June 16, 2009

Future imperfect: high skills and low wages?

Writing about web page http://www2.warwick.ac.uk/fac/soc/ier/glacier/learning/

Europe as a whole, following the Lisbon Goals, had a plan to become a globally competitive knowledge society, as part of a high skilled, high wage economy. This view is shared by the UK government with their desire to move towards higher value-added products and services underpinned by a commitment to higher skills and workforce development. However, any consideration of whether this approach will be successful needs to be placed in a context of the strategies in which other global players, both companies and countries, are engaged. Phil Brown, Hugh Lauder, and David Ashton have been researching in this area and through their TLRP associate project on 'Globalisation and the Skill Strategies of Multinational Companies: A Comparative Analysis', which examines the future of skills in the new global competition, including China and India. It is based on extensive interviews with leading companies from North America, Europe and Asia, along with senior policy-makers across seven countries. It challenges current policy assumptions about the role of education and skills in the global knowledge economy and their findings are very thought-provoking.....

Phil Brown, Hugh Lauder, and David Ashton argue that, in common with other developed economies, Britain has advocated the creation of a high-skilled, high-waged economy by upgrading the education and skills of its workforce. Such policy prescriptions rest on the idea of a knowledge economy where innovative ideas and technical expertise hold the key to the new global competitive challenge, with Britain well placed to become a 'magnet' economy, supplying the global economy with high skilled, high waged workers. But the recent success of China and India in moving into the production of high value-added, high-technology products has caused political leaders and their advisors to re-evaluate the global economic challenge. The OECD recently acknowledged that emerging economies including China and India were moving up the value chain to compete with Western companies for high-tech products and R&D investment, so Western economies need to focus on their ability to introduce change, innovation and productivity growth. The challenge is to outsmart other national economies - whether established or emerging - in the 'knowledge wars' of the future.

Their findings challenge the policy mantra of a high-skills, high-wage economy. While the skills of the workforce remain important, they are not a source of decisive competitive advantage. Many countries, including China and India, are adopting the same tactics as the UK. It is how the capabilities of the workforce are combined in innovative and productive ways that holds the key. High-skilled workers in high-cost countries will have to contend with the price advantage of university graduates in developing economies. The main threat to high rewards for large numbers of highly skilled workers in the West, however, will not come principally because they are being outsmarted by graduates in China and India, but because companies are discovering new ways of doing the same things in more cost-effective ways: through the spread of 'Digital Taylorism' to knowledge work. One consequence could be that in the early decades of the twenty-first century the rise of the high-skill, low-wage workforce may become a feature of the developed as well as the developing economies. The rewards associated with graduate careers could become very unevenly distributed.

Digital Taylorism does not eliminate the importance of employee motivation nor the need for good 'soft' skills such as self-management and in customer-facing activities. The standardisation required to achieve mass customisation still needs customers to feel that they are receiving a personalised service. This demand may contribute to a continuing demand for university graduates. But their occupational roles will be far removed from the archetypal graduate jobs of the past and we need to consider the prospect of a high-skilled, low-waged economy for the UK. The one-dimensional view of education as a preparation for employment is not a reflection of labour market realities, but an attempt to maintain the idea that justice, efficiency and the good life can be achieved through the job market driven by economic growth. There has never been a time when alternative visions of education, economy and society have been more important.

For a four page research briefing on this topic, see 'Are we witnessing the rise of a high skilled, low waged workforce?' In the 24 page TLRP Commentary on 'Education, globalisation and the knowledge economy'Phil Brown, Hugh Lauder and David Ashton consider the implications of the global skills race; the globalisation of high skills; competition based on quality and cost; global skill webs; where to think?; knowledge work and the rise of digital taylorism; creating a war for talent; the importance of 'skill' in corporate investment decisions; qualifications, skills and competence; and wider policy implications. 

