Skills are increasingly important for economic success. Technological change, globalisation and the rise of the ‘knowledge economy’ have all favoured highly skilled workers. When the recession hit, the sharpest rises in unemployment – in the UK at least – were amongst those with fewer skills. This was particularly the case for young people, with youth unemployment reaching crisis point in a number of countries. The global economy has changed, and workers across the OECD need the right skills to succeed in it.
This makes the ministerial meeting held yesterday to discuss the new OECD skills strategy an important event. The skills strategy will guide discussion on how OECD countries can create the skilled workforces they need to compete in an international knowledge economy. So what priorities should the ministers be discussing?
For national economies to come out of the crisis, there needs to be a focus on high-level skills. Across the OECD, employment rates are higher for those with degrees than without. To create jobs in an innovation-rich economy requires specialists with postgraduate education. In many OECD countries, increasing numbers of young people are taking postgraduate degrees, and the returns to postgraduate education are often high. Those with high-level skills are more likely to be in employment, and are increasingly likely to create new jobs.
But skills are important for everyone, not just those with degrees. As the strategy shows, youth unemployment is in double digits in most OECD countries. Part of this is due to the recession, but other structural changes in some economies are exacerbating these trends. The skills required for young people entering the workplace are changing. In economies increasingly based on the service sector, young people’s first jobs are more likely to be in personal services than on a factory floor. Employers need to be confident that young people have the necessary skills in customer service, time-management and teamwork.
Young people need to develop soft skills to work, but these soft skills are often only developed while in work. The result is a Catch 22 for many young people from disadvantaged backgrounds. The solution lies in ensuring young people are properly supported when taking their first steps into the labour market, with meaningful work experience that encourages realistic expectations of employment and the skills they will need to succeed. Some OECD countries such as Germany are better at this than others.
While it is extremely important to ensure young people have the necessary skills to enter the labour market, governments also need to continue to focus efforts on lifelong learning. The international economy has undergone important changes over the past few decades. Increasingly, the economies of OECD member states are based on the production, dissemination and use of knowledge. The skills required for these new environments evolve over time, and workers need to be able to catch-up.
Yet a focus on the supply of skills is not enough. In the UK, Slovenia and Greece, over 40% of employees feel they could cope with more demanding duties at work – their skills are underutilised. Such problems are caused by poor business models and management being unable to effectively use the skills of their staff. Tackling poor skills utilisation is an important means of both raising productivity and boosting the demand for skills.
OECD Ministers face a number of significant challenges. In the short-term, they need to address economic crisis, the problems of youth unemployment and the question of how to return to growth. In the longer-term, they will also need to ensure their economies can grow sustainably. They need policies to address youth unemployment now, whilst also continuing to ensure their workforces are able to succeed in the knowledge economy. We need solutions to these difficult questions – and skills will play a crucial part in all of them.
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