How Skills Gaps Impact Firm Performance In The Arab World

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In the Arab World there is a poor match between regional human capital and the skills demanded by employers with many firms expressing concern that they face internal employee skills deficiencies that …

In the Arab World there is a poor match between regional human capital and the skills demanded by employers with many firms expressing concern that they face internal employee skills deficiencies that limit performance, a phenomenon that has been popularly labeled as a “skills gap.” Many countries in the Arab World rank amongst the countries facing the most severe skills gaps in the world. While several surveys in the Arab World have identified soft skills and more basic employability skills lacking in the workforce, there is a large empirical absence, both globally and in the Arab World, of studies regarding the impact of skills gaps on firm-level performance. This analysis will attempt to apply empirically driven international research to the case of the Arab World to determine the operational impacts of skills gaps on Arab companies. With the belief that companies and governments require more rigorous empirical evidence to translate management research into practices that solve organizational problems, the paper will conclude with suggestions on proactive strategies to close labor skills gaps to increase the competitiveness of key industries which face skills gaps.

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  • 1. How Skills Gaps Impact Firm Performance in the Arab WorldAbout Us Tahseen Consulting is an advisor on strategic and organizational issues facing governments, social sector institutions, and corporations in the Arab World. You can read more about our capabilities at tahseen.ae ▲Public Sector The operational impacts of skills gaps on Arab companiesSocial SectorCorporate ResponsibilityCONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of Tahseen Consulting is strictly prohibited www.tahseen.ae
  • 2. Agenda Overview • Factors affecting demand for skilled labor1 Prevalence of • Global prevalence of skills gaps Skills Gaps • Presence of skills gaps in the Arab World • What international experience tells us about the impact of2 Impact on Firm skills gaps on private sector firm performance Performance • Impact of economic growth on skills Causes of • The case for government intervention in skills formation3 Skills Gaps • Skills ecosystem approach to structuring a proactive response Reducing • Systemic inefficiencies may stall knowledge-based economic development4 • Policy responses to reducing skills gaps based on international experience Skills GapsAbstractIn the Arab World there is a poor match between regional human capital and the skills demanded by employers with many firms expressing concern that they faceinternal employee skills deficiencies that limit performance, a phenomenon that has been popularly labeled as a “skills gap.” Many countries in the Arab World rankamongst the countries facing the most severe skills gaps in the world. While several surveys in the Arab World have identified soft skills and more basic employabilityskills lacking in the workforce, there is a large empirical absence, both globally and in the Arab World, of studies regarding the impact of skills gaps on firm-levelperformance. This analysis will attempt to apply empirically driven international research to the case of the Arab World to determine the operational impacts of skillsgaps on Arab companies. With the belief that companies and governments require more rigorous empirical evidence to translate management research into practicesthat solve organizational problems, the paper will conclude with suggestions on proactive strategies to close labor skills gaps to increase the competitiveness of keyindustries which face skills gaps. 2
  • 3. Expanding trade, technological change, and changing forms of workorganization have increased the relative demand for skilled workers globally Expanding International Trade 1 • Trade has increased dramatically • Globalization increases the importance of skills rather than resources • Trade-induced flow of employees from importing, low skill, labor intensive 4 industries, to higher skill, export industries 2 Other factors Skill-biased • Decline in unionization Technological Change • Tinbergen’s Race: • Pairing skilled workers demand and supply of with capital raises different grades of labor Increasing Global productivity governed by trade and Demand for Skilled Labor • Globalization led to technical progress massive investment • FDI • Countries adopting technology from abroad Evolving Forms of Work Organization 3 • Firms embracing decentralized decision making, less hierarchy, and autonomy • Communication, decision making, social and problem solving skills are needed in addition to technical skillsSource: Shankar, R. and A. Shah (2001), David H. Autor (1998), Ashton, D., F. Green, et al. (1999), Ashton, D. N. and J. Sung (2002) | 3