- 2 comments by 1 or more people Not publicly viewable

  1. Brian hardy

    Hi at present writing up my research on the appetite for enterprise/entreprenurial learning of further education college students, studying on, vocational education training (VET) courses. There is at present very little enterprise learning taking place at FECs. A key factor for these VET folk is low wages/salaries that their trades command on graduating. I am a retired chartered accountant and the salaries that a newly qualified accountant in London might expect is around £45,000. I know there is a debate about the effect of the minimum wage, but how true is it, in my ‘middle class’ profession there is effective restriction of trade/licensing, thereby keeping wages high, but for a ‘plumber’ and other constuction trades (for men) and Hair/beauty/Care for (women) ‘laissez-faire’ is the rule and wages may go up and down, usually down. If we are serious about eliminating child poverty start having a guild of hairdressers or carpenters who set out the training required and what can be charged, and who can only call themselves a ‘master carpenter’ if they are part of the guild (like medic/lawyers/accountants). This may cost the consumer more, but at least it would rule out ‘cowboys’ and work would be of a better standard. Low wage eceonomies only benefit the ‘better-off’ and condemn the majority to sub-standard existence. Too much is made of the policy that education and high skills are required in the UK, as you have pointed out, overseas countries may do it anyway. However building and mantainence of our houses etc., care of children and elderly, and other personal services have to be carried out in the UK. So lets raise wages for these necessity professions as well as the middle-class ones?

    25 Aug 2009, 16:49

  2. Alan Brown

    The following edited comments are drawn from SKOPE news archive from 2008 (see: http://www.skope.ox.ac.uk/Archived%20news%20items/Forum%20news.html) with comments from Ewart Keep on discussions on the issue of licensing: linked to the emergence of a growing ‘non-dual system’ aspect of the German training system and the extent to which the licensing of skills regulates parts of the US labour market.

    Chip Hunter, Associate Professor of Management at the University of Wisconsin-Madison explained that in the USA the words skills and policy do not normally go together. At the secondary school level vocational studies receive little funding or emphasis; and the emphasis was on removing inequalities in the education system. However, and against the wishes of employees, a significant shift away from initial training in the workplace was taking place. Apprenticeships in industries such as construction were in decline. In organisations the emphasis is on using and incentivising the use of skills rather than training. Skill shortages have been a problem but policies have supported local and regional initiatives particularly in key sectors. Helping people to ‘climb the ladder to the middle class’ was one of the challenges highlighted in the election. Training policies aimed to help adults, dislocated workers and young people. The emphasis was on local control overseen at state level and backed by incentives to continue to study and resume studying. It had proved hard to involve employers. In discussion, the importance of skill licensing and registration arrangements which vary from state to state and from city to city, which are underpinned by local legislation and insurance requirements and the ‘by-product’ influence of legislation on training and skills enlargement, eg related to health and safety, was noted.

    Dr Hubert Ertl, lecturer in higher education at the Oxford University Department of Education provided an overview of developments in Germany and especially the decline of the dual system. A number of institutional changes had taken since the mid 1990s. New training occupations had been introduced and others updated. It was easier for small organisations and consortia to be involved; there was a new emphasis on cooperation between colleges and training companies. The introduction of training related to work processes and planning had taken place and training provisions had been modularised. However, these measures aimed at making provision more flexible and thereby more attractive to employers had not enticed them to provide more training places.

    Instead, three things had happened: the proportion of school leavers at age 16 in the dual system had come down from two thirds in the 1980s to about two fifths; the number of young people entering HE had overtaken the number of new entrants to the dual system; and the proportion of school leavers at 16 who were not able to enter VET in specialised colleges or the dual system had grown from a very low level and now almost matched the number (about 500,000) in the dual system. It appears that the changes taking place are irreversible. The dual system has not found a substantive foothold in the new service sectors. The German core of high value manufacturing is taking on fewer people.

    It may be concluded that German employment priorities and practices, like those in the UK, are reflecting cost and competitiveness pressures in a similar way to that in the US. Employers are becoming more ‘short-termist’ where they can. Public policy in the UK and Germany is still highly structured and embraces qualifications and in the USA this ‘policy gap’ does not seem to be a significant problem. De facto, license to practice is very influential in the USA, much as it is in Germany.

    26 Aug 2009, 11:37

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