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Chapter 2: Investing in human capital and responding to long-term societal challenges
The two principal components of human capital identified above explain almost 80 % of the cross-country variability in the
twelve original statements. Taking these as a basis, the subsequent cluster analysis depicts how businesses in Member States
position themselves in the context of firm- and worker-related human capital concerns.
Member States are divided into four clusters with respect to their scores in the two principal components extracted. The result is shown
in Chart 5. A score of zero in each of the components is equivalent to the non-weighted average of factor scores across Member States.
The Southern/Mediterranean Member cluster combines Member States (Greece, Spain, France, Italy, Portugal, Croatia, but also the
Czech Republic and Slovenia) in which firm-productivity-related confidence plays little role in businesses’ regard for their own situation.
On the other hand, worker-related confidence (good health, skill-equipment) is clearly under-represented in Eastern Europe (Bulgaria,
Hungary, Poland, Slovakia, Latvia, Romania, Lithuania and Estonia).
In contrast, businesses in the Northern Cluster (Denmark, Finland, Sweden, the Netherlands, as well as the UK, Ireland and Belgium)
place strong emphasis on both factors, whereas organisations in the Central Cluster (Germany, Austria and Luxembourg) seem to pay
particular attention to the competitive environment (high importance of firm-related/productivity considerations).
Chart 5: Clustering Member States with relation to two Principal Components of Human Capital
Principal components of businesses' Human Capital concerns
2.5
2.0 FI
1.5 EL ES FR DK NL IE
Workers' capital 1.0 IT PT PL CZ BE UK SE DE
0.5
0.0
-0.5
-1.0 HR SI HU SK LV RO LT LU AT
-1.5
-2.0 BG EE
-2.5
-2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5
Firms' productivity
Source: DG EMPL calculations based on IMD World Competitiveness Yearbook 2014, International Institute for Management Development.
3. Policy and 3.1. Forming human individual’s (child’s) socio-demographic/
institutional capital economic background. Reducing inequali -
framework ties in skills and education is important,
Education is one of the main channels not only for reducing income inequali-
The following analysis seeks to demonstrate for human capital formation, hence it ties but also for broadening the pool
the potential of the EU Member States to figures among the headline targets of of candidates for higher education and
improve their economic and labour market the Europe 2020 strategy. This section high-skilled jobs and, by implication, for
outcomes, and at the same time to prepare analyses in detail the different aspects improving long-term labour productivity.
for the long-term challenges with a better of policies aimed at forming and enhanc- The focus on ECEC follows from its
skilled, and more productive, workforce. In ing people’s capabilities. It also seeks to potential to overcome inequalities and
order to reap the benefits and realise that identify both barriers to progress and good its long-term importance for the future
38
potential, however, the institutional and practice examples. formation of human capital ( ). For a
policy framework will need to be able to pro - more detailed analysis of educational
vide incentives or direct support for human This section cannot touch exhaustively and training systems, see the Education
36
capital formation, maintenance and use ( ). upon all relevant issues ( ). It limits and Training Monitor 2014 (European
37
This chapter sets out the institutional frame - itself to discussing investment in forming Commission, 2014d).
work for forming, maintaining and using human capital from the existing popula-
human capital. It presents evidence on tion, while it does not touch upon acquir - 3.1.1. Early childhood education
how countries perform on indicators from, ing human capital from outside the EU. and care: double dividend
among others, recent PIAAC and PISA sur- As it can’t cover all levels and aspects
veys. It tries to give evidence on the large of education and training, it focuses The benefits of early childhood education
extent to which the EU is currently wasting mainly on inequality aspects and early and care (ECEC) are two-fold — it improves
human resources and points to a variety of childhood education and care (ECEC). child development and facilitates labour
policy approaches to better activate them The access to education and educational activity, especially female involvement in
while investing in higher productivity. performance are often influenced by an the labour market ( ).
39
38
( ) See European Commission (2014d): ( ) See for instance Box 1.
37
( ) See for example OECD (2012a). Education and Training Monitor (2014). ( ) For more on female activity, see section 3.3.3.
