Building tax systems to foster better skills

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Pascal Saint-Amans, Director, OECD Centre for Tax Policy and Administration and Andreas Schleicher, Director, OECD Directorate of Education and Skills. Today’s post is also being published on the OECD Education and Skills Today blog

Investing in skills is crucial for fostering inclusive economic growth and creating strong societies. In an increasingly connected world, skills are particularly important for citizens to get the most out of new forms of capital, such as big data and robotics. More and more, policy makers are recognising that rapid change in technologies and work practices mean that people will have to continually upgrade their skills throughout their lives.

This new reality raises many questions for governments, firms and individuals, including: who is to pay for all these skills investments? In many OECD countries, student debt is rising, and in many others, public debts are persistently high. How can policy makers decide on the right financing mix for students and governments?

This is where taxes have an important role to play. In a nutshell, delivering educational services will depend on taxes, and good tax income will depend on good educational services.  A new OECD Tax Policy Study, Taxation and Skills,  released today, highlights the role of the tax system in ensuring that the right financial incentives are provided for investments in skills. This means making sure that governments, individuals and firms all share the costs and the benefits of better skills.

In addition to raising the revenue to finance government spending on skills, every OECD country uses the tax system to provide support for skills investments. Provisions such as tax credits, tax deductions and reduced tax rates on student income help governments support skills investments both early on and later in life. Sharing the costs in this way can make investing in skills more affordable, although these tax provisions need to be well-designed.

Besides helping share costs, the tax system divides the returns to skills between governments and students. When investments in skills yield returns, it means that individuals get higher wages, and governments get more tax revenue.

The results published today show that these returns to skills are substantial. In almost every country examined, both students and governments earn a sound return on skills investments. In some countries, however, policies could be improved to better share the returns to skills between individuals, firms and governments. Rising earnings premiums paid to skilled workers across OECD countries means that the returns to skills may grow into the future. This means better wages for individuals, more profits for firms and more sustainable public finances for governments, a win all around.

In spite of these high returns, many workers do not have the right financial incentives to make the necessary investments in their skills to succeed throughout their lives. Unlike physical assets, like property and equipment, human capital cannot be used as collateral for borrowing to finance investments. This impedes access to credit for individuals’ skills investments. Firms may also underinvest in skills because they worry that newly skilled workers may be poached by competitors. Often, individuals and firms do not have access to the right information to make informed choices about how they can invest in their skills.

Designing tax and spending policies to encourage skills investments is crucial. Useful policy approaches can include refundable tax credits for lifelong learning, income-contingent loans for tertiary education, or extra tax deductions for firms that invest in their workers’ skills.

OECD governments are increasingly looking at how policies can be designed to raise productivity, innovation and growth. We hear a lot about how tax systems can encourage investments in physical capital and innovative technologies through R&D tax credits and other measures. The report released today shows the importance of tax policies that are equally geared towards incentivising investments in human capital.

Useful links

OECD Centre for Tax Policy and Administration

OECD Directorate of Education and Skills

The future of work: a world of new and changing skills

Digital native in natural surroundings

Glenda Quintini and Alastair Wood, OECD Directorate for Education, Employment and Social Affairs

What do you want to be when you grow up? As young girls and boys learn about space and the cosmos they may dream about being an astronaut. Building a beautiful Lego construction might lead them to declare their desire to be an architect. These days however, rather than catching a young boy or girl playing with Lego or a toy space rocket, they might be learning how to write computer code, aspiring to change the world through technology. Even 3-year-old children scroll through photos on an iPad with an ease and dexterity that stun many adults. That our children are so comfortable using new technologies is encouraging given where our societies are heading. The Internet of Things, Big Data, artificial intelligence (AI) and other new technologies are expected to create new and different jobs, substantially change many existing jobs, and make others obsolete. Adapting to and benefiting from these profound changes requires new skills, now and in the future.

