Integration from the Right (Economic Development/Strategic Sectors)

Finally, particularly promising from the standpoint of a focus on employment demand and better quality jobs are interventions that integrate intermediation and employment in economic development strategies. There are many forms in play in both developed and developing countries. Two of interest are national economic development strategies and sectoral economic interventions.

National economic development strategies are typically economy-wide strategies, and for developing economies often seek to attract and channel foreign and domestic investment to promote economic growth. Those integrating human capital interventions to stimulate both employment and economic growth strategy are of particular note here. Ireland built their growth strategies in the 1990s through attracting foreign investment and then quickly realigning education to produce the next generation of higher technology products - from call centers, to computer hardware, to software. Realignment of secondary, vocational-technical, and higher education was aided by an Expert Group on Skills.15 In Ireland’s case, the National Employment Service increased operations and job matching of both returning Irish migrants and Eastern European migrants.16 Singapore prioritized STEM (Science, Technology, Engineering and Math) skills at all levels of education, benchmarked to international standards, and used web-based career information, catapulting from its low rankings in 1960 to the number two ranking by the Global Economic Forum for Global Competitiveness in Higher Education and Training (2014).17 Malaysia is a third developing country that leapt forward in growth, also using an entity to help calibrate and realign education and training with employment demand. There are some common success factors in these three cases of smaller economies, as noted by Monika Aring of SkillsNation:18

  • • a national strategic vision or articulated national plan;
  • • a medium-term human capital strategy, including planning for future skill needs, training incentives in STEM fields;
  • • benchmarking to international standards;
  • • an independent human resource agency that can calibrate the supply and demand of skills;
  • • realigned education delivery with adequate resources.

In the three cases of Malaysia, Singapore and Ireland, it is important to point out that existing intermediation services played supporting and enabling roles, rather than leadership ones. In all three cases, some form of new independent skills agency was created to benchmark key needed skills and induce universities and training institutions to produce graduates in these fields. Such independent agencies were able to cross new institutional lines, but did so with a set of competencies in skill identification, educational and training curriculums and industry needs that would not be the typical skill set of an intermediation service. In the case of Ireland’s Expert Group on Future Skill Needs, both national and international experts served on its board, and detailed studies were prepared in new and emerging employment fields, such as green jobs and information processing that were used by the counselors of the National Employment Service to guide career advice.

Sectoral strategies are defined as “partnerships of employers within one industry that bring government, education, training, economic development, labor and community organizations together to focus on the workforce needs of an industry within a regional labor market.”19 There are many variants of sectoral strategies, spanning distinct industries and suppliers as well as ones with distinct geographic reach. Groups of industries can be formally developed into supply-chain clusters, or drawn naturally together via geographic co-location “agglomeration” strategies, as in Mumbai, India. A random-assignment evaluation of three sectoral strategies in the United States found increases in employment, significant increases in earnings (18% more over two years) and better quality employment.20 By channeling employment into growth sectors, more people worked more consistently at higher wages with more benefits.21 The Colorado, US-based Aspen Institute studied these sectoral strategies further and found that 48% of the previously poor participants exited poverty as a result solely of better income.22 Like workforce development strategies, sectoral strategies seek to address current and future skill needs by aligning institutions better to address those needs, helping employers better define and develop skill needs and using labor market information to guide this realignment.

While integrating intermediation systems directly with employment strategies or growing sectors seems clearly the most promising direction for future intermediation evolution, which economic/employment strategies countries should follow when is far from an international consensus. Economist Dani Rodrik argues that the days of export-led growth pursued by East Asian nations is unlikely to fit future cases. He argues for

“contextual analysis” for individual countries as the context continues to change both within and outside a country. In “One Economics, Many Recipes” he argues that countries must both experiment and adapt, as China did with a dual-track agricultural reform and manufacturing boom and Mauritius did with industrialization.23 In a recent forum, Dr. Rodrik presented three types of economic growth “channels,” each with distinct short and longer-term implications for employment:24

  • 1. Fundamental Channel. This is the most well-known channel or strategy. It is based on a progressive transformational change in human capital investment and skills upgrading together with major institutional change. Rodrik argues this is a slow strategy, sometimes taking a generation, but it is an essential channel for sustainable, long-term growth.
  • 2. Escalator Channel. This “big leap” strategy Rodrik argues has a bigger short-term impact on growth but less on employment over the medium term.
  • 3. Structural Change Channel. In this well-known channel, successful developing countries are making a structural advance out of low- productivity agriculture to higher-productivity, export-oriented manufacturing. In such cases, Rodrik argues you only need policy reform in one key sector as is the approach pursued by South Korea, Singapore, Taiwan, Malaysia, and China. With China’s slowdown and its impact on other developing countries, many economists wonder if this export- led manufacturing strategy can really be replicable for other countries.

Are we currently seeing the end of the export-led growth in the manufacturing model? With the greatest growth rates now in the services sector, and from resource-led growth (e.g. Latin America, Africa), do these require specialized attention despite the lower numbers of jobs associated with these sectors? India, which is growing in a healthy manner but principally in services, offers some pause for thought. India may be signaling at least a different path for advancing labor productivity, essentially continuing both low-productivity agriculture and a small, low-productivity manufacturing sector. Whether India can advance by skipping over manufacturing-dominated growth and pursing labor productivity growth principally in services, such as in information technology and finance, is far beyond the scope of this book. The future for matching workers to growing employment areas will lie in matching workers to jobs more rapidly, many more times over one working life, and with higher skill and technological content - whatever sectors, products or value chains are producing employment - is more widely agreed on for the future of both developing as well as developed economies.

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