36
39
109
The two principal components of human capital identified above explain almost 80 % of the cross-country variability in the
twelve original statements. Taking these as a basis, the subsequent cluster analysis depicts how businesses in Member States
position themselves in the context of firm- and worker-related human capital concerns.
Member States are divided into four clusters with respect to their scores in the two principal components extracted. The result is shown
in Chart 5. A score of zero in each of the components is equivalent to the non-weighted average of factor scores across Member States.
The Southern/Mediterranean Member cluster combines Member States (Greece, Spain, France, Italy, Portugal, Croatia, but also the
Czech Republic and Slovenia) in which firm-productivity-related confidence plays little role in businesses’ regard for their own situation.
On the other hand, worker-related confidence (good health, skill-equipment) is clearly under-represented in Eastern Europe (Bulgaria,
Hungary, Poland, Slovakia, Latvia, Romania, Lithuania and Estonia).
In contrast, businesses in the Northern Cluster (Denmark, Finland, Sweden, the Netherlands, as well as the UK, Ireland and Belgium)
place strong emphasis on both factors, whereas organisations in the Central Cluster (Germany, Austria and Luxembourg) seem to pay
particular attention to the competitive environment (high importance of firm-related/productivity considerations).
Chart 5: Clustering Member States with relation to two Principal Components of Human Capital
Principal components of businesses' Human Capital concerns
2.5
2.0 FI
1.5 EL ES FR DK NL IE
Workers' capital 1.0 IT PT PL CZ BE UK SE DE
0.5
0.0
-0.5
-1.0 HR SI HU SK LV RO LT LU AT
-1.5
-2.0 BG EE
-2.5
-2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5
Firms' productivity
Source: DG EMPL calculations based on IMD World Competitiveness Yearbook 2014, International Institute for Management Development.
3. Policy and 3.1. Forming human individual’s (child’s) socio-demographic/
institutional capital economic background. Reducing inequali -
framework ties in skills and education is important,
Education is one of the main channels not only for reducing income inequali-
The following analysis seeks to demonstrate for human capital formation, hence it ties but also for broadening the pool
the potential of the EU Member States to figures among the headline targets of of candidates for higher education and
improve their economic and labour market the Europe 2020 strategy. This section high-skilled jobs and, by implication, for
outcomes, and at the same time to prepare analyses in detail the different aspects improving long-term labour productivity.
for the long-term challenges with a better of policies aimed at forming and enhanc- The focus on ECEC follows from its
skilled, and more productive, workforce. In ing people’s capabilities. It also seeks to potential to overcome inequalities and
order to reap the benefits and realise that identify both barriers to progress and good its long-term importance for the future
38
potential, however, the institutional and practice examples. formation of human capital ( ). For a
policy framework will need to be able to pro - more detailed analysis of educational
vide incentives or direct support for human This section cannot touch exhaustively and training systems, see the Education
36
capital formation, maintenance and use ( ). upon all relevant issues ( ). It limits and Training Monitor 2014 (European
37
This chapter sets out the institutional frame - itself to discussing investment in forming Commission, 2014d).
work for forming, maintaining and using human capital from the existing popula-
human capital. It presents evidence on tion, while it does not touch upon acquir - 3.1.1. Early childhood education
how countries perform on indicators from, ing human capital from outside the EU. and care: double dividend
among others, recent PIAAC and PISA sur- As it can’t cover all levels and aspects
veys. It tries to give evidence on the large of education and training, it focuses The benefits of early childhood education
extent to which the EU is currently wasting mainly on inequality aspects and early and care (ECEC) are two-fold — it improves
human resources and points to a variety of childhood education and care (ECEC). child development and facilitates labour
policy approaches to better activate them The access to education and educational activity, especially female involvement in
while investing in higher productivity. performance are often influenced by an the labour market ( ).
39
38
( ) See European Commission (2014d): ( ) See for instance Box 1.
37
( ) See for example OECD (2012a). Education and Training Monitor (2014). ( ) For more on female activity, see section 3.3.3.
36
39
109
