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									             Developing Workforce Skills
             An International Perspective



                   A report for the Norfolk Charitable Trust


                                   February 2007




Miles Beale
Policy adviser, Regional, Urban and Economic Policy
Department of Communities and Local Government

Paul Brush
Head of Entrepreneurship Development
Invest Northern Ireland

David Campbell
Economic adviser
Department of Trade and Industry

Lee Hopley
Senior Economist
EEF
Acknowledgements

We would like to thank the staff of Invest Northern Ireland‟s overseas offices in
Shanghai, Taipei and Tokyo and specifically to Vicki Chiu who provided invaluable
support in compiling the programme of meetings and much more.

Also thanks to all those who organised meetings and round table discussions thereby
enabling us to make the most efficient use of the limited time available at each
destination.

The tour and report would not have been possible without those who gave their time
to meet us and give us the benefit of their insight (more than 150 individuals in total).

Finally, we are very grateful to the Norfolk Charitable Trust for providing such a
unique opportunity and to Laura Foster for keeping us organised and focused on the
task. Without her we would probably never have left the UK.




                                            1
                         CHAPTER 1 - INTRODUCTION


Origin of the study

The continuing emergence of many countries in Asia and South America into the
global economy has been the subject of considerable debate in the UK and other
developed nations. In terms of gross domestic product, China is now the fourth largest
economy in the world and is considered by many analysts to have the potential to
catch up with, and even overtake, the US within the next thirty years.

A simple view often expressed is that the rapid development of these economies poses
a threat to existing products and jobs within developed economies. The 2005 Norfolk
Fellowship Study Tour focused on trying to understand in more depth the effect that
changes in the Chinese and Indian economies may have on the UK and Europe. The
report presented the opportunities and challenges that face the UK as a result of
globalisation. Drawing on the theory of international trade, the report outlines the
potential benefits to all countries within the global economy resulting from an
expansion in trade with China and India.

The 2005 report, however, did highlight the impact that globalisation may have for
the distribution of job opportunities in countries like the UK. China and India possess
vast stocks of low skilled workers who are able to perform routine jobs at a low wage.
In the long run it may become more difficult to sustain UK employment in these
routine products and services that can be traded internationally. Therefore the
competitive advantage can only be retained by concentrating on higher quality and
innovative products, which are typically thought of as requiring higher levels of skill.
Both China and India have had some success too in high tech sectors and produce a
large number of graduates particularly in science, engineering and technology. There
are some questions though concerning the quality of these graduates and the ability of
organisations to manage skills and innovation which constrains these economies from
competing in the high value added sectors.

It is more likely to be in medium skilled manufacturing and services where China and
India have the greatest potential for growth and thus present the most immediate
challenge to countries like the UK. Some authors have argued that globalisation may
lead to a polarisation of the workforce with many low skilled jobs remaining (as a
result of routine goods and services that are not traded internationally but which only
serve local or national markets) alongside high skilled jobs.

One of the themes that emerged from the 2005 report centred on how countries can
prepare their workforce with the skills needed given the way that globalisation is
affecting the types of job that will remain and the tasks that will be performed by
individuals in these jobs. This in turn leads to questions surrounding how best to
prepare individuals for work, the role of educational institutions and employers, the
type of skills that should be developed, and how to create sufficient flexibility to
respond to the changing environment that accompanies globalisation. These questions
formed the starting point for the 2006 study.



                                           2
Developing the study questions and approach

From the start our approach focused on policies and practices to promote skills
development in other countries in an attempt to assess what works best and whether
there are any lessons that could be learned for UK policy. Much has already been
written about the rise of China and India and the corresponding impact this may have
on the future competitiveness of other nations. Rather than presenting another study
of these two economies, we took much of this discussion and the work presented in
the 2005 report as a starting point.

In selecting the countries to visit we considered a number of factors. In Europe, two
of the most obvious choices were Finland and Denmark which are both in the top five
of the World Economic Forum‟s Global Competitiveness rankings and are frequently
highlighted because of their strong education, technology and innovation
performance. For the Asia leg of the tour a brief visit to Shanghai was made as a way
of providing some context to the study and to experience the pace of change. Given
their relative trading proximity to China, meetings were also held in Singapore, Taipei
and Tokyo. Singapore is often used as a comparator for skills and for case study work
with it being a small city-state with a diverse industrial mix and a historic reliance on
multi national corporations.

Within each country meetings were held with government departments, employers
and research institutes (see annex for the full list). Throughout the study we were keen
to move away from thinking of policy responses at a national level and focus where
possible on activities being undertaken at a local, city or regional level. This naturally
proved easier to explore in the US where the distinction between federal and state
level initiatives are often very apparent. We looked at a specific economic
development plan for San Francisco – an unbalanced city economy with little
manufacturing and with around 50% of the workforce holding a four-year university
degree. Boston is an example of an economy with very strong centres of academic
excellence that has led to many successful business ventures. Washington DC also has
a highly educated workforce with almost half being employed in the knowledge sector
and one of the smallest service sectors in the US.

City                          Dates
Helsinki                      14 – 16 August
Copenhagen                    17 – 18 August
Shanghai                      5 – 6 September
Singapore                     7 – 10 September
Taipei                        11 – 13 September
Tokyo                         14 – 20 September
San Francisco                 21 – 26 September
Ottawa                        27 – 30 September
Boston                        1 – 2 October
Washington DC                 3 – 7 October
Minneapolis                   8 – 11 October




                                            3
It became clear at an early stage within each city that there were often some very
specific factors that have contributed to success. The existence of these factors has to
always be remembered when trying to determine if there are many lessons relating to
skills policy that could be applied to the UK. One theme that emerged throughout was
how being small can be advantageous in terms of coordinating all players within the
economy. This, together with the political landscape, was particularly apparent in
Singapore. Late industrialisation, a small population and the emergence of Nokia
were also given as reasons for success in Finland. In Ottawa, close proximity to the
US border and an entrepreneurial culture that could be traced back to the Second
World War were presented to us as important parts of the city‟s economy. Clearly,
many of these factors can never be duplicated in a UK setting, making it more
important to identify successful policies that could be imported to another country.

It also became obvious that most of the countries we visited faced many similar
challenges. Although our study started by thinking of how countries are attempting to
develop the skills of their workforce to remain competitive in an increasingly
globalised economy, there were other common factors that we explored as the study
progressed. Changing demographics is influencing both the size and composition of
the workforce. This was perhaps highlighted most strongly in Japan where there has
been a decrease in the number of young workers who have also not had sufficient
time to learn on-the-job skills from their older colleagues. Expansion of the workforce
through the employment of older workers, women and those with disabilities then
becomes more important. For many of these groups, schemes need to be adopted to
improve their existing skills and make them more attractive to employers.

One of the original intentions of the study was to focus primarily on ways of
improving the skills of individuals already in the workforce. Upskilling and retraining
existing workers is often seen as providing a more flexible approach to meeting skill
needs in the short and medium term. In an economy facing increased international
competition there is often a need for employers to require their existing workforce to
respond to changing conditions in their product markets. Relying on freshly skilled
workers to emerge from the education system and enter the labour market is more of a
long term solution. Even recent graduates from the education system, however, are
likely to require continuous lifelong learning to maintain their stock of skills and
employability. Although we initially tried to focus more on learning taking place at
work, almost all of the organisations we met stressed the importance of having solid
compulsory, further and higher education that prepares individuals for work.

In the second chapter of this report, we present a discussion of the primary role that
government plays in developing a skilled workforce. Given the importance that most
of the people we visited attached to compulsory education, this is the natural starting
point. Government influence also clearly extends to post compulsory education and
the chapter moves on to discuss the pathways open to individuals as they progress into
this stage of their education. Finally, faced with significant demographic changes,
many governments are engaged in encouraging more individuals to participate in
education, training and the labour market.

Government involvement in human capital development is clearly not restricted to the
education system. Support is also generally available to both employers and
individuals to raise skills. Chapter 3 looks more closely at the role employers have in


                                           4
developing workforce skills through their own investment and engagement with local
training providers. Employers provide considerable assessment on the type of skills
demanded within the labour market which in some cases influences curriculum design
within the education system. The chapter also discusses policy options available to
employers, ranging from a tax credit in Japan to a levy in California which is used to
support the development of high skills.

Chapter 4 concentrates on the role that individuals have to play in developing their
own skills. One of the common themes emerging across countries involved attempting
to outline the responsibilities of government, employers and individuals. The UK
Skills Strategy is based on a shared responsibility across these parties and Denmark
has adopted a similar style strategy to respond to the challenges of globalisation. In
Japan the traditional view has been that it is the responsibility of employers to train
their workers and that hiring is based more on an individual‟s potential to develop
rather than the skills they currently hold. However, more responsibility is increasingly
being placed on individuals to encourage them to train and improve their abilities.
Japan, like may other countries, has a significant proportion of young people not
engaged in employment, education or training. There appears to be quite a strong role
for both government and individuals to improve participation amongst this group,
particularly where the size of younger cohorts the labour market can draw on is
declining.

Although much attention is given to the stock of qualifications and skills held by the
workforce, there is growing evidence that the way these skills are used within an
organisation is important to economic performance. The ability of an individual to
manage and lead others in an organisation is in itself a skill and one that should be
developed. Despite being widely recognised as an important determinant of
performance there are generally less initiatives in place to develop management and
leadership compared to other generic skills such as team working, communication and
ICT. Closely related to management and leadership skills are the skills related to
innovation, entrepreneurship, creativity and commercialisation. The final part of
chapter 4 discusses some of the activities undertaken within countries to develop these
skills which were generally felt to be important for future competitiveness.

The core chapters of this report, therefore, present some of the key observations from
the tour under the headings of Government, employers and individuals. Clearly there
is the potential for considerable overlap and many of the policies and initiatives we
heard about could be placed under more than one heading, but we have placed
material according to where we think the main focus is. Finally, chapter 5 presents
some of the main conclusions and observations we took away from the tour.

Before moving on to the detail of these chapters, we present some further background
on the skills landscape in the UK and other countries as a way of introducing some of
the key issues and how they are relevant to each of the three main players.




                                           5
The importance of skills for Government, employers and individuals

Much of the recent policy focus on skills in the UK is derived from international
comparisons revealing that productivity, measured in terms of output produced per
worker, is lower in the UK than in some of its key economic rivals. Figure 1 presents
the most recent data for gross domestic product per hour worked, which is the
preferred measure relating to the amount of labour utilised within the economy. A
significant productivity gap of between 10 and 20% exists between the UK and
France, US and Germany. However, for two of the other countries visited as part of
the tour – Canada and Japan – the UK enjoys a productivity advantage.


