Translating better skills into better economic and social outcomes (Lisbon Council 15 September 2011)
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Translating better skills into better economic and social outcomes (Lisbon Council 15 September 2011)
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Andreas Schleicher Special advisor to the Secretary-General on Education Policy Head of the Indicators and Analysis Division, ED
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Translating better skills into better economic and social outcomes (Lisbon Council 15 September 2011)
- 1. PIAAC Lisbon Council 15 September 2011 OECD Programme for the international assessment of adult competencies Andreas Schleicher 1 1 Lisbon Council 15 September 2011 Translating better skills into better economic and social outcomes
- 2. 2 2 Agenda for this morning Skills matter for individuals... because skills have an increasing impact on labour market outcomes and social participation … and for economies 15 September 2011 Andreas Schleicher because failure to ensure a good skills match has both Lisbon Council short- term consequences (skills shortages) and longer- term effects on economic growth and equality of opportunities … but better skills do not automatically translate into higher incomes and higher productivity PIAAC OECD Programme for the international assessment of adult competencies Success with converting skills into jobs and growth depends on whether – we know what those skills are that drive economic outcomes – the right mix of skills is being taught and learned in effective, equitable and efficient ways – economies and labour-markets fully utilize their skill potential – Governments build strong coalitions with the social partners to find sustainable approaches to who should pay for what, when and where .
- 3. PIAAC Lisbon Council 15 September 2011 OECD Programme for the international assessment of adult competencies Andreas Schleicher 3 3 more people to higher qualifications Many systems have done well in getting
- 4. 4 4 Australia Austria Belgium Canada A world of change – higher education Chile Czech Republic 30,000.0 Denmark Estonia 1995 Finland France 25,000.0 Germany 15 September 2011 Andreas Schleicher Greece Expenditure per student at tertiary level (USD) Lisbon Council Hungary 20,000.0 Cost per student Iceland Ireland Israel Italy 15,000.0 Japan Korea PIAAC OECD Programme for the international assessment of adult competencies Luxembourg 10,000.0 Mexico Netherland New Zealand Norway 5,000.0 Poland Portugal Slovak Republic 0.0 Slovenia Spain 0 10 20 30 40 50 60 70 Sweden Switzerland Graduate supply Turkey United Kingdom Tertiary-type A graduation rate United States
- 5. 5 5 Australia Austria Belgium Canada A world of change – higher education Chile Czech Republic 30,000.0 Denmark Estonia 1995 Finland France 25,000.0 Germany 15 September 2011 Andreas Schleicher Greece Expenditure per student at tertiary level (USD) Lisbon Council Hungary 20,000.0 Cost per student Iceland United States Ireland Israel Italy 15,000.0 Finland Japan Korea PIAAC OECD Programme for the international assessment of adult competencies Luxembourg Japan 10,000.0 Mexico Netherland New Zealand Norway 5,000.0 Poland Portugal Slovak Republic 0.0 Slovenia Spain 0 10 20 30 40 50 60 70 Sweden Switzerland Graduate supply Turkey United Kingdom Tertiary-type A graduation rate United States
- 6. 6 6 Australia Austria Belgium Canada A world of change – higher education Chile Czech Republic 30,000.0 Denmark Estonia 2000 Finland France 25,000.0 Germany 15 September 2011 Andreas Schleicher Greece Expenditure per student at tertiary level (USD) Lisbon Council Hungary 20,000.0 Iceland Ireland Israel Italy 15,000.0 Japan Korea PIAAC OECD Programme for the international United Kingdom assessment of adult competencies Luxembourg 10,000.0 Mexico Netherland New Zealand Norway 5,000.0 Poland Portugal Slovak Republic 0.0 Slovenia Spain 0 10 20 30 40 50 60 70 Sweden Switzerland Turkey United Kingdom Tertiary-type A graduation rate United States
- 7. 7 7 Australia Austria Belgium Canada A world of change – higher education Chile Czech Republic 30,000.0 Denmark Estonia 2001 Finland France 25,000.0 Germany 15 September 2011 Andreas Schleicher Greece Expenditure per student at tertiary level (USD) Lisbon Council Hungary 20,000.0 Iceland Ireland Israel Italy 15,000.0 Australia Japan Korea PIAAC OECD Programme for the international assessment of adult competencies Luxembourg 10,000.0 Mexico Netherland New Zealand Norway 5,000.0 Poland Portugal Slovak Republic 0.0 Slovenia Spain 0 10 20 30 40 50 60 70 Sweden Switzerland Turkey United Kingdom Tertiary-type A graduation rate United States
- 8. 8 8 Australia Austria Belgium Canada A world of change – higher education Chile Czech Republic 30,000.0 Denmark Estonia 2002 Finland France 25,000.0 Germany 15 September 2011 Andreas Schleicher Greece Expenditure per student at tertiary level (USD) Lisbon Council Hungary 20,000.0 Iceland Ireland Israel Italy 15,000.0 Japan Korea PIAAC OECD Programme for the international assessment of adult competencies Luxembourg 10,000.0 Mexico Netherland New Zealand Norway 5,000.0 Poland Portugal Slovak Republic 0.0 Slovenia Spain 0 10 20 30 40 50 60 70 Sweden Switzerland Turkey United Kingdom Tertiary-type A graduation rate United States
- 9. 9 9 Australia Austria Belgium Canada A world of change – higher education Chile Czech Republic 30,000.0 Denmark Estonia 2003 Finland France 25,000.0 Germany 15 September 2011 Andreas Schleicher Greece Expenditure per student at tertiary level (USD) Lisbon Council Hungary 20,000.0 Iceland Ireland Israel Italy 15,000.0 Japan Korea PIAAC OECD Programme for the international assessment of adult competencies Luxembourg 10,000.0 Mexico Netherland New Zealand Norway 5,000.0 Poland Portugal Slovak Republic 0.0 Slovenia Spain 0 10 20 30 40 50 60 70 Sweden Switzerland Turkey United Kingdom Tertiary-type A graduation rate United States
