealand can expect an unemployment rate of 2.8 percent. So in the next decade, there will be a basis for further expansion of the extensive commuting already taking place from Region Zealand to workplaces in the Capital Region of Denmark. However, such an expansion requires that the supply can meet the demand that will come for specific qualifications. Furthermore it is likely that there will be a need for recruitment from abroad, as we saw in the recent economic boom. 21

22 The private service sector will continue to grow and will contribute to a large increase in employment The service sector will have a dominant influence in East Denmark will we be living off the service sector? The private service sector already plays an important role in the economy of East Denmark. In 2008 it represented half of the jobs in the Capital Region of Denmark (employment calculated according to workplace), and 37 percent in Region Zealand. For many years, the sector has had an essential employmentrelated role in the Capital Region of Denmark, and it will maintain this role with a rate of 52 percent in 2020, corresponding to an increase of 15,000 jobs. In Region Zealand the sector will grow into the largest sector in terms of employment in 2020 with a rate of 40 percent, corresponding to an increase of 8,600 jobs. People in employment according to workplace broken down by business sector, Number of people Change in % Number of people Change in % Primary sectors 19,747 13, , Manufacturing 131, , , East Denmark Construction 69,153 57, , Private services 627, , , Public services 492, , , All sectors 1,339,863 1,312, ,335, Primary sectors 6,643 4, , Capital Region of Denmark Manufacturing 87,948 83, , Construction 43,851 36, , Private service 502, , , Public services 361, , , All sectors 1,003, , ,003, Primary sectors 13,104 9, , Manufacturing 43,554 40, , Region Zealand Construction 25,302 20, , Privat service 124, , , Public services 130, , , All sectors 336, , , Source: LINE/SAM-K, basic version, October 2009 Note: 2008 preliminary figures, 2014 and 2020 forecast 22

23 Traditional businesses, such as manufacturing and construction will experience a decline in employment The public sector will have a large and increasing proportion of people in employment of 50 years or more On the other hand, there will be a drastic decline in employment within construction and the primary sector (for instance within agriculture). Manufacturing, which has seen several cutbacks in recent years, will not lose jobs to the same extent. The age challenge is particularly large in the public sector Employment within the public sector will be particularly affected by demographic developments. Almost every other person in Region Zealand employed within public administration (48.3 percent) and within healthcare (46 percent) in 2020 will be over 50 years. These areas will also be marked by a high age average in the Capital Region of Denmark in 2020, however not as pronounced (40.4 percent and 42.3 percent, respectively). In 2020, 3 in 10 will be older than 50 years for all business sectors. Number of people in employment older than 50 years in selected sectors, Number of people Percent Change in % points Percent Change in % points Public administration ,098 31,979 33, East Denmark Teaching 35,793 34,941 34, Healthcare 28,059 28,984 30, Social institutions 45,030 51,804 56, All sectors 367, , , Public administration 23,312 24,485 25, East Denmark Teaching 24,019 23,233 22, Healthcare 19,872 20,656 21, Social institutions 28,489 32,755 35, All sectors 257, , , Public administration 6,786 7,494 7, Region Zealand Teaching 11,774 11,708 11, Healthcare 8,187 8,328 8, Social institutions 16,541 19,050 21, All sectors 109, , , Source: LINE/SAM-K, basic version, October 2009 Note: 2008 preliminary figures, 2014 and 2020 forecast. 23

24 The most marked added value will be in the service sector, particularly in Region Zealand Substantial value added in the service sector In the next decade, the value of production in the service sector will show a growth above average for all sectors, a gross value added for the Capital Region of Denmark of 22.6 percent, and a great deal more for Region Zealand, i.e percent. The manufacturing sector in the Capital Region of Denmark will show an equally high gross value added in the next decade. Gross value added broken down by sector, DKK Mill Change in % Primary sectors East Denmark Manufacturing 75,982 91, Construction 24,711 27, Privat service 284, , Public services 188, , Capital Region of Denmark All sectors 578, , DKK Mill Change in % I Capital Region of Denmark 2008vil Manufacturingssektoren i den Primary kommende sectors 10 years periode udvise en lige så høj 26.9 bruttoværditilvækst. Manufacturing 55,545 68, Construction 15,695 17, Private services 244, , Public services 135, , All sectors 452, , DKK Mill Change in % points Primary sectors Region Zealand Manufacturing 20,437 23, Construction 9,016 9, Private services 40,723 52, Public services 52,267 64, All sectors 125, , Source: SAM-K/LINE, basic version October Note: 2008 preliminary figures and 2020 forecast. 24