                                            International Comparisons of Productivity 2005

                               140.0

                               120.0
   producitiviy index UK=100




                               100.0

                                80.0

                                60.0

                                40.0

                                20.0

                                 0.0
                                       Canada   France   Germany    Italy       Japan     UK       USA   G7

                                                          GDP per hour worked     GDP per worker

                                                               FIGURE 1


In order to raise productivity, the UK Government identifies five „drivers‟ of
productivity – investment, innovation, competition, skills and enterprise. For most of
these drivers there are strong theoretical reasons linking them directly and indirectly
to productivity gains, although the empirical evidence often struggles to observe these
relationships. Therefore the approach has been to look at a set of indicators relating to
each driver alongside productivity data.i

The most common data used when comparing qualifications across countries is
produced by the OECD.ii Figure 2 replicates the most recent data from 2004 which
establishes the commonly held view that the UK has a long-tail of people holding
only low level qualifications and ranks 18th on this measure. Almost one in three
people of working age in the UK only possess qualifications at a level associated with
the end of compulsory schooling. Finland, Denmark, Japan, Canada and the US all
appear to have a more highly educated stock of working age people.




                                                                     6
                 International Qualifications Profile, 2004 OECD
                                UK ranked18th/30
   100%
    90%
    80%
    70%
    60%
    50%
    40%
    30%
    20%
    10%
     0%




          Luxembour




            Portugal
             Canada


             Sweden
                Japan




              Poland
              Iceland
            Hungary

          Netherland




                 Spain
               Slovak




             Belgium
                Korea




               Ireland




                  Italy
              Greece
            Germany




                  New




               Turkey
              Finland
          Switzerland
                  USA
                Czech




              Austria




              France
              Norway




                    UK
            Australia




              Mexico
            Denmark




                   Below Upper Secondary   Upper Secondary   Tertiary


                                       FIGURE 2


The recently published independent review on UK skills by Lord Leitchiii also uses
this data to outline the need for raising the skills base. The review suggests new
targets be set for educational attainment by 2020. By this date, 90% of adults should
be educated to at least level 2 (the equivalent of five GCSEs at grades A*-C). The
current figure is 69%, which is approximately indicated by the low skills bar in the
chart above. In addition, the percentage of adults with level 4 (degree equivalent)
qualifications should increase from 29% (the high skills bar) to 40%.

Although many of the statistical comparisons made across countries focus on the
qualifications held by people (as in Figure 2), considerable attention is also given to
the mix of skills contained within these qualifications. Through learning both in
schooling and on-the-job, individuals develop skills such as literacy, numeracy, ICT
and problem solving. Qualifications provide one method for measuring the extent to
which individuals possess these skills. A common issue raised in the countries visited
related to how, despite gaining qualifications through the education system,
individuals were often deficient in certain skills relevant for the workplace.

As an example of this, in England the Skills for Life Survey of 2003 measured the
literacy and numeracy skills of working age individuals through a series of tests. It
estimated that 16% of the working age population lacked the basic level of literacy
skills to function at work and in society. In addition, 21% of people lacked the
numeracy skills to function at this level. Similar international surveys suggest that the
UK has a relatively poor record on literacy and numeracy, but concern was also
expressed in other countries. In Denmark, 20% of people completing basic schooling
do not have adequate literacy and in Canada, 40% of adults do not have the necessary
literacy, numeracy and ICT skills to participate in further training.

Despite holding qualifications, employers often argue that people leaving the
education system still do not have the skills to prepare them for work. Table 1


                                             7
presents some findings from a survey of employers in England where 31% of
employers who recruited 16 year old school leavers reported that they were poorly or
very poorly prepared for work. For 17-18 year old school/college leavers and
university graduates this proportion falls to 24% and 12% respectively. The types of
skills felt to be lacking were working experience, oral communication, commitment,
job-specific skills and practical experience.


Views of employers who recruited young people on work-preparedness

Preparedness for       16 year old school        17-18 year old        University/HE
work                              leavers        school/college      leavers to age 24
                                                        leavers
Very well prepared                   14%                   15%                    26%
Well prepared                        46%                   54%                    55%
Poorly prepared                      23%                   19%                    10%
Very poorly                           8%                    5%                     2%
prepared

Source: National Employers Skill Survey, 2005
                                    TABLE 1


Similar views were expressed in other countries. Research published by the US
National Association of Manufacturers found that 60% of employers felt that high
school graduates were poorly prepared for a typical entry level job. This contrasts to
two-year community college graduates, where only 20% of employers reported that
they were poorly prepared for employment. Overall there was a strong feeling that
public institutions were not doing a good job in preparing students for the workplace
with the key deficiencies being identified in the areas of reading and comprehension,
math and science, and basic employability skills.iv The lack of preparation in high
school has resource and cost implications for further study with 42% of community
college freshmen and 20% of freshmen in four-year institutions having to take some
remedial courses, often to gain the skills they should have acquired from high school.v

A similar debate occurred in Canada over whether the education system was
providing the appropriate skills for employment. After wide consultation, the
Employability Skills 2000+ profile identified the skills individuals needed „to enter,
stay in, and progress in the world of work – whether you work on your own or as part
of a team‟. This set out a broad range of generic skills under the headings of
Fundamental Skills, Personal Management Skills and Teamwork Skills.




                                            8
                           CHAPTER 2 - GOVERNMENT

This chapter considers the role of government in developing a skilled workforce that
can compete in a globally competitive market place. It concentrates primarily on the
education system - arguably its most direct lever for developing the knowledge and
skills of its current and, particularly, its future workforce. After considering both
compulsory and post compulsory education, the chapter goes on to consider
significant challenges for developed countries and their impact on workforce
development. This later section covers areas in which governments need to provide
the primary policy response. Government's continuing and complementary role in
workforce skills provision for those already in employment is covered in more depth
in the subsequent chapters of the report - on employers and individuals.


Context

By visiting a wide range of organisations in a number of countries, the tour provided
an opportunity to investigate which actors operated at which level and for which
functions. The variety we encountered was as true for government as for any other
actor. The roles of national, regional and local government is never the same in any
two countries. In the US compulsory education (often referred to as "schooling") is
historically important, politically divisive and - above all - an intensely local issue.
The Bush Administration's "No Child Left Behind" policy shows the government's
interest, but it also highlights the American federal government's lack of power to
influence delivery of education to its citizens. At State level a Governor's powers are
also limited. Decisions on compulsory education are devolved to the local level. This
is reflected in an administrative structure that boasts 30,000 school districts and a
funding system in which 5.7% of funding comes from the federal government. In
China by contrast, the educational tradition is very different. Education was never for
the masses, but was the preserve of the rich and the route to wealth and social
influence. Curricula was always decreed by central government and methods based
on reproduction and replication. All exams had a 60% pass mark, failure was frowned
upon and teachers were always right! This didactic and inflexible tradition has
crowded out local flexibility and innovation. It is also out of step with the soft skills
demanded of workers by their employers in today's global market place. This system,
however, has helped China to maintain a healthy respect for education, which is
heightened by the one child policy.


Compulsory education

Over the course of the tour, our discussions around compulsory education highlighted
two assertions that were common to all the places we visited. First, compulsory
education is vitally important because it provides the basic skills on which all learning
and development is based. Secondly, employers claim that the literacy and numeracy
skills of school leavers are (increasingly) insufficient for working life. As a result it is
clear either that the standard of compulsory education are slipping across the board, or
that too few students complete compulsory education, or that basic skills are
increasingly important for a successful transition from education into the workforce -
or all three. What is the extent and nature of the compulsory education 'problem'?


                                             9
And what are different governments doing about their compulsory education systems
as a result?

Participants in our meetings presented a number of statistics and observations to us
which raise concern about the quality of compulsory education and basic skills. For
example:

      Denmark: one in five leave compulsory education without decent reading
       skills.
      Taiwan: employers complain that the attitude of students is poor; that they
       often fail to demonstrate team working or leadership skills; and that they fail
       to make an effective transition from education into the workplace.
      US: The K12 (compulsory education) system is failing to produce students
       with the necessary skills for the manufacturing jobs that are available. This
       means that higher and further education institutions often need to provide
       additional remedial courses alongside degree and other courses. This, in turn,
       means that students become further indebted by their post-schooling
       education.
      Canada: 40% of Canadians lack sufficient literacy, numeracy and IT skills

It was also made clear to us that even if we assume that the standard of compulsory
education is sufficient, the number of students completing their education is not.
Although compulsory education is a local responsibility in the US, evidence of
incomplete schooling is visible nationally. Secondary education completion rates are
poor, with a significant proportion of students dropping out at 15. This rises in cities
and educational attainment is lower amongst low income groups and ethnic
minorities. Sometimes, falling completion rates can occur as a response to local
conditions - in Alberta, Canada students are leaving school early to take up good, well
paid jobs due to the demand created by a healthy regional economy. The federal
government views this as problematic in the medium and long term, but is not able to
influence Alberta's regional government.

In all cases, those we met expressed concerns that these deficiencies (poor and/or
incomplete education) left the workforce 'standing still'. Without basic numeracy and
literacy skills, 'up-' and 're-skilling' are made very much more difficult, if not
impossible. This has an impact on a country's capacity and potential to compete
globally, in particular for the coveted 'high value - high skill' jobs.


Target-based approaches

In order to combat these concerns around basis skills, we came across a variety of
responses. It is worth noting that governments' concern with basic skills is a question
of equity as well as of economic efficiency. Good basic skills increase access to
education, to which all citizens are entitled and create employment opportunities. At
the same time, good basic skills allow employers to provide further training to
workers and so remain competitive. The identification of such market failure for
investment in basic and low level skills is the justification for the current UK system
offering stronger support for these skills.



                                          10
The first and most obvious response involves the setting of targets for educational
attainment. The intention is therefore to reduce the number of young people leaving
school before completion of secondary education. It is no coincidence that this type
of approach is most common to small countries, where responsibility usually rests
with national governments and where evaluation at a national level is practicable.

A good example of this approach is in Denmark, where central government has
imposed a target of 95% of each cohort completing youth education by 2015. This
ambitious goal would build on a current rate of 80%. In addition, the higher
education participation rate should increase from 44.5% to 50% by 2015.

The Government has also introduced a requirement for all schools to teach a
minimum of two languages - English and Danish. While not all of these aims relate
only to compulsory education, it is significant that they relate to part of Denmark's
wider strategy for responding to globalisation. In Finland, the Ministry of Education is
currently targeting the 5% of students who fail to complete their secondary education.
Interestingly this target has been identified even though the Finnish education system
formally contains a larger number of stakeholders and delivery agents. Finland's
government delivers compulsory education through local organisations - but they can
be private or municipal ones. All are required to earn a licence to provide local
education services and are funded by Government grant. They have also been tasked
with delivering education that takes account of local (employer) needs, and have
enjoyed flexibility for delivering on these demands since 1993. This appears to make
for a target-based approach that retains a degree of flexibility.


Qualitative approaches

These sorts of responses concentrate on developing students so that they are better
prepared for working life by making education more responsive to the needs of
employers. This government response is about adapting curricula and teaching the
'new' skills - these are referred to variously as soft, generic, or transferable skills. In
Japan, the Ministry of Economics, Trade and Industry (METI) has been running a
pilot programme in 300 elementary and primary schools for some 3,000 students -
they are introduced to 'job experience' through, for example, practising selling
products as part of a role playing exercise. Japan's Ministry of Education is keen to
learn from the outcomes of the pilot and will consider mainstreaming this approach
nationally.