  • 4. These conclusions are supported by macroeconomic data showing the growth of skilled workers globally, international trade, and investment in fixed capital Evolution of Skilled Versus Unskilled Work Trade as a % of Global Domestic Product Gross Fixed Capital Formation Number of workers in millions Exports and imports as a % Glob. Dom. Prod. Investment in fixed capital in trillions1,000 60 3,000 Investment in 900 950 960 960 58 920 fixed capital assets 2,715 891 2,500 800 56 Trade Growth 57 by enterprises, 57 2,4432,415 790 2% CAGR government and 700 741 Skilled Workers 2,223 54 2,000 households 600 653 6% CAGR 54 10% CAGR 1,928 52 500 1,500 1,639 52 50 400 457 1,358 420 Unskilled Workers 1,192 48 49 1,000 300 49 49 -.38% CAGR 48 1,041 928 200 46 500 100 155 160 138 146 177 171 171 44 131 126 102 0 42 0 1999 00 01 02 03 04 05 06 07 2008 2000 01 02 03 04 05 06 2007 2000 01 02 03 04 05 06 07 08 2009 Source: International Labor Organization, World Bank | 4
  • 5. In many countries, evidence points to an unmet quantitative demand for highlyskilled workers, known as a “skills shortage,” as well as “skills gaps” in whichfirms face qualitative internal skills deficiencies that limit performance Skills Gaps Skills Shortage Skill Shortage Skills Gap Desired Quantity of Internal Workers Workforce Current With a Quantity of Skill Level Internal Particular Workers Workforce Skill With a Skill Level Required Particular Skill Available • Employers feel that their existing workforce has inadequate • Genuine lack of adequately skilled individuals available skill types/levels to meet their business objectives in the labor market with the type of skill being sought • New entrants to the labor market trained and qualified for • Employers unable to recruit staff with the skills they occupations but still lack a variety of the skills required are looking for at the going rate of pay 5 | 5
  • 6. Skills gaps are globally widespread with the Arab World, Latin American andCaribbean, and the Eurasian regions indicating the highest incidence Skills gaps are globally prevalent … … and appear to be getting worse Prevalence of Skills Gaps by Region % of firms indicating they face a major or very severe skills gap The World Bank Enterprise Survey, a global survey of firms with more than five 15.01% 24% employees in the manufacturing and services 23.98% sectors, indicates skills gaps are globally becoming a more frequent phenomena: 16.50% • Of 43,705 companies surveyed in 99 countries from 2006-2009, 26.7% indicated that a skills gap 20.29% is either a major or severe obstacle to the current 17.81% operations of their business 19.65% • Of 66,000 firms surveyed in 143 counties from 2002-2005, 14% of firms responded this way Middle East and North Africa Latin america and the Carribean • This represents a nearly 90% increase in firms Europe and Central Asia Africa indicating that they face a skills gap East Asia and the Pacific South Asia Source: Author’s calculations from the World Bank Enterprise Survey | 6
  • 7. Synthesizing data from the World Bank and regional reports, many of the Arabcountries rank extremely high on a global ranking of skills gaps prevalence % of Total Firms Suveyed % of Total Firms Suveyed % of Total Firms Suveyed Rank Country and Survey Year Which Have a Major or Rank Country and Survey Year Which Have a Major or Rank Country and Survey Year Which Have a Major or Very Severe Skills Gap Very Severe Skills Gap Very Severe Skills Gap 1 Brazil 2009 73.03% 42 Oman 2007 MBRF 33.00% 83 Angola 2006 20.00% 2 Kuwait 2007 MBRF 68.00% 43 Chile 2006 32.06% 84 Bangladesh 2002 19.83% 3 Egypt 2007 MBRF 66.00% 44 Uzbekistan 2008 31.97% 85 Tanzania 2006 18.38% 4 Chad 2009 57.33% 45 Peru 2006 31.33% 86 Lebanon 2007 MBRF 18.00% 5 Belarus 2008 55.31% 46 China 2002 30.73% 87 Timor Leste 2009 18.00% 6 CapeVerde 2009 53.85% 47 Dominican Republic 2005 30.67% 88 Mongolia 2009 17.96% 7 Saudi Arabia 2007 MBRF 53.00% 48 Estonia 2009 30.40% 89 Mozambique 2007 17.95% 8 UAE 2007 MBRF 51% 49 Tunisia 2007 MBRF 30.00% 90 Afghanistan 2008 17.94% 9 Kazakhstan 2009 50.18% 50 Malawi 2009 30.00% 91 Ethiopia 2002 17.90% 10 Russia 2009 48.90% 51 Thailand 2004 29.96% 92 Serbia 2009 17.78% 11 Argentina 2006 48.35% 52 Egypt 2004 29.80% 93 Togo 2009 17.42% 12 Morocco 2007 MBRF 47.00% 53 Kyrgyz Republic 2009 29.36% 94 Sierra Leone 2009 17.33% 13 Romania 2009 46.21% 54 Guatemala 2006 29.31% 95 