A recently published ESRI Research Bulletin, ‘The local factors that affect where new businesses are set up’ summarises their analysis of new firms setting up in Ireland. Data from the Department of Business, Enterprise and Innovation (DBEI) on the number of start-up firms each year in 190 localities, all outside of the Greater Dublin Area, is linked to data on local characteristics thought to be important to business location. This data is used to develop models of how much each factor (or combination of factors) contributes to the number of business start-ups in a given place and time.
The authors state that the results of this analysis show that
‘Educational attainment of local residents is highly attractive to start-ups; we use the share of the population with a third-level qualification as an indicator for this, and it has the largest effect of the factors in our models.’
The analysis also shows that broadband access is a significant factor
‘However, a key finding is that broadband’s effect on start-ups depends on the education level of an area’s population. Only areas with enough highly qualified staff seem to enjoy a boost in start-ups when they have broadband network access.’
This analysis clearly points to the importance of human capital in the location decision of new business start-ups. Of course the direction of causality is a challenge, new businesses are attracted to areas with a highly skilled population, but highly skilled people will only remain/move to an area if suitable job opportunities exist.
The latest WDC Insights, published by the WDC last week (27 March), ‘Census 2016: Education Levels in the Western Region’ is therefore very timely, as it examines the level of educational attainment of the adult population of the Western Region and its seven counties.
Highest level of education completed
Overall, the Western Region displays a lower educational profile, with a smaller share of its adult population (aged 15+ years and who have ceased education) having third level qualifications and a greater share having low levels of education (Fig. 1) than the rest of the state. 13.4% of adults in the Western Region have only completed primary education compared with 11.1% in the rest of the state. The region’s older age profile contributes to this.
At the highest levels of education the difference between the Western Region and the rest of state is quite substantial e.g. 8.5% in the Western Region have a postgraduate degree/diploma compared with 11.7% in the rest of the state. Given the importance of third level education for business location and stimulating overall economic growth, this presents a challenge for the region.
Highest level of education completed in western counties
There are significant differences across western counties in the share of the population with a third level qualification (Fig. 2). At 55.2%, Galway City has the second highest share of residents with a third level qualification (Advanced Certificate/Completed Apprenticeship and higher) in Ireland. It is behind Dún Laoghaire-Rathdown but ahead of Fingal, Dublin City and Kildare. Within the region, Galway County, Clare and Sligo have the next highest shares of third level graduates, illustrating a strong concentration around Galway / Limerick and also in Sligo, clearly showing the influence of larger urban centres.
Donegal has the highest share of its population with no formal education or primary only (21.9%) in the State, with Mayo, Leitrim and Roscommon next highest in the region. This is partly due to greater reliance on sectors traditionally associated with lower qualifications.
In general, the counties offering fewer graduate employment opportunities tend to have weaker educational profiles, with many of those with higher qualifications having left these areas. This presents a double challenge for such areas – the weaker educational profile makes it more difficult to attract new business start-ups, while the lack of suitable job opportunities makes the area less attractive to those with higher qualifications. Often in such areas, it is the public sector (education, health, public administration) which presents the most significant graduate employment opportunities. Stimulating greater demand for highly qualified staff among private enterprise in these areas, as well as supporting opportunities for self-employment is required.
Overall the Western Region continues to display a lower educational profile than the rest of the state. Given the key role of human capital in regional development, this is a significant challenge for the region and in particular more rural counties. A number of factors including the region’s older age profile and its sectoral pattern of employment – smaller shares working in sectors which demand higher qualifications (e.g. professional services, ICT, finance) and more working in sectors traditionally characterised by lower qualifications (e.g. hospitality, agriculture) – strongly influence its educational profile.
Galway City shows a very different educational pattern however with the second highest share of third level graduates in Ireland. This is both cause and effect of its recent strong economic performance. The sectoral pattern of employment in Galway City differs from the rest of the Western Region with a high share working in ICT and medical devices manufacturing which demand higher qualifications, the presence of NUI Galway is another key contributor.
Download the latest WDC Insights ‘Census 2016: Education Levels in the Western Region’