"Self-activation" skills were widely touted as requirements of all workers in the new
economy. Employers want to employ individuals who know how to learn new things.
We experienced many examples of ways in which governments are trying to
introduce this discipline, for example by increasing project-based learning in schools.
There is also evidence that schools are being asked to improve team-working skills
for the same reason.

Clearly, target-based and qualitative models are not mutually exclusive. In Singapore
the purpose of the education system is rigorously focused on the creation of future
economic wealth. Due to Singapore's size and the ubiquitous nature of its
government, it is perhaps easier to monitor progress and to change curricula or


                                            11
implementation rapidly. We were impressed by the fact that - on advice from the
Economic Development Board (EDB) regarding future trends in economic
development - the school curriculum could be changed in the space of a term in order
to meet new requirements.

The subject of teacher training also reared its head. High quality education requires
high calibre teachers. In Finland we discovered that teaching is a popular, highly
respected profession. Only 20% of trainee teachers make the grade. In the US there
are emerging calls to improve teacher pay to attract talent. In terms of approach,
while many of those we met cited the importance of school teachers in preparing the
future workforce, there remains evidence of two distinct camps. Those countries
where teachers exist to educate students academically and to groom them for
continued education; and those where teachers are genuinely focused on preparing
students for working life. In the US teachers are focused on getting students into
'college'; in China the spirit of Confucius remains strong - academic achievement is
the goal and it retains great kudos. By contrast, in response to the idea that teachers
are ill-equipped to impart knowledge to their students about a wide variety of careers,
some countries have instituted schemes such as 'industry days'. The EDB in
Singapore arranged for some 100 teachers to visit a petrochemical plant and in
Minnesota teachers are encouraged to visit businesses to help them understand what
modern manufacturing looks like and what its prospects are. While a balanced
approach must be the right one, teachers who are better equipped to introduce ideas
about careers and ask questions about other aspects of working life give their students
a head-start.

In concluding this section on compulsory education, it is worth emphasising the
importance of compulsory schooling as the first port of call or gateway for all future
workers. Compulsory education is a pre-requisite but insufficient for effectively
skilling the future workforce. Future learning requires high quality foundations on
which to build and this is the fundamental role of compulsory education. At the same
time, compulsory education cannot provide the sorts of skills needed to capture the
high end, high value jobs that governments want for their citizens and their
economies. For this reason, the next section discusses the role of post compulsory
education in workforce development.

Post compulsory education

Broadly speaking, there are two policy approaches towards post-secondary education.
These are the 'strong' government model, in which government (usually central)
directs the role, function and activity of institutions and - to a lesser extent -
individuals also. On the other hand there is the 'weak' government model, in which
government sets broad parameters for institutions and allows the existence of a
functioning education market, where individuals act like customers. Often central
government will also dictate the location, size and number of post-secondary
establishments in this model - for example, in China the major cities have large
universities that specialise in the industries selected by the government. Students are
encouraged to move to study their chosen discipline in the place where it is
specialised. 'Strong' approaches were prevalent in China, Singapore and Taiwan
(where individuals are often plucked and prepared for leading roles). 'Soft'
approaches include Canada and the US, where individuals are free to choose where


                                          12
they wish to study and where educational organisations need to attract students in
order to survive. Under this approach educational establishments blossom in localities
where demand is high, leading to academic clusters, for example Boston.

There are many different routes available to people beyond their compulsory
education. Countries have adopted different terminology, but higher education is
widely used to describe university based education leading to the award of a degree.
Education across the range of other levels is often provided through colleges (referred
to as further education in the UK). Strong distinctions are also often made between
academic and vocational pathways in post compulsory schooling, although in some
cases these start to appear during the compulsory years. A common reflection on all
countries we visited is that there is a rising demand for vocational education. In
Finland the number of those in vocational education has risen from 5,000 to 36,000
since the 1990s; and the number of qualifications has grown from 3,000 in 1995 to
58,000 in 2005. Figure 3 illustrates the education system in Finland and the differing
academic and vocational routes available to individuals.




            FIGURE 3 – THE EDUCATION SYSTEM OF FINLAND


                                          13
One Washington DC based commentator to whom we spoke referred to an idea that
the US higher education system has begun to divide sharply between the good
universities and the ones that are easy to enter. Fuelled by the decline in high school
graduates this could mean growing disparities between the quality of education and
wide range of skills possessed by Ivy League undergraduates, and students attending
other universities, where competition for places is less intense. If this is true, a rise in
popularity of the vocational education sector may be occurring in the US. Students
may prefer to gain high quality vocational skills and qualifications to ones from HE
institutions that are perceived to be of low value.

A strong alternative, and often complement, to higher education institutions in the US
is the community college system that is strong, well funded and well developed. And
in places like San Francisco the system is undoubtedly flourishing in response to
demand: there are 108 community colleges in San Francisco in comparison with 26 in
the wider Bay Area. This constitutes an impressive network concentrated in urban
areas where demand is greatest and climbing. The ethos of the system is: to provide
post-secondary education for those who want it; to support economic development;
and to achieve community and cultural enrichment. Generally programmes are two
years in duration (as compared with four years in HE institutions). A similar system
also exists in Canada, although here the community college system is even more
specialised and vocational. A long, historical tradition of skills investment is apparent
in Singapore. A decade after the end of colonial rule, it reached near full employment
partly due to its strategy of investing heavily in vocational workforce skills. It
repeated the trick again in the 1970s when - having taken advice from the big,
industrial nations - the Singaporean government invested in training institutes
teaching specialist skills, such as precision engineering. Then, in the 1990s the same
training institutes were amalgamated with Singapore's polytechnics, bringing together
the major FE providers. Singapore remains unusual in Asia in that it invests heavily in
the high technology machinery required by these industries - but for training
purposes.

In the US job tenure has reportedly decreased by 70%. Individuals are returning to
community colleges at later stages of their lives. The average age of a community
college student is now 28 and rising. This phenomenon is supported by the ability to
deliver training and educational services via the Internet. In some cases this has had
unexpected success in reinvigorating old industries. For example, Canadian
colleagues reported the success of a TV channel for training car mechanics. This had
proved highly effective and cost-efficient for training a widely dispersed workforce.
It had required only a small amount of seedcorn funding for a short pilot stage, but
was now self-sufficient. Another common example in North America was the use of
'webinars', notable for would-be entrepreneurs.


Developing and attracting highly skilled graduates

If a greater number of university graduates equates to higher skills levels, China and
India are heading for the top of the global economic class. China produces 4.75m
graduates per annum already. By contrast Japan now has more places than students in
its 740 universities. However, quantity does not guarantee quality - arguably, the


                                            14
opposite is true. Higher education produces three distinct and marketable 'products':
people, qualifications and institutions.

Increasingly highly skilled people congregate in cities to take advantage of the
economic benefits of agglomeration. As a result places increasingly market their
human capital. For example, San Francisco's message to a multi national corporation
when considering where to locate was "come and locate here - we have your future
workforce". At the same time part of this sort of 'offer' is the idea that places need to
be attractive to the kinds of people they are seeking to attract - this is certainly the
approach that Singapore has taken in respect of multi-national companies, and Ottawa
describes its success as a function of it being a "sticky" place - people come and stay,
and people who leave return. In essence attractive places attract highly skilled people,
who attract other highly skilled people - it is a virtuous circle. An interesting example
of recovering the people product of HE is Taiwan's attempt to recover its brain drain
through selling a "home and progress" package to former citizens. It has managed to
attract back its academics who left to study and then stayed in the US through its
science park programme. Taiwan has also copied the "Singapore Connection" - a
roadshow to attract foreign talent through its educational offer. Finally, the search for
"commercialisation skills" (management techniques; financial & legal services;
marketing & branding) are perhaps developed countries most powerful "USP" - and
this is all about the people with the right experience. It is also where the competitive
advantage over low cost economies lies. Significantly, the increased mobility of
people has led to what some describe as the "globalisation of HR" - to which (along
with leadership) we will return in the chapter on individuals.

HE qualifications are a product in their own right. The idea of selling an educational
product abroad relies on a reputation of quality. The UK's university qualifications
are hugely popular with Chinese students. Of course, education is a product marketed
domestically too. US citizens are huge consumers of education products and are
highly motivated to learn and improve their skills. San Francisco-based ICF
Consulting has concluded that the greatest return on investment in the US system
comes from a two year degree (at $1100 pa). But ultimately it is the quality of HE
qualifications that is important to the capture of the high skilled jobs, not least
because the quantity of university graduate degrees is eroding their status – MIT
researchers have estimated that 50% of the US workforce will be graduates by 2020.

Generally, it is the HE sector's role in commerce and economic development that
most excites governments. In this sense HE institutions are laboratories for the
cultivation of new and/or economically important skills. Nowhere is this more in
evidence than in Silicon Valley and Boston where businesses are spawned many times
over. Stanford University's original remit was to attract post-WW2 grants and to be
closely connected to local businesses. California's ETP believe that job creation
thrives off high quality education (HE usually). San Francisco has the highest
percentage (c.40%) of adults in continuing education in the US and it is no
coincidence that Berkley, Stanford and others are located side-by-side with Silicon
Valley. Universities also play an irreplaceable role in industry clusters by
contributing to their 'critical mass'. Finland has had some success in designing a
network of universities, with different specialisations located in different regions.
China is following suit e.g. ICT in Beijing and manufacturing/banking/insurance in



                                           15
Shanghai. This approach contrasts with the San Francisco/Bay Area 'melting pot'
approach - and yet the effects are similar.

HE institutions are also the sites for R&D. R&D represents perhaps the clearest
economic role for HE institutions in the new, global economy. Hence, Taiwan's
leading position on semi-conductor technology and the reason China and India have
invested so heavily in R&D. Canada is going further by paying to send PhD students
to do MBAs in order to match up R&D knowledge with commercialisation skills.
FedNor (a regional development organisation in Ontario) help academics to take
sabbaticals working in industry to develop their ideas. The key is to achieve the right
mix between academia and business at universities.

It is fair to suggest that the role of HE in creating a globally competitive workforce
and economy is near impossible to analyse accurately or define succinctly. If high
skills help us to capture the high value jobs, then HE is important for global
competitiveness. But the complexity of the skills mix required by people and places
for them to be competitive globally means that FE can no longer be considered as a
second class citizen.


Widening participation

The previous sections of this chapter have focused on the role of government in
developing both the quantity and quality of individuals passing through the education
system. There are a number of common challenges facing governments, however,
which would appear to suggest that there is also a role in terms of anticipating and
preparing for future challenges, widening labour market participation, and developing
the right workforce composition.

