Skills, Jobs and the Global Economy: A Comparative Perspective

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Skills, Jobs and the Global Economy A
Comparative Perspective

• Prof. David Finegold
• Dean, School of Management and
• Labor Relations, Rutgers University

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The Following Trailer Has Been Approved For All
Audiences

• Are skills the answer?
• Yes, but the question keeps changing
• Yes, but we must think skill ecosystems,
  not just vocational education and training
• Integrated approach to enabling lifelong learning
• Yes, but not in isolation skills wont solve
  the current financial crisis
• Must focus on demand side and connect with a
  variety of government policies

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Skills PolicyA New Challenge for Each Generation

• 1980s A Nation at Risk
• Loss of firm competitiveness to Japan Germany
• 1990s The War for Talent
• Skill shortages and demographic time bomb
• Today Tomorrow The Flat World Global
  Economic Crisis
• Internet creates global work platform
• Facilitates movement of now scarce jobs

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The Flat World Global Economic Crisis

• Billions of new entrants to the global economy
• China low cost manufacturing
• India high-skill services
• Leading firms were doing well prior to the crisis
• Concern is the future of good jobs
• College degree no longer insures a good job
• Estimates that 30-40 million information
  processing jobs are vulnerable in US (Blinder,
  2007)
• In what jobs will workers be competitive?
• What careers advice do we give our kids?

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Threat of Economic Nationalism

• Danger of making a bad situation worse
• Broader than just traditional protectionism
• Deflating currencies
• Reduced FDI
• Foreign divestments
• Each nation focused on stimulating its own job
  growth
• E.g. Buy American provisions in US stimulus
  package
• Poses huge risk for global recovery

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Technological Change

• Other key force affecting future skill demands
• Long-term driver of need to enhance skills (Katz
  Goldin, 2008)
• Advances in artificial intelligence (Elliot,
  2008)
• Language, reasoning, vision, movement
• Predictions that by 2030 60 of current jobs
  could be automated
• Many holes in the analysis, but gives hint of
  potential challenge
• Risks further bifurcation of skills jobs the
  barbell economy
• Growth at high and low end of the labor market

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Case Study Global Biotech Industry

• Most countries and regions investing heavily to
  build biotech clusters
• Singapore Biopolis, Scandanavia Medicon
  Valley
• Why?
• Core enabling technology for the 21st Century
• Health, agriculture, environmental, industrial
  applications
• Could impact up to 25 of global GDP (Shahi,
  2004)
• Highest skilled jobs
• Most Phd and masters as of workforce
• Among the highest paying jobs (though not that
  many)
• Sticky jobs
• RD historically most likely to remain in home
  country

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Growing competition in highest skilled segments
Biotechnology
No. of Biotech Firms

• US unchallenged leader entering 1990s
• Still home to the most successful biotech firms
• But Europe and Asia catching up rapidly
• India and China entering the game with change in
  patent regime
• India alone now has 400 bioscience firms
• Most created in last 5 years

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The Indian Model Research Process Outsourcing

• Internet offers developing countries
• Instant access to global discovery science
• Ability to fill niches in global RD process
• Chance to reach profitability quickly
• Evolve from service providers ? research-based
  dedicated biotech firms
• Example Avesthagen

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Human Capital is the key to Indias Competitive
Advantage

• Indias Strong Bioscience HE Infrastructure
• 40 national research institutes
• Employ 15,000 scientists
• 300 life science colleges IITs/IIMs
• 1 Million English-speaking grads annually
• 120 medical colleges, 100 teaching hospitals
• 17,500 medical graduates/year
• Asias leading healthcare provider - Apollo
  Hospitals

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Future of Indian Skills

• Alternative scenarios for Indias future skill
  development
• Education-driven prosperity or backlash against
  widening inequality?
• Opportunities created by globalization
• Huge increase in attractive jobs for graduates
• Rapid growth in middle class
• Private sector expansion of HE
• Returning Indian nationals fuel growth in
  start-ups

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Future of Indian Skills

• Second-order effects more worrying
• Majority of population currently denied
  high-skill path
• Inadequate basic schooling
• Government failing to capture and reinvest
  sufficient revenue in upgrading basic education
• Policy response extreme form of affirmative
  action
• Raise quotas for under-represented groups in HE
  from 20 to 47
• Lack of preparation reinforces traditional
  prejudices
• Middle class backlash, riots