- 10. 10 10 Australia Austria Belgium Canada A world of change – higher education Chile Czech Republic 30,000.0 Denmark Estonia 2004 Finland France 25,000.0 Germany 15 September 2011 Andreas Schleicher Greece Expenditure per student at tertiary level (USD) Lisbon Council Hungary 20,000.0 Iceland Ireland Israel Italy 15,000.0 Japan Korea PIAAC OECD Programme for the international assessment of adult competencies Luxembourg 10,000.0 Mexico Netherland New Zealand Norway 5,000.0 Poland Portugal Slovak Republic 0.0 Slovenia Spain 0 10 20 30 40 50 60 70 Sweden Switzerland Turkey United Kingdom Tertiary-type A graduation rate United States
- 11. 11 11 Australia Austria Belgium Canada A world of change – higher education Chile Czech Republic 30,000.0 Denmark Estonia 2005 Finland France 25,000.0 Germany 15 September 2011 Andreas Schleicher Greece Expenditure per student at tertiary level (USD) Lisbon Council Hungary 20,000.0 Iceland Ireland Israel Italy 15,000.0 Japan Korea PIAAC OECD Programme for the international assessment of adult competencies Luxembourg 10,000.0 Mexico Netherland New Zealand Norway 5,000.0 Poland Portugal Slovak Republic 0.0 Slovenia Spain 0 10 20 30 40 50 60 70 Sweden Switzerland Turkey United Kingdom Tertiary-type A graduation rate United States
- 12. 12 12 Australia Austria Belgium Canada A world of change – higher education Chile Czech Republic 30,000.0 Denmark Estonia 2006 Finland France 25,000.0 Germany 15 September 2011 Andreas Schleicher Greece Expenditure per student at tertiary level (USD) Lisbon Council Hungary 20,000.0 Iceland Ireland Israel Italy 15,000.0 Japan Korea PIAAC OECD Programme for the international assessment of adult competencies Luxembourg 10,000.0 Mexico Netherland New Zealand Norway 5,000.0 Poland Portugal Slovak Republic 0.0 Slovenia Spain 0 10 20 30 40 50 60 70 Sweden Switzerland Turkey United Kingdom Tertiary-type A graduation rate United States
- 13. 13 13 Australia Austria Belgium Canada A world of change – higher education Chile Czech Republic 30,000.0 Denmark Estonia 2007 Finland France 25,000.0 Germany 15 September 2011 Andreas Schleicher Greece Expenditure per student at tertiary level (USD) Lisbon Council Hungary 20,000.0 Iceland Ireland Israel Italy 15,000.0 Japan Korea PIAAC OECD Programme for the international assessment of adult competencies Luxembourg 10,000.0 Mexico Netherland New Zealand Norway 5,000.0 Poland Portugal Slovak Republic 0.0 Slovenia Spain 0 10 20 30 40 50 60 70 Sweden Switzerland Turkey United Kingdom Tertiary-type A graduation rate United States
- 14. 14 14 Australia Austria Belgium Canada A world of change – higher education Chile Czech Republic 30,000.0 Denmark Estonia 2008 Finland France 25,000.0 Germany 15 September 2011 Andreas Schleicher Greece Expenditure per student at tertiary level (USD) Lisbon Council Hungary 20,000.0 Iceland Finland Ireland Israel Italy 15,000.0 Japan Korea PIAAC OECD Programme for the international assessment of adult competencies Luxembourg 10,000.0 Mexico Netherland New Zealand Norway 5,000.0 Poland Portugal Slovak Republic 0.0 Slovenia Spain 0 10 20 30 40 50 60 70 Sweden Switzerland Turkey United Kingdom Tertiary-type A graduation rate United States
- 15. 16 16 The composition of the global talent pool has changed… Countries’ share in the population with tertiary education, for 25-34 and 55-64 year- old age groups, percentage (2009) 55-64-year-old population 25-34-year-old population 15 September 2011 Andreas Schleicher Lisbon Council PIAAC OECD Programme for the international assessment of adult competencies About 39 million people About 81 million people who attained tertiary level who attained tertiary level
- 16. 17 17 The composition of the global talent pool has changed… Countries’ share in the population with tertiary education, for 25-34 and 55-64 year- old age groups, percentage (2009) 55-64-year-old population 25-34-year-old population 15 September 2011 Andreas Schleicher United Lisbon Council United other, 14.5 States, 20.5 other, 12.9 States, 35.8 Korea, 1.6 Australia, 1.7 Korea, 5.7 Mexico, 1.8 Australia, 1.6 PIAAC OECD Programme for the international assessment of adult competencies Italy, 1.9 Mexico, 3.9 Spain, 2.1 Italy, 2.0 Japan, 10.9 Brazil, 3.5 Spain, 3.5 France, 3.5 Canada, 4.2 Brazil, 4.5 United France, 4.1 China, 18.3 Kingdom, 5.3 Japan, 12.4 Canada, 3.1 Germany, 6.3 Germany, 3.1 China, 6.9 United Kingdom, 4.4
- 17. 18 18 …and will continue to change Share of new entrants into tertiary education in 2009 (all OECD and G20 countries) Other China, 36.6% countries, 4.8% 15 September 2011 Andreas Schleicher Lisbon Council Netherlands, 0.5 % Other Portugal 0.5% Chile, 1.3% Czech Republic 0.4% Australia, 1.3% Israel 0.4% PIAAC OECD Programme for the international assessment of adult competencies Sweden 0.4% Italy, 1.4% Belgium 0.4% Spain, 1.6% Hungary 0.4% Poland, 2.1% Austria 0.4% New Zealand 0.3% Germany, 2.5% United Switzerland 0.3% States, 12.9%Slovak Republic 0.3% Argentina, 2.7% Denmark 0.2% Korea, 3.1% Norway 0.2% Ireland 0.2% Mexico, 3.1% Russian Finland 0.2% Federation, 10.0 Slovenia 0.1% United % Estonia 0.1% Kingdom, 3.3% Japan, 4.2% Indonesia, 4.9% Iceland 0.0% Turkey, 3.7%
- 18. PIAAC Lisbon Council OECD Programme for the international 15 September 2011 assessment of adult competencies Andreas Schleicher 20 20 ...but qualifications are not the same as skills...