Flexibility to adapt to future needs was discussed by many of the people we met as
crucial to staying ahead of the game. Forecasting or foresight (the systematic
gathering of information about medium and long-term social, economic and technical
developments and needs) is used as a tool in many countries to at least gather some
idea of future challenges and workforce requirements. Those countries that practised
it 20 years ago did not predict, but were at least ready for so-called megatrends such
as the Internet. But it's a 'long game' and we can never know exactly which skills will
be needed next. Taiwan builds long-term relationships with young rising stars in the
Chinese political firmament. San Francisco's 15 year biotech boom has yet to see a
profitable biotech company, and the race for nanotechnology has long since begun.

Mobility has reached new levels and is increasing at faster speeds: people and
information travel faster, longer and more often. At the same time places - and in
particular cities - are becoming more important to economic success. But a successful
place is not always a nation state and skills are a marketable commodity traded across
borders and boundaries. You only have to consider an example such as the Finnish
construction industry where Estonian workers travel little over a mile by boat from
Tallinn to Helsinki to start work.

One of common challenges faced by developed countries is the existence of an ageing
population, often combined with a declining birth rate. More older people will need to


                                          16
be supported by fewer younger people and for longer given that people are living
longer. This thorny issue - often coupled with a fundamental change in family units -
is prompting some important debates. In response governments could do a number of
things - raising the retirement age is one that was discussed. This would help to
extend working lives or at least to increase flexibility that allows for semi-retirement
options. For example, in Japan RENGO is pushing for re-employment at 60 on 50%
of their former salary while maintaining their full pension.

Other approaches to keeping people active longer included the Singaporean
government's efforts to reskill older workers for jobs that benefit from age e.g. gaps in
the hotel and healthcare service industries.

Another response to the ageing crisis resides in immigration policies. Here history
and culture play their role. Singapore built its modern foundations on immigration
whereas Japan resisted and resists it still, with the exception of high skilled workers
who stay for a limited time period. Generally immigration policies in developed
countries (outside the European single market) tend to be designed to attract high
skilled immigrants. Taiwan has set up a single service centre to attract foreign talent.
It delivers work visas for high skilled labour (architects, engineers, accountants)
quickly. In the US there are many low skilled immigrants (legal and illegal), but it is
in spite of rather than because of federal government policy.

Given demographic changes, many governments also need to influence the size and
composition of the workforce to maintain competitiveness and prepare for future
changes. In Japan change has occurred over the last 10 years while the economy
slumbered. Recession has led to the appearance of NEETs (those not in education,
employment or training) and „freeworkers‟ or „freeters‟ (who are employed on short
term contracts); longer working hours; and the breakdown of the much-respected and
emulated master-apprentice culture.

In Japan the Ministry of Health, Labour and Welfare delivers training Prefecture
(local authority) schools for some 4 million young people, in particular focusing on
the 640,000 NEETs and the 'freeworkers' or 'freeters'. They specialise in high
technology manufacturing, construction and IT, but they have autonomy to tailor
curriculum to local employer needs in the area. All training is done by one of 3,000
qualified training instructors who move between the Prefecture training centres. All
centres are run by their prefecture and independently reviewed on an annual basis.
They train approximately 500,000 individuals per annum.

In Taiwan the Council of Labour Affairs' Bureau of Employment and Vocational
Training (BEVT) has responsibility for all training needs for those not in
employment. The genesis of this approach came in the aftermath of the 21/9/99 Taipei
earthquake, which badly affected Taiwan's economy. BEVT focus on retraining
targeted at the services sector in 12 specific areas: IT, finance, logistics,
communications, media, medical services, training, outsourcing, tourism,
environmental technologies and high tech manufacturing (including semi-conductor
and digital technologies). Training is delivered through five public training centres
and online through virtual colleges. They also focus on two target audiences: the
unemployed and those requiring retraining.



                                           17
Many countries are also attempting to raise the participation rates of female workers.
The Finnish government and the City of Helsinki heavily subsidise day care for 0 - 6
year olds (based on ability to pay) in order to encourage female workers to remain at
work. Taiwan and Japan are both pursuing approaches to encourage work-life
balance. The government of Sescachuan, Canada has had increasing success in recent
years with a programme designed to bring women back to work.

Finally, it should not go unsaid that changing the size and nature of the working
population requires a culture change. Singapore's Workforce Development Agency is
investing in the country's capacity and infrastructure to reskill. The approach
acknowledges that we do not yet know the skills we will need in 15, 30, 50 years
time. For Singapore, practice makes perfect; small is beautiful.

The role of governments must be to prepare its workforce for lifelong employability
(rather than employment) and global competitiveness. This will require the
achievement of excellent basic skills, nurturing of soft skills, a capacity to change and
to specialise, and the knowledge to commercialise all the assets of all of its places.
Governments also need to galvanise employers and individuals around a common
vision of how to achieve these things. But it is only through cooperation that success
is feasible. And it is the contribution of employers and of individuals that the
following chapters will examine.




                                           18
                                    CHAPTER 3 - EMPLOYERS


Meeting the skills challenge involves not only the government‟s framework for
education and training, but also the investment and engagement of employers. This is
key to improving the stock and flow of skills in an economy. The rise of low cost
economies, such as China and India, is changing the way firms do business. China is
the world‟s workshop and India is the back office of the world. Increasingly, the
spread of competitive threats is becoming wider. Central and Eastern Europe and
even lower cost locations in Asia, such as Vietnam, are increasing the
internationalisation of business. Firms in the developed world are, as a consequence,
placing greater emphasis on value-addition. Activities such as innovation are vital in
ensuring firms in the developed world remain competitive.

For companies operating in a global environment a highly skilled and adaptable
workforce is crucial. Targeting new markets, developing new products and services
and making decisions on the location of business activities all require highly skilled
personnel. Virtually all the stakeholders we met with over six weeks acknowledged
the growing challenges firms and policy makers face as they respond to globalisation.
Figure 4 illustrates the growing importance business places on a talented labour force.
Around a third of respondents cited difficulties in attracting and retaining talent as a
significant risk to their business over the next three years.

                        A skilled workforce high on the agenda
               % of respondents citing as risk to business in next three years
      Increased competitive
            pressues

         Failure to innovate

     Attracting and retaining
              talent
      Responding to market
          conditions
        Employee wage and
          benefit costs
           Competitive new
            technologies
   Macroeconomic/financial
           risk
                                                                            %

                                0   10   20   30     40     50      60     70

Source: Economist Intelligence Unitvi
                                    FIGURE 4

Education and employability

Business needs a flow of adequately skilled people into the workforce. While this
section will deal primarily with employers‟ actions in raising the skill levels of their
employees, it is worth saying a few words on the part firms can play in ensuring a
flow of appropriately qualified and skilled people into the workforce. In England, for
example, employers and employer organisations are being consulted on the
development of Specialised Diplomas. The Diplomas will offer 14 new lines of


                                              19
vocational learning at Key Stage 4. Employer engagement is clearly important to
ensure these new qualifications are fit for purpose and equip young people with the
skills business needs.

Similarly, major employers and industry representatives have been engaged in
developing career pathways in the US. Career pathway study plans outline
recommended learning routes to over 80 occupations across 16 career clusters. These
can then be tailored by individual educational institutions depending on courses
offered and graduation requirements. The principle is to ensure that a young person
wishing to enter a career in architecture and construction, for example, has the core
skills for employability in the sector.

Business, therefore, often has some responsibility for skills development even before
young people enter the workforce. Employer input into curriculum development is
one way in which this can be achieved. Another is ensuring that teachers and trainers
have up to date industry experience. In Northern Ireland, there is a scheme to keep
further education providers up to date with the needs of modern industry. Similarly,
Taiwan promotes the movement of both teachers and industry representatives between
business and the further and higher education sector.

Business can also play an important role in the continuing training of young people
that have completed compulsory education. Apprenticeships, for example, are
increasingly in popularity. In the UK there has been reform of the apprenticeship
frameworks in recent years. In addition, the Leitch review recommended a significant
increase in the numbers entering apprenticeships to meet skill requirements at NVQ
Levels 2 and 3. This is a good example of how formal training, work-based learning
and employment can bring benefits to the firm and the individuals. Research supports
this approach - a study by Dearden et al (2004)vii showed that the returns to education
at NVQ level 2 were greater if combined with employment.

Other countries are also looking at reforming or expanding apprenticeships. Taiwan,
for example, began an apprenticeship programme in 2003. The framework is based
on the German model, with three days training at college and two days in the
workplace. The Council of Labour Affairs describes the programme as a „bridge
between enterprise and schools.‟ The Finnish apprenticeship system is slightly
different. Apprentices are recruited by employers and the training element is largely
government funded, but apprenticeships are seen as an attractive way for low-skilled
adult workers to develop skills. The Canadian government, also recognising the value
of work-based learning, offers tax incentives for young Canadians to learn skilled
trades, and for businesses to hire new apprentices.

In Japan there has been a breakdown of the informal system of apprenticing, for
which Japan became famous in the 1980s. The ingrained practice of passing
information and experience from older to younger workers (master-trainee
arrangement) has broken down with the recession of the last decade. Businesses took
on fewer new workers and so the virtuous cycle was interrupted. Furthermore, there
has been a decline in the practice of starting managers by working on the shop floor.
This has created a loss of respect between lower skilled workers and managers. As a
result, the Japanese government launched a more formal apprenticeship system in
2006, again based on a German model, which is designed to arrest decline of the


                                          20
informal system by embedding apprenticeships. They also aim to use the scheme to
market Japanese manufacturing to 18+ year olds.


Company attitudes to training

In the UK around 70% of the workforce in twenty years time is in employment today.
In addition, as figure 5 shows, the qualifications and skills that will be required for the
UK to remain a competitive economy in 2020 will increase. This can only reinforce
the need for employers to invest in the skills of their employees. In the UK a great
deal of emphasis has been placed on raising employer investment in training.

              Demand for intermediate and high level skills set to grow
                     % of working population by qualification
         %    < Level 2      Level 2      Level 3       Level 4          Level 5
  100

   80

   60

   40

   20

     0
                 1994                   2004                      2014

Source: IER
                                       FIGURE 5

Recent survey data suggest that UK firms spent in excess of £33bn on training last
year – including wage costs, course fees and in-house training facilitiesviii. There is
little comparable data on employers‟ contribution to skills in other countries.
However Green and McIntosh (2006)ix suggests that UK firms tend to offer more
frequent training than firms in competitor countries, but this tends to be of a relatively
short duration.

The recent review of UK skills by Lord Leitch emphasised the importance of the
employer contribution to improving workforce skills – “Without employer
participation it will not be possible for the UK to achieve the scale of increase in
skills levels that being world-class will require. Without a partnership between the
Government and employers, businesses will lack the skilled workforce to adapt to
technological change and succeed in the new global economy.” Nevertheless, the
Leitch review acknowledges that this responsibility should be in partnership with
government and individuals. While the onus of responsibility is increasingly being
placed on employers in the UK, there are different expectations of the business role in
developing workforce skills across the countries visited.




