Strategic policy approach to skills (1)

The importance of skills -- either hard skills, learned through the operation of equipment on the job, or soft skills, such as teamwork, communication and negotiation, acquired through real-world experience -- goes beyond their role in determining wages and salaries and economic growth rates. Skills are essential for individuals’ better health as well as their greater civic involvement and political participation. They also help reduce income inequality, which is driven largely by the wage gap between high-skilled and low-skilled work, and promote social mobility.

During the last 50 years, as economies changed structurally and new technologies rapidly replaced old ones, the demand for non-routine cognitive and interpersonal skills has risen, but the demand for routine cognitive and trade skills to perform physically repetitive labor tasks has fallen. Changes in the supply of skills have lagged behind the changes in demand, and one of the critical issues facing us today is matching the right skills with the available jobs. In Europe, on average, 30 percent of workers report that they have the skills to perform more complex tasks, while 13 percent report that they lack the skills required by their jobs. Even at the nadir of the global crisis in 2009, more than 40 percent of employers in Australia, Japan, Mexico and the US reported that they could not find the workers with the required skills. In 2010, close to 50 percent of Turkish employers reported recruitment difficulties due to skills shortages.

The Organization for Economic Cooperation and Development (OECD) has developed a Skills Strategy to help countries assess and internationally benchmark their national skills systems toward developing policies to transform higher skills into better jobs, faster economic growth and greater social inclusion. This strategy, presented in the 114-page report “Better Skills, Better Jobs, Better Lives: A Strategic Approach to Skills Policies,” was released on May 21 and endorsed by the OECD Ministerial Council, which met in Paris on May 23-24 under the chairmanship of Ali Babacan, Turkey’s deputy prime minister. The strategy, which uses “skill” and “competence” concepts interchangeably, focuses beyond the traditional measures of skills, such as the years of formal education and the types of qualification or diploma attained, to consider the skills that can be acquired, used and maintained but also lost over a lifetime. The “Better Skills, Better Jobs, Better Lives” report will be followed, in October 2013, by the OECD Skills Outlook, comprising new data from the most comprehensive Adult Skills Survey ever conducted under the OECD’s Program for the International Assessment of Adult Competencies, covering 5,000 people aged 16 to 65 in 26 participating countries (which do not include Turkey), to be published regularly with updated data and analysis.

The OECD Skills Strategy urges countries to adopt a systematic and comprehensive skills policy approach to: (1) help to prioritize investment of scarce resources; (2) strengthen the case for lifelong learning; (3) foster a whole-of-government approach; (4) combine short- and long-term considerations; (5) align different levels of government; (6) include all relevant stakeholders; and (7) provide a global perspective. The “Better Skills, Better Jobs, Better Lives” report’s three major chapters, titled “Developing Relevant Skills,” “Activating Skills Supply” and “Putting Skills to Effective Use,” are presented as inter-related “Policy Levers.”

The first policy lever is aimed at ensuring, through targeted education and training, that the supply of skills is adequate to meet the current and emerging demand for skills in terms of both quantity and quality. The second policy lever is aimed at reintegrating inactive skilled workers into the labor force by offering them financial incentives and removing demand-side non-financial barriers to their employment. The third policy lever is aimed at ensuring that the available skills are used effectively, especially through matching the right skills with the available jobs, so that no investment in human capital is wasted, keeping in mind that unused skills tend to atrophy while new skills are often developed informally through work experience. Fostering entrepreneurship can also create new jobs and raise the demand for skills.

The gist of the OECD report is that developing and using higher skills strategically is in the long-run much less costly than incurring the costs of poor health, low income, high unemployment and social exclusion, all of which stem from lower skills. Next week I will focus on the skills issues facing Turkey.