A book by World Economic Forum founder Klaus Schwab on the fourth industrial revolution has raised the question of how technological change, job creation, income inequality and education are related. Forty years ago, Jan Tinbergen described this relationship as a race between the ability of countries to increase their investment in education and the speed of technological change. The wave of change we are experiencing today is no different.
Those nations that invest in quality education and inclusive skills development are likely to manage the impact of change better than those that don’t, which risk losing the race and facing the consequences of structural unemployment and rising income inequality.
However, while investment in skills and education is a necessary condition for managing technological disruption, it is not enough. What also matters is the use of skills – putting human talent to good use, most importantly at the workplace.
The failure of industrialized countries to recognize this is, I believe, one of the reasons why we are starting to see a “productivity paradox”. This is where increasing technological potential is accompanied by a decrease or stagnation in productivity, rather than economic growth and higher living standards.
Some light has been thrown on this dilemma in the latest OECD Employment Outlook. In a chapter studying the use of skills, OECD economists assess supply and demand for skills. In particular, they look at how effectively generic skills such as numeracy and literacy are being used in the workplace.
The research draws on data from the Survey of Adult Skills (PIAAC) and arrives at some significant conclusions – notably that up to one-quarter of workers in OECD countries are overqualified for the job they are doing.
This finding casts doubt on the claim by businesses that they are unable to find the right workers for the vacancies they offer – and that education systems are to blame for the skills mismatch.
What’s really causing the skills gap?
So, why aren’t employers making the most of their workers’ skills? The OECD offers two reasons.
1. There are very few workplaces that require their employees to be highly skilled. This may be due to too little labour-market regulation, rather than too much. After all, collective bargaining, trade union representation and robust minimum wages may encourage employers to improve the use of workers’ skills.
Pressure to raise wages and improve working conditions requires increased productivity, thus pushes employers to make better use of the skills of their workforce. This is the logic behind the model of labour markets prevalent in Nordic countries.
2. Technological change may be amplifying job polarization, pushing skilled workers into lower-income, lower-skilled jobs.
More trade unions
To prevent such a scenario from getting worse, we need not only new skills policies and, but also labour-market regulation. We also need fair remuneration and social dialogue on the use of skills. Higher minimum wages (especially when these are set a central level), more trade unions, universal social protection – these all have a positive effect on the use of skills, as this table of econometric results shows.
Ultimately, it is the employer who has the responsibility over how the workplace is organized. Internal devaluation, which offers employers more say over wages and working conditions, has become the received wisdom. This is why so-called “counterweights”, such as unions and collective bargaining, are so necessary. They help to move us away from a situation of low wages and low productivity.
The Trade Union Advisory Committee (TUAC) has surveyed trade unions in several OECD countries to see how they support skills development, skills use and work organization. Traditional approaches, such as apprenticeships, are being complemented by a range of union activities which play an important role in extending and strengthening vocational education and training in the workplace.
The survey's main findings are:
· Unions are increasingly involved in skills, working with employers to improve the quality, quantity and equity of training.
· This reflects the growing importance of skills at work and growing demand from workers for a voice in their own training.
· There is strong evidence that union involvement improves the impact and sustainability of skills systems.
· Such involvement is most effective when unions are supported by governments, providers and employers.
One new and innovative approach is Union-learn in the United Kingdom. The agency receives government funding to help more than 200,000 workers acquire new skills every year. The findings of the TUAC study, as well as other surveys by the International Labour Organization, show that when unions get involved in skills strategies, it can make a crucial difference – not only in helping employers make the best use of skills, but by including far more workers in high-road strategies.
As the working world enters a new digital era, it’s time for employers to re-think their relations with unions in a positive way, and avoid the errors of the past. Governments, too, should work to strengthen rather than weaken labour market institutions and set the standards for the jobs of the future, now.
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You can find more blogs in the Skills for Your Future series here