Foreseeing supply and demand for competence

and education with a regional CGE model

Jouko Kinnunen

Bjarne Lindström

Katarina Fellman

26 August 2015

ERSA, Lissabon

Statistics and Research Åland, ÅSUB

The official statistical authority of the Åland Islands

Research institute serving local and other customers

Personnel 10.5 man-years

Annual gross income 0.8 € m.

About the study

• On behalf of the Åland Government (department of

education)

• Meant to be used as a decision support for the

educational planning in the Åland Islands

• The current study was preceeded by an earlier one in

2006 (Palmer and Kinnunen; ÅSUB Report 2006:2)

• Analysis is based on a further developed version of the

CGE model for Åland first presented in Kinnunen (2005)

Outline of the presentation

• Short presentation of the Åland Islands

• Main results & conclusions

• Characteristics of the CGE model

• Presentation of scenarios

• Presentation of some detailed results

• Introduction to PC-Axis result databases

Åland, self-governed archipelago region

in the middle of the Baltic Sea

Ålands makes business of

the pleasures of others...

• Tax free sales on board of passenger ferries in 2013: 249 MEUR, 8.686 EUR/capita

• Internet and other gaming revenues of publicly owned gaming company (paf.com) 78 MEUR, 2.744

EUR/capita in 2012

• Tourism 85 MEUR, 2 965 EUR/capita in 2013

• GDP of Åland in 2012: 1 140 EUR m. Population in 2014: 28 900

Åland is one of the most prosperous

regions in Finland

Source: Statistics Finland

GDP per capita, euro in year 2000 prices

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

50 000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Helsinki-Uusimaa

Åland

WHOLE COUNTRY

Western Finland

Southern Finland

Northern andEastern Finland

Population growth 1990 = 100

90

95

100

105

110

115

120

125

130

135

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Capital region Uusimaa

Åland Islands

Finland

Åland is responsible for the local

educational policies

• 16 municipalities organize primary

education

• Secondary education: preparatory and

vocational within a single school

• Technical university, tertiary education: – Business Administration

– Electrical Engineering

– Health and Caring Sciences

– Hospitality Management

– Information Technology

– Marine Engineering

– Navigation

Main future trends • Ageing: increasing departures from labour market,

population grows more than labour supply

• Low growth in labour demand in total

• Increasing demand for service personnel (trade,

health care)

• Lower participation rate in the future labour market

• Non-traded sector of economy grows

• Demand for higher-skilled labour (post-secondary

educ.) grows more than that of low-skilled labour

• Female occupations have higher growth in

demand than the traditional male ones

• Men tend to undereducate themselves, the

opposite applies for women

Main conclusions • Education in Åland covers rather well the labour

market needs regarding low-skilled (secondary

level) labour

• Higher nr of graduates will be needed within

non-traded service sector (health care, trade

other services) and within IT services

• Highly skilled labour is mainly imported (incl.

return migrants) – migration very important

• Challenges:

– Flexibility

– Structural adjustment

– Policy coordination

CGE model for Åland

• Based on IFPRI Standard Model

• Recursive dynamics

• Imperfect competition

• Detailed demographics

• Endogenous participation rate

• Philips-curve type wage dynamics

• Endogenous migration

• Public demand driven by population size and

age structure

• Household demand affected by the age

structure as well

Dimensions of the model

• One aggregate hhd (in submodule 8 hhds

with different consumption parameters;

grouped by age of ref.person)

• 2 tourist hhds: Finns, RoW tourists

• Public sector: state, regional gov,

municipalities, social security funds

• 15 industries, 17 commodities

• 11 tax/subsidy accounts

• 2 types of labour: low- and high-skilled

Shall we have a look

into the future?

Three paths to future

• Base scenario: continuation of past developments, with some new

ones:

– Sulphur directive: higher fuel costs for sea transport

– Higher municipal taxes, low increases in transfers from state to

government and from government to municipalities

– Increasing demand for specialist occupations

– Ageing increases private demand for health care services

• Growth: higher external demand for Åland’s exports, higher

productivity growth, higher participation rates among workers 45+,

increasing local competition, higher inmigration flows

• Deceleration: even higher fuel costs than under base, low external

demand, lower productivity growth, lower inmigration, same

participation rates than under base

Population

Net migration

Persons

GDP

Dependency ratio, % (20-64)

Employment

of Ålanders

Participation rate 15-74 years

Labour market exits

Recruiting need

by gender and labour type

Base scenario

Recruiting need = change in labour demand + labour market exits

Recruiting need by occupation, yearly

averages, base scenario

Recruiting need by field of education,

base scenario

Share of recruiting need covered by

local graduations, per cent

2011-2015 2016-2020 2021-2025

Humanities, arts Base scenario 68,5 48,1 40,9

Humanities, arts Growth 64,2 42,6 37,3

Humanities, arts Deceleration 78,9 49,9 44,1

Business adm. and pol. Sc. Base scenario 45,3 44,4 57,8

Business adm. and pol. Sc. Growth 43,4 40,7 50,1

Business adm. and pol. Sc. Deceleration 50,4 44,7 62,4

Technical sciences Base scenario 67,3 71,6 92,6

Technical sciences Growth 63,8 64,2 78,9

Technical sciences Deceleration 79,7 69,2 101,8

Health and social care Base scenario 56,8 52,3 53,1

Health and social care Growth 54,9 48,5 48,2

Health and social care Deceleration 62,2 52,0 55,9

Service Base scenario 83,3 66,9 69,8

Service Growth 80,0 62,1 64,0

Service Deceleration 96,7 64,4 73,2

General, unknown, other Base scenario 67,4 114,1 168,7

General, unknown, other Growth 63,7 93,1 121,8

General, unknown, other Deceleration 82,6 101,8 208,5

ÅrYear

Detailed results are accessible on the

web as PC-Axis matrices...

PC-Axis files in English

Thank your for your interest!