How to surf the new wave of globalisation

by Andreas Schleicher
Director, OECD Directorate for Education and Skills

Globalisation is connecting people, cities, countries and continents, bringing together a majority of the world’s population in ways that vastly increase our individual and collective potential, and creating an integrated market in products and services. One in three jobs in the business sector now depends on demand in other countries. In fact, a single product is often produced by workers in different parts of the world along the so-called Global Value Chain. Global value chains give small companies and countries unprecedented opportunities to reach global markets and create new jobs.

But the same forces have made the world more volatile, more complex and more uncertain. The rolling processes of outsourcing and the hollowing out of jobs, particularly for routine tasks, have radically altered the nature of work. For those with the advantage of the right knowledge and skills, this is liberating and exciting. In India and South East Asia, for example, online providers have picked up the outsourced functions of corporate and public enterprises, while in America and Europe, 20-something entrepreneurs are using disruptive Internet models to invent new services. However, for those who are insufficiently prepared, it can mean unemployment or the scourge of vulnerable and insecure work: zero-hour contracts without benefits, insurance, pension or prospects.

So there is a potential weak link in global value chains: the workers who don’t have the right cognitive, social or emotional skills to contribute to – and benefit from – it. The 2017 OECD Skills Outlook shows there are over 200 million workers in OECD countries who don’t even have the most basic foundation skills: for example, they don’t read as well as a 10-year-old child is expected to read. This matters a lot. In all countries more educated workers enjoy higher job quality. But while better integration with global value chains has resulted in significant increases in productivity, it has also widened the gap in job quality between those with better and worse skills.

To ensure that no one is left behind, countries need to equip all workers with a mix of skills and qualifications that are relevant and understood around the world. These skills are needed to realise the productivity gains offered by global value chains and ensure that these gains transfer to a broad range of firms, including small ones, and thereby benefit the whole economy. They can protect workers against the potential negative impacts of global value chains, including job losses and lower job quality. And they are crucial for countries that want to specialise in the most technologically advanced manufacturing industries and in complex business services.

Reaching the technology frontiers and specialising in technologically sophisticated industries is what many countries aspire to these days, because it is those industries that largely drive innovation, higher productivity and job creation. The Skills Outlook analyses how successful these efforts are, and what individuals, companies and nations can do to advance their position in global value chains. Countries like Estonia, Japan, Korea and New Zealand already have the talent pool to capitalise on a wide spectrum of specialisation opportunities across the different technologically advanced sectors. Austria, the Netherlands, Norway, the Slovak Republic and Slovenia are currently better positioned to thrive in advanced service sectors, while the skills of Canadians, Chileans and Finns are better aligned with high-end manufacturing. Australia, Ireland, the United Kingdom and the United States still have a comparative advantage in complex business services, but they need to watch out because their talent pool is no longer well-aligned with further specialisation in either advanced services or manufacturing. In fact, in Australia, Canada, Norway and the United Kingdom the talent pool no longer provides the skills several high-tech industries demand; as a result, the comparative advantage in these industries has actually deteriorated.

So education and skills policies come into play, but migration, labour market and tax policies also need to be revisited so that they too are aligned with countries’ ambitions to advance along global value chains. It is important to bear in mind that countries’ comparative advantages always emerge from the interaction between skills and industry requirements – which underlines the importance of connecting the world of learning with the world of work. That can include vocational education and training with a strong work-based learning component, local initiatives to link education institutions to the private sector, and specific policies to foster collaboration between the universities and research institutions and the private sector. Management policies, too, can be a source of comparative advantage in global value chains, and entrepreneurship education can foster awareness and knowledge of best practices for employers and workers. It is also important to design employment-protection legislation that provides both flexibility to firms and security to workers.

And don’t expect workers to accept losing their jobs through outsourcing or automation if they don’t feel prepared to get or create new ones. Countries need to seek a better balance between short-term training and labour market programmes for displaced workers, and long-term policies that facilitate lifelong development of the knowledge and skills for tomorrow’s world. Removing barriers to further skills development means working on several fronts: whether it is improving the tax system to provide stronger learning incentives, easing access to formal education for adults, or working with trade partners to enhance flexibility in the sharing of time between work and training.

Countries also need to work together to define workers’ skills so that employers around the world understand what diplomas and degrees really mean, and become better at recognising skills acquired informally or abroad. Recognising skills acquired abroad makes it easier for foreign students and workers to contribute to research, innovation and workplace performance; recognising skills acquired informally helps workers exposed to the risks of offshoring to gain further qualifications and adapt their careers to changing needs. This is also about ensuring greater consistency between the degrees awarded and the skills actually acquired. As the report shows, the issue isn’t just that, in many countries, there is a significant dispersion of skills among workers with similar degrees; the data also show that Japanese high school graduates have stronger literacy and numeracy skills than Italian or Spanish university graduates.

Last but not least, global value chains make it much harder for countries to recoup their investment in education. This suggests that countries need to collaborate more in the design of education programmes and perhaps seek financing arrangements that reflect the distribution and benefits of costs across countries.

None of this is easy, none of it will be done overnight. But with forward-looking policies and a shared understanding of what workers’ qualifications signify, countries can both improve their international competitiveness and help more of their citizens benefit from this wave of globalisation. And the alternative is clear – just visit Albania or any other of the countries that have excluded themselves for half a century from international collaboration and global value chains.

OECD Skills Outlook 2017: Skills and Global Value Chains 
OECD National Skills Strategy
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