Economy Watch: A lack of competitiveness means we can't stand still
Brexit notwithstanding, a lack of competitiveness remains our greatest single challenge. Greater competitiveness would increase sales of goods and services while also raising wages and living standards. Competitiveness is very closely related to a high and rising level of productivity.
Along with colleagues from the Ulster University, I have published an article in the international journal Regional Studies describing how approaches to measuring the competitiveness of the Northern Ireland economy developed between 1957 and 2017.
The good news is that we now know more about competitiveness but for more than six decades we have continued to lag behind other countries/regions.
We have found that Northern Ireland has had a long-standing and substantial shortfall in competitiveness. Labour productivity has lagged GB by a substantial margin - this was true in comparisons using data relating to the 1930s and 1920s published in 1957.
Similar results were produced by labour productivity comparisons in the late 1980s.
Using a much more comprehensive and multi-faceted index of competitiveness, the World Economic Forum (WEF) Index including 144 countries in 2012-13, Northern Ireland was ranked 42nd from the top: one of the lower performers within the Western world.
The UK overall was ranked eighth and the Republic of Ireland 27th. A later comparison, the UUEPC Competitiveness Scorecard (2016), using data for 2010-15, and concentrating largely on countries which are either EU or OECD members, put Northern Ireland well below average though with a slight improvement during 2010-15.
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Over the last 60 years the methods used to measure competitiveness have changed substantially.
First, statistical comparisons of output per worker (mainly to GB but also, sometimes, to countries such as West Germany and the US). Second, the WEF index applied to the Northern Ireland region. Third, the UUEPC index or Competitiveness Scorecard.
Fourth, and most recently in 2017, there have been strong suggestions that the Department for the Economy is moving towards concentrating on comparisons of Northern Ireland to a peer group made up of eight small and successful economies: Singapore, Republic of Ireland, Denmark, Finland, Scotland, Estonia, New Zealand and Israel.
A critical assessment of the changing approach to measuring competitiveness implies there has been some progress in understanding the concept.
The labour productivity measurements, as used in the 1950s and 1980s, were quite narrow in scope. The application of the WEF index allowed an opportunity to tailor the measurements towards the particular circumstances of Northern Ireland.
But things remain to be done in terms of future research and policy making. Competitiveness is so important a topic that we cannot afford to leave things standing still. The article suggests an agenda for future research and policy.
While all of the measures made allowance for education and skills in general, the quality of management has not received much attention.
There was a study in 2009 which benchmarked management practices and capabilities: compared against a dozen other economies, NI along with the Republic of Ireland, did not fare well. That study which was commissioned by the DETI and DEL Departments along with InterTradeIreland and Irish Forfas agencies, has never been repeated but it should be. A recent study by UK statistical agency ONS using data for the GB regions showed that businesses which applied production plans or Key Performance Indicators tended to have higher productivity.
The WEF-based comparisons for 2012-13 included an assessment of "governance" in Northern Ireland (did business people trust politicians? How transparent was policy making?)
With first being "best", Northern Ireland ranked 57th on trust whereas the UK average was 31st and the Republic 51st.
If the WEF questions were repeated today, there has to be a very strong suspicion that the low ranking position of 2012-13 would have got worse.
Very importantly, research is likely to be of greatest benefit to policy makers if there is some scope to measure how NI's position has changed over time.
That is most likely to happen if there is a degree of consistency in the measurements. The changes in the methods of competitiveness measurement and comparison have brought improved understanding but there has been reduced ability to measure how far performance improved over time.
In next week's Economy Watch, we hear from Ulster Bank chief economist Richard Ramsey