Consumption of educated workers in local authorities and regions in the light of the knowledge society and local government reform
by Henrik Christoffersen, Jie Zhang and Bjarne Madsen, June 2007
Summary
Recent years have seen a shift in the understanding of the conditions for the production of public welfare services. Traditionally, the standard practice in describing the technology in the production of welfare services has been for output or benefit or the value of the production to be decided by how much labour is utilised in producing the services in question: In order to produce more or better services for the elderly or teaching at schools, it is necessary to hire more home care professionals or teachers. What we see now is an adherence to the theory that strengthening the level of education and qualifications of employees may also be a way to increase the benefit and value in relation to expenses.
This shift in understanding has undoubtedly contributed to paving the way for the local government structural reform. The Local Government Restructuring Commission’s report strongly emphasises that the structural reform can create the organisational framework for improved professional sustainability. It points out that large local authorities will have a stronger standing when it comes to recruiting educated workers and that large local authorities will have special opportunities, through specialisation and the like, to organise the work so that strong competencies are developed within the individual task areas.
In this context, the present report provides a picture of trends in the utilisation of educated workers in Danish local authorities and counties in recent years. It also presents a projection of the utilisation of educated workers based on recent trends and on developments in the factors that determine the local and regional demand for labour. The report’s analyses place special emphasis on the fact that differences exist between local authorities and between counties in the level of education of their employees. These differences are, in part, regionally conditioned in that there is generally a higher level of education among employees in local authorities and counties situated in the central areas of Denmark while the level of education is lower among employees in the fringe areas of the country. It is also, in part, due to the fact that the small local authorities (at least outside the Greater Copenhagen Area) generally have a lower level of education among their workers than the large local authorities, which will generally become the centres of the new amalgamated local authorities.
The latter aspect – differences in the level of education among workers in small and large local authorities – is particularly relevant from the perspective of local government amalgamation. A large share of the local government amalgamations that are being implemented involve local authorities of differing sizes, where a central local authority in many instances is amalgamated with surrounding smaller local authorities. For such amalgamations, it is possible to imagine that, when it comes to the level of education among employees and, thus, to staff professionalism, a highest common denominator will apply after the amalgamation process such that the new local authorities will seek to continue the level of education of the local authority with the highest educated employees. If this is the case, a need will arise in the short term for an educational boost of the amalgamated staff, and in the long term an effort will be made when recruiting to increase the level of education. This report also presents calculations that reveal the scope of the educational challenges that are a consequence of the local government amalgamation process. Of the 68 new local authorities created by the amalgamation of two or more local authorities, the findings show that 54 are characterised by the central local authority employing people with higher levels of education than the surrounding local authorities involved in the amalgamation.
The reports’ numerical description of the utilisation of educated workers in local authorities and counties covers the period from 1996 to 2003. This period is interesting because it contains a shift in the number of employed persons in the Danish labour market. The number of employed persons increased up to 2001, after which the trend reversed. Since then, due to a very high level of demand, a new increase in the number of employed persons has taken place, while the unemployment rate has, at the same time, been reduced. However, this demographic trend means that the long-term trend as regards the number of employed persons in the labour market will be declining.
The total number of employed persons in the Danish labour market for the period 1996-2003 as a whole increased by 54,000 people, corresponding to a growth rate of 2.0%.
This growth in the number of employed persons in the labour market has been accompanied by an increase in the level of education of the employed persons. This has primarily taken place through generational change, in that the new generations that enter the labour market have generally had a higher level of education than the generations leaving the labour market through deaths or transition to some form of “income-replacing” remuneration. The fact that the people who are already in employment obtain a higher education further contributes to raising the level of education. The report sets a measurement for the level of education which is calculated as the average length of the employed person’s most recently completed study programme. The calculations are based on data from registry statistics on the most recently completed study programmes of employed persons, where the length of education is taken as the standard amount of time it takes to complete a study programme.
The analysis of the level of education shows that employees in the public sector are generally characterised by having a higher level of education than employees in the private sector. From 1996 to 2003, the boost in level of education has been even stronger in the public sector than in the private sector. A key aspect is that the majority of the employed persons without a qualifying education are found in the private sector, and this trend continues to increase. In the public sector, the state and counties employ people who generally have a higher level of education than employees in the local authorities. The boost in level of education in recent years has been strongest at state level, which is closely related to staff reductions in connection with the automation of many functions as well as the phasing out of tasks in connection with e.g. privatisation.
Since education in the knowledge society can be seen as a production factor along the lines of labour (calculated simply as the number of employed persons) and capital equipment, the amount of education capital that goes into production in the Danish economy has been calculated. This is a very straightforward calculation, where the amount of education capital is simply expressed as the total number education years possessed by the employed persons in the labour market. Calculated in this way, the number of education years in the labour market increased by 5.1% from 1996 to 2003. In addition to the 2.0% increase in the number of employed persons, this represents an increase in the average number of education years of 3.1% in that period.
One consequence of this shift in the trend in the number of employed persons is that the increase in the number of education years put into production in the Danish economy stopped in 2000 and was replaced by a modest decline in subsequent years. Whereas employment in the public sector has continued to increase, employment in the private sector has decreased after 2000. Moreover, since the public sector has raised the level of education of its employees much more than the private sector, a situation has developed where the steady increase in the level of education among employed persons in the Danish labour market after 2000 is characterised by the public sector continuing to utilise more education years in the production of public services. In contrast, the private sector after 2000 and at least up to 2003 was in a situation where it utilised fewer education years in the production of private market-based products.
The steady increase in the level of education among employed persons is quite in agreement with the basic targets for Danish educational policy, see for instance the recommendations drawn up by the Globalisation Council in spring 2006. That these targets can have such a prominent position is largely due to socio-economic considerations, which is exactly what the Globalisation Council’s focus on the significance of education emphasises. However, an increase in the level of education does not in itself guarantee a stronger economy or a higher degree of socio-economic balance. In this context, it is crucial that educational investments are turned into an increase in productivity and a balanced distribution of educational investments among the production sectors.
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