- 19. 21 21 PIAAC will in each country interview 5000 adults aged 16-65 in their homes and testing their skills collect information on the antecedents, outcomes and contexts of skill development and use … in order to… 15 September 2011 Andreas Schleicher Lisbon Council provide a comprehensive assessment of the human capital stock show to what extent skills held by individuals are actually used at work and identify the role skills play in improving labour market prospects PIAAC OECD Programme for the international assessment of adult competencies improve understanding of the labour market and social returns to education and training help governments better understand how education and training systems can nurture these skills help countries prioritise investment of scarce resources in education contribute to building strategic partnerships for policy implementation .
- 20. 22 22 Key elements of PIAAC Measures of adult Measures of key competencies social and economic Test-based measures in areas outcomes where methodologies exist Labour-market experience 15 September 2011 Andreas Schleicher Indirect measures in other , status and Lisbon Council areas that support PIAAC‘s transitions, earnings, adult policy objectives learning, social outcomes Surveyed: Surveyed: individuals individuals Assessment: Assessment: direct and indirect PIAAC OECD Programme for the international assessment of adult competencies indirect Surveyed: Surveyed: individuals individuals Measures of the A background Assessment: Assessment: utilisation of indirect, indirect questionnaire competencies e.g. JRA To contextualise and analyse determinants of at the workplace competencies, their Through a development, and their job-requirement survey use
- 21. PIAAC Lisbon Council OECD Programme for the international 15 September 2011 assessment of adult competencies Andreas Schleicher 23 23 150 200 250 300 350 Skill score Source: PIAAC Field trial Not completed school Upper secondary University Not completed school Upper secondary University Not completed school Upper secondary University Measuring the value of qualifications Interquartile range in skill distribution by educational qualification
- 22. PIAAC Lisbon Council OECD Programme for the international 15 September 2011 assessment of adult competencies Andreas Schleicher 24 24 PIAAC participating countries Round 1 Round 2
- 23. 26 26 15 September 2011 Andreas Schleicher Lisbon Council Skills matter for individuals… …because skills have an increasing impact on labour market outcomes and social participation PIAAC OECD Programme for the international assessment of adult competencies
- 24. 27 Low skills and economic outcomes 27 Increased likelihood of failure (16-65 year olds) 3.5 In lowest two quintiles of personal 3.0 income 15 September 2011 Andreas Schleicher Lisbon Council Unemployed 2.5 2.0 Received social PIAAC OECD Programme for the international assessment of adult competencies assistance in last 1.5 year Did not receive 1.0 investment income in 0 1 2 3 4 last year Number of skills domains with low performance Odds are adjusted for age, gender and immigration status.
- 25. 28 28 Marginal probability of being unemployed by skill decile 16-65 years 16-24 years 0.12 Probability of being unemployed 15 September 2011 Andreas Schleicher 0.10 Lisbon Council 0.08 y = -0.007x + 0.115 0.06 PIAAC OECD Programme for the international assessment of adult competencies 0.04 y = -0.004x + 0.075 0.02 0.00 1 2 3 4 5 6 7 8 9 10 Skill decile Level 1 Level 2 Level 3 Level 4/5 Adjusted for age, gender, foreign language status, and country.
- 26. 29 Low skills and social outcomes 29 Odds ratios Has fair to poor health 2.6 Does not volunteer for 15 September 2011 2.4 Andreas Schleicher charity or non-profit Lisbon Council 2.2 organizations Poor understanding of 2.0 political issues facing country 1.8 Poor level of general trust PIAAC OECD Programme for the international assessment of adult competencies 1.6 Higher propensity of 1.4 believing people try to take 1.2 of advantage of others Lower propensity to 1.0 reciprocate Level 5 Level 4 Level 3 Level 2 Level 1 PIAAC skill level Poor political efficacy Odds are adjusted for age, gender, pand immigration status.
- 27. 30 Low skills and ICT outcomes 30 Odds ratios 3.0 In bottom half of computer 15 September 2011 Andreas Schleicher 2.5 engagement at home index Lisbon Council 2.0 Do not use internet at work 1.5 PIAAC OECD Programme for the international assessment of adult competencies 1.0 0.5 0.0 Level 5 Level 4 Level 3 Level 2 Level 1 Proxy skill level Source: PIAAC Field trial Odds are adjusted for age, gender, education, parents' education and immigration status.
