Hi-tech skills deficit means 500,000 IT jobs go to waste

Date: 19/11/1998

By Myles Neligan

ACUTE skills shortages and an unwillingness to invest in start-up firms are shackling the EU's information technology industry and letting half a million potential jobs go to waste, according to the European Commission.

A report due to be unveiled by Employment Commissioner Pádraig Flynn next Wednesday (25 November) argues that inadequate training has left 500,000 IT job vacancies unfilled and warns that, unless "urgent, concerted action" is taken, this figure will swell to 1.2 million by 2002.

It says that governments, companies and labour unions should jointly draw up programmes to promote training, introduce new forms of business organisation and revitalise the sector's entrepreneurial culture.

Flynn's call to arms comes as an increasing number of EU leaders wake up to the job-creating potential of the 'information society'. The initiative chimes with the ambitions of recently-elected Socialist governments, many of which support German Chancellor Gerhard Schröder's plan for an intergovernmental pact to boost employment as a counterweight to the euro zone's tough public spending rules. British Prime Minister Tony Blair this week urged his country to become a "knowledge-based economy".

EU leaders asked for the report at their jobs summit in Luxembourg last autumn, calling on the Commission to assess how employment prospects and training needs have changed as a result of the IT sector's spectacular growth.

When he formally presents the report to employment ministers early next month, Flynn will call on each of them to appoint a "high-level representative" to coordinate government programmes to plug the skills gap. He will also ask member states to present comprehensive national strategies to deal with the problem by June next year.

The report highlights obstacles to the growth of European IT companies compared with their US competitors. It points out that while EU firms are enjoying spectacular growth - generating 400,000 new jobs between 1995 and 1997 - their continued development is jeopardised by their poor record in attracting risk capital.

European IT companies receive just 17% of available venture capital investment, as compared with the 55% notched up by their US counterparts.

Computer industry professionals complain that finding investors when new businesses are being set up is difficult, with the result that small firms tend to be taken over by their larger rivals. California's Silicon Valley and Boston, on the other hand, boast venture capitalists specialising in financing IT start-ups.

The Commission's report criticises EU companies across all sectors for failing to follow the example of their US competitors by investing in new technology, and for neglecting to train staff in the use of innovative IT tools.

The study favours loosening regulatory constraints on firms and recommends standardised EU procedures for business start-ups. It also urges member states to make IT training an integral part of national education policy and to improve public access to hi-tech communications equipment.

It identifies the low number of Internet-users in the EU as a further brake on the sector's expansion, but acknowledges that this will improve in line with falling costs as the effects of liberalisation of the telecommunications industry kick in. In the US, local calls are free and the cost of Internet access is consequently much cheaper.

Leading IT firms have warmly welcomed Flynn's initiative. "Narrowing the IT skills deficit is one of the major challenges that the EU is facing," said Kees Tronk, head of marketing at Microsoft Europe. "We and our partners often have real difficulties hiring the right people and I think Europe is in danger of falling seriously behind. It is highly positive that the Commission is taking the issue seriously."

However, Tronk warned against any attempts to address these concerns by excessive public-sector involvement, arguing that IT firms are best placed to assess the training needs of their employees.

Feature on a European Commission report assessing how employment prospects and training needs have changed as a result of the IT sector's spectacular growth.