Lesotho 2009 17.22% 14 Algeria 2007 MBRF 45.00% 55 Vanuatu 2009 28.91% 96 Bhutan 2009 17.20% 15 Mauritius 2009 44.97% 56 Yemen 2010 28.72% 97 Ireland 2005 15.63% 16 Micronesia 2009 44.12% 57 Kenya 2003 27.64% 98 Fiji 2009 15.24% 17 Ukraine 2008 43.48% 58 Slovak Republic 2009 27.64% 99 Mexico 2006 15.14% 18 Lithuania 2009 43.12% 59 Samoa 2009 27.52% 100 Dem. Rep. of Congo 2006 14.71% 19 Moldova 2009 42.98% 60 Venezuela 2006 27.40% 101 Madagascar 2009 14.61% 20 Tonga 2009 42.67% 61 El Salvador 2006 27.27% 102 India 2006 14.47% 21 Latvia 2009 41.70% 62 Georgia 2008 27.08% 103 Kosovo 2009 14.44% 22 Jamaica 2005 41.57% 63 Turkey 2008 26.82% 104 Nicaragua 2006 14.44% 23 Gabon 2009 41.34% 64 Bolivia 2006 26.26% 105 Panama 2006 14.24% 24 Congo 2009 40.40% 65 Algeria 2002 25.47% 106 Macedonia 2009 14.21% 25 Guyana 2004 40.37% 66 Honduras 2006 25.46% 107 Burundi 2006 14.07% 26 Bahrain 2007 MBRF 40.00% 67 Colombia 2006 25.40% 108 Spain 2005 13.81% 27 Niger 2009 38.67% 68 Benin 2009 25.33% 109 CostaRica 2005 13.41% 28 Lebanon 2006 37.96% 69 Czech Republic 2009 25.20% 110 Swaziland 2006 13.36% 29 Jordan 2007 MBRF 37.00% 70 Laos 2009 25.00% 111 Liberia 2009 13.33% 30 Syria 2003 36.33% 71 Malaysia 2002 25.00% 112 Guinea Bissau 2006 13.21% 31 Paraguay 2006 36.22% 72 Armenia 2009 24.06% 113 Slovenia 2009 13.04% 32 BurkinaFaso 2009 35.79% 73 Namibia 2006 23.71% 114 Pakistan 2002 12.76% 33 Zambia 2002 35.75% 74 Uruguay 2006 23.51% 115 Guinea 2006 12.56% 34 Cameroon 2009 35.26% 75 Botswana 2006 22.22% 116 Peru 2002 12.48% 35 Qatar 2007 MBRF 35.00% 76 Mauritania 2006 22.03% 117 Portugal 2005 12.39% 36 Tajikistan 2008 35.00% 77 Croatia 2007 21.64% 118 Azerbaijan 2009 12.37% 37 Oman 2003 34.63% 78 SriLanka 2004 21.33% 119 Gambia 2006 11.49% 38 Poland 2009 34.51% 79 Morocco 2004 21.06% 120 Montenegro 2009 11.21% 39 Albania 2007 33.88% 80 Mali 2003 20.78% 121 Albania 2005 10.45% 40 Ecuador 2006 33.13% 81 Bosnia and Herzegovina 2009 20.50% 122 Rwanda 2006 10.38% 41 Ivory Coast 2009 32.32% 82 Bulgaria 2009 20.14% 123 Uganda 2006 9.24% *Footnote: Data are from two sources and caution must be used in interpretation and comparison Data Source: MBRF-PWC Report World bank Enterprise Survey Source: Author’s calculations from the World Bank Enterprise Survey | 7
  • 8. Agenda Overview1 Prevalence of Skills Gaps • What international experience tells us about the impact of2 Impact on Firm skills gaps on private sector firm performance Performance3 Causes of Skills Gaps4 Reducing Skills Gaps
  • 9. International studies show skills gaps have a significant negative impact onproductivity, capital investment, and R&D Effect of Higher Industry, Product Type, Effect of Skills Effect of Skills Gaps on Productivity Capacity Utilization, Innovation Gap Educational Qualifications 22.8% less Produced quality product/service • A significant negative impact on productive 51% less productivity depending upon the Producing considerably below capacity productive industry, product type, level of •Text Leads in developing 5% more innovation, and capacity utilization Products/Processes productive Manufacture of leather and leather 39.5% less 20% less • Dampen productivity in capital intensive products productive productive Manufacture of Fabricated Metal industries as well as labor intensive 36.7% less 9.1% less Products, Except Machinery and productive productive Equipment • Lead to underutilization of capital, with Manufacture of Machinery and 49.9% less firms operating below full capacity Equipment Not Elsewhere Classified productive Manufacture of Office Machinery and 27.5% less • Global competitiveness suffers due to Computers industry Manufacture of Rubber and Plastic productive 38.6% less lower productivity – For example, in the Products productive UK, foreign owned plants have higher Manufacture of Wearing Apparel; 10.2% more levels of productivity than British owned: Dressing and Dyeing of Fur industry productive US-owned plants are 15% more Manufacture of Wood and Products of Wood and Cork, Except Furniture; 13.7% more productive; other foreign owned plants Manufacture of Articles of Straw and productive are 14% Plaiting Materials Manufacture of Motor Vehicles, 8.1% less • Reduce incentives to invest in capital Trailers and Semi-trailers productive and R&D due to complementarities Manufacture of Machinery and 9.7% less between skilled labor and capital Equipment Not Elsewhere Classified productive 16% less Manufacture of Tobacco Products productive Source: (Harris, Li et al. 2006) 9 | 9
  • 10. Agenda Overview1 Prevalence of Skills Gaps2 Impact on Firm Performance • Impact of economic growth on skills Causes of • The case for government intervention in skills formation3 Skills Gaps4 Reducing Skills Gaps