But how well are countries prepared for the digital economy? OECD evidence paints a disturbing picture. Today, 95% of workers in large businesses and 85% in medium-sized businesses have access to and use the Internet as part of their jobs (OECD, 2013).  Yet over half of the adult population (56%) have no ICT skills or can only fulfil the simplest set of tasks in a technology-rich environment. Even among young adults, those between 25 and 34, only 42% can complete tasks involving multiple steps and requiring the use of specific technology applications, such as downloading music files or looking for a job online (Level 2 or 3); among people aged 55-65, only 10% can do this. And not only the workplace is changing; interactions between citizens and governments, between businesses and clients, and within personal networks also rely more and more on digital, mobile or social-media tools (OECD, 2009, 2011). Obviously, workers who can code and develop applications are in high demand; but digitalisation also means that everyone needs to be quite proficient using ICT, even those in low-skilled jobs: today, a factory worker often has to interact with an entirely automated chain of production and a waiter might be taking orders on an iPad.

Being good at ICT pays off. Workers with strong ICT skills are paid almost 30% more, on average, than those who cannot do much more than type or use a mouse (i.e. with skills at or below Level 1). These pay gaps exceed 50% in England, Singapore and the United States. Like in other sectors, there are also gender gaps in ICT: ICT specialists account for 5.5% of all male workers but only for 1.4% of female workers (OECD, 2016a). And this gap is likely to persist in the future: more than twice as many boys currently expect to work in science and engineering jobs when compared to girls, as stated in the latest OECD PISA survey, despite the fact that ICT jobs are in high demand, well-paid and offer promising careers.

But while tech skills are crucial, more is needed to succeed in the new world of work. In addition to ICT skills, workers also need entrepreneurial and organisational knowhow and the right social skills to work collaboratively. Workers also need the flexibility to adapt as technologies evolve (Spitz-Oener, 2006; Bessen, 2015). As Einstein put it “The measure of intelligence is the ability to change.” Our children will likely have a whole range of different jobs and even a range of careers over their lifetime – an exciting prospect but also a challenging one.

New OECD work on Skills for a Digital World calls on governments to ensure that digitalisation brings good quality jobs and that both employers and workers have the means to benefit from new opportunities that open up. Skills policies should strengthen initial learning; anticipate and respond better to changing skill needs; increase the use of workers’ competences; and improve incentives for further learning along with greater recognition of MOOCs (massive open online courses) and OERs (open educational resources). Our challenge today is that we have to educate people for jobs that don’t exist yet and the only way to do this is to be flexible and adapt education and training continuously. Then there is no reason to be worried if kids have no idea what they want to be later in life. Being open-minded and making sure that one remains open to learning and using new skills is likely the best attitude to adopt.

Useful links

Arntz, M., T. Gregory and U. Zierahn  (2016), “The Risk of Automation for Jobs in OECD Countries: A Comparative Analysis“, OECD Social, Employment and Migration Working Papers, No. 189, OECD Publishing, Paris

Autor, D. (2015), “Why Are there still so many Jobs? The History and Future of Workplace Automation”, Journal of Economic Perspectives, Vol. 29, No. 3, pp. 7-30.

OECD (2016), PISA 2015 Results (Volume I): Excellence and Equity in Education, OECD Publishing, Paris.

OECD (2016a), “Skills for a Digital World: 2016 Ministerial Meeting on the Digital Economy Background Report”, OECD Digital Economy Papers, No. 250, OECD Publishing, Paris.

OECD (2015b), Adults, Computers and Problem Solving: What’s the Problem? OECD Publishing, Paris.

OECD (2013), OECD Skills Outlook 2013: First Results from the Survey of Adult Skills, OECD Publishing, Paris.

Spitz-Oener, A. (2006), “Technical Change, Job Tasks, and Rising Educational Demands: Looking Outside the Wage Structure”, Journal of Labor Economics, Vol. 24, No. 2, pp. 235‑270.