- 28. 31 Producing an effective skill mix 31 15 September 2011 Andreas Schleicher Lisbon Council PIAAC OECD Programme for the international assessment of adult competencies Drivers of current and future demand of skills Instruments to ensure responsiveness of education provision to labour demand Optimising access to education and training throughout life Impact of migration and international labour mobility on skill formation systems
- 29. 32 32 Demographic challenges Skills by age Skill score 305 295 15 September 2011 Andreas Schleicher 285 Lisbon Council 275 265 255 PIAAC OECD Programme for the international assessment of adult competencies 245 235 225 15 25 35 45 55 65 No adjustment Age Adjusted for immigrant status and education Adjusted for immigrant status, education and reading engagement
- 30. 33 33 Keeping learning beyond school Cross-sectional skill-age profiles for youths by education and work status Mean skill score 320 310 Youth in education 15 September 2011 Andreas Schleicher 300 Lisbon Council Youth in and work 290 education 280 270 260 Youth in work PIAAC OECD Programme for the international assessment of adult competencies 250 240 230 Not in education, 220 not in work 16 17 18 19 20 21 22 23 24 25 Age Linear (In education only) Linear (In education and work) Linear (Work only) Linear (NEET)
- 31. 34 Optimising the use of skills 34 15 September 2011 Andreas Schleicher Lisbon Council PIAAC OECD Programme for the international assessment of adult competencies Which measures help optimise the utilisation of skills on the job? How can workforce participation be boosted? Which tools facilitate the recognition of skills? How can transparency of skills systems be ensured? What information is necessary to facilitate matching of skills?
- 32. 35 35 How the demand for skills has changed Economy-wide measures of routine and non-routine task input (US) Mean task input as percentiles of the 1960 task distribution 65 Routine manual 15 September 2011 Andreas Schleicher 60 Lisbon Council Nonroutine manual 55 Routine cognitive PIAAC OECD Programme for the international assessment of adult competencies 50 Nonroutine analytic 45 Nonroutine interactive 40 1960 1970 1980 The dilemma for education and training: 1990 2002 The skills that are easiest to teach and test are also the ones that are easiest to (Levy and Murnane) digitise, automate and outsource
- 33. 36 36 Changes in employment shares by occupation 1960-2009, selected OECD countries 20 15 10 15 September 2011 Andreas Schleicher Lisbon Council 5 0 -5 PIAAC OECD Programme for the international assessment of adult competencies -10 -15 -20 -25 -30 Prof. and Tech. Admin. and Clerical Sales Service Farm Prod. and Manag. labour. Australia, Austria, Belgium, Canada, Chile, Denmark, Finland, France, Germany, Greece, Ireland , Italy, Japan, Korea, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom and United States.
- 34. 37 Skill use by occupational groups 37 Problem solving 1.00 Computer use Teamwork 0.80 0.60 Internet use 0.40 Oral communication 15 September 2011 Andreas Schleicher 0.20 Lisbon Council 0.00 -0.20 Basic numeracy -0.40 Influence others -0.60 -0.80 -1.00 Advanced numeracy Plan own time PIAAC OECD Programme for the international assessment of adult competencies Write Plan others time Read document type texts Fine motor skills Read prose type texts Gross motor skills Total Service (low-skill) Goods Information (low-skill) Information (high-skill) Managers Knowledge (expert) Source: PIAAC Field trial
- 35. 38 Skill mismatch by occupational groups 38 HIGH-SKILL MATCH 60% 50% 40% 15 September 2011 Andreas Schleicher Lisbon Council 30% 20% 10% MISMATCH-SKILL MISMATCH-SKILL 0% DEFICIT SURPLUS PIAAC OECD Programme for the international assessment of adult competencies LOW-SKILL MATCH Goods Service (low-skill) Information (low-skill) Information (high-skill) Managers Knowledge (expert) Source: PIAAC Field trial
- 36. 40 40 international Assessments Making investment in skill development and utilisation more Impact of efficient 16 September 2009 Andreas Schleicher Who should pay for what, when and how? Which is the right level of intervention (regional and local dimension)? How should financing and incentives (to employers and individuals) be structured? What are good models of policy evaluation to ensure efficiency/continuity of skills policies?
