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Chapter 2: Investing in human capital and responding to long-term societal challenges
Chart 3: Employment and necessary productivity growth at 2 % GDP growth (% p.a.), EU-28
EU-28
Past GDP growth Productivity growth required to have 2 % GDP growth, high activity scenario
Past productivity growth Productivity growth required to have 2 % GDP growth, low activity scenario
Past employment growth Projected employment growth rate, high activity scenario
GDP growth assumed Projected employment growth rate, low activity scenario
4
Average 2000-08 Average 2008-13 Annual growth in %
3
2
1
0
-1
-2
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
Source: Update of Peschner and Fotakis (2013), p. 17.
This implies that the EU has to obtain Demand for skilled workers will con- make rapid productivity gains in the
much faster productivity growth rates in tinue to increase in the EU’s strategy EU a reality. Research in this chapter
the near future than it has in the past, to ensure higher productivity gains. shows that such strong productivity
if the current productivity gap relative According to model projections by
gains must come from investment in
to the EU’s main competitors ( ) is to Cedefop, there will be more than 80 human capital if it is to be socially
31
be closed. This may become increas - million additional job openings in sustainable. There is strong evidence
ingly difficult to the extent the pressure the EU over the current decade, and that competitive businesses take this
to generate higher productivity growth 90 % of these job openings will be challenge very seriously and do relate
rates results only in rationalisation and in medium- and high-skilled employ- human capital concerns directly to
capital deepening, but without suffi- ment. Looking only at the expansion in productivity performances (Box 2).
cient investment in the existing stock of demand (new, rather than replacement, At the same time, productivity gains
human capital. jobs), Cedefop anticipates almost 20 from only substituting missing work-
million more high-skilled job openings, ers with capital would further reduce
This underlines the argument for seek- while in the low-skilled area, expan- the national income share of work-
ing to generate higher productivity sion demand will decline by almost ers relative to capital. Investing in
gains by investing in skills and making 14 million ( ). This increased demand human capital to meet increasing
33
physical capital investment comple- for higher labour skills coincides with skill requirements is therefore seen
mentary to, rather than a substitute the continued ‘general shift towards as the socially sustainable option for
for, human capital accumulation. In employment in services and the knowl- generating higher productivity growth
34
this respect, the evidence suggests edge economy’ ( ) with the main driv- in line with greater investment in new
that there is a strong complementarity ers being ‘demography, globalisation, innovative technologies. The follow-
between capital and skills in today’s international competition and cost ing sections will discuss the different
globalised production chains ( ) and pressures’ ( ). options of human capital investments,
32
35
that investment, growth and pro describing the policy framework and,
-
ductivity rates and levels correlate To conclude in these respects, global based on model projections, showing
with the share of higher skills in the competition and workforce shrink- its potential impact on the labour mar-
labour force. age will increase the pressure to ket and the economy.
31
( ) Van Ark et al. (2013).
( ) Timmer et al. (2014); Krusell et al. (2000); ( ) CEDEFOP (2012a), p. 85 (table 12).
32
33
DG EMPL’s Labour Market Model incorporates 34
the capital-skills-complementarity, see Berger ( ) Ibidem, p. 19.
et al. (2009), p. 3. ( ) Ibidem, p. 35.
35
107
Chart 3: Employment and necessary productivity growth at 2 % GDP growth (% p.a.), EU-28
EU-28
Past GDP growth Productivity growth required to have 2 % GDP growth, high activity scenario
Past productivity growth Productivity growth required to have 2 % GDP growth, low activity scenario
Past employment growth Projected employment growth rate, high activity scenario
GDP growth assumed Projected employment growth rate, low activity scenario
4
Average 2000-08 Average 2008-13 Annual growth in %
3
2
1
0
-1
-2
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
Source: Update of Peschner and Fotakis (2013), p. 17.
This implies that the EU has to obtain Demand for skilled workers will con- make rapid productivity gains in the
much faster productivity growth rates in tinue to increase in the EU’s strategy EU a reality. Research in this chapter
the near future than it has in the past, to ensure higher productivity gains. shows that such strong productivity
if the current productivity gap relative According to model projections by
gains must come from investment in
to the EU’s main competitors ( ) is to Cedefop, there will be more than 80 human capital if it is to be socially
31
be closed. This may become increas - million additional job openings in sustainable. There is strong evidence
ingly difficult to the extent the pressure the EU over the current decade, and that competitive businesses take this
to generate higher productivity growth 90 % of these job openings will be challenge very seriously and do relate
rates results only in rationalisation and in medium- and high-skilled employ- human capital concerns directly to
capital deepening, but without suffi- ment. Looking only at the expansion in productivity performances (Box 2).
cient investment in the existing stock of demand (new, rather than replacement, At the same time, productivity gains
human capital. jobs), Cedefop anticipates almost 20 from only substituting missing work-
million more high-skilled job openings, ers with capital would further reduce
This underlines the argument for seek- while in the low-skilled area, expan- the national income share of work-
ing to generate higher productivity sion demand will decline by almost ers relative to capital. Investing in
gains by investing in skills and making 14 million ( ). This increased demand human capital to meet increasing
33
physical capital investment comple- for higher labour skills coincides with skill requirements is therefore seen
mentary to, rather than a substitute the continued ‘general shift towards as the socially sustainable option for
for, human capital accumulation. In employment in services and the knowl- generating higher productivity growth
34
this respect, the evidence suggests edge economy’ ( ) with the main driv- in line with greater investment in new
that there is a strong complementarity ers being ‘demography, globalisation, innovative technologies. The follow-
between capital and skills in today’s international competition and cost ing sections will discuss the different
globalised production chains ( ) and pressures’ ( ). options of human capital investments,
32
35
that investment, growth and pro describing the policy framework and,
-
ductivity rates and levels correlate To conclude in these respects, global based on model projections, showing
with the share of higher skills in the competition and workforce shrink- its potential impact on the labour mar-
labour force. age will increase the pressure to ket and the economy.
31
( ) Van Ark et al. (2013).
( ) Timmer et al. (2014); Krusell et al. (2000); ( ) CEDEFOP (2012a), p. 85 (table 12).
32
33
DG EMPL’s Labour Market Model incorporates 34
the capital-skills-complementarity, see Berger ( ) Ibidem, p. 19.
et al. (2009), p. 3. ( ) Ibidem, p. 35.
35
107