                                            21
In Japan, for example, it has traditionally fallen to companies to provide education
and training opportunities for employees. This is driven, to some extent, by cultural
factors. Prior to the prolonged economic downturn in the Japanese economy,
employees expected to remain with the same firm for a long time – unlike in the UK,
where job tenure has been in decline. This resulted in the expectation that employers
would deliver the education and training the firm needs. However, greater worker
mobility is leading to a change in attitudes and gradually individuals are being
expected to take greater individual responsibility for career development. That said,
employers are having to take on a different role in supporting that career
development.

While it is more difficult to make generalisations about the fragmented US market,
the responsibility for workforce development is more skewed towards the individual.
Labour market competition and a lower degree of welfare support has reinforced the
recognition among individuals of the need for self-development and continuous
learning.

In parts of Europe social partners also play a role in how firms train. In Denmark, for
example, work-based learning is considered as part of the collective bargaining
process. In a recent bargaining round employees were given the right to two weeks
paid leave for relevant training. Dialogue between firms, individuals and unions plays
a more important role in developing workforce skills than is the case in the UK.

In most countries, however, small companies were seen to be contributing less to
work-based learning than medium and large firms. In the UK, evidence from the
National Employer Skills survey confirms that small employers are less likely to
engage the workforce in training. The 2005 National Employer Skills Survey showed
that around a third of firms with between five and 24 employees provided no training
in the previous 12 months. This compares with fewer than one in ten firms employing
more than 500 people. Similarly, there is lower take up of part-subsidised training
among Finnish SMEs. Stakeholders in Denmark (which has a relatively high
proportion of SMEs) identified the need to better educate smaller firms as to the
benefits of developing high skilled workers. Here, and other countries, the lack of an
ambitious business plan may be at least part of the problem.


Increasing investment

Despite these cultural variations, all countries increasingly view employer investment
in training as critical in building the workforce need to maintain competitiveness. The
UK government has been active in seeking to leverage greater business investment in
skills. Its latest flagship policy is Train to Gain. This initiative offers employers fully
funded training for all employees lacking a first full qualification at NVQ Level 2.
Pilots are also in operation – these offer part-funding for a first NVQ Level 3
qualification through the same mechanism.

In addition to the subsidy element of Train to Gain, firms are able to seek advice and
guidance from a Train to Gain skills broker. While this service is available for all
firms to access, the brokerage service has been tasked with targeting small, „hard to



                                            22
reach‟ employers. Achieving greater involvement in skills development by this group
is essential in driving up skills across the workforce as a whole.

The final report from Lord Leitch states that the costs of the review‟s ambitions „must
be shared between government, employers and individuals‟. The operation of Train
to Gain is an example of this policy being put into practice. The funding flows fully
support lower level qualifications and numeracy and literacy training, while
individuals and employers pay a greater share of the costs for intermediate and higher
level skills. A number of international agencies have been looking at the Train to
Gain as a model to direct resources from the public purse into work-based learning.

The new Commission on the Skills of the American workforce makes a
recommendation along similar lines to the Train to Gain funding model. The
Commission‟s report „proposes that the federal government pass legislation entitling
every adult and young adult worker – at no charge – to the education required to meet
the standard set by the new Board Exam standards that most people meet by age 16.‟

While other European countries we visited part-subsidise work-based learning, Japan
has taken a more broad-based approach to incentivising employer investment in skills
with the introduction of a tax credit for training. The Japanese government, led by the
Ministry of Economy, Trade and Industry (METI), set up a new tax credit system for
employee training April 2005 , known as the Jinzai Toushi Sokushin Zeisei (literally
"human investment tax credit"). Economic fundamentals played a part in the decision
– a sluggish economy, weak profitability and the need for corporate restructuring had
greatly reduced employer investment in training. The government estimate that skills
investment had fallen to just over 1% of salary costs, compared with around 3% in
Finland and 4% in China.

The tax credit is based on incremental training expenditure and is only a temporary
measure; it is due to expire in March 2008. Eligible firms receive a tax credit
equivalent to 25% of the increase in training expenditure compared to the previous
two fiscal years. SMEs may claim 20% of the total training costs, if that is higher. The
credit is subject to a cap of 10% of their total tax liability. Eligible education and
training expenditure is broadly defined as any costs incurred to help employees
acquire or improve techniques or knowledge that are necessary for their work.

The introduction of the tax credit was welcomed by employers, although the
preference from employer representatives was for a volume-based, rather that
incremental credit. Using tax credits can be valuable for firms seeking to reduce the
up front costs of training. Unlike other expenditure on items such as capital
equipment, the productivity and profitability benefits of investment in training can be
uncertain and have a longer payback period. Reducing the costs of that investment
through the tax system can, therefore, make it a little easier for firms to increase
training investment.

The Ministry has not yet completed an evaluation of the tax credit, nor did it make
estimates of likely take-up in advance of implementation. There was some evidence
of rising training expenditure among SMEs, although it is hard to distinguish the
impact of the tax credit from other improvements in business cash flow for example.



                                          23
A number of US states also operate system of tax credits for human capital
investment, however, not in the states visited on the tour.

In California, in fact, the opposite is true. Instead of offering firms tax breaks for
training the state imposes a tax levy to finance training. The California Employment
Training Panel (ETP) is an economic development programme that funds training to
ensure that employers give workers the skills they need to compete globally. It is
funded through the Employment Training Tax which is levied on employers
participating in the Unemployment Insurance system. Funding is directed towards
companies with „out of state competition‟, for high-skilled, high-wage job training.
An evaluation of ETP showed that the average participant earned over $42,000 in the
year before training. This highlights the important placed on developing high-level
skills by the programme, as opposed to other initiatives which focus on improving the
skills of low-skilled workers.

The evaluation also points to some significant benefits for individuals, firms and the
state economy. Individuals tend to benefit from high wages after training and firms
benefit from a more highly skilled workforce which allows them to improve
competitiveness in a high-wage location. Furthermore, ETP and the training
opportunities available has attracted new firms to California and allowed incumbent
firms to expand and grow.


Constraints to investment in training

While the vast majority of firms would acknowledge the potential benefits to the firm
of investing in skills and training, some face constraints in doing so. Developed
economies are having to tackle the consequences of an ageing population. In
Singapore the age of the average worker is expected to rise to over 45 in the next ten
years. Firms must ensure that they maintain a skilled and adaptable workforce as
more and more people reach retirement age. In Singapore the unions are playing a
part by working with firms to adapt jobs and also advising firms on how to deliver
training to older workers.

The problem is particularly acute in Japan and employers are becoming increasingly
concerned about how they will replace the skills of those retiring. Despite the high
proportion of young people graduating from university in Japan, concern was
expressed about the ability of the next generation to fill the shoes of those
approaching retirement age. Some are using mentoring to pass on knowledge and
experience. However, it is yet to be seen if this will be sufficient to retain and develop
the skills needed to maintain competitiveness. Furthermore, the reluctance to use
immigration as a tool to fill skill gaps may need to change as the population declines.

The UK‟s National Employer Skills Survey showed that a relatively high proportion
of firms lack a business plan and a training plan. In 2005 over half of firms did not
have a business plan clearly outlining the firm‟s objectives. However, these were
mainly small firms. In addition, research from EEF showed that training done in an
ad-hoc way or insufficiently linked to a business plan will not deliver on its objectives
and will have less impact on profitability or productivity. One way of cementing the
training and business plan relationship is the Investors in People standard. Already


                                           24
running in a number of countries outside the UK, Taiwan is considering adopting the
framework as a means to improving how firms go about their training activities.


Employer engagement

Firms have a responsibility to invest in the skills of their workforce and collaborate
with the education system to ensure that it equips young people with the skills needed
to enter the work. In addition, business must also engage with the learning and skills
infrastructure to ensure training providers offer appropriate solutions to skill needs.
They must also work with the relevant institutions to develop a responsive
qualifications framework that is fit for purpose.

All the countries visited recognised the importance of this engagement. In saying
that, most also felt there was more that needed to be done to improve how firms
engage with the learning and skills infrastructure. In England, employer engagement
is organised on both a regional and a sectoral basis. Sector Skills Councils work with
firms to identify skill needs and gaps in provision. A Sector Skills Agreement is then
developed, which outline how employers will work with funding partners to ensure
appropriate training provision.

In addition, Regional Skills Partnerships are tasked with taking the lead on skills at
the regional level. These committees, led by Regional Development Agencies, have
the responsibility for identifying the skills required to implement regional economic
strategies. They are seen by government as potentially important influencers of local
and regional training provision, which should match the needs of employers and
individuals.

Employers should play a key role in these regional and sector bodies and providers
should take their lead from the research carried out by them. However, the Leitch
review identified some problems with this approach. Firstly, it acknowledged that the
current system is complex and its attempts to match training provision with predicted
skill needs has a „historically weak record of meeting economic needs‟. While the
review does not go so far as to make specific recommendations on how to improve
the post-16 training landscape, it does throw its weight behind a sector-based
approach.

Other countries have opted for a sector model to influence training providers,
curricula and qualifications. In Singapore this is coordinated by the Workforce
Development Agency. Established in 2003, it is responsible for the development of
workforce skills qualifications (WSQ). It is an industry-led system comprising 12
Industry and Skills Training Council, chaired by high profile industry leaders. The
qualifications are competency based and business is central to the design and
development of the framework, which encompasses generic skills, industry and
knowledge skills and occupational skills across seven levels – from certificate to
graduate diploma.

The underlying principle is the development of a framework which ensures
qualifications remain up to date. Business has bought into the project and a built in
review system allows industry to signal when elements or whole qualifications


                                          25
become obsolete. The aim is to establish Sector Skills Councils and devolve WSQ
development, accreditation and management to them by 2009.

Industry bodies are also the main method of business engagement in Canada. In
Finland, however, they are adopting a regionally-based approach. Its foresight
programme plans for skills needs over the next decade, and it uses detailed forecasts
to develop occupational profiles ten years from now. This is a relatively new
programme so it is not yet clear how effectively this forecasting approach will
successfully match the provision of education and training with business needs.

In parts of the US business-education collaboration is more local. In California, for
example, community colleges develop links with local industry. In San Francisco the
economy and workforce development arm of the city college works with industry to
meet workforce needs. It seeks to develop customised training to meet future skill
needs in emerging industries and also keeps on top of technological developments
within existing industries.

Regardless of the model adopted, getting input and buy-in from employers is essential
in the delivery of a responsive education and training system. It must be accessible to
employers, with clearly communicated objectives. Business investment in workforce
training will be affected if appropriate provision along with an appropriate framework
of qualifications and accreditation is not in place. Policy makers have a duty to put
this user-friendly infrastructure in place and employers have a role in engaging with it
and articulating their needs.

