Innovating on skills

It is well known that youth unemployment in some parts of Europe has hit alarming levels. From about 15 per cent in 2007, it went up to 22 per cent in 2012. The situation is grave.

Interestingly, it appears that the primary causes of this distressing trend cannot be blamed on the economic crisis alone. That is only part of the story.

In 2012, youth unemployment rates varied from less than 10 per cent in countries such as Austria, Germany, Sweden, Denmark, and the Netherlands, to close to 50 per cent in Greece, Italy, Portugal and Spain. So, what is the reason for this huge difference? The answer is: education.

Empirical analysis across Europe reveals that education and skills development play a key role preparing young people for the labour market. In general, countries that have a strong vocational education sector show lower youth unemployment rates than countries with a predominantly general education system. In countries with a strong apprenticeship system such as in Germany, Austria or the Netherlands, skilled young people make a smooth transition from school to work.

One reason is that apprenticeship systems are resourceful in turning over helpful information about the apprentice’s skills and aptitude to employers. The collaboration between business and education makes sure that vocational education turns imparts skills that beautifully match employers’ needs.

Right Skills In flourishing European economies, it is all about learning the right skills. In an environment where technology is quickly displacing medium-skilled workers in manufacturing and back offices, the employment share of routine task jobs is rapidly diminishing. Jobs for high-skilled as well as low-skilled workers involving non-routine tasks have been increasing.

Another important aspect in some highly successful and innovative European economies is the expenditure on education — training and lifelong learning — which is well above the world average for developed countries. Institutions of higher education and research enjoy great autonomy in education, research and innovation, recruitment methods, and to draw on alternative sources of funding.

Most important, education and training curricula focus on equipping people with the capacity to learn and develop additional, unfettered competency such as decisive thinking, problem solving, innovation and inventiveness, teamwork, and intercultural and communication skills.

Research and Innovation Some European countries also have the highest world share of R&D spending as percentage of GDP. This is backed up by a complex set-up involving all relevant stakeholders, such as industry, regional and local authorities, parliaments and citizens. The object is to trigger off an innovation culture and build mutual trust between science and society.

Funding support to research institutions is tailored to the needs of industry, predominantly SMEs. The emphasis is placed on output rather than on input and control. Bureaucracy is kept to a minimum, selection criteria are clearcut and time from contract to actual flow of funds is as short as possible. Funding schemes are regularly evaluated and benchmarked against comparable schemes in other countries. Specific support is often available to young, innovative companies to help them commercialise ideas quickly. Innovative funding like public-private partnerships and huge tax incentives are often offered by the State.

In a rapidly changing global economy, Europe is building on many of its strengths and decisively dealing with weaknesses.

(The author is former Europe Director, CII, and lives in Cologne, Germany.)

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