25 Value added of the service sector will primarily be through expansion of employment In contrast with the service sector, employment within manufacturing will drop in the coming period. Therefore an increase in productivity must be expected for the manufacturing sector; The service sector will not experience the same increase in productivity and the gross value added in the service sector will be a result of an increase in employment, which is higher in Region Zealand than in the Capital Region of Denmark. 25

26 Productivity in East Denmark was also stagnating before the crisis Growth in productivity has been limited, especially during the economic boom The general development in productivity has been relatively limited in the past five years after a surge since the turn of the millennium. Already before the recession, the weak productivity increase formed the basis for the initiatives involving redundancies, relocation of production and similar, which have characterised the past year in East Denmark. DKK per person employed Development in productivity all sectors, , , , , , , , All of Denmark East Denmark Capital Region Denmark Region Zealand Value of production per person employed in DKK, All of Denmark 417, , , , , , , , ,411 East Denmark 425, , , , , , , , ,702 Capital Region of Denmark 440, , , , , , , , ,866 Region Zealand 383, , , , , , , , ,389 Source: SAM-K/LINE, basic version October Note: final figures, preliminary figures, forecast The Capital Region of Denmark has the highest productivity in Denmark Region Zealand has a relatively low level of productivity Productivity in general is currently significantly higher in the Capital Region of Denmark than in the rest of Denmark. Region Zealand has currently a relatively low level of productivity, which is linked to a relatively low gross value added within the manufacturing sector. The competitiveness of Region Zealand will thus increasingly depend on productivity being raised within the various sectors in general and particularly within the service sector, with its growing importance for the future economy. In the period , productivity increase was DKK 6,400 per person employed in the Capital Region of Denmark, and DKK 2,900 per person employed in Region Zealand. However, it is expected that productivity will increase over the next years on the basis of recent years restructuring in enterprises. 26

27 Stagnation in productivity has impaired competitiveness... The limited productivity increase in recent years has impaired Denmark s competitiveness in foreign markets and the opportunities to retain export shares of enterprises in East Denmark. The manufacturing sector is also where the greatest productivity increases can be expected, when comparing gross value added to developments in employment. On the other hand, productivity developments will not have quite the same significance for the service sector, which is mainly targeted towards domestic demand, and is therefore more dependent on improving domestic purchasing power.... and this means that export businesses are under pressure, as are the possibilities for continuing growth and development Competitiveness is under pressure and this will affect growth opportunities for East Denmark The large drop in the percentage of total production in East Denmark exported in recent years suggests that export businesses, in particular, have been impacted by the financial crisis. Things will look better over the next couple of years, but exports cannot be expected to reach the levels of This means that East Denmark will lose ground in relation to the rest of the country. In the Capital Region of Denmark, export shares will drop by 1.9 percentage points, which is slightly less than in Region Zealand; 0.5 percentage points. Nevertheless East Denmark will be faced with more difficult conditions for creating growth and development in the years to come than the rest of Denmark. 27

28 Developments in export shares of total production, Development in % points Capital Region of Denmark East of Denmark Region Zealand All of Denmark Percent Change in % points All of Denmark 28,0 28,6 0,6 East Denmark 27,7 26,3-1,4 Capital Region of Denmark 29,6 27,8-1,9 Region Zealand 20,3 19,9-0,5 Source: SAM-K/LINE, basic version October 2009 Note: Final figures -2006, Preliminary figures ; Model 2009 Great demand for labour with further and higher education qualifications in the Capital Region of Denmark In Region Zealand the demand for skilled labour is greater Growth and development require the right competences The current composition of higher educated people in employment reflects the business structure. Today, the Capital Region of Denmark has a very large proportion of people in employment with further and higher education (36.7 percent), relatively few skilled workers (30.5 percent), but at the same time a relatively large proportion of unskilled workers (32.7 percent), many of whom are employed in the private service sector. Region Zealand has a more limited proportion of people in employment with further and higher education (25.2 percent), but relatively many skilled workers (39.3 percent). The figure for unskilled labour is 35.6 percent. 28

29 Employed after education, % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Capital Region of Denmark Region Zealand East Denmark All of Denmark Long-cycle higher education Short-cycle higher education Upper secondary school leaving examination, higher preparatory examination, higher commercial examination, Medium-long cycle higher education Skilled Unskilled/Unspecified And in figures Capital Region of Denmark Region Zealand East Denmark All of Denmark Number Percent Number Percent Number Percent Number Percent Unskilled/ Unspecified Upper secondary school * 110, , , , Skilled 279, , , , Shortcycle higher education 54, , , , Medium-longcycle higher education 163, , , , Long -cycle higher education 119, Total Source: SAM-K/LINE. basic version October 2009 * Leaving examination, higher preparatory examination, higher preparatory examination, higher commercial examination, higher technical examination. 29