In conclusion, employers can benefit enormously from skills upgrading. For most it
is essential, particularly if they wish to exploit new technologies or increase
innovation. Business must, therefore, play its part in improving workforce skills by
offering employees development opportunities and investing in training. Many of the
countries visited reported similar constraints faced by companies in offering more
training. Small, hard to reach companies were a feature of most economies and while
some countries are looking at the UK for lessons on how to address low investment in
skills by this group, UK policy makers had previously visited many of the countries
on our tour to hear their experiences.

In addition, a lot more is expected of business; from collaborating with the education
system to ensure that the outcomes of school education meet business needs to
engaging with stakeholders on appropriate qualifications frameworks. Across the
world, most stakeholders recognised that building the relationship between business
and the learning and skills sector is hard work. Firms often find it difficult to
articulate their skill needs and in an attempt to build a responsive training system,
policy makers may make the supporting networks too complex to be user-friendly.
Nevertheless, governments and other stakeholders are increasingly focused on how to
get this engagement right.




                                          26
               CHAPTER 4 – INDIVIDUALS AND ENTERPRISE


The focus of this chapter is the role of the individual in the development of workforce
skills; the extent to which each student or employee takes responsibility for planning
and managing their own training and the incentives in place (both formal and
informal) which encourage this type of initiative. Cultural differences play an
important role in this context leading to significant variation across the different
countries we visited.

The chapter also looks in more detail at efforts being made to cultivate and nurture
some of the more specific skill sets needed to compete in this new global
environment. Among these, entrepreneurial and innovation skills were mentioned in
many of our meetings as keys to unlocking creativity at all levels of the education
system and across the workforce. Together with management and leadership
expertise and a range of „softer‟ skills, these are increasingly seen as the source of
competitive advantage for developed economies and potentially limiting factors in
emerging economies.

Individual engagement - the challenge

Individuals today are much more likely to be employed in a number of different jobs
over the course of their working lives, many even completely changing career path
two or three times. This job mobility means that businesses may be less willing to
take full responsibility for workforce training as they risk losing their best employees
to competitors. In this environment, individuals must take greater ownership of their
own career path and acquire the necessary skills to realise their ambitions. However,
the lack of employment stability makes it increasingly difficult for individuals to plan
ahead with any degree of certainty which further complicates the task of getting them
to take this responsibility seriously.

The need for individual engagement, in partnership with both government and the
employer was highlighted to a greater or lesser extent in every country we visited.
The objective in all cases was to effect a culture change where each person would
take responsibility for skills acquisition from an early age and maintain this
commitment through lifelong learning.

One of the principles underpinning Leitch‟s recommendations is this shared
responsibility between employers, individuals and the government with a clear
requirement for individuals to contribute more where they stand to benefit most. To
achieve this, he argues for the need to “increase people‟s aspirations and awareness of
the value of skills to them and their families through high profile, sustained awareness
programmes, a rationalisation of existing fragmented „information silos‟ and the
development of a new universal adult careers service.” He argues that there has been
too little responsibility taken by individuals for their own learning as they have been
“unable to access quality training at a time and place that fitted in with their job”. In
short, we need to move away from a supply managed approach to a demand-led
system. One where individuals raise their aspirations and awareness, demand more of
themselves and their employers and crucially, invest more in their own skills
development.


                                           27
Cultural differences

This is the challenge being faced across all our tour destinations, though some already
have a much higher level of individual engagement than others, largely as a product
of their history and culture.

In the US, lifelong learning is a reality for many. The opportunities to go back to
„school‟ and top-up on skills are widespread and most employees expect to do this
from time to time, often at their own expense. There are dozens of private and public
institutions in most States offering courses of all levels (and costs). Television
advertising regularly encourages viewers to improve themselves and their career
prospects by enrolling for anything from a few night classes to a PhD on-line. The
history of having to pay substantially towards the cost of one‟s third level education
has created an ethos which views training as a personal investment and the enterprise
culture reinforces this „self-help‟ attitude.
.
However, there are many now expressing concern that US competitiveness will be
seriously hindered in the future as cuts in college aid and rising tuition fees at even
public universities is making it more difficult than ever for young people to educate
themselves. This means that a generation of retiring Americans are being replaced by
a cohort which is considerably less well educated. This concern largely relates to the
three and four year degree institutions. The community colleges (which offer 2-year
courses) continue to be used by many individuals to supplement their more academic
degrees with practical training. Much of this is market driven – individuals
recognising that they are likely to be more employable with these additional skills and
being prepared to pay for them.

However, the college system does not allow its curriculum to be determined entirely
by current „student‟ demands, rather it makes a serious attempt to engage with its
local business community and offer courses to meet the needs of emerging sectors.
The challenge of getting prospective students to enrol for courses which are based on
projected business requirements can be a more difficult task. For example, in
California, the college system is offering an increasing number of places in nano-
technology related disciplines based on their, and industries assessment of likely
demand in the next few years. However, take-up of these places is low as individuals
have yet to appreciate the potential of the industry. To combat this, the colleges work
closely with their „feeder‟ high schools, to „build up the student pipeline.‟ Similar
initiatives are employed to get more young people interested in engineering and
manufacturing careers, supported by a one stop career centre in every college.

Japan is quite a different story. While there have been changes in recent years, many
still expect lifelong employment with the same employer and all necessary training
provided as part of the deal. A number of meetings highlighted the need for
individuals to have the „will‟ to improve their skills and that the system must
encourage this. “We want to support those who want to learn…we need to
differentiate between the motivated and unmotivated.” (Nippon Keidanren).

The Finnish working environment is learning oriented. There tends to be a
democratic environment within companies which encourages individuals to develop


                                          28
their skills and the culture generally values education and training as an investment.
However, one academic we met suggested that the high levels of social welfare with
extensive unionisation and collective bargaining created less incentive for the
individual to invest in their own training. They felt that the onus was still very much
on the employer and government to take the lead.


Encouraging individual engagement

Methods to encourage individual involvement in the training process generally
involve awareness raising and/or financial incentives.

The Globalization strategy in Denmark has at its heart the desire to change the
collective mindset from one which fears the „threats‟ of globalization to one which
accepts that there is more to gain than to loose. There is an understanding that, for
this to be successful, individuals must buy into the vision and take personal
responsibility to help achieve it. The focus on lifelong learning is growing and there
is an expectation that individuals and employers should help to co-finance this. The
need for „partnership‟ is recognised with programmes being developed to achieve this.
One such initiative is a Training Fund which would see employees having an amount
regularly deducted from their salary and added to employer and government
contributions. The Fund will then be accessed to purchase training agreed jointly by
the employee and employer. As this initiative is at an early stage of development,
there is yet no indication of its impact.

In Singapore, efforts to motivate the individual revolve around making training
affordable and easy to access. Fees for lifelong learning are relatively low with many
options available. There is a greater emphasis on helping workers take responsibility
for their own training by providing „clear training and skills upgrading pathways‟.
These include holding very high profile „showcase‟ events such as the „Singapore
Learning Festival‟, lifelong learner awards and a range of new career guides.

To help workers upgrade their skills, a National skills and qualifications framework
has also been introduced. There is some reported success with the WDA claiming
that 96% of 950 polled at Singapore‟s Learning Festival accepting that „upgrading
their skills was their own responsibility.‟ Having said that, those choosing to attend
this event may already be more personally motivated than the general population.

Currently piloted by NTUC and three cooperatives in Singapore, the SkillSave
scheme aims to promote individual responsibility for lifelong learning. The scheme
allows contributions from employees and employers and until 2009 Singapore Labour
Foundation provides a matching grant. The account holder can use the money in their
account for payment of courses from an approved course list.

In Taiwan, the shift from the manufacturing economy to a service based economy has
seen a corresponding change in the type of skills required – a move from harder to
softer skills. Within this context, there is an increasing desire to have individuals take
responsibility for their own training and actively engage in lifelong learning. To this
end, Individual Learning Accounts are being piloted. These represent a systematic
investment in training by the employee, the employer and the government. While


                                           29
individuals will identify the courses they wish to take, employers are expected to
liaise with training providers to ensure that what they offer is business relevant and of
an acceptable standard. The Learning Account pilot is at an early stage, but early
signs are positive in terms of their ability to gain active employee participation.

Individual Learning Accounts (ILAs) were introduced in the UK 2000 and were a key
component of the government‟s skills strategy. They were, however, withdrawn just
a year later after serious allegations of fraud. Despite the mistakes that were made the
first time around, the Department for Education and Skills (DfES) has been
committed to resurrecting the idea of Learning Accounts. A new pilot programme of
Learner Accounts is due to be introduced this Autumn. The Accounts will contribute
to the cost of a full Level 3 qualification. Scotland and Wales retained their
programme of Individual Learning Accounts and a number of other countries have
looked at the UK experience in developing some form of Account for Individual
Learners.

In Washington DC we came across the „Dream it, do it‟ campaign which aims to get
more young people interested in manufacturing by dispelling some of the myths
which surround the sector. This is part of an agenda to “Promote a clear
understanding of advanced, hi-tech manufacturing and its enormous contribution to
innovation, productivity, economic growth, wealth building and high quality jobs.” It
does so by providing advice on what skills are needed to take up these jobs and allows
students, teachers and parents to explore career options which match their unique
interests and abilities. The associated strap line says „Your future‟s here for the
making‟.

An even more extensive effort to educate and inform the market for training is made
in Minnesota with the annual publication of MnCareers and accompanying on-line
guides. These claim to have something for all job seekers, offering profiles of over
200 jobs with associated interactive tools for career planning. The introduction
challenges users to “Determine what you‟re best at, establish your potential worth to
future employers and realize how to market yourself in today‟s global economy. Find
the skills and training you need. Discover which jobs best suit your interests. Learn
what you need to do to reach your career goals.” There is detailed information on
issues such as the wages each job is likely to pay, the career prospects, number of
opportunities and links to relevant training providers. All together a very impressive
resource which seems to be widely used by students, teachers, parents and older job
seekers.




                                           30
The Minnesota resource is just one example of many US on-line tools aimed at
helping students and adults plan their careers and identify the training they need.
Some of the best examples are listed below:

MNCareers - (www.mncareers.org) as described above.

America‟s Career Resource Network (ACRN) – a national site doing much the same
as MnCareers - www.acrnetwork.org,

Bestprep – provides a number of games to explore careers in business and industry –
www.bestprep.org

Real games Series – an interactive career exploration curriculum for both youth and
adults – www.realgame.org

Reality Check – includes a budget calculator that demonstrates how educational
choices are related to securing a job – which ultimately impacts one‟s lifestyle. It
challenges users to “Find out how much money you will need and which career will
pay for the lifestyle you want” – www.cdr.state.tx.us/RealityCheck

Career Liftoff – assesses individual interests and compares them to various career
profiles – www.careerliftoff.com

CareerOneStop – allows you to gauge your skill levels using the „Skills Profiler‟ and
the „Employability Checkup‟ tools – www.CareerOneStop.org

ISEEK – offers online skills assessments – www.iseek.org



This extensive use of on-line resources was unique to North America where the use of
all kinds of technology was highlighted as a tool increasingly employed in the
training/learning process. Other examples included game based learning, simulation
based education, on-line learning and web-based case studies. EXCEL Energy told us
that they currently do 75% of all their staff training on-line. This again makes it
easier for the individual to take control of their own learning, accessing resources
when they want and progressing at their own pace.