  • 11. This conclusion is further supported by rampant market failures observedinternationally that lead to underinvestment in human capitalSource ofMarket Failure Key Areas of FailurePoor 1 • Poor macroeconomic policy and unfavorable business environments: Technical skills accumulation requires sound macroeconomic management, high rates of investment, outward looking trade regimes, and open domestic marketsMacroeconomicPolicy • Misalignment of education and training system with economic development: The education and training system and policies must be aligned with industrial needs • Overreliance on foreign direct investment and foreign technology: FDI cannot solely drive the industrial sector; Skills and capabilities of domestic competing and supplier firms must be upgraded as wellInsufficient 2 • Externalities - The benefits of training investments may accrue to other partiesIndividual • Information gaps and uncertainty: Individuals may not know the future value of skills investments, the return on particular skills,Investment and future skills needs • Risk aversion: Individuals may prefer more certain short term returns to available jobs • Lack of certification of skills acquired during enterprise training: This makes the investment in such training less attractive, since its value to other firms is reduced. • Capital market deficiencies: Individuals may not be able to finance their learning costs and foregone earnings, because capital markets lack the information and monitoring capacity • Labor market rigidities: Artificially compressed wage scales; unions or minimum wage legislation that raise wages above the market level, low employer demand for skilled labor; when pay and status are not linked to the attainment of qualifications may reduce the incentives of workers to invest in their own training (Research 1996) Source: (Acemoglu and Pischke 1996; Research 1996; Lall 1999; Ziderman 2003) | 11
  • 12. Sources ofMarket Failure Key Areas of FailureEducation and 3 • Supply-Demand Informational Gaps: Lack of information on current and future skill trends in industry and demands from students due to rapid technical and organizational change or government industrial policyTraining SystemMisalignment • Insufficient Funding: Capital market deficiencies in raising the funding for better standards • Prohibitive Costs: High costs of educational services provided • Low Teaching Standards and Curricula Irrelevancy: In the public sector training institutions, danger of bureaucratic and rigid management, poor remuneration and inadequate incentives for trainers, lack of interaction with the market, and low standards leading to irrelevant curricula, poor teaching and equipment, and an emphasis on abstract rather than practical training • Lack of Quality Standards: In the private sector system, risks of variable and unsatisfactory standards in the absence of effective monitoring 4 • Inadequately educated workforce: Low absorptive capacity by poorly educated workersFailure of Firmsto Invest in • Inadequately educated management: Low educational qualifications on the part of employers and managers who underestimateWorkforce the returns to training • Informational gaps to calculate training returns: Lack of appreciation of or information on the benefits of training, latest technology, and skills in relevant activities • Lack of training capacity and needs assessment: Lack of training materials or teachers in-house or Inability to form efficient training programs in line with changing skill and technology needs • Lack of private training providers: Lack of specialized institutions to provide appropriate training at reasonable cost or lack of interactions between these institutions and enterprises • Cost Constraints: Lack of finance to cover costs of training. • Externalities: If trainees are likely to leave for better-paid jobs after training, a bias towards providing training in specific, non- transferrable skills or decreased levels of training emerges (Acemoglu and Pischke 1996) • Low-skill production methods supported by poor economic policy: Lack of technological upgrading, with enterprises content to stay with existing technologies, equipment, and skill levels exacerbated by policy that stifles competition and exposure to markets | 12