30 Changes in number of jobs, by education, Number of jobs Change in % Unskilled, upper secondary school* 416, , East Denmark Skilled 409, , Short-cycle higher education 71,966 77, Medium-long-cycle higher education 218, , Long-cycle higher education 141, , All types of education 1,258,173 1,228,785-2,3 *Leaving examination, etc. Number of jobs Change in % Capital Region of Denmark Unskilled, upper secondary school* 279, , Skilled 244, , Short-cycle higher education 48,142 51, Medium-long-cycle higher education 157, , Long-cycle higher education 120, , All types of education 851, ,554-2,8 *Leaving examination, etc. Number of jobs Change in % Unskilled, upper secondary school* 136, , Region Zealand Skilled 164, , Short-cycle higher education 23,824 26, Medium-long-cycle higher education 60,831 67, Long-cycle higher education 21,103 25, All types of education 407, , Source: LINE/SAM-K, October 2009 basic version Note: 2008 preliminary figures, and 2020 forecast. Note: People with unknown education are not included in the total. Demand for labour with further and higher education will rise, but supply will keep up In the future, there will be an increasing demand for people with higher education in both regions, particularly in Region Zealand. Furthermore, there will be a decreasing demand for skilled labour, however as the supply of skilled labour can be expected to fall dramatically unless the current training and education trend is radically changed, a shortage of skilled labour of about 21,000 is expected in

31 Unskilled. upper secondary school leaving examination. etc. Balance between supply and demand of labour after education, Supply Demand Balance Development in % Development in % ,691 53,182 Skilled 411, , , , ,721-21,246 Short-cycle further education 72,567 78, ,966 77, Medium-long-cycle further education 219, , , , ,340 Long-cycle further education 143, , , , ,502 4,990 All 1,281,579 1,263, Source: LINE/SAM-K, basic version, October Note: 2008 preliminary figures, and 2020 forecast. Demand for unskilled labour will drop, and there will be a large surplus of unskilled labour in 2020 Educated labour is necessary to ensure growth and development In contrast, there will be a surplus of 50,000 unskilled workers. The current development in the level of education among young people, where fewer choose further and higher education, particularly vocational courses, will therefore act to further reinforce the development that we are already seeing up to Seen in relation to the fact that there will be a drop in unemployment in the next decade, the demand for labour in the next years will be under serious pressure, as it will be difficult to find educated labour. The limitation in educated labour may therefore limit the growth and development otherwise indicated by the projections. However, recent years economic boom shows that enterprises are capable of finding ways out of labour shortages by substituting labour that does not have quite the right qualifications and by recruiting foreign labour. 31

32 SAM-K LINE how to understand and analyse the results What is SAM-K-LINE SAM-K LINE is a mathematical model based on input-output principle. The model consists of two main parts: SAM-K (which is an input) and LINE (which is a simulation and a forecast output). SAM-K is a Social Accounting Matrix for Danish municipalities (K-kommuner) and is based on the UN recommendation for national accounts. Compared with the traditional input-output tables, SAM-K is a more comprehensive description of the regional economy. SAM-K includes various types of actors that affect the economic processes in regions and in municipalities. These actors are presented in historical perspective ( ) and by each municipality, which later can be aggregated as administrative regions and as a country itself. These actors can be presented as detailed as there is required to have in LINE output. Each of these actors has an account, showing expenditures (columns) and revenues (rows) and their interconnection makes an input database, which is used as an input source for LINE model. Input Database SAM-K is calculated for each municipality. The economic and labour market connections among the municipalities are linked by transportation of goods and services, commuting and import/export abroad. LINE is a mathematical model that calculates economic process in the local economies of Denmark. LINE model produces the output at different aggregation level. the outputs describe historical and current trends of economic and labour market processes as well as calculating forecasts for the future potentials of the local economy and labour market. To calculate the forecast, LINE uses Population forecast from Denmark s Statistics and ADAM-Macroeconomic forecast from the Ministry of Finance of Denmark. Population forecast from Denmark s Statistics is based on the registered population trend by 5 population groups: 1. Danish origin persons; 2. Immigrants from Western countries; 3. Immigrants from non-western countries; 4. Descendants from Western countries; 5. 32