- 37. PIAAC Lisbon Council OECD Programme for the international 15 September 2011 assessment of adult competencies Andreas Schleicher 41 41 Individuals are getting a good return…
- 38. Components of the private net present value for a man 42 42 with higher education (2007 or latest available year) Direct cost Foregone earnings Income tax effect Social contribution effect Transfers effect Grosss earnings benefits Unemployment effect Portugal 373,851 United States 323,808 Italy 311,966 Korea 15 September 2011 Andreas Schleicher 300,868 Ireland Lisbon Council 253,947 Czech Republic 240,449 Hungary 230,098 Slovenia 225,663 Poland 215,125 United Kingdom 207,653 Canada 175,670 OECD Average 175,067 Austria 173,522 PIAAC OECD Programme for the international assessment of adult competencies Germany 147,769 France 144,133 Japan 143,018 Finland 135,515 Net Belgium 115,464 present Netherlands 112,928 value in Australia 100,520 Spain 95,320 USD Norway 92,320 equ. New Zealand 74,457 Turkey 64,177 Sweden 62,481 Denmark 55,946 -400,000 -200,000 0 200,000 400,000 600,000 800,000 USD equivalent C hart A9.3
- 39. PIAAC Lisbon Council OECD Programme for the international 15 September 2011 assessment of adult competencies Andreas Schleicher 44 44 …Taxpayers are getting a good return too
- 40. Public cost and benefits for a man obtaining tertiary education 45 45 (2007 or latest available year) Public benefits Public costs United States 193,584 Germany 168,649 Belgium 167,241 Hungary 166,872 Slovenia 155,664 Finland 100,177 15 September 2011 Andreas Schleicher United Kingdom 95,322 Lisbon Council Netherlands 95,030 Poland 94,125 OECD Average 91,036 Austria 89,705 Portugal 89,464 Korea 89,034 Ireland 85,917 PIAAC OECD Programme for the international assessment of adult competencies Australia 84,532 Italy 82,932 Czech Republic 81,307 Canada 79,774 Japan 67,411 France 63,701 Net present Norway 43,419 value New Zealand 46,482 Sweden 37,542 Spain 29,582 Denmark 28,621 Turkey 21,724 Chart A9.5 0 50,000 100,000 150,000 200,000 250,000 In equivalent USD
- 41. 47 47 15 September 2011 Andreas Schleicher Lisbon Council The crisis hit the least educated hardest Lack of relevant skills/experience brings higher PIAAC OECD Programme for the international assessment of adult competencies unemployment risk for recent entrants to the labour force
Editor's Notes
- Lets look at the insights PIAAC provides about how skills translate into economic and social outcomes.Of course, everyone knows being skilled is an advantage: Skilled workers are more productive and therefore tend to earn more and have better employment prospects. Greater productivity, in turn, is the foundation for growth. Failure to ensure a good skills match has both short- term consequences (you see skills shortages) and becomes a longer-term drag on growth and equality of opportunities. The trouble is that there is no automaticity in these relationships: PIAAC data show that skills do not automatically translate into higher incomes and higherproductivity. Success with converting skills into jobs and growth depends on:Whether we have a good understanding of what those skills are that drive strong, sustainable and balanced economic outcomes; whether the right mix of skills is being taught and learned in effective, equitable and efficient ways; whether economies fully utilize their skill potential; and whether governments can build strong coalitions with the business sector and social partners to find sustainable approaches to who should pay for what, when and how. That is why an instrument such as PIAAC is so critical for policy development.
- The first thing you see is a dramatic expansion of higher education.
- This chart shows you the college graduation rate on the horizontal axis, and how much countries invest per college student each year. Each dot is one country.
- This shows you both how rapidly education systems have expanded but also how much the pace of change has differed across countries. The United States, that was the benchmark for higher education output in 1995, is now an average performer because so many countries have expanded higher education so much faster.In fact, if you followed this chart closely, you will see that, while most countries have moved towards the right, towards more people completing degrees, the US has primarily moved upwards, becoming more expensive.
- You can see this here once more.
- The expansion of higher education has had significant implications on the global talent pool (here 36 countries with comparable data). Among the age group nearing retirement, there are 39 million with a tertiary qualification. Among the age group entering the labour-force, it is 81 million.
- But while in the older age group every third person in global talent pool was in the United States, it is only every fifth in the younger age group. China’s share of this global talent pool has expanded from less 7% among the older age group to 18% among those who have just entered the labor market – just 2 percentage points below that of the U.S. In sum, the US still has one of most highly educated labour forces in the OECD area. With 41% of the adult population having attained a tertiary degree, the US ranks among the top five countries on this measure, and has over 10 percentage points more of its labour force with this level of education than the OECD average (30%). But much of this advantage stems from a high educational level among older age groups. The US, together with Germany and Israel, are the only countries where attainment levels among those about to leave the labour market (55-64 year-olds) are similar to those who have just entered the labour market (25-34 year-olds). This is why the picture looks very different among younger age groups. Among those 25-34 year-olds who have recently entered the labour market, the US ranks 15th among 34 OECD countries in tertiary attainment (Table A1.3a). Similarly, the rate of graduation from tertiary education has increased in the US from 42% in 2000 to 49% in 2009, but the pace of the expansion has been more rapid in other countries: on average across OECD countries, graduation rates have increased from 37% to 47%. Graduation rates from longer, theory-based programmes (tertiary-type A) and advanced research programmes in the US stand at the OECD average of 38% (Table A3.2).
- When you ahead into the future output of education systems, by comparing the number of people who are entering higher education, you can see even more dramatic changes.
- And the picture becomes even more pronounced when you look at the number of high school graduates across countries, which represent the future pool of potential university entrants.
- Education is generally good insurance against unemployment and for staying employed in difficult economic times, and this has been particularly true in the US.
- A couple of words on methodology: PIAAC is a representative household survey, that means, professionally trained interviewers will knock on the doors of at least 5000 adults in each country to test their skills and to collect information on the contexts in which they develop and use these skills.Up to now, we used to approximate skills by the formal qualifications people had attained at some stage in their life. But ask yourself how much the formal educational credentials that you received really say about the actual skills you have and employ to be a successful Ambassador. PIAAC opens a new chapter by directly measuring the skills of people, so it takes into account what people learn at the work place and informally in life – and it also discounts what we forget as we get older or what becomes irrelevant as the context in which we work changes.The goal is to help countries develop and implementpolicies that make investing in skills cost-effective for individuals and their employers. And investments here are not just about public money but also include the role of tax systems and other measures to encourage individuals and firms to invest in skills. By looking at the bottom line of available skills, wherever and however they have been developed, PIAAC facilitates a whole-of-government approach to skills policies. So we hope that PIAAC will support ablueprint for designing and implementing policies that make the most of each country’s human capital by nurturing – and using – the skills of its citizens to foster economic growth and social inclusion.