  • 13. In the Arab World, for example, higher education is facing several challenges starting from its underlying environment through to supply and consumption Education – Key Findings Consumption and Environment, Funding and Institutions Related Beneficiaries Infrastructure (Education Supply) (Education Demand)Big spenders on education in order of magnitude: Universities account for at least 86% of the total More females than males are enrolled in higherJordan, Saudi Arabia, Tunisia, and Morocco number of students in higher education education; Only five countries in the Arab World have more male studentsAvg. regional expenditure per student is US$ 2,444, Teaching is didactic, with no emphasis on students Education is more developed in Jordan, Lebanon,OECD countries average US$ 14,027 per student becoming independent learner and critical thinkers Libya, and the Palestinian Territories, where enrollment is near 40% or aboveMany universities do not have sufficient Universities that teach in Arabic have limitedinstitutional resources for teaching and research choices regarding texts and other teaching material The higher the degree level, the larger the proportion who study abroad: 5.7% at the BA level, Current system does not reward faculty 13.0% at the MA level, and 34.4% at the Ph.D. levelCentralized educational systems are organized to performance and full time engagement infacilitate expansion rather than performance- academia The bigger education spenders in the region haveoriented systems with emphasis on quality higher quality domestic labor markets Arab scholarly, scientific, and professionalGovernments lack experience in policy and strategy organizations operate at a low level of activity Few partnerships between the private sector anddevelopment as well as in planning and education institutions which produce graduatesmanagement of higher education systems Institutions rely on faculty members educated with new and adaptable skills and who possess the abroad to enrich the education scene with a variety ability to continuously upgrade their skillsLeaders require accurate data to compare of intellectual background and educationalinstitutions, promote more informed decision practices There have been attempts to link higher educationmaking about programs, and formulate policies 100,000 faculty members in institutions of higher to development and social issues but they center education; 60% of them have PhDs; (40%) have on public awareness campaigns rather than on keyProfit-oriented, private institutions are not M.A.’s, but only a few (15.5% of both groups) hold changes in the curriculum or the communityadequately accommodated in educational policy professorial titlesand there are no governmental quality standards Legend Favorable Satisfactory Unsatisfactory Source: Author’s analysis | 13
  • 14. Similarly, many of the features necessary for an innovation system typical ofknowledge-based economies in high and medium income countries is lacking Funds to bring Commercialization Research Funds research to Research Funds Development and consumers Research Consumers Institutions Product Prototype Linkages to bring (Demand) (Supply) Commercialization Research Linkages research to Linkages consumers Research Corporate funds Corporate R&D Entrepreneurs Consumers IP developers Seed VC, Angels Corporations • Academics and Universities Researchers Professional Corporate R&D Industrial Funds Societies • Business National labs Technology transfer agencies Community Entrepreneurs SME’s • Government Govt. SciTech Tech. transfer bodies funds • The Public Govt. departments Late VC, PE • Press Science foundations To bridge this lack of infrastructure, several Arab countries have launched industry clustering Status initiatives. Examples include Dubaiotech and the Qatar Science Missing Weak Existing and Technology Park. Source: Adapted from DDIA R&D White Paper, 2004 | 14
  • 15. In addition to market failures and changing skills demands, public budgets,demographics, and skilling previous disadvantaged groups are key challengesto high skill, knowledge-based economic development in the Arab World Market Failures E&T systems failing to keep up with macroeconomic forces Government budgets ↓ High skill, innovation-based, knowledge economy Demographic change and high population growth rates Lack of skills of disadvantaged groups | 15
  • 16. Agenda Overview1 Prevalence of Skills Gaps2 Impact on Firm Performance3 Causes of Skills Gaps • Skills ecosystem approach to structuring a proactive response Reducing • Systemic inefficiencies may stall knowledge-based economic development4 • Policy responses to reducing skills gaps based on international experience Skills Gaps
