Competitiveness and the knowledge economy - where do

we stand?

Prof David Charles

University of Newcastle upon Tyne

Knowledge and the Economy

• Knowledge (as human capital) is increasing in importance as a factor of production

• Output and employment growth globally is fastest in knowledge intensive sectors

• Investment in knowledge creation and formal learning are increasing (over 17% of GDP in some cases)

• Skilled and knowledge workers are in increasing demand• Core regions are massively specialised in knowledge

intensive activities

External Drivers for Change

• Combination of three main processes– Globalisation will continue to weaken demand for low skilled

workers in all OECD countries– Technological change will reduce demand for traditional and low

skilled jobs– Shift to new flexible firm organisation requires a more

autonomous, creative, cosmopolitan and ultimately more self-reliant workforce

• Demand for unskilled workers will continue to fall, growth in demand for personal services will only increase in the context of wealth creation

• What is needed for a city or region to be creative, economically successful and have a good quality of life in a post industrial and highly globalised world?

Competitiveness and city-region challenges

Key interlinked urban development processes and policy arenas underpinning competitiveness

• Knowledge and economic competitiveness• Cosmopolitanism and image• Reducing social polarisation• Environmental sustainability• Effective governance

Knowledge and city competitiveness

• A central role for cities in the knowledge economy• Virtuous cycles of knowledge creation and application• Innovation and creativity• Knowledge as a strategic resource• Place specific tacit knowledge and localisation • Knowledge clusters and cluster knowledge• Emergence of new geographies of services• Building strengths in R&D and HE to underpin

clusters

Cosmopolitanism culture and image

• The city as crossroad and place of interchange of ideas• Fashion, diversity, hybridisation, innovation, creativity• Combination of social classes and ethnic groups• Elite culture and innovation in popular culture• Stimulus to innovation in new forms of work and services• Cultural strategies

– Realisation of role as a production base – – Re-branding the city - diversity and tensions– Ripples and spillovers - diffusion of ideas

Creativity – talent, technology and tolerance

• Cluster success requires and encourages flow of talented individuals

• Especially important in new economy, multimedia, creative industries etc

• Work in the US on the geography of talent focuses on role of urban amenities

• Association between creative employment and open, vibrant communities

• Interactions among the three Ts – technology talent and tolerance

Criticisms of the Florida thesis

• Directions of causality• Assumptions about ease of migration• Innovation associated with both shared beliefs

and with difference• But there are important points to consider

– Argument concerning US advantage in talent attraction in the past - Other places now catching up

– International student market and retention of PhDs– Global mobility of engineers – Finland and Bangalore

Region 1991 2000 % change North East 48800 67200 37.7% North West 170300 246900 45.0% Yorks 93000 166000 79.1% East Midlands 80000 150500 88.1% West Midlands 121600 198700 63.4% East 135100 258000 91.0% South East 260000 544100 109.3% London 436500 845200 93.6% South West 110700 177800 60.6% Wales 41400 64300 55.3% Scotland 127400 187500 47.2% GB 1624900 2906900 78.9%

Knowledge Intensive Business Services Relative Employment change 1991 – 2000 (Source: NOMIS)

Growth of services

0%

20%

40%

60%

80%

100%

Primary

Man

ufactu

ring

Constructi

on

Distrib

ution

Transp

ort

Busines

s Serv

ices

Public &

Personal

Service

sTotal

Proportion of Workforce with Degrees by Sector

0 <5.0 5.1-10.0 10.1-20.0 20.1-49.9 >50

Percentages

Higher GCE GCSE gradesDegree or education A level or A*-C Other Noequivalent qualifications3 equivalent4 or equivalent qualifications qualifications

United Kingdom 16.3 8.5 24.1 21.7 13.7 15.0

North East 11.3 9.1 25.1 22.7 12.6 18.8North West 13.3 8.3 24.6 24.1 11.4 17.5Yorkshire and the Humber 13.4 7.7 25.6 22.1 14.4 16.2

East Midlands 13.0 7.6 25.1 22.6 13.4 17.1West Midlands 12.7 8.3 23.6 22.7 14.1 17.6

East 16.2 7.7 22.7 25.0 14.0 14.0London 24.7 6.0 18.5 16.7 20.2 13.4South East 19.9 8.6 24.2 22.4 13.7 10.6South West 16.2 9.8 24.9 24.1 13.4 10.7

England 16.6 8.0 23.5 22.2 14.5 14.6Wales 14.6 8.8 23.2 23.4 11.6 17.1Scotland 15.4 13.3 29.9 16.4 9.7 14.7Northern Ireland 13.1 7.7 26.9 21.0 6.7 23.7

4 Includes recognised trade apprenticeship.

1 Males aged 16 to 64 and females aged 16 to 59.

2 For information on equivalent level qualifications, see Notes and Definitions.

3 Below degree level.

Implications for the regions

• Regional competitiveness is being defined by success in high GVA knowledge based services

• This is dependent on growing levels of graduate skills

• UK productivity as a whole depends on raising the performance of the regions

• How can regional skills partnerships support a knowledge based regional economic strategy?

The graduate labour market process

Students domiciled in

the region

Regional HEIs

Regional employers

Students studying in other regions

New migrants

Students from elsewhere

Employers in other regions

Non-local graduates

Local graduates

Local and non-local graduates

Key questions

• How should regional partners intervene in graduate labour markets?

• What kinds of skills policies can help to develop new high value added industries?

• How does the regional skills strategy link together lower level and high level skills development?

An aside on learning regions (and cities)

• Innovation systems or training strategies?

• Both are very partial readings of learning and the extent to which it is characteristic of place

• Individualised and social forms of learning

• We need to be promoting learning within policy arenas as well as for individuals and amongst organisations of all kinds