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Employment and Social Developments in Europe 2014
6
technological change and rapid improve- skills matching, allowing for more rapid recent Commission-OECD research ( ),
ment in technology, investment in human productivity gains. however, goes beyond the scope of this
capital is a crucial condition to securing chapter, which focuses on investing in the
sustainable levels of employment. In view of the above, this chapter explores human capital of the existing EU popula-
the role of human capital investment as tion and labour force as the central issue.
Both challenges lead to workforce short - a tool for creating the skills that changing
6
ages in many sectors, and the crisis has globalised markets require. It also looks ( ) The joint EU-OECD research project ‘Matching
economic migration with labour market needs’
clearly shown that high unemployment at the economic, social and employment shed light on the following key questions: what
can coincide with such shortages due to implications of such investment, which policies and practices are needed to ensure
that economic migration and free movement
skill mismatches. Hence, it is a dangerous differ depending on the groups that contribute to meeting the labour market
fallacy to rely on changing demographics are targeted. shortages that are expected to arise over the
short-to-medium term? How to ensure a better
to relieve Europe’s labour market prob- use of migrants’ skills? What are the lessons
lems. In the absence of a demographic Given the EU’s demographic ageing, qual - learnt from non-European OECD countries,
particularly in the management of labour
dividend for economic growth, ensuring ified migration will be another important migration? Its findings have been published in
decent prospects in standards of liv- element in forming and maintaining EU two reports, ‘Free Movement and Workers and
Labour Market Adjustment. Recent Experiences
ing and social welfare in Europe in the human capital stock in the future. The from OECD Countries and the European Union’
future will require better utilisation of complex issue of migration, which is in 2012 and ‘Matching Economic Migration
with Labour Market Needs’, (http://dx.doi.
existing labour capacity through better extensively dealt with for instance in org/10.1787/9789264216501-en).
Box 1: The concept of human capital
Human capital can be defined in overall terms as ‘the knowledge, skills, competencies and attributes embodied in individuals that facilitate
7
the creation of personal, social and economic well-being’ ( )(Chart 1) — an approach that is much broader than earlier definitions that
focused essentially on the ‘productive value’ of human capital ( ).
8
Chart 1: Human capital: the links between formation, composition and benefits
Human capital investment Human capital categories
(formation and maintenance (embodied in individuals) Benefits
lifelong&lifewide)
Institutional Individuals
and policy framework Economic: employment, earnings,
(utilisation) professional status/career development
Non-economic: life satisfaction,
well.being, health&longevity,
individual motivation, self-confidence
Parenting Enterprises and groups
Education Knowledge Economic: enterprise performance,
Training Skills employee productivity
Informal learning Competencies Non-economic: inclusion
Workplace Attributes of disadvantaged groups
Health care
Migration Society
Economic: economic growth,
labour-market outcome, faster rate
of technological adoption
Non-economic: crime reduction,
informed citizens, improved civic behaviour,
willingness to cooperate, social cohesion,
health, solidarity between generations,
better parenting, lower morbidity
Sources: Developed based on CEDEFOP (2013), Boarini et al. (2012) and Heckman and Kautz (2013).
Human capital categories, except for attributes, can be described by the European Qualifications Framework (EQF) ( ). Knowledge is the body
9
of facts, principles, theories and practices related to a field of work or study and can be theoretical and/or factual. Skills mean the ability to
10
apply knowledge and to use know-how to complete tasks and solve problems. In the EQF they are described as cognitive and practical ( ).
Competence means the proven ability to use knowledge, skills and personal, social and/or methodological abilities, in work or study
situations and in professional and personal development. Competence goes beyond cognitive elements and encompasses functional
aspects, interpersonal attributes and ethical values ( ).
11
7
( ) OECD (2001).
8
th
( ) Human capital analysis has gained more interest in research since late 1950s although it appeared in the economic analysis already in the 18 century
in Adam Smith’s book The Wealth of Nation. The motive for its rebirth was the need to explain a huge residual in growth accounting and to better
understand the variance in labour incomes that was one of the largest components of income inequality in the US according to Mincer (1997). The
beginners of the human capital theory are researchers such as Becker, Schultz, Mincer or Ben-Porath.
( ) Broad EQF approach is used for two reasons. First, EQF defined key terms to support common understanding of key concepts and, second, key terms are shared by all the EU
9
Member States, EEA and candidate countries participating in the EQF. Recommendation of the European Parliament and of the Council on the establishment of the European
Qualifications Framework for lifelong learning (2008/C 111/01); European Qualifications Framework, Key Terms, http://ec.europa.eu/eqf/terms_en.htm and CEDEFOP (2014).
( ) Currently favoured typology of skills distinguishes between cognitive (e.g. reading, writing, problem solving, numeracy, IT etc.), interactive (all forms of communication
10
and other activities for cooperative working and engagement with customers and suppliers, including emotional and aesthetic labour) and physical skills (strength and
dexterity) according to Green (2013). Author also presents some other typologies, e.g. based on where or how the skills are used (skills according to domain of activity,
generic or occupation-specific), who pays for them and who benefits from them (firm-specific or transferable), or based on the skills’ complexity (basic skills).
( ) CEDEFOP (2014).
