Currently, major changes are happening in the knowledge geography in Europe. The study The geography of Europe’s brain business jobs measures the share of the working-age population across Europe employed in highly knowledge-intensive enterprises. The index is used by national governments, regional governments, universities, and businesses to better understand the changing geography of enterprises in Europe. The seventh edition of this index shows massive changes in Europe’s knowledge intensive jobs geography.
The top six countries in share of adults employed in knowledge-intensive jobs are now Switzerland followed by Ireland, Netherlands, Malta, Denmark and Estonia. Three out of these, namely Ireland, Malta and Estonia used to be behind in economic development and knowledge intensity a generation before, and have risen thanks to a for Europe unusual focus on free markets and low taxes. Switzerland was already previously developed thanks to low taxes and business friendly policies. The Netherlands has a welfare model, but for Europe moderate taxations and focus on workfare rather than welfare policies. Denmark is the only high-tax nation on the top of the list, managing to do so mainly through past progress since growth of knowledge jobs has been sluggish here as well as in all other European high tax economies.
Cyprus and Portugal have doubled the share of adults employed in highly knowledge intensive jobs since 2014. In Lithuania, Romania, Croatia, Bulgaria, Malta and Poland the share has grown by about two thirds or more. Estonia, Slovenia, Slovakia and Hungary have had an increase of half or more. Sweden is the only country that, due to recent years stagnation, has experienced a reduction. Hopefully the nation can regain its previous top position, through constructive reforms. Currently there is a steady progress towards tax-reductions in Sweden.
The knowledge jobs are migrating where there is most talent available, at lowest costs. This tends to be those European economies that are catching up in prosperity, and have the most favorable policies for business and work. No high-tax European country is experiencing strong growth of knowledge intensive jobs.
Table: rate of change in brain business jobs concentration (per capita working-age inhabitants) between 2014 and 2024.
There is also a clear link between energy usage and knowledge intensive jobs concentration. Those European countries which have a higher share of adults employed in brain business jobs, also tend to use more total energy per adult. The link is that for each percent higher brain business jobs per capita, 9.1 gigajoule more energy is used per capita. This points to energy supply playing a key role in knowledge-intensive industries. Besides this, colder countries in the north, such as Iceland, have due to climate reasons more energy usage.
The infrastructure for energy is something that needs to be created and maintained, based on long-term strategies. Many European governments are today striving towards building more sustainable energy production facilities, with focus on primarily wind and nuclear power. The limited current capacities, and the limited expected capacities, to produce and deliver energy, are stalling economic growth throughout Europe. Malta and Cyprus have had significant real reductions of non-household electricity prices, contributing to their success.
Additionally, those European countries where real electricity prices for businesses have risen more over time, tend to have had a slower rate of brain business jobs growth. In a linear regression just under 4 percent of the variation of growth of brain business jobs can be explained by the difference in change in non-household real electricity prices. This is in line with electricity prices for businesses being one of several factors that influences knowledge-intensive jobs growth. High-tech manufacturing, pharmaceuticals production, IT services, media and research & development are examples of brain business jobs activity that are strongly reliant on energy.
Figure: European regions with high share of brain business jobs have lower unemployment.
Fostering high-value-creating jobs remains important for the regional labor markets of Europe. European regions need to have advanced sectors, particularly those that bring in export revenues through trade of good and or services. Sectors that are on top of the value chain create well-paid jobs and additionally boost local demand in support-activates, and local services.
Each percentage point higher share of the population of European regions employed in brain business jobs is linked to 0.27 percentage points lower regional unemployment. This is shown through comparison of those 244 European regions for which data exists. The results mean that in a region where 10 percentage points more of the population is employed in brain business jobs, the average unemployment is 2.7 percent lower, compared to the typical European region.
Knowledge intensive jobs in short are important for regional labor markets, and they are increasingly shifting to where the best economic policies exist. Europe is becoming an increasingly integrated economy, which creates institutional competition for creating more favorable business policies.
This might be of interest for the policy discussion on the other side of the Atlantic, given that European nations share many cultural and policy traits with US states. The bottom line is that the progress in Europe shows the importance of back-to-basics economic policies. Knowledge jobs grow where good supply of human talent is combined with low tax regimes and competitive energy policy.
Nima Sanandaji, Director, European Centre for Entrepreneurship and Policy Reform (ECEPR)
Photo: Lead image derived from cover of referenced report. Charts: courtesy Nima Sanandaji.
Email this Story
Interesting Analysis with Questions
Very interesting and encouraging. I think you are right about growth potential from free markets and low taxes. But I do have questions:
- Your table of growth rates with Cyprus and Portugal at the top suggests that smaller economies may find it easier to grow faster.
- I don't see the UK in your table.
- You cite a linear regression of 4 percent between growth of brain business and non-household real electricity prices. It would be of interest to see the scatter plot and regression line and formula.
- Your plot of Brain business jobs per 1000 adults vs. Regional unemployment shows a linear trend, but I'm pretty sure other polynomial line formulas would have better agreement, such as negative exponential.
- And I'm curious to know where the US would fit in.
If you care to respond by email is bpound@msn.com