- I mentioned that formal qualifications cannot be equated with actual skills. Let me illustrate this point with a chart that shows the distribution of skills for people with different educational qualifications. Lets pick one country. First you see that adults who didn’t complete secondary schooling demonstrate a range of skills, the orange bar represents the middle half of the skill distribution. So not everyone who is a high-school dropoutis unskilled. As you would expect people with a high school degree tend to do better, but you see that there is significant overlap. And those who have a university degree come out on top.The picture is not that clear in all countries. Take another country. Here the performance of adults with school and university qualifications is rather similar. The picture gets most interesting when you contrast one country with another. Take a third country here. You see that high school graduates in the second country are about as highly skilled as the university graduates in the third. That illustrates the power of PIAAC in benchmarking the value of national academic and vocational qualifications across countries, something we have never been able to do before.
- Education is generally good insurance against unemployment and for staying employed in difficult economic times, and this has been particularly true in the US.
- One way to look at the relevance of skills is to look at how poor skills raise the likelihood of poor individual economic outcomes. Let us put the highly skilled at the left side, the poorly skilled on the right side of the chart. You see those adults who perform at Level 1 in the PIAAC test are almost twice as likely to be among the bottom quarter of earners than those who perform at Level 5. You also see how poor skills raise the risk of unemployment and that poor skills make you a liability for society, in terms of incurring social costs.
- Marginal probability in this figure essentially reflects the correlation between skill and unemployment holding other variables (i.e., age, gender, foreign language status, and country) at their average.
- You can see a similar relationship between skills and social outcomes. If you lack foundation skills, you are more likely to be in poor health, you are less likely to volunteer, you will have less of an understanding of political issues facing your country.You are also less likely to trust institution and people and constantly think that others are taking advantage of you. You may ask why trust is so important but the bottom line is that there is no functioning democracy without trust in institutions and there is no functioning business relationship without trust in your partners and the rule of law. Afghanistan is an example for what financial capital can achieve in a country without a human capital base. You will also be less likely to reciprocate.Finally, those with poor skills show also low levels of political efficacy, that is, they tend to believe that politicians do what they want and that they themselves have no influence.
- You can also see that skills are an important predictor for individuals to deal effectively with technology, which is another ingredient for productivity and economic outcomes.
- Producing skills isn’t just about delivering more of the same skills, because the demand for skills keeps changing. You can see this by the toxic mix of skill shortages and high levels of unemployment that is plaguing many OECD countries today: Even at the height of the crisis in 2009, more than 40% of employers in Australia, Japan, Mexico and Poland reported difficulties in finding people with the appropriate skills. Policy therefore needs to pay attention to producing an effective skill mix that ensures that the stock of skills matches demand and this is not just about initial education and workforce training, but also about the design of policies on workforce participation and immigration. PIAAC allows us to measure how the demand for skills is evolving, in terms of how skills are actually being used, and it tells us something about the drivers of changes in the demand for skills. PIAAC will also help to conceive skills policies within a framework that has both a short-term and a longer-term perspective. On the one hand, skills-formation must respond effectively to the immediate needs of individuals and firms. So in the aftermath of the crisis the focus is naturally on responding to the needs of unemployed young people and displaced workers through effective training and retraining and to support efforts aiming at recovery and sustainable jobs growth. On the other hand, skills policy must also have an eye to the future. To form the workforce of the future you need a vision of the evolution of the labour market and of the dispositions, knowledge and skills that will permit individuals to prosper in the future world of work. We also need to remain attuned to the varying demands and constraints that individuals face at different stages in their lives, and to the pathways that they follow through education and training into work.
- Let me show you the most depressing chart from PIAAC. This chart shows you how literacy skills decline with age. And unfortunately, all of us in this room here are beyond the age of no return on this chart.Now you can say that this has in part to do with the fact that older cohorts generally got less formal education than younger ones do today, but even after you account for things like educational attainment or immigration, this is the green line, the picture does not change significantly.Now if you are in Japan, or some European countries, where societies are rapidly ageing, you can only imagine how dramatically this effect will depreciate your stock of human capital. PIAAC puts us into a position to anticipate the long-term cost of the depreciation of human capital, which have been hidden so far when we only counted formal qualifications. And it is not just Japan, in the OECD area the ratio of older, inactive persons per worker is expected to almost double from around 38% in the OECD area in 2000 to just over 70% in 2050 (OECD, 2006a). Or conversely, take this chart and put yourself in the Middle East, where you have large youth cohorts with poor education so you can imagine what will happen if they do not find employment where they can deploy and improve their skills. [More than 60% of Africa’s population is under the age of 25 and this is expected to increase to 75% by 2015 (OECD, 2010f)]. Ensuring that these young people contribute productively depends on implementing skill formation and labour market policies which support the expansion of employment. The one positive element that is coming out of our analysis is that if you remain an engaged reader in your adult life, you maintain your skills much longer. Also important is that these curves work out quite differently across countries, which tells you that some countries are doing a much better job than others in fostering the development and maintenance of skills than others. So there is lots we can learn for how to deal with the effect of changing demographics.