11
104
6
technological change and rapid improve- skills matching, allowing for more rapid recent Commission-OECD research ( ),
ment in technology, investment in human productivity gains. however, goes beyond the scope of this
capital is a crucial condition to securing chapter, which focuses on investing in the
sustainable levels of employment. In view of the above, this chapter explores human capital of the existing EU popula-
the role of human capital investment as tion and labour force as the central issue.
Both challenges lead to workforce short - a tool for creating the skills that changing
6
ages in many sectors, and the crisis has globalised markets require. It also looks ( ) The joint EU-OECD research project ‘Matching
economic migration with labour market needs’
clearly shown that high unemployment at the economic, social and employment shed light on the following key questions: what
can coincide with such shortages due to implications of such investment, which policies and practices are needed to ensure
that economic migration and free movement
skill mismatches. Hence, it is a dangerous differ depending on the groups that contribute to meeting the labour market
fallacy to rely on changing demographics are targeted. shortages that are expected to arise over the
short-to-medium term? How to ensure a better
to relieve Europe’s labour market prob- use of migrants’ skills? What are the lessons
lems. In the absence of a demographic Given the EU’s demographic ageing, qual - learnt from non-European OECD countries,
particularly in the management of labour
dividend for economic growth, ensuring ified migration will be another important migration? Its findings have been published in
decent prospects in standards of liv- element in forming and maintaining EU two reports, ‘Free Movement and Workers and
Labour Market Adjustment. Recent Experiences
ing and social welfare in Europe in the human capital stock in the future. The from OECD Countries and the European Union’
future will require better utilisation of complex issue of migration, which is in 2012 and ‘Matching Economic Migration
with Labour Market Needs’, (http://dx.doi.
existing labour capacity through better extensively dealt with for instance in org/10.1787/9789264216501-en).
Box 1: The concept of human capital
Human capital can be defined in overall terms as ‘the knowledge, skills, competencies and attributes embodied in individuals that facilitate
7
the creation of personal, social and economic well-being’ ( )(Chart 1) — an approach that is much broader than earlier definitions that
focused essentially on the ‘productive value’ of human capital ( ).
8
Chart 1: Human capital: the links between formation, composition and benefits
Human capital investment Human capital categories
(formation and maintenance (embodied in individuals) Benefits
lifelong&lifewide)
Institutional Individuals
and policy framework Economic: employment, earnings,
(utilisation) professional status/career development
Non-economic: life satisfaction,
well.being, health&longevity,
individual motivation, self-confidence
Parenting Enterprises and groups
Education Knowledge Economic: enterprise performance,
Training Skills employee productivity
Informal learning Competencies Non-economic: inclusion
Workplace Attributes of disadvantaged groups
Health care
Migration Society
Economic: economic growth,
labour-market outcome, faster rate
of technological adoption
Non-economic: crime reduction,
informed citizens, improved civic behaviour,
willingness to cooperate, social cohesion,
health, solidarity between generations,
better parenting, lower morbidity
Sources: Developed based on CEDEFOP (2013), Boarini et al. (2012) and Heckman and Kautz (2013).
Human capital categories, except for attributes, can be described by the European Qualifications Framework (EQF) ( ). Knowledge is the body
9
of facts, principles, theories and practices related to a field of work or study and can be theoretical and/or factual. Skills mean the ability to
10
apply knowledge and to use know-how to complete tasks and solve problems. In the EQF they are described as cognitive and practical ( ).
Competence means the proven ability to use knowledge, skills and personal, social and/or methodological abilities, in work or study
situations and in professional and personal development. Competence goes beyond cognitive elements and encompasses functional
aspects, interpersonal attributes and ethical values ( ).
11
7
( ) OECD (2001).
8
th
( ) Human capital analysis has gained more interest in research since late 1950s although it appeared in the economic analysis already in the 18 century
in Adam Smith’s book The Wealth of Nation. The motive for its rebirth was the need to explain a huge residual in growth accounting and to better
understand the variance in labour incomes that was one of the largest components of income inequality in the US according to Mincer (1997). The
beginners of the human capital theory are researchers such as Becker, Schultz, Mincer or Ben-Porath.
( ) Broad EQF approach is used for two reasons. First, EQF defined key terms to support common understanding of key concepts and, second, key terms are shared by all the EU
9
Member States, EEA and candidate countries participating in the EQF. Recommendation of the European Parliament and of the Council on the establishment of the European
Qualifications Framework for lifelong learning (2008/C 111/01); European Qualifications Framework, Key Terms, http://ec.europa.eu/eqf/terms_en.htm and CEDEFOP (2014).
( ) Currently favoured typology of skills distinguishes between cognitive (e.g. reading, writing, problem solving, numeracy, IT etc.), interactive (all forms of communication
10
and other activities for cooperative working and engagement with customers and suppliers, including emotional and aesthetic labour) and physical skills (strength and
dexterity) according to Green (2013). Author also presents some other typologies, e.g. based on where or how the skills are used (skills according to domain of activity,
generic or occupation-specific), who pays for them and who benefits from them (firm-specific or transferable), or based on the skills’ complexity (basic skills).
( ) CEDEFOP (2014).
11
104