Learn to Earn: Skills, Inequality and Well-being

NAECAndreas Schleicher, Director of the OECD Directorate for Education and Skills

Jobs, wealth and individual well-being depend on nothing more than on what people know and what they can do with what they know. There is no shortcut to equipping people with the right skills and to providing them with opportunities to use these skills effectively. If there’s one lesson the global economy has taught us over the last few years, it’s that we cannot simply bail ourselves out of a crisis, that we cannot solely stimulate ourselves out of a crisis and that we cannot just print money our way out of a crisis.

But we can do much better with equipping more people with better skills to collaborate, compete and connect in ways that lead to better jobs and better lives and drive our economies forward. The OECD’s Skills Survey shows that poor skills severely limit people’s access to better-paying and more-rewarding jobs. It works the same way for nations: The distribution of skills has significant implications for how the benefits of economic growth are shared within societies. In the end, productivity is about working smarter, not just working harder.

Put simply, where large shares of adults have poor skills, it becomes difficult to introduce productivity-enhancing technologies and new ways of working, which then stalls improvements in living standards. Importantly, skills affect more than earnings and employment. In all countries with comparable data, adults with lower skills are far more likely than those with better literacy skills to report poor health, to perceive themselves as objects rather than actors in political processes, and to have less trust in others. It is for these reasons that the new Sustainable Development goals (SDGs) formulate their goals no longer just in terms of years of education, but in terms of the skills that people attain.

In short, without the right skills, people languish on the margins of society, technological progress will not translate into economic growth, and countries can’t compete in the global economy. We simply can’t develop fair and inclusive policies and engage with all citizens if a lack of proficiency in basic skills prevents people from fully participating in society. That is especially important for today’s youth, who cannot compete on experience or social networks in ways that older people can.

All that said, skills are only valuable when they are used effectively, and some countries are far better than others in making good use of their talent. While the US has a limited skills base, it is extracting good value from it. The reverse is true for Japan, where rigid labour-market arrangements prevent many high-skilled individuals, most notably women, from reaping the rewards that should accrue to them. But underuse of skills is visible in many countries, and not just for women. It is also common among young and foreign-born workers and among people employed in small enterprises. Employers may need to offer greater flexibility in the workplace. Labour unions may need to reconsider their stance on rebalancing employment protection for permanent and temporary workers. The bottom line is that unused human capital represents a waste of skills and of initial investment in those skills. And as the demand for skills changes, unused skills can become obsolete; and skills that are unused during inactivity are bound to atrophy over time. Conversely, the more individuals use their skills and engage in complex and demanding tasks, both at work and elsewhere, the more likely it is that skills-decline due to ageing can be prevented.

In some countries, skills mismatch is a serious challenge that is mirrored in people’s earnings prospects and in their productivity. Knowing which skills are needed in the labour market and which educational pathways will get people to where they want to be is essential. The under-utilisation of skills, in specific jobs in the short to medium term can lead to skills loss. Workers whose skills are under-used in their current jobs earn less than workers who are well-matched to their jobs and tend to be less satisfied at work. This situation tends to generate more employee turnover, which is likely to affect a firm’s productivity. Under-skilling is also likely to affect productivity and, as with skills shortages, slow the rate at which more efficient technologies and approaches to work are adopted.

Developing the right skills and using these effectively needs to become everyone’s business: governments, which can design financial incentives and favourable tax policies; education systems, which can foster entrepreneurship as well as offer vocational training; employers, who can invest in learning; labour unions, which help that investments in training are reflected in better-quality jobs and higher salaries; and individuals, who can take better advantage of learning opportunities.

Countries also need to take a hard look at who should pay for what, when and how. Governments need to design financial incentives and tax policies that encourage individuals and employers to invest in post-compulsory education and training. Some individuals can shoulder more of the financial burden for tertiary education, and funding can be linked more closely to graduation rates, provided individuals have access to income-contingent loans and means-tested grants.

It’s worth getting this right. If the industrialised world raised its learning outcomes by 25 PISA points, the level of improvement that we have seen in a country like Brazil or Poland over the last decade, its economies could be richer by over 40 trillion euros over the lifetime of today’s students. Many countries still have a recession to fight, but the cost of low educational performance is the equivalent of a permanent economic recession.