All the efforts outlined above demonstrate an attempt to broker greater individual
engagement in the training process. The rest of this chapter looks at some specific
skill sets needed to compete at the top.


Entrepreneurship and innovation skills

Entrepreneurs are individuals who spot opportunities and bring together the resources
to exploit them. They are creative, innovative, self-motivated people who are
determined to succeed and in doing so bring considerable social and economic benefit
to their communities. It is hardly surprising then, that every country we visited wants


                                          31
more of these people, often pinning their hopes on the competitive edge which
innovative entrepreneurship can provide for their economies in the face of mounting
global competition. Efforts to create an innovative, entrepreneurial eco-system are
being pursued on a variety of fronts. Figure 6 shows how the level of entrepreneurial
activity varies across a range of the countries included in the Global Entrepreneurship
Monitor.

                   Earky Stage Entrepreneurship (ESE) in Selected Countries and NI (GEM, 2002-06)

 0.14



 0.12



  0.1



 0.08



 0.06



 0.04



 0.02



   0
          Canada            Denmark             Japan                  UK              USA          NI

                                               2002   2003   2004   2005    2006

                                               FIGURE 6

The education system

There is considerable effort being made to instil entrepreneurial attitudes and
behaviours through the primary and post-primary education system. Professor
Francis Rushing of Georgia State University proposes a radical educational policy for
teaching entrepreneurship. He says, “Society has placed a great deal of responsibility
on schools for teaching and training children for their roles in society. What the
economy needs in the 21st Century are individuals who are quite different from those
sought in the past. We should focus on teacher training and education which is
infused with enterprising content and techniques”. We saw evidence that his proposal
is being implemented (with varying levels of intensity) in many of the places we
visited.

Finnish culture is risk averse and the high level of social welfare for employees
discourages self-employment. Overall, levels of entrepreneurship remain relatively
low and there is an attempt to address this through a coordinated set of actions under
The National Entrepreneurship Development Plan launched in 2004. As part of this,
Enterprise is being embedded within the curriculum at all levels in an attempt to
increase creativity. However, there is no agreement on how best to „teach
entrepreneurial skills‟ and certainly no confidence that the stock of existing teachers is
up to the job. Yet the evidence suggests we must persist as there is a clear correlation
between those who consider they have the skills to start a business and those who


                                                        32
actually do it. Table 2 shows how the countries with the higher proportions with the
necessary skills tend to have the higher rates of Early Stage Entrepreneurship.

                          Early Stage             Have the
                          Entrepreneurship (%     necessary skills
                          of population           (% of
                          engaged)                population)
             Japan        2.9                     15.7
             Singapore    4.85                    25.4
             Finland      4.99                    36.5
             Denmark      5.32                    36.4
             UK           5.77                    49.6
             Canada       7.12                    53.2
             USA          10.03                   50.2

                                       TABLE 2

Students in Finland are also being encouraged to be „international citizens‟ – there is a
focus on language skills and incentives to study abroad. High schools are being
encouraged to have an „international strategy‟ which should include twinning with
schools around the world and exposing children to cultural diversity from an early
age. All vocational qualifications include an entrepreneurship module in an attempt
to encourage more to start their own business.

As discussed earlier, the education system in China is very highly valued but tends to
be authoritarian with little potential for independent thinking and creativity on the part
of students. Conformity to the system is valued above all else which tends to stifle
innovation and the ability to deal with uncertainty and complex problems in
unfamiliar contexts. The fear of failure too is a disincentive as the social
consequences of failing are considerable in Chinese culture.

All of this has a dampening effect on the level and quality of entrepreneurship with
inherent weaknesses in the skill sets necessary for new venture creation and
innovation within existing companies. While there are serious efforts by the Ministry
of Education to turn this around, the underlying cultural norms are difficult to shift.
As one commentator put it, “The entire education system encourages people to fit in –
it is principally about passing exams.”

However, there are some provinces and cities in China which do have a much more
supportive entrepreneurial culture than others. Here there are many highly successful
entrepreneurs emerging as role models. As more and more people gain experience of
working in multi-nationals, their awareness of entrepreneurial opportunities increases
along with their ability to capitalise on these.

Like China, Japan is also struggling to instil through its education system, the skills
needed for the new innovative, entrepreneurial economy. A culture which values
stability, authority and continuity, now sees the need to move away from the
traditional methods of education to an approach which encourages creativity.

There are many opportunities for education and training – indeed, so many that the
quality of some courses is questionable. Japan has 740 universities and with the


                                           33
declining birth-rate, there is very little competition for many of the places available.
Coupled with this is the need to attract the best international academics – described by
the Ministry of Economy, Trade and Industry as the „Competition for global
brainpower‟. There is a recognition that Japan still tends to be closed and isolated and
that the top students and researchers from East Asia often pass by en route to Europe
and the US. There is a clear will to address this through an expansion of scholarships.
“In order for Japan to attract talented personnel from all over the world, it is necessary
to support an expansion of scholarship funds and employment opportunities for
foreign students, along with efforts to enrich higher education institutions that can
compete on a global level.” Japanese Ministry of Labour.

The education system is also being used to encourage more team based learning with
opportunity for freedom of expression. However, of all the places we visited, Japan
seemed to be facing the greatest challenge in developing an entrepreneurial culture
which perhaps explains its Global Entrepreneurship Monitor score as the lowest of all
OECD countries. The fear (and stigma) of failure is relatively high which as table 3
shows is a factor suppressing levels of entrepreneurship in a number of the countries
we visited.

                          Early Stage
                          Entrepreneurship (%     Fear of Failure
                          of population           as inhibiter (%
                          engaged)                of population)
             Japan        2.9                     26.0
             Singapore    4.85                    34.4
             Finland      4.99                    40.5
             Denmark      5.32                    40.2
             UK           5.77                    35.8
             Canada       7.12                    24.2
             USA          10.03                   21.0

                                       TABLE 3

The location of the SBA network of Small Business Development Centres in many
US community colleges reinforces the link between education and enterprise which
already exists in the US. Students are encouraged to consider entrepreneurship while
they are still students. The tolerance of failure which is part of the culture in the US
encourages an entrepreneurial attitude. Indeed, „Fault Tolerance‟ was mentioned
again and again as key to the creative experimental environment which has created
the many start-up companies in areas like Silicon Valley and the Palo Alto area.

Another interesting example of how entrepreneurial skills are mainstreamed in many
parts of the US higher education system was evident when we visited the Director of
the Stanford Technology Ventures Program. This is an entrepreneurship education
centre located within Stanford University‟s School of Engineering, dedicated to
accelerating high-technology start-ups. The Director explained that “in addition to
technical skills, engineers and scientists need a thorough understanding of the
entrepreneurial environment in which they will be working and we provide them with
the enterprise skills necessary to capitalize on this.”




                                           34
Commercialisation skills

With considerable effort going into the education system in an attempt to produce the
type of creative individuals who will deliver innovations into the future, there is a
parallel effort to develop the research base and the commercialisation skills needed to
quickly bring new intellectual property to market.

Innovation is at the heart of Finland‟s Economic strategy as exemplified by TEKES,
the government agency charged with channelling Euro 425 million per year into a
range of R&D projects. The focus is on building networks and collaborations with
key individuals around the world often at the top universities in the US (MIT,
Stanford etc.) It is individual academics who often hold the key to research success
and institutions tend to be internationally competitive in just a few areas. Increasingly
the aim is to identify these niche areas and focus research resources accordingly.

However, exploiting this research is a challenge and there is a focus on the skills
required to establish and grow new enterprises. Over the next generation, Finland
anticipates the decline and closure of 60,000 businesses currently in existence and
consequently new, high-growth starts are needed to replenish the stock. Canada too is
increasingly concerned about the number of Highly Qualified Personnel (HQP) it has
to support the innovation agenda and individuals who can fully exploit R&D
expenditure. It is using a number of approaches to build its capacity in this area,
including economic immigrant selection and increasing the number of PhDs funded at
its top universities. The role of the individual in the process is highlighted by the
Industry Canada expert who told us “Commercialization occurs when the supply of
high-quality ideas and research is met by a demand from competitive businesses for
innovation. People and excellence connect ideas to the market-place”

Successful examples of knowledge transfer and university spin- outs often depend on
individuals and their skills/experience. Industry Canada is convinced that success is
entirely due to the „quality‟ or skills of the individuals hired to manage the
commercialisation process within each institution. Those most successful have
business experience and are extremely well connected. Academic entrepreneurs need
to quickly develop business skills and a high level programme is in place to facilitate
this, including sabbatical opportunities which enable them to focus on their business
idea for a period with the option of returning to their academic career if they wish to
do so.


International business skills

Starting a business is challenging enough, but growing it to a company of scale
requires an even broader range of skills. Denmark has a relatively good record on
start-ups but struggles to grow them. Growth is inherently risky and requires specific
expertise which is in short supply (e.g. knowledge and experience of global markets,
sophisticated financing arrangements, recruitment and selection expertise – in short,
world class management).



                                           35
Taiwan‟s International Trade Institution brings together business and language skills.
This represents a planned approach to ensure that the economy has the mix of
language skills necessary to capitalise on key markets. High levels of subsidy with
close business links and the improved employment prospects make these courses very
popular. It is essentially an academy for global management.

China also faces huge challenges in accessing individuals with International Business
skills and is increasingly sourcing such individuals from abroad including through
acquisitions of foreign companies and strategic FDI attraction. Exposure to
international markets and business practices is considered crucial and China is
seeking every opportunity to have its managers trained in western companies at home
and abroad.

Canada has an initiative aimed at attracting ex-pats back home and is particularly
interested in individuals with skills in international markets. Ottawa has had a lot of
success in this effort, especially bringing people back from the US. Ottawa‟s
transformation into an entrepreneurial cluster was sparked by a downturn in the
economy which triggered some large scale redundancies at Nortel and coincided with
a privatisation of the government‟s HR functions. The skills developed by these
people in large corporations provided the ideal basis for a new entrepreneurial career.
In 1995 Ottawa had no resident VC firms – today there are 12, servicing the large
number of technology start-ups which have emerged. There is now considerable
movement of staff between the public and private sectors which further develops
skills and makes for a more dynamic entrepreneurial economy.

The need to manage business succession is also a key requirement in many countries
– with those family members most likely to take over not always equipped with the
necessary skills. This is particularly important in economies with a large number of
family-owned SMEs such as rural US and Canada.