- One of the innovations of PIAAC is that it does not solely look at schools and universities when it comes to skill formation, but that it takes a truly lifelong, and lifewide, perspective of learning.That is very important, because given the pace of change in the demand for skills, and amplified by the impact of demographics you just saw, the workforce twenty years down the road will largely consist of people who are already in the labour market. Much of the demand for new skills will thus have to be met by training existing workers. This chart from PIAAC shows you how different forms of learning contribute to enhancing skills among youths. You see that if you stay enrolled in formal education between the ages of 16 and 25 years you learn something, as one would expect. But you also see that those youths who combine education and work tend to start out from a lower base but increase their skills even more rapidly. And those who are only working also keep improving their skill base, even if they do not quite catch up.In contrast, those who are neither in work nor in education are actually losing the skills they acquired in school. They end up worth than they started out with.So what does this imply for policy? Well, to help adults keep learning, education and training systems need to offer flexibility, allowing adults to learn what they want, when they want, and how they want; second, they need to facilitate access by reducing barriers to entry, such as institutional rigidities, up-front fees and age restrictions; third, they need to offer a variety of entry and re-entry pathways for people who need a second chance or want to upgrade their skills or learn new ones later in life; fourth they need to recognise all learning throughout a working life, by ensuring that credit is granted for components of programmes, offering training modules, and providing credit accumulation and credit-transfer systems. PIAAC shows you which countries are doing a good job with these things and which are not.Initial results from PIAAC also suggest that we need better policies to tackle inequities in training programmes, including ‘age training gaps’ and ‘gender training gaps’, where older workers and women, respectively, are often less involved in training than their younger and male counterparts (OECD, 2005a). The bias towards large firms in providing skills development is also striking (participation in training activities is 50% lower in SMEs than in large firms, see Martinez-Fernandez, 2008; Dalziel, 2010; Kubitz, 2011; Box 2).[drop rest?]In addition to developing policies to boost participation in general, targeted interventions may be needed to support certain groups that tend to be marginalised in the labour market. Integrating immigrants and minorities into the labour market is an issue of major concern in most OECD countries (OECD, 2010k). School dropouts are another group at risk as are young people who entered the labour during the recent downturn. To activate older workers, co-ordinated policies are needed, including reforming pension schemes, increasing the retirement age, introducing age-discrimination legislation and encouraging greater investment in training older workers (OECD, 2006a). Women represent the largest underutilised pool of human capital in most countries. These are all issues where PIAAC will shed light on.
- Producing the best skills in the world is not much use if economies don’t deploy those skills optimally. Under-utilisation of skills – whether it’s because of mismatch between workers’ skills and those demanded by the job or because individuals are out of the labour market altogether – represents a waste of the resources that were invested in nurturing these skills. In addition, as you saw, failure to make active use of skills may lead to depreciation of existing skills. And in most countries, you have substantial proportions of the working-age population out of work and not using their skills productively. The crisis has only exacerbated the situation. And it is not just a matter of having a job or not: Skills mismatches have emerged in a number of countries where up to one-third of workers consider themselves over-skilled for their current job, and another 13% believe that they have some skills deficit. And even where the skills that people have got closely match those that are needed that is not always a good thing: A match between a low supply of skills and a low demand for skills can lead to a ‘low-skills equilibrium’, a problem that particularly affects rural areas and countries where mobility between regions is limited (Green and Martinez-Solano, 2011); local incomes and productivity suffer as a result (Froy, Giguère and Hofer, 2009).
- It is important that we look at skill utilisation in a dynamic framework. The kind of skills that are needed for success are rapidly evolving. As an example, this chart shows how the composition of the US work force has changed between 1970 and 2000. Work involving routine manual input, the jobs of the typical factory worker, was down significantly, that is the result of automation and outsourcing. Non-routine manual work, things we do with our hands, but in ways that are not so easily put into formal algorithms, was down too, albeit with much less change over recent years – and that is easy to understand because you cannot easily computerise the bus driver or outsource your hairdresser. All that is not surprising, but here is where the interesting story begins: Among the skill categories that you see here, routine cognitive input, that is cognitive work that you can easily put into the form of a script saw the sharpest decline in demand over the last couple of decades. So schools are now challenged on where they have traditionally put much of their focus, and what we tend value in multiple choice tests.The point is, that the skills that are easiest to teach and test are also the skills that are easiest to digitise, automatise and offshore. Where are the winners in this process? These are those who engage in expert thinking, up 8% - and complex communication, up almost 14%. This chart is just translating into numbers what I have said before.
- Another way to look at this is to examine changes in occupational profiles: Over recent decades there has been a steady change in the industrial and occupational structure of employment. There has been particularly strong growth in occupations requiring higher skills. And in some emerging countries these changes have been much more radical and will therefore require substantive modification in the skills supply over a very short period of time.
- Don’t be misled that these changes are somehow averaging out, you can’t just shift workers from one occupation to another. On the contrary, the challenges which those changes in occupational profiles pose for skills policies become clear when you take into account that different occupations require very different skill profiles. Its just very hard to transform an unemployed steelworker into a productive computer specialist.With PIAAC, we are now able to track those skill profiles within a comparative framework: Let me mark the average in white.The violet shade shows you that low-skilled service workers (like a servant in a restaurant) need a lot of motor skills but few computer skills. People producing goods need more of everything but the profile is quite similar. Low-skilled information workers (like clerks or bookkeepers) are using a pretty rounded skill profile, High-skilled information workers use an even wider range, and you see that literacy skills and oral communication are particularly important. For managers, planning their time and the time of others is particularly important. And when you move to high-skilled knowledge workers (like yourselves) you need more of everything but a lot better skills in oral communication, reading and computers. So as you move from producing goods to high-level knowledge work, you need to develop not just more but also different skills. With PIAAC, we now have an opportunity to map competitive advantages of countries.