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Future of Indian Skills

• India risks losing high-skill advantage
• HE system eating seed corn
• Profs and Phd students attracted to much higher
  pay in private sector
• Separation of research teaching may inhibit
  production of top manpower
• IITs and IIMs only limited expansion
• New institutions of suspect quality
• Other nations upgrading more rapidly
• China building huge research university
  infrastructure
• WuXi PharmaTech Chinese RPO leader - projected
  to employ more chemists than Pfizer by end of
  2009

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Need for a National Skills Strategy

• UK - Leitch Review
• Skills strategy through 2020
• Tremendous progress over past 20 years
• Focus on what to do for the ½ not participating
  in HE
• Limited action on demand side
• US No national skills strategy
• Desperate need 40th out of 40 in recent
  comparison of rate of change in building
  innovation systems
• Weak Federal Government role
• But Obama just announced ambitious goal Restore
  US as leader in HE participation by 2020
  fallen to 14th

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Crafting Australias Skills StrategyLearn
Lessons from World Leaders

• Need to adapt each element to local context
• Build on best elements of current system
• Learn from others failures as well as successes
• Universal early childhood education high ROI
• France Scandinavia
• Strong secondary education foundation
• International baccalaureate, NJ career academies
• Alternative teacher certification for displaced
  workers
• Vocational training linked to firm strategies
• Modern German apprenticeship system

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Crafting Australias Skills StrategyLearn
Lessons from World Leaders

• World-class higher education
• US research universities
• Australian HECS for access sharing of
  investment
• Ongoing investment in workforce development
• Singapore systematic skills upgrading
• UK workplace learning representatives
• Australian Group Training Companies
• Capitalize on new modes of learning
• Particularly important for remote areas
• Web-based learning Prison to community, Second
  Life

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Core StrategyCreating Skill Ecosystems

• Original Concept High-skill ecosystems
• Catalyst
• Research to fuel innovation
• Nourishment
• Flows of human and financial capital
• Supportive environment
• Culture and regulations supporting innovation and
  specialized infrastructure
• Need connectivity
• Foster local networks, social capital
• Source (Finegold, 1999)

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US New Skill Ecosystem Experiment

• WIRED Workforce Innovation Regional Economic
  Development
• US Dept of Labor initiative to create clusters
• Combines workforce and economic development
• Integrate public workforce system more closely
  with employers and education providers
• Began in February 2006
• 325 Million awarded to 39 regions
• New Jersey most WIRED state
• Bio-1 Foster life science cluster in Central NJ

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Australia Has Been Leader in Adopting Skill
Ecosystem Concept

• Beyond Flexibility Skills and Work in the Future
  (Buchanan et al, 2001)
• Broaden from high tech to all skill levels
• Led to joint national-state effort (2003-06)
• Launch of 9 demonstration projects and national
  network
• Skillecosystem.net
• Evaluation and revision of the strategy (2007- )
• New guidelines
• Creation of tools, resources and learning network

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Australia Has Taken Lead in Applying Skill
Ecosystem Concept

• Place workforce development in wider context
• Business strategy - key products and services,
  target markets
• Business environment - competitive pressures,
  inter-firm relationships, access to finance
• Government support and the regulatory framework
• Capital investment and the technology in use
• Employment relations and the operation of labour
  markets
• Work organisation and job design
• The capacity of education and training and its
  ability to meet industry's and workers' needs
• Source Skillecoystem.net

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Ways ForwardIntegrated approach to policy-making

• Place skills at the center of wider jobs
  economic strategy
• Trade Immigration
• Energy the Environment
• Public services
• Social safety net Unemployment displaced
  workers
• Retirement

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Trade and Immigration

• Higher education Australias 3rd largest
  export
• Top 2 competitors (US and UK) severely impacted
  by global financial crisis
• Universities focus on recruiting international
  students likely to intensify
• Benefits beyond influx of dollars to HE system
• Graduates nodes in wider Asian innovation
  networks
• But raises concerns
• Quality of educational experience
• Crowding out of native-born population
• Diminish research capacity