33 Descendants from non-western countries. Population forecast is issued annually with the prognoses for about years. Population is forecasted by age and gender. The conditions and methods to calculate the forecast is based on: 1. Fertility; 2. Mortality; 3. Immigration; 4. Emigration. Population forecast in LINE model is applied at the municipality level, which is also delivered by Denmark s Statistics. There are several insecurities with the Population forecast 1 : 1. Total population: in the population data the most insecure are to forecast the young age groups, who are not yet born by the time the forecast is made. There is also insecurity on their gender. The same insecurity follows with the mortality. Fertility is calculated by each population group separately, where the Danish women have given the constant value, immigrants from western countries, as well as descendants from western and non-western countries increasing value and the immigrants from non-western countries decreasing value. Mortality is more or less the same for all population groups, however differs by gender. 2. Immigration and emigration forecasts are also insecure due to the swings in historical trend. Immigration forecast is calculated for each population group separately. As to emigration is mostly based on the average development trend for the period 2008 and Insecurity in the regional population forecast is at the municipality level. Conditions of mobility (moving) pattern from/to municipality are forecasted based on the average development trend during for each municipality. 2 ADAM is Annual Danish Aggregated Model 3, which is the macroeconomic forecast model, applied in LINE at the national level. The model is calculated twice a year by the ministry of Finance. The model gives a simplified mathematical description of the interactions in the Danish economy, and it is widely used by Danish governmental agencies for macroeconomic forecasting and planning. The rationale of the model is the Keynesian tradition, where demand determines the production and production determines the income. Income is calculated by consumption that determines demand. Therefore, the model is a simulation of demand, production and income. Employment and unemployment in the model is calculated in relation of the production size and the wage as the expenditure for the applied capital inventory. 1 For detailed description see Varedeklarationer/emnegruppe/emne.aspx?sysrid=773 2 For detailed description see Varedeklarationer/emnegruppe/emne.aspx?sysrid=

34 ADAM consists of the following main factors: commodity and factor demand; commodity supply; labor market; commodity and factor prices; incomes and taxes; sector balance; Financial factors, such as obligations; ADAM the Annual Danish Aggregated Model, is the macroeconomic forecast model, which is applied LINE model simulates SAM-K trends, ADAM and population forecast to calculate the forecast output for the project. The LINE simulation is a complex process: aggregating micro register data (in SAM-K) at the meso level (municipal/regional) applying the population forecast at meso level (municipal/regional) applying the economic forecast at macro level (Denmark) disaggregating (or distributing) results back to the meso level (municipal/regional). How are the factors of labour forecasted in LINE Factors of labour (age, gender, education, etc) in LINE are based on the aggregations in SAM-K database. The forecasting of these factors follows simple simulation of SAM-K trend and macro economic forecast of the development in economic sectors, investments, consumptions etc. in each municipality/region. An example: There is the increasing trend for labour force having completed higher education in medicine in Copenhagen municipality between 1996 and There is also economic assumption that the investments, consumption and production in health sector will increase in Copenhagen. Then LINE simulates that the demand in health sector for higher educated in medicine will increase in Copenhagen. If at the same time there is increase in employment then LINE assumes that the jobs requiring higher education in medicine will continue positive growth. 34

35 SAM K (micro) LINE (meso) LINE + ADAM + population Forecast (marcro) LINE Forecast (meso) Reliability of the LINE forecast output SAM-K is a highly reliable database, as it is built on the micro-register data per person. Therefore the historical input in the model is reliable. However, reliability of the forecast output of the model highly depends on the reliability of Denmark s Statistic s population forecast and ADAM macro economic forecast. How to interpret and apply LINE forecast output The results from LINE forecast model has to be treated carefully (as from any other forecast models). The results show the assumption of how Danish economy and population will develop and what implications it will have on the Danish labour market. The results can be used for considering the problems that might arise in the future labour market. The Line model is flexible to make several scenarios, which can be recommended in order to analyse various future possibilities for the Danish local labour market. An example: LINE forecast shows that the unemployment of persons with completed higher education in medicine is negative (-2000 persons) in 2020 in Copenhagen municipality. The negative unemployment value can mean that the future demand of the jobs in the health sector will be higher then the labour force supply. The results can be a consequence of the population forecast in general, or a decreasing trend for persons completing higher education in medicine. On the real market unemployment can never be negative; sooner or later market will adjust and find the labour supply if there is a demand (doctors from other countries, immigration, commuting, etc). However, the negative unemployment is the alerting sign for the planners and decision makers to plan ahead for the possible solutions for this particular problem, so that the market can re-balance faster without impeding the economic progress. 35