- Perhaps most importantly, PIAAC allows us to look at how well today’s skill supply matches demand. It does so by comparing the actual skills of workers as measured by PIAAC with the extent of their engagement in related activities at work. For example, if workers have literacy skills that roughly correspond to PIAAC Level 3, (that’s what you need for coping with moderately complex literacy demands), and they engage in literacy related activities at work at least once a week, then we consider them in a high-skill equilibrium. On average across OECD countries, that is true for 33% of workers. If workers are found to have literacy skills below Level 3, and they report engaging in literacy related activities less than once a week, they are deemed to be in a low-skill equilibrium (26%). On average across countries, 25% are found to be in a surplus situation – where workers have higher literacy skills than what their jobs demand; and about 17% are found to be in a deficit situation – they are not sufficiently skilled for their jobs.Now again, you can look at this by occupational sectors. The goods producing sector, that does not require high skills, employs lots of low-skilled workers, but it also employs a fair share who could actually deal with higher literacy requirements. The situation is similar in the low-skill service sector. Low-skill information workers are moving closer to a high-skill match situation. The situation is a bit more pronounced for high-skill information workers and managers. When you move to high-skill knowledge workers you find generally a good high-skilled match but you also see some skill deficits.As you would expect, you find that knowledge workers are more likely to be in a high-skill equilibrium and non-knowledge economy workers are more likely to be in a low-skill equilibrium. Both types of workers experience surpluses and deficits, but deficits are more common among knowledge economy workers while surpluses are more common among non-knowledge economy workers. And that is a good illustration why you can have unemployment and skill shortages at the very same time.
- Perhaps most importantly, PIAAC allows us to look at how well todays skill supply matches demand. It does so by comparing the actual skills of workers as measured by PIAAC with the extent of their engagement in related activities at work. For example, if workers have literacy skills that roughly correspond to PIAAC Level 3, (that’s what you need for coping with moderately complex literacy demands), and they engage in literacy related activities at work at least once a week, then we consider them in a high-skill equilibrium. On average across OECD countries, that is true for 33% of workers. If workers are found to have literacy skills below Level 3, and they report engaging in literacy related activities less than once a week, they are deemed to be in a low-skill equilibrium (26%). On average across countries, 25% are found to be in a surplus situation – where workers have higher literacy skills than what their jobs demand; and about 17% are found to be in a deficit situation – they are not sufficiently skilled for their jobs.The picture becomes most interesting of course when you look at the comparative strengths of countries. You can see that goods producing workers in Norway have generally a skills surplus, and there is an excellent match for knowledge economy workers: Norway produces lots of highly skilled knowledge workers and uses them well.When you look at Korea, the picture is quite different, the goods producing jobs are such that they generally require lower skills and also employ less skilled workers and for the knowledge economy workers their is a significant skill deficit. Like Japan, Korea has coordinated an impressive match up the value added chain keeping its eye on high-skill, high-value added jobs. But the picture you see for Korea is also the result of differences between young and old workers. The only way to fix this is through adult education and training.
- Countries make very significant investments in skills, but data from PISA and PIAAC show that there is considerable scope for making investments in skill development and utilisation more efficient. PIAAC will help us answer difficult questions about who should pay for what, when and how when it comes to skills development. It will also allow us to examine how regional and local levels can intervene most effectively, and how different countries structure financing and incentives for learners and employers for the upgrading of skills.
- The additional taxes and social contributions paid by tertiary graduates make investment in this level of education very profitable, from the public perspective.
- The additional taxes and social contributions paid by tertiary graduates make investment in this level of education very profitable, from the public perspective.
- The net gain over the working life of a tertiary-educated man in the US is above USD 190,000 – the highest in the OECD area and well above the OECD average of USD 91,000. Among tertiary-educated women in the US, the net gain is close to USD 90,000, also well above the OECD average of USD 55,000. These high returns to taxpayers are largely seen in income taxes paid by tertiary graduates, who have a particularly large earnings premium in the US. In addition, the public share of the direct costs for higher education is among the lowest in the OECD area. Further expanding higher education to meet labour-market demands thus makes good economic sense from a public perspective (Table A9.4).
- Education is generally good insurance against unemployment and for staying employed in difficult economic times, and this has been particularly true in the US.
- Since the start of the recession in 2007, employment rates among those who have not completed high school have dropped by almost 6 percentage points, and stand at 52.5%. In comparison, employment rates among those with tertiary education declined by only 2.5 percentage points, and the overall employment rate is still above 80% (80.8%), over 28 percentage points higher than for those without a high school degree (Table A7.3a).Unemployment rates for those without a high school education have shot up to 15.8% in 2009, more than 4 percentage points above the OECD average. Some 9.8% of those who have completed high school are unemployed (3 percentage points above OECD average), while unemployment rates has stayed below 5% (4.9%) for college graduates, which is just half a percentage point above the OECD average (A7.4a). The proportion of individuals employed in full-time jobs tells a similar story: only 58% of those without an upper secondary education are employed full-time (the OECD average is 66%); 69% of those with an upper secondary education are in full-time employment (the OECD average is 72%); and 76% of those with a higher education are in full-time jobs (the OECD average is 75%) (Table A7.5).As a result, the job market in the US is thus particularly difficult for those without a college degree. Higher-educated individuals have fared substantially better in this recession and face a job market that is no worse, on average, than in other OECD countries.
- Education is generally good insurance against unemployment and for staying employed in difficult economic times, and this has been particularly true in the US.