Useful links

OECD Skills Outlook 2015 – Youth, Skills and Employability

 6th International Summit on the Teaching Profession (ISTP), Berlin, 3-4 March

Breaking down the silo: connecting education to world trends

Now connect to world trends
Now connect to world trends

Tracey Burns, OECD Directorate for Education and Skills

Did you ever wonder if education has a role to play in stemming the obesity epidemic sweeping across all OECD countries? Or what the impact of increasing urbanisation might be on our schools, families, and communities? Or whether new technologies really are fundamentally changing the way our children think and learn? If so, you’re not alone.

The OECD’s work on Trends Shaping Education stimulates reflection on the challenges facing education by providing an overview of key economic, social, demographic and technological trends. It has been used by ministries to guide strategic thinking and in Parliaments as a strategic foresight tool. It’s also part of the curriculum in teacher education colleges, and is a resource for teachers when designing courses and lectures, as well as parents and students themselves.

The fourth edition of the book will be launched in January 2016. Two weeks ago, the Trends team travelled to Brussels to hold an expert workshop with researchers in a number of domains, including demography, governance, urban design, new technologies, climate change, financial literacy, small and medium enterprises, children and families, and banking.

Why take the time to meet face-to-face with these experts? To be honest we weren’t sure that it would yield any results. Researchers have many demands on their time, and it is not often that they are given a chance to look beyond their own particular speciality to think more holistically about global trends. Sometimes, though, it is by bringing people together unexpectedly that the best ideas emerge.

Will robots replace our teaching force in 10 years? In 20 years? Will new fertility technologies allow for designer babies (and, in parallel, “rejects” that did not turn out as expected)? Will online relationships rival or replace our friendship groups? What might this mean for families, and schools? These ideas might seem radical, but the trends behind them are supported by science. And while they are still speculative, there are a number of trends that could have an impact on education, if not today, then tomorrow or the next day. And yet most of our education systems still do not address them.

For example, climate change trends make it clear that across OECD countries we can expect to experience more and more extreme weather events. In most of our countries, the effects will be felt most acutely in cities, where the density of the population and ageing infrastructure (roads and services, such as water, electricity and plumbing) makes us especially vulnerable. If you combine this with worries about the emergence of new epidemics (MERS in Korea is just the latest example) and our ageing populations, a cautious city planner has reason for concern. And not just hypothetical reasons, either. Recent flooding in New York and other major cities has revealed the weakness of many of our emergency-response services.

So what does this have to do with education? Good question. In the short term, communities need to have a plan to educate their populations on what to do (and not do) in the event of a major storm or other extreme weather event such as drought or fires. In the medium and long term, we need to develop school infrastructure and transport that are designed to provide safe access for our students. Hoping it won’t happen is not a sustainable plan – certainly not for the communities that have already experienced an extreme weather event or those that are forecast to do so in the near future.

This is just one example. Important trends to keep an eye on range from the macro level (increasing globalisation and migration) all the way through national and regional labour markets, urban planning, and our changing demography and family structures. How can education support our ageing populations – currently one of the major demographic preoccupations for most OECD governments – to stay active and healthy well past retirement? Will cities keep growing at increasing speeds, or will we continue to see the decline of mid-size cities, such as Detroit (USA) and Busan (Korea)? What about new technologies in the classroom, will they change the way we teach and learn? Perhaps even our concept of what a classroom is?

In September, we plan to hold a second workshop in order to discuss how the trends we have identified might interact with education in the short and medium term. Stay tuned to find out how that goes, and to get a sneak peek between the covers of the next Trends Shaping Education volume, due out in January next year.

Useful links

OECD work on innovation in education

Better Plays for Better Lives: Love’s Labour’s Lost

O this learning, what a thing it is!
O this learning, what a thing it is!

Today we publish the next article of a summer series in which Kimberley Botwright of the OECD Public Affairs and Communications Directorate looks at OECD work through a Shakespearean lens.