  • 17. The skills ecosystem model, based on high skills environments such as SiliconValley, provides a useful conceptual and theoretical framework to summarizethe enabling factors and institutional players involved in skills formation High skill ecosystem that supports competitive advantage, innovation, and high wages Education and Firms Governments Individuals Training Providers Key Role Key Role Key Role Key Role See comparative advantage Vocational Education and Invest in skills because Responsive delivery at all levels through addressing skill Training, employment, and rewarding career that individuals and employers development and business industry policies that support opportunities are available value performance to generate high skills strategy innovation and growth Typical Stakeholders Typical Stakeholders •Universities/schools Typical Stakeholders • Training policy bodies •Training Organizations • A network of enterprises • Development agencies •Industry forums/bodies • Industry bodies and unions • Sector-specific agencies •Material/equipment suppliers • Supply chains • Local government •Technical/industry experts • Regional clusters/networks •Research Centres •Centres of Excellence Source: Adapted from (Windsor and Alcorso 2008) | 17
  • 18. Many countries in the Arab World are reaching the high skills equilibrium,knowledge-based economic stage; yet many are at intermediate stages 10 High Skills Equilibrium United Kingdom Germany 9 Ireland Employer Demand for higher, knowledge-intensive Estonia • Strong demand for high level skills High Spain Czech Republic Hungary • Skills formulation institutions and the Lithuania Korea, Rep. 8 Latvia Portugal enabling environment work in tandem Knowledge Economy Index Ranking) Slovak Republic Greece • Knowledge-based economies with skills (as proxied by the World Bank Poland Croatia Chile Bulgaria lower levels of skills gaps 7 United Arab Emirates Qatar Romania Uruguay Bahrain Malaysia Costa Rica Kuwait 6 Brazil Serbia Russia Turkey Medium Saudi Arabia Jordan Oman Mexico Africa South Belarus Very little research in 5 Colombia Lebanon this area despite the massive China growth in these countries Egypt Tunisia Sri Lanka Philippines Morocco Botswana Azerbaijan 4 Bolivia Vietnam Cape Verde Indonesia Syria Honduras India Guatemala Swaziland 3 Kenya Algeria Senegal Uganda Pakistan Ghana Low Skills Equilibrium Zambia Yemen Tanzania Lesotho Burkina 2 Nepal • Employers face few skill gaps in a Low Faso Mozambique Cambodia Bangladesh Ethiopia Eritrea predominantly low skilled workforce Rwanda Guinea • Little incentive to participate in 1 education and training and raise qualification levels and aspirations 0 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00% Low Medium High % of firms with sufficient internal skills levels (1- % of firms reporting major or very severe skills gaps) | 18
  • 19. International experience suggests several policy options for intervention intraining markets Policy Options Government GovernmentReason for Intervention Subsidy of Training Provision of Training Complementary PoliciesExternalities NoneProperty rights (employer Levy-grant schemesfear of poaching)Market imperfections Deal with sources of(economic and social imperfections ifpolicy distortion) politically possibleInadequate Firm-based Build firm trainingtraining capacity; levy-grant schemesWeak private training Build up private trainingprovision capacityCreate equal opportunity Reduce subsidies to trainees peers, selective scholarshipsDisadvantaged groups Targeted training subsidies; employment creation; Source: Ziderman (2003) income redistribution | 19
  • 20. Traditional theories of skill formation provide some prescriptive guidance forhuman capital development shedding light on how skills gaps can occur butfall short due to challenges and changes brought on by macroeconomic forcesTheories Key Arguments/Approaches Takeaways • Look at effective institutional • High skills production systems are architecture and ways in which associated with competitiveness and Educationalist education and training is strong economies; but low skills delivered alternatives may be necessary given constraints • Education and training are investments • Sufficiently high levels of general • Individuals/firms respond to individual incentives education are required by the workforce Economics and optimization to determine training for higher skill production • When examining a country’s training system must look at level of general education, how much of • Effective institutions are key elements of skills formation occurs in firms, regulation and skills formation systems regulatory institutions • There is no one ideal national education • Education provision, and training system ; forms are shaped by organizational structure, Sociological social, historical, and cultural, and industrial relations, and class organizational factors, as well as level of structure shape skills formation economic development • Policies and institutions combine • Without sufficient systemic incentives or in to create high skills systems the presence of labor market constraints Political Science both individuals and firms underinvest in education and training Source: Author’s analysis, (Ashton and Green 1996) | 20
