Page 105 - ePaper
P. 105
Chapter 2
Investing in human capital
and responding to long-term
societal challenges ( )
1
1. Introduction starting point into an era in which Europe to the changing needs of the economy.
faces strong, partly new, challenges. Globalisation should be seen as an
Five years after the recession hit the Those challenges require a shift in pol- opportunity for stronger EU exports of
European Union (EU) the prospects for icy focus, with long-term human capital goods with high value added, and evi-
a robust labour market recovery are still formation as the central component of dence shows that firms tend to focus
3
uncertain. With unemployment persis- social investment: their expansion of labour demand ( ) on
tently remaining above 10 %, and almost workers with higher skills.
one out of four economically active Globalisation has already led to fast
young people without a job, the current structural changes in both factor and Demographic ageing will reinforce
situation not only presents a serious con- product markets. It bears many oppor- the competitive pressure that the EU is
cern for labour market policy making, but tunities as it improves worldwide fac- already exposed to. Other parts of the
also a long-term challenge to the social tor allocation and generates income to world will mostly continue to benefit
4
welfare of our society. industries engaged in both export and from a demographic dividend ( ) since
import businesses. Companies exposed their working-age population will con -
From today’s perspective, long and per- to global competition have a strong tinue to expand over the next decades,
sistent spells of unemployment prevent incentive to reduce inefficiencies, better while the EU will face a sizeable workforce
5
people from achieving a self-sustained exploit innovation potential and come decline ( ). As the workforce shrinks, the
living and participating fully in society — to stronger productivity gains. However, EU economy can only continue to grow
a situation which places strong pressure as a result of such pressure, firms also if future productivity growth becomes
on current labour market policies to find exploit the potential of technological a multiple of what it was in the past.
solutions without further delay. However, progress and automation to substitute In fact, it is foreseeable that, even with
2
the urgency of today’s situation should low-profile jobs by capital ( ). Apart from ambitious employment rate targets, pro-
not divert attention from the detrimen- substitution, outsourcing of such activi- ductivity growth will eventually become
tal long-term impact of unemployment. ties to other parts of the world in search the only source of potential economic
The exclusion of people from the labour of competitive (cost) advantages will growth as employment growth turns
market today means a waste of human continue being a wider-spread phe- negative. Hence, to the extent human
resources and undermines tomorrow’s nomenon. These adjustments may capital investment helps maintain a pro-
production capacity, just as human capi - happen at the expense of social peace, ductive workforce, including in times of a
tal depreciation destroys a major part unless policies manage to implement declining working-age population, this is
of previous social investment. In that reforms that combine alleviating the the obvious policy response to this chal-
sense, current labour market develop- pressure on those most affected with lenge unless Europe engages in a mere
ments should also be seen as a difficult a focus on adapting the skills supply substitution of labour by capital. Given
3
( ) Expansion means demand for workers where
there is a net increase of employment (not
just a substitution), see Cedefop (2012a), p. 7.
( ) As working-age population increases,
4
this will help potential GDP to increase even
( ) Autor et al. (2003) argue that, in contrast in the absence of shifts in the employment
2
to more complex tasks, manual tasks and rates. See Coomans (2012), p. 200.
those ‘following explicit rules’ face higher ( ) See, for example, the European
5
( ) By Paolo Pasimeni, Jörg Peschner and risk of getting substituted by ‘computer Commission’s 2012 Ageing Report (European
1
Monika Velikonja. capital’ (p. 1279). Commission, 2012f), esp. p. 69.
103
Investing in human capital
and responding to long-term
societal challenges ( )
1
1. Introduction starting point into an era in which Europe to the changing needs of the economy.
faces strong, partly new, challenges. Globalisation should be seen as an
Five years after the recession hit the Those challenges require a shift in pol- opportunity for stronger EU exports of
European Union (EU) the prospects for icy focus, with long-term human capital goods with high value added, and evi-
a robust labour market recovery are still formation as the central component of dence shows that firms tend to focus
3
uncertain. With unemployment persis- social investment: their expansion of labour demand ( ) on
tently remaining above 10 %, and almost workers with higher skills.
one out of four economically active Globalisation has already led to fast
young people without a job, the current structural changes in both factor and Demographic ageing will reinforce
situation not only presents a serious con- product markets. It bears many oppor- the competitive pressure that the EU is
cern for labour market policy making, but tunities as it improves worldwide fac- already exposed to. Other parts of the
also a long-term challenge to the social tor allocation and generates income to world will mostly continue to benefit
4
welfare of our society. industries engaged in both export and from a demographic dividend ( ) since
import businesses. Companies exposed their working-age population will con -
From today’s perspective, long and per- to global competition have a strong tinue to expand over the next decades,
sistent spells of unemployment prevent incentive to reduce inefficiencies, better while the EU will face a sizeable workforce
5
people from achieving a self-sustained exploit innovation potential and come decline ( ). As the workforce shrinks, the
living and participating fully in society — to stronger productivity gains. However, EU economy can only continue to grow
a situation which places strong pressure as a result of such pressure, firms also if future productivity growth becomes
on current labour market policies to find exploit the potential of technological a multiple of what it was in the past.
solutions without further delay. However, progress and automation to substitute In fact, it is foreseeable that, even with
2
the urgency of today’s situation should low-profile jobs by capital ( ). Apart from ambitious employment rate targets, pro-
not divert attention from the detrimen- substitution, outsourcing of such activi- ductivity growth will eventually become
tal long-term impact of unemployment. ties to other parts of the world in search the only source of potential economic
The exclusion of people from the labour of competitive (cost) advantages will growth as employment growth turns
market today means a waste of human continue being a wider-spread phe- negative. Hence, to the extent human
resources and undermines tomorrow’s nomenon. These adjustments may capital investment helps maintain a pro-
production capacity, just as human capi - happen at the expense of social peace, ductive workforce, including in times of a
tal depreciation destroys a major part unless policies manage to implement declining working-age population, this is
of previous social investment. In that reforms that combine alleviating the the obvious policy response to this chal-
sense, current labour market develop- pressure on those most affected with lenge unless Europe engages in a mere
ments should also be seen as a difficult a focus on adapting the skills supply substitution of labour by capital. Given
3
( ) Expansion means demand for workers where
there is a net increase of employment (not
just a substitution), see Cedefop (2012a), p. 7.
( ) As working-age population increases,
4
this will help potential GDP to increase even
( ) Autor et al. (2003) argue that, in contrast in the absence of shifts in the employment
2
to more complex tasks, manual tasks and rates. See Coomans (2012), p. 200.
those ‘following explicit rules’ face higher ( ) See, for example, the European
5
( ) By Paolo Pasimeni, Jörg Peschner and risk of getting substituted by ‘computer Commission’s 2012 Ageing Report (European
1
Monika Velikonja. capital’ (p. 1279). Commission, 2012f), esp. p. 69.
103
