Flexibility of workforce is way forward
Copyright 1996 Caledonian Newspapers Ltd
The Herald (Glasgow)
April 10, 1996
Nicola Reeves
As markets around the world liberalise, the industrialised west is presented with the growing problem of how to compete against these low-cost labour countries.
The labour costs in these emerging markets are lower because of rock-bottom wages, longer hours and more difficult working conditions. The fact is that Europe cannot compete on cost grounds, barring perhaps a few industries such as textiles in countries such as Portugal and Turkey. The key to future prosperity in Europe lies in creating a highly skilled flexible workforce. This is increasingly necessary as individuals have to change careers and jobs more frequently. Such a workforce will enable the industrialised countries of the West to specialise in high technology and value added goods, thereby providing the route to future prosperity.
This is an area in which the European Commission takes a keen interest.
All member states have underlined the need to sharpen public awareness that investment in the qualifications and skills of the present and future workforce are as indispensable as investment in real capital.
The Government appears to recognise the need for such an approach in its Technology Foresight Programme. Announced in the 1993 White paper "Realising our Potential", the programme brings together industry, academia and government to identify trends in markets and technology over the next 10-20 years, opportunities for the UK arising from these trends and actions which should be taken now to benefit from these opportunities.
Research data shows that economic growth rates since 1960 appear to have been affected both by the initial educational attainment of its labour force, and by the growth of its educated labour during the post-1960 period. Tertiary education is thought to be especially effective in OECD counties. There is some evidence that having a more educated labour force leads to higher growth rather than - or as well as - growth causing people to choose more education.
A paper recently presented at the Royal Economic Society's annual conference in Swansea suggested that far from being a threat, foreign competition and growth lead to improvements in manufacturing productivity in the UK by encouraging innovation and providing buoyant foreign markets.
Gavin Cameron of Nuffield College, Oxford, has examined the productivity performances between 1970 and 1992 of the 19 industries that comprise UK manufacturing industry. He found that the performance of all of them was dramatically different in the 1980s than in the 1970s.
The reasons for this varied according to the industry under review. For instance, in the chemical and electronics industries advances in research and development were largely responsible for the improvement. However in the engineering sector, R&D had little effect with de-unionisation raising productivity.
A major problem associated with focusing on improving productivity is what to do with the inevitably large numbers of people who will be made redundant. If new work is not found for these people then the benefit to the whole economy of increased labour market productivity is offset to some extent by higher social costs, not to mention the waste of human talent. As yet no country appears to have the answer to how to reorder society to take account of the need for fewer employees while at the same time maintaining social cohesion.
You can email me at Gavin.Cameron@economics.ox.ac.uk
Last updated: 18 December 2003.