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Energy the Environment

• Green jobs a major theme of this conference
• Though can be difficult to define
• Opportunities across the skill spectrum
• Research and innovation
• Smart infrastructure IBM, Google, HP
• Renewable energy sources solar, wind,
  geothermal
• Biotechnology engineer microbes that produce
  oil ones that will eat it
• Retraining of craft technical workers
• Retrofitting homes and offices for energy
  conservation
• Green construction
• Require demand stimulation

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Safety Net Support for Displaced Workers

• Huge issue with current crisis
• Most vulnerable to downsizing, offshoring
  routine information processors and middle
  management
• Requires universal system of lifelong learning
  assistance with finding work
• Assume career changes unemployment spells are
  the norm not the exception for all skill levels
• Leverage best of technology the private sector
• Full integration of TAFE universities
• Focus on support for entrepreneurs

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Rethinking Retirement Longer lives, Longer
Periods of Disability
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Surge in Over-55s Labor Force Participation
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Rethinking Retirement

• Multiple implications for the skill system
• Large potential source for future experienced
  workers
• Exacerbated by current financial crisis
  reducing retirement savings
• Need lifelong learning system to support career
  reinvention
• Requires more flexible work arrangements

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Public Sector Employment

• Growing dependence on government for job creation
  in current economic crisis
• Direct and indirect employment effects
• Example Caring professions
• Largest growth in jobs in developed countries
• Home healthcare and elder care
• Daycare and pre-school
• Societal choice over quality of service jobs

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Conclusion

• Nations that best meet our generations skills
  challenge will have a strategy that integrates
• Across levels of the workforce development system
• Universal access to early childhood education ?
• World-class educational foundation in schools ?
• Individual entitlement to post-secondary ET ?
• Opportunities for training retraining within
  and outside employers
• Across departments and policy domains
• Between skills supply demand

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Supplemental Slides

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Wave I. A Nation at Risk

• Our once unchallenged preeminence in commerce,
  industry, science, and technological innovation
  is being overtaken by competitors throughout the
  world. If an unfriendly foreign power had
  attempted to impose on America the mediocre
  educational performance that exists today, we
  might have viewed it as an act of war. As it
  stands, we have allowed this to happen to
  ourselves. We have in effect, been committing an
  act of unthinking, unilateral educational
  disarmament

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Focus on Loss of Firm Competitiveness

• Followed by Americas Choice Low Skills or High
  Wages (1990)
• Share concern that poor worker skills was hurting
  ability to compete with Japan Germany
• Prompted decades of education reform
• But original problem appeared to fade away
• Unforeseen issues for key competitors
• German reunification, Japanese bubble burst
• Underestimated adaptability of market economy
• Growth in high tech
• Growth in services
• Restructuring of manufacturing

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II. War for Talent Demographic Time Bomb
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II. The War For Talent

• Focus on skill shortages
• Driven by demographics, Internet bubble and tight
  labor markets
• Develop strategies for attracting, retaining and
  retraining managers and employees
• McKinsey a particular focus on leadership talent
• Real issue for countries with low birth rates
• Japanese, Korean population already shrinking
• Major issue for many West European nations
• Offset by EU expansion
• Again underestimated labor market flexibility
• Growth in labor supply
• Women, immigrants, welfare-to-work

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From Prison to the Community

• Pilot online learning project for female
  prisoners
• Common platform from prison to halfway house to
  the community
• High level of acceptance for computer-based
  learning generally - I realized the value of
  distance learning for this ever-moving
  population. It provides the inmates with the
  opportunity to continue their learning despite
  movement from facility to facility. There is no
  end date for distance learning. They have more
  course options, fewer time-constraints, and more
  flexibility.

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From Prison to the Community

• Most successful aspects to date
• -Building self-efficacy among achievers This
  program offers opportunities to people who didnt
  think they had another chance at education. It
  is like a light goes off in their head.
• - Classroom Environment It makes me feel good
  to see how happy and engaged the women are.
  Prison is so difficult for the ladies being in
  the classroom makes them feel like they are not
  in prison.
• 90.3 of the achievers reported plans to go back
  to school and get more education upon their
  release
• Preliminary results suggest reduction in
  recidivism rates