Last week, we spoke about the importance of skills and education for tackling youth unemployment. Love’s Labour’s Lost offers some useful pointers in this area too. The play begins with Ferdinand, the King of Navarre, encouraging his three companions to join his “little academe:”

“You three, Berowne, Dumaine and Longaville,
Have sworn for three years’ term to live with me,
My fellow-scholars, and to keep those statutes
That are recorded in this schedule here.”

Naturally, one of the companions, Berowne, protests. He wants to know what the point of all this fastidious studying is: “What is the end of study, let me know?” Doubtless, you may have felt the same way at some point in your educational career. So you’ll be pleased to know that the OECD Skills Strategy emphasises that all that effort wasn’t wasted and skills are the “global currency” of the 21st century.

But it is important to develop the right skills, least we cry out like the tiresome schoolmaster of the play, Holofernes, “O thou monster ignorance, how deformed does thou look!” He is speaking about a character named Dull, who “hath never fed of the dainties that are bred in a book. He hath not eat paper, as it were. He hath not drunk ink.”

The OECD’s Programme for International Student Assessment (PISA) can help us test the standard of reading, mathematical and scientific skills taught in schools around world by measuring the competencies of 15-year-olds. And when some 25% of firms in OECD countries are concerned about the availability of adequately trained workers, it is also important to establish an education system that gathers intelligence on the demand for future skills, so that what is taught is relevant.

Holofernes actually turns out to be the dullest person in the play, with his outdated expressions rendering him incomprehensible (and amusing). As Berowne says “So study ever more is overshot. / While it doth study to have what it would, / It doth forget to do the thing it should.”

Berowne also complains that the King is too old to pursue further learning, “So you, to study now is too late.” The double-irony of this line is that there is much the companions still need to learn, and not all of it is to be found in books – “learning that occurs outside the formal learning system” as the OECD’s Education Directorate says.

Understanding the level and distribution of skills in adult populations is the key to our modern economies, because as well as economic growth, skills affect social trust, political engagement, and health. The OECD’s Programme for the International Assessment of Adult Competencies (PIAAC) will publish data and analysis on adult learning in October 2013. The study will also highlight international patterns on adult learning, which can then be used to remove barriers to investing in further skills-development.

This is important when, depending on the country, between a third and two-thirds of the adult population lack the minimum core skills necessary to engage in further learning and function in modern economies. With rising long-term unemployment among migrants, particularly in the EU, policy measures such as language and professional training, as well as a focus on youth migrants, can make a real difference.

Once skills are developed, ensuring skills supply to the labour market is the next step. By Act II of the play, the Princess of France and her three ladies arrive in Navarre on a diplomatic mission. Instead of offering the appropriate welcome to his court, the King bids the Princess to camp in a field. We warned you that there was a lot he still needed to learn, although he may simply have forgotten courtly manners he learned as a boy but never practised. Unused skills atrophy over time, making it more difficult for people who have been out of the workforce to get back in.

Participation rates can be improved by providing affordable childcare services, as well as reforming tax systems that make work economically unattractive. Employers, trade unions, and government should work together to design more flexible working conditions, in order to make the most of a talent pool that includes people with care obligations or individuals with disabilities. A recent OECD paper notes that women’s average earnings from self-employment are up to 60% lower than men’s, citing obstacles such as cultural norms, stereotypes, time shortages and the composition of their professional network.

Finally, ensuring good skills use is also necessary, by supporting employers to make better use of employees’ skills, helping the young gain a foothold in the labour market and fostering entrepreneurship. As the Princess notes, “We are wise girls.” but the King and his companions, for all their love-sonnets and wit, fail to impress her and her ladies. Berowne comments, “Here stand I lady, dart thy skill at me” and concedes, “O, never will I trust to speeches penned, / Nor to the motion of a school boy’s tongue.”

This is ultimately a play that interrogates definitions of learning. The men eventually learn the importance of soft-skills. The Princess initially flatters the King; “I am too sudden-bold: / To teach a teacher ill beseemeth me,” but by the end, it is the King who begs the Princess, “Teach us, sweet madam, for our rude transgression some fair excuse.”