  • 21. Human capital requirements increase as countries develop, as industrystructures become more diversified and competitiveness oriented, and as firms move from smaller patriarchal family structures to larger size firmsEconomic Development Phase and Key Government Economic Firm-level Competitive EnvironmentSource of Competitiveness Policy Priorities and Innovation Capacity Education and Training PrioritiesMiddle Income Countries • Improvements in • Export manufacturing and • Universal secondary education for literacy• Investment-driven growth infrastructure outsourced service exports and numeracy, language, mathematics,• High quality, technologically • Regulatory enablers of high value added goods and science skills advanced, flexible (customs, taxation, and services • Deepened vocational and technical production using imported company law) to allow • Technology/designs still education for post-secondary technicians technology global integration imported through licensing, • Life-long learning• Attraction of foreign capital • Reduction of red tape and JVs, FDI, and imitation • Enterprise-based training for SMEs and technology to support improved the legal system • Companies extend • Private training provision economic growth • Development of local capabilities more widely in • Develop managerial capacity financial markets the value chain • Strengthened training authority to administer skills development funds High income transition requires direct government involvement in fostering a high rate of innovation, through public as well as private investments in research and development, higher education, and improved capital markets and regulatory systems that support the start-up of high-technology enterprises.High Income Countries • Emergence of world-class • Companies innovate at the • Highly developed education with high• Innovation-driven growth research institutions world technology frontier, rates of science-based learning in general• High rate of innovation, • Dynamic R&D) sector develop unique product education adaptation, and linking higher education designs, sell globally • Technical education in engineering commercialization of new and innovative firms • Low reliance on foreign specializations technologies • Venture capital availability technology • Occupation-specific training provided• Production of innovative • Improving supply of • Decentralized and flexible privately, either within enterprises or products and services scientists and engineers organizational structures through trainee-financed private training• Knowledge-based • Sophisticated demand providers economies that generate conditions and intense • Complete professionalization of technological innovation local competition management with a break from family orientation Source: (Porter, Sachs et al. 2002), (Bank 2004) | 21
  • 22. • For Further Information About This ‫للمزيد من المعلومات عن هذا العرض التقديمي‬ • Presentation ‫للحصول على العرض التقديمي الكامل لهذا العرض التقديمي‬ To get a copy of the full presentation or to ‫يرجى االتصال بـ ويزلي شوالييه على العنوان‬ discuss the findings, please contact Wes wes.schwalje@tahseen.ae Schwalje wes.schwalje@tahseen.ae ‫• لالستفسار عن خدماتنا ولعرض أفكاركم علينا‬• For Inquiries About Our Services and Requests for Proposals ‫لالستفسار عن خدماتنا أو عرض أفكاركم علينا يرجى االتصال‬ ‫بنا عبر اإلنترنت باستخدام النموذج أدناه أو إرسال بريد إلكتروني‬ To inquire about our services or submit a request fikra@tahseen.ae ‫إلى‬ for proposal, please contact us using the online form or send an e-mail to fikra@tahseen.ae ‫• بالنسبة للمنظمات التي لديها اهتمام بالدخول في اتفاقيات شراكة‬• For Organizations Interested in Alliances ‫وفي تحالفات مع شركة تحسين لالستشارات‬ We are interested in opportunities where our ‫إننا مهتمون بالفرص التي يمكن من خاللها استخدام مهاراتنا‬ technical skills and expertise can be used to ‫وخبراتنا الفنية لتكميل أو لتنويع مهارات وخبرات شركائنا‬ complement or diversify those of potential ّ ‫المحتملين بما يمكن من السعي للحصول على تمويل حكومي أو‬ partners to pursue specific government funding opportunities, commercial contracts, or RFPs. To ‫عقود تجارية. لبدء نقاش حول الدخول في تحالف مع شركة‬ begin a discussion about entering into an alliance ‫تحسين لالستشارات يرجى االتصال بوليد العرادي على العنوان‬ with Tahseen Consulting, please contact Walid walid.aradi@tahseen.ae Aradi at walid.aradi@tahseen.ae ‫• بالنسبة للعاملين في الصحافة أو في وسائل اإلعالم‬• For Members of the Press or Media ّ ‫لالستفسارات المقدمة من قبل وسائل اإلعالم يرجى االتصال بـ‬ For media inquiries, please contact Wes Schwalje wes.schwalje@tahseen.ae ‫ويـزلي شـوالييه على العنوان‬ at wes.schwalje@tahseen.ae