Promoting Investment and Increasing Employment Among the Economically Inactive - A Review of Best Practice: Final Report to the Department of Enterprise, Trade and Investment, Northern Ireland

Introduction
This report sets out the findings from a study into strategies that link the
promotion of investment and the employment of economically inactive groups.
The aim is to ascertain current practice in 10 relevant countries (Australia;
Belgium; Denmark; Finland; Germany; the Netherlands; New Zealand;
Slovenia; Spain; USA plus Great Britain) and their transferability to the
Northern Ireland (NI) policy and labour market context. The study was carried
out by the Employment Research Institute at Edinburgh Napier University on
behalf of the Department of Trade, Enterprise and Investment in NI (DETI).

The study describes cases of good practice in securing investment in areas,
sectors and occupations that provide accessible entry-level positions for
economically inactive groups. It seeks to identify the ‘critical success factors’
common to effective strategies, drawing out lessons for future Northern
Ireland policy.
In this study ‘Investment’ includes foreign direct investment (FDI) and private
investment that expands the ‘export’ capacity of the NI economy (i.e.
excluding investment aimed at the NI market). ‘Economically inactive’ people
are those excluded or seriously at risk of exclusion from the labour market.
Promoting Investment and Job Creation for the Inactive
This study has not found significant evidence of direct incentives to encourage
investment that is specifically aimed at employing high levels of economically
inactive groups. Indeed most participants in the study argue against such a
link in general and target predominantly high-value added sectors and jobs.
There are some incentives tied to job creation, but these are not focused in
the main on particular groups of jobseekers and workers. Only a minority of
the case studies explored in this study obliged companies to employ specific
groups of jobseekers. For instance, in the Basque Country any enterprise
(including FDI) with more than 50 employees should have at least 2% of
workers who are registered as disabled. However, enforcement of such
policies is difficult.
Linking Investment and Employment Policies for the Inactive
There are examples of indirect links between investment and job creation for
the economically inactive. Employment agencies have a number of strategies
to encourage the creation of employment and the integration of the
economically inactive into the labour market. This can take the form of
subsidies or quotas for employers. There are also opportunities for employing
economically inactive in the social economy (potentially subcontracted from
newly investing firms). Investors can be encouraged to use these incentives and therefore, arguably, they indirectly link investment with the employment of
the economically inactive.
Joint working between investment promotion and employment agencies (and
employers) appears crucial if strategies for the greater employment of the
inactive are going to be successfully implemented. There are some examples
of fairly effective communication between these stakeholders and they do
promote each other’s services. Additionally any incentives and obligations that
encourage the employment of economically inactive groups need to be
closely monitored to ensure that the economically inactive feel the benefits
and to reduce any displacement or deadweight effects.
Targeting Sectors
Investment agencies often target certain sectors when promoting the
investment opportunities in their country. Generally the focus is on high-tech
and R&D activities. These high wealth generators in the main require a highly
skilled workforce and do not always offer many opportunities to the
economically inactive. With limited resources, a focus on high value added
contact centres and other investors is more likely to meet DETI priorities such
as improved productivity. Nonetheless whichever industries are targeted it
needs to be ensured that the labour force has the skills required by industry.
Lessons for Northern Ireland
This report considers the transferability of some strategies to the Northern
Ireland policy and labour market context.
• There were no significant strategies to link investment and the
employment of inactive people. It was the general view that the two
should not be compulsorily linked as it may deter mobile investment.
• There are examples of good practice showing indirect links between
investment and the access of the economically inactive to the jobs
created.
• The emphasise of DETI is likely to be in terms of closer working with other
agencies (e.g. the Department for Employment and Learning (DEL)):
o To ensure they have suitable programmes to act as incentives for the
employment of inactive people.
o To market the employment support available from DEL to potential
investors.
o To ensure suitable training packages are available and tailored to the
needs of investors.
o To help gain the agreement of the investor to consider and use these
programmes; and to encourage some sub-contracting to bodies who
employ significant numbers of formally inactive people (including in the
social economy).
o To improve co-ordination, for example through regular action orientated
meetings between DETI, DEL and employers to discuss forthcoming
and potential investments so that flexible provision of training support
can be made.
Of course any body promoting investment is in a highly competitive market
and the fine balance between attracting or losing an investor must always be
considered.
Recommendations
Targeting Sectors
• With limited resources, a focus on high value added investments, including
high value added contact centres, is more likely to meet DETI priorities
such as improved productivity and value added, and potentially indirectly
open opportunities for the inactive.
Linking Investment Agencies and Employment Agencies
• DETI may consider explicitly marketing training and employment support
available through DEL for different groups, such as the inactive, when the
www.nibusinessinfo.co.uk website is re-launched. It may be useful to
consider the Flemish website when designing the relaunch.
• When considering potential employment subsidies, the Hamburg model, of
wage subsidies for those with inadequate skills, may be worth further
investigation by DEL.
Training and Skills Development
• DETI should continue to work with DEL and local training and skills
development bodies to ensure that suitable training and work readiness
packages are available to tailor to the needs of investors. Consideration
might be given to how these programmes can better be adapted to, and
marketed to, potential inward investors.
The Social Economy and Intermediate Labour Market Enterprises
• DETI could investigate working with DEL to identify the opportunities of
encouraging investors to consider using Intermediate Labour Market type
enterprises as suppliers to investors (e.g. enterprises that provide work
experience for disadvantaged people, including the inactive). The Basque
country examples may be worth further consideration.
Joint Working
• To improve co-ordination - for example through regular action orientated
meetings between DETI, DEL and employers to discuss forthcoming and
potential investments so that flexible provision of training support can be
made. The New Zealand regional examples may be worth further
consideration.