Interrogating what skills we want for today, for tomorrow, and how we are going to go about teaching and harnessing those skills also requires definition and redefinition, particularly in a fast-moving world; “Education is increasingly expected to develop new ways of thinking, involving creativity, critical thinking, problem-solving and decision-making; new ways of working, including communication and collaboration; new tools for working, including the capacity to recognise and exploit the potential of new technologies; and, the capacity to live in a complex world as active and responsible citizens.”

Alternatively, we could eat paper and drink ink.

Useful links

OECD work on skills

OECD educationtoday blog

OECD Insights Human Capital by Brian Keeley

 

Art for Art’s Sake? A gift to philanthropists and policymakers

Art for Art's SakeToday’s post is by Moy Eng, Senior Advisor and former Executive Director at the Community School of Music and Arts

Art for Art’s Sake? The Impact of Arts Education is a gift. Whether one is an artist, educator, policy maker, or philanthropic organization, it offers a comprehensive, cogent review of research studies, and identifies both evidence and gaps in our knowledge.  It examines the question of whether arts education helps to develop attributes for the workforce in innovation-directed economies, and lays out the next steps for potential research.  Perhaps most importantly, the authors remind us that the primary justification of arts education should be in the intrinsic value of the arts and the important habits of mind that they promote.

This study tempers what is at times a highly charged topic. When the question of public subsidy for arts education and its impact arises, assertions about the arts’ role in developing creative, innovative, and more empathetic schoolchildren emerge. Not unlike a heightened interest in the role of arts in economic and community development in the 1980’s and early 1990’s in New York City.  Arts advocates would assert its powerful impact on economic development and cite studies regarding its leverage ratios, for every dollar spent on a ticket to an arts event attracted three other dollars. As the issue became more popular and more studies were commissioned, the “artistic dividend” appeared to notably increase and one began to question the genuine leveraging potential and methodology of the economic studies.

The authors of the OECD study look methodically for evidence, and at best a causal relationship, that illustrates the impacts of arts education for schoolchildren.  A second prong of the authors’ scrutiny is the question of what, if any, benefits formal arts learning brings to other domains such as mathematics, language, the sciences and social studies. As befits these three respected researchers, especially Ellen Winner  – whose work at Harvard University’s Project Zero I’m familiar with -, their collective eye is rigorous and measured in its assessment, laying out the facts and identifying studies which have or have not demonstrated plausible evidence on the question(s) researched.  For example:

Music education strengthens IQ (intelligence quotient), academic performance, word decoding and phonological skills and there is preliminary evidence that music education might facilitate foreign language learning. While there are a number of studies showing a positive impact of music education on visual- spatial reasoning, the sole longitudinal study on this question detected no persistent influence after three years of music, which suggests the need for caution. There is also no evidence that music education has any causal impact on mathematics scores, even though mathematicians may be attracted to music.” Pg 18

As illustrated above, the reader will discover, as I did, that there is strong evidence that arts education has a positive impact on the development of certain selected skills. Yet, there is far too little research on the impact of arts education on outcomes affecting creativity, problem solving, and behavioral and social attributes, such as persistence and motivation.

A second notable aspect is the breadth of the review.  I admire the fact that the research team assessed more than 200 studies covering a sixty-year period (1950-2013). They also incorporated the engagement of and feedback from selected OECD staff members and the Center for Educational Research and Innovation (CERI) governing board, as well as attendees at the OECD-France workshop, “Innovation for Education: the Role of Arts and STEM Education”, held in Paris in 2011.

The authors’ research recommendations are a clear call to strengthen our foundational knowledge of the habits of mind that each discipline may engender and their impact on learning outcomes, research on those habits of mind that may transfer to other subjects, and the methodological frameworks through which future research is conducted.

For this long-time “soloist in the choir” on the importance of arts education, I think that Art for Art’s Sake? The Impact of Arts Education is an exceptional new resource.  For my policymaker and philanthropic colleagues, I strongly suggest that you read and take note. There appears to be an opportunity for us to collaborate and invest in long overdue and seminal research studies in arts education.