                                          36
Singapore’s Action Community for Entrepreneurship

While a number of the initiatives outlined above are being implemented to a varying
degree in each of the countries we visited, Singapore can boast the most
comprehensive strategy we came across.                 The Action Community for
Entrepreneurship (ACE) is a joint effort between the public and private sector
focusing on the regulatory environment, financial support, culture change and
internationalisation (i.e. growing local companies). The vision as articulated by the
Minister for entrepreneurship is “A Singapore where our people are quick to seize
opportunities willing to take calculated risks to create something new and blaze new
paths to success. Society will welcome those who dare to be different, and celebrate
those who succeed brilliantly. But it will also accept those who meet setbacks and
encourage them to pick themselves up and try again. It is a vision for everyone, of
every age.”

There is much attention being paid to the education system and the need to encourage
independent learning as the means of nurturing the skills necessary for
entrepreneurship in later life. “Entrepreneurship is still as valid as ever, it will
become more and more important in the next phase of Singapore‟s economic growth”
- Singapore Minister of State for Trade and Industry. The Minister stresses the need
for developing entrepreneurial skills within existing businesses too – “In today‟s
world, where product differentiation and distinction through innovation give the edge
over the competition, entrepreneurs are the key to companies‟ success and growth.”

The Government is trying to transform the cream of its workforce from disciplined
corporate team-players who serve multinationals into free-thinking, risk-taking
entrepreneurs.



Training for entrepreneurs

Entrepreneurs learn best from their peers – hence the importance of networking
opportunities. In the Bay area there are over 200 networking organisations with at
least 3 or 4 events taking place every week. Examples like the Stanford
Entrepreneurial Network are hugely influential in generating new business starts. It
is in these more informal environments where they develop their skills, share
experiences and learn how to grow their business. Starting a new venture and
developing it presents many challenges and the dynamic training environment of peer
networks serve to increase the chances of success. Also, as many of the
entrepreneurial businesses in the Bay area are in „young industries‟ (e.g. Biotech),
they tend to have a less systematic approach to training. In any case, the skills
demands of these businesses can be difficult to predict much in advance and a „just in
time‟ approach to training is more appropriate.


Perhaps the most comprehensive work on identifying the innovation and
entrepreneurial skill set and associated training material has been carried out by the


                                         37
Conference Board of Canada. They have mapped these skills and developed a range
of curriculum which are now used extensively by SMEs, educators and students. The
Innovation/Entrepreneurial skills profile isolates the unique contribution that an
individual‟s skills, attitudes and behaviours make to an organisation‟s innovative
performance by focusing on creativity and continuous improvement skills, risk-taking
skills, relationship building skills and implementation skills. The Conference Board
says that, “The skills of individuals create an organisation‟s capacity to innovate”.


Management and leadership

One of the issues we attempted to discuss throughout the tour was the role of
management and leadership skills. The Leitch review highlights the importance of
management and leadership skills - “While there are examples of very good
management, the UK has some serious problems with management and leadership.”
Deficiencies in management practice have been linked with the UK‟s poorer
productivity performance relative to other countries. Research from LSE and
McKinsey (2005)x showed while management practice varied widely within countries
and sectors, the UK ranks behind the US, Germany and France. Indeed the US
workforce has a similar qualifications make up to the US, with a relatively high
proportion of low-skilled workers. Better quality management may be one of the
factors contributing to the US-UK productivity gap. Although many of the
organisations we met recognised the importance of management and leadership, no
specific initiatives to promote these skills were mentioned.




                                         38
                           CHAPTER 5 – CONCLUSIONS

The original aim of the study tour was to explore what other countries are doing to
develop the skills of their workforce to meet the ever changing requirements of an
increasingly globalised economies. Many have argued that the UK has a skills
deficiency, particularly at low and intermediate levels, which is not only holding back
its current competitiveness but may damage its position in the future. Faced with these
concerns any lessons that could be learned from examples of best practice in other
countries would be highly valuable.

It became clear at the very early stages of the tour that there is no one country that
appears to have a genuine lead in skills policy. Countries actually appear to have been
eyeing each other up over many years. As a result, what we observed were countries
using a wide range of approaches and initiatives that already seem to borrow ideas
from others. It had often become difficult to identify where the true origins of any
policy rest such is the extent of the diffusion of ideas. This is not really too surprising
given the number of international visits made by academic and policy makers in the
skills arena. Many of the people we met had participated in their own study tours to
the UK and elsewhere in the world. In producing the recent Leitch Review of skills,
visits were made to many of the countries we visited. If there really were a unique and
definitive solution to workforce skills, somebody would have found it by now.

The fact that so many countries seem to be wrestling with the same issues suggests
they are the right ones to be looking at. Top of this list appears to be compulsory
education. Despite our initial reluctance to focus on this we were quickly forced to do
so by almost every organisation we met over the six weeks. Providing more people
with a solid basic education is seen as being a crucial part of any long term solution to
developing both a skilled and flexible workforce.

Simply producing a higher quantity of people with compulsory education is not
enough. The qualifications that people obtain during this phase of education need to
prepare them for employment. This is where employers have a strong role to play in
terms of providing feedback on how suitable new entrants to the labour market are.
Increasingly employers are expressing concerns about the skills of university
graduates in addition to those with only a compulsory education. An extreme example
of this was observed in the US where university graduates often enrol in community
college courses, which typically involve greater engagement with local employers, to
further develop the skills for employment. Embedding sets of employability and
generic skills into the education system appears to be a priority in many countries. To
successfully achieve this and keep it relevant to changing market conditions requires
strong dialogue and cooperation between education providers and employers.

As a way of increasing this employer engagement many of the countries visited adopt
some form of sectoral approach to skills development. This often exists alongside
national and local policy. The existence of the UK‟s Sector Skills Councils (SSCs)
was mentioned as a positive model by many of the people we met, suggesting that the
proposal in the Leitch Review to increase their role is a suitable direction to take.

Most countries are facing similar demographic changes with ageing populations and
smaller cohorts progressing through the education system into employment. It has


                                            39
therefore become necessary to widen labour market participation. Perhaps the most
commonly referred to group are young people who are not in education, employment
or training. As in the UK, some countries have quite specific schemes to encourage
engagement amongst this group of individuals. But raising participation is not just
about young people – there are strong efficiency and equity grounds for reaching out
to women with childcare responsibilities, the disabled, and those from ethnic
minorities. Government clearly has a role in this, but it also requires a cultural change.
Individuals should be encouraged to take greater responsibility for developing their
skills throughout their working lives. There are fewer jobs for life and individuals
should recognise that they may experience several job and career changes, all of
which will require continual skills development.

Any cultural change, however, should also extend to employers. Government may be
able to provide an education system that prepares people for work, and individuals
can further develop their skills through lifelong learning, but employers also need to
invest in their own workforce to develop the skills for their business. Employers often
do not recognise the benefits from skills and fail to have training plans that feed into
their business plans. In this case it is not just a cultural change for employers – it
makes business sense to invest in the workforce.




                                           40
       ANNEX – DESTINATIONS AND ORGANISATIONS VISITED


HELSINKI, FINLAND

     Ministry of Education
     National Board of Education
     Confederation of Finnish Industries (EK)
     TEKES (Gov R&D agency)
     Ministry of Interior (Dept of regions and public administration)
     Labour Institute for Economic Research
     TIEKE (Finnish Information Society Development Centre)
     Helsinki University of Technology
     Ministry of Labour
     City of Helsinki (Mayor‟s Office)

COPENHAGEN, DENMARK

   Dansk Industi
   Ministry of Education
   Danish Confederation of Trades Union (LO)

SHANGHAI, CHINA

   British Chamber of Commerce
   Zhaopin.com (HR agency)
   LawInn (headhunter – originally for lawyers)

SINGAPORE

     Singapore Human Resources Institute (SHRI)
     Economic Development Board (EDB)
     National Trades Union Congress (NTUC)
     Workforce Development Agency (WDA)
     IE Singapore
     SPRING (Standards Productivity and Innovation)
     A*STAR Graduate Academy

TAIPEI, TAIWAN

     Department of Council for Labour Affairs
     Council of Economic Planning and Development
     Industrial Development Bureau, Ministry of Economic Affairs
     External Trade Development Council

TOKYO, JAPAN

   Keidanren (CBI equiv.)
   RENGO (TUC equiv.)
   Ministry of Health, Labour and Welfare


                                        41
    JETRO (Japan External Trade Organization)
    Polytechnic University (also under the Ministry of Health, Labour and
     Welfare)
    METI (Ministry of Economics, Trade and Industry)
    Dinner at British Embassy (3 professors, METI and Cabinet Office)

SAN FRANCISCO, USA

      Employment Training Panel
      City College of San Francisco (Community College)
      ICF Consulting (City of San Francisco‟s economic development strategy)
      Bay Bio Institute
      Stanford University

OTTAWA, CANADA

Canada Labour and Business Centre (CLBC) hosted roundtable including:
        CLBC
        Association of Canadian Community Colleges
        Human Resources and Skills Development Centre (HRSDC)
        Canadian Manufacturers and Exporters
        Conference Board of Canada

Industry Canada hosted event (3 sessions) including:
    Industry Canada (various)
    HRSDC
    Federal Economic Development for Northern Ontario (FedNor)
    Western Diversification
    Technology Partnerships Canada
    Natural Sciences and Engineering Research Council of Canada (NSERC)
    Queens University
    Ottawa Centre of Research and Innovation (OCRI)

BOSTON, USA

    MIT

WASHINGTON DC, USA

      National Centre for Education and the Economy
      Greater Washington Initiative
      Centre for Law and Social Policy
      US Department for Vocational and Adult Education
      Information Technology and Innovation Foundation
      International Economic Development Council
      National Association of Manufacturers
      Small Business Administration




                                       42
MINNEAPOLIS - ST PAUL'S, USA

Humphrey Institute of Public Affairs hosted roundtable discussion, including:
   Humphrey Institute of Public Affairs
   University of Minnesota Extension Service
   Department for Employment and Economic Development (DEED) - Micro-
     economics for competitiveness seminar
   Minnesota State Colleges and Universities
   Inver Hills Community College




                                      43
i
  DTI Productivity and Competitiveness Indicators
ii
    OECD Education at a Glance
iii
    Prosperity for all in the global economy – world class skills, HMT
iv
    2005 Skills Gap Report – A Survey of the US Manufacturing Workforce, NAM
v
    http://www.nam.org/s_nam/bin.asp?CID=86&DID=237450&DOC=FILE.PDF
vi
    Economist Intelligence Unit (2007) CEO Briefing: Corporate priorities for 2007 and beyond
vii
     Dearden L, McGranahan L and Sianesi B (2004) An In-Depth Analysis of the Returns to National
Vocational Qualifications Obtained at Level 2. Centre for the Economics of Education
viii
     Learning and Skills Council (2006) National Employers Skills Survey 2005
ix
    Green F and McIntosh S (2006) Non-Certified Learning and Skills: Incidence in the UK, Variation
across Countries and Links to Productivity. A report for the DTI
x
    Bloom, Dorgan, Dowdy, Van Reenan, Rippin (2005) Management practices across firms and nations




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