PODCAST

Report co-author Stéphan Vincent-Lancrin talks about Art for Art’s Sake? in French to Anne-Lise Prigent

Report co-author Stéphan Vincent-Lancrin talks about Art for Art’s Sake? in English to Patrick Love

Useful Links

Arts education in innovation-driven societies by report co-authors Stéphan Vincent-Lancrin and Ellen Winner on the educationtoday blog

Does education still pay?

Click to download the report

Today’s post is from Dr Neil Lee, senior economist at The Work Foundation.

Youth unemployment is reaching crisis point in many countries. The financial collapse of 2008/9 and the weakness of the subsequent recovery have made it harder for young people to make the first step into the labour market. Unemployment rates have risen across the OECD. Some in the media have claimed that there is a crisis in graduate unemployment, and that education may not be worth the cost. And a cursory glance at the statistics would seem to support this point of view: across the OECD, unemployment rates have increased for those with higher education from only 3.3% to 4.7% between 2008 and 2010.

Yet if the labour market is difficult for those with higher education, it is far worse for those without. As the OECD’s Education at a Glance report – released last week – makes clear, education is more valuable than ever. For those without an upper secondary education, unemployment across the OECD has increased from 8.8% to 12.5%. Education matters, and increasingly so.

Given that the supply of highly educated workers has increased hugely over the past 30 years, why hasn’t the demand for educated workers declined? One answer is structural change in the economy. As we move to an economy based on knowledge rather than physical production, the demand for workers who can create, use and disseminate knowledge has increased. The economic crisis accelerated structural change, with weak industries closing and marginal jobs reduced.

Alongside this is the related issue of technological change. Skilled workers who can use and – to a lesser extent – produce technology are increasingly in demand. And globalization, or the increase in trade between countries, is also a partial explanation, meaning that low-skilled workers in advanced economies have fewer job opportunities – but that workers in other parts of the world often have more.

Young people without education have been caught between these trends. And where low-skilled employment has increased, it has been in low-waged service work. While manufacturing has declined as a source of employment, services have become more important, with the result that even the skill requirements for entry level work has changed. Large plant manufacturing gave young people opportunities to ‘learn on the job’, meaning that it mattered less if young people lacked the soft skills to work – they could enter the labour market and develop them.

Yet in service based economies, young people without soft skills are caught in a “Catch 22”: it is hard to develop soft skills without experience of work, but they cannot find employment without soft skills. In many countries, including the UK, these two processes have led to long-term increases in youth unemployment, particularly for those with less education.

So what are the answers?

Firstly, the public debate needs to abandon the myth that there are too many graduates, or that education is not worth it. The facts directly contradict this and it is vital that neither policymakers nor young people themselves begin to believe it.

Secondly, it is important to provide young people with a ‘soft landing’ into the labour market – the opportunity to develop workplace skills alongside formal education. Countries with low levels of youth unemployment, such as Germany or the Netherlands, are often good at this. In the Netherlands, many young people work part-time whilst still in education. This allows them to develop workplace skills in the areas of teamwork, punctuality and customer service without getting caught in a ‘Catch-22’.

Thirdly, we need continued efforts to ensure young people from any background have the chance to gain higher education. The OECD’s Education at a Glance report contains some startling findings on differences in attainment for young people of different backgrounds. On average across the OECD, young people whose families have low levels of education are less than half as likely to be in higher education compared to the average.

However, some countries perform better on this measure than others – chances are better for a young person from Australia than the UK. And one of the key drivers of this is attainment while at school: countries that are better at educating children in school fare better when it comes to translating this into higher education.

Youth unemployment is a major challenge across the OECD, with rates especially high for those with fewer qualifications. Governments need to respond across a number of fronts, but at the heart of the problem is education. Increasing educational attainment, particularly amongst disadvantaged groups, will be the key to addressing the long-term challenge of youth unemployment.

Useful links

OECD work on employment

OECD work on education