KNOWLEDGE ECONOMY CHALLENGES FOR LIFEONG LEARNING

KNOWLEDGE ECONOMY CHALLENGES FOR LIFEONG LEARNING Anna Kaderabkova, Centre for Economic Studies, Prague www.cesvsem.cz 10. 11. 2006, Prague 1

Structure: 1. Innovation-driven demand for skills in enterprises 2. Public finance squeeze limiting resources for training 3. New division of labour bringing challenges for adjustment capacity 2

1. Innovation-driven demand for skills in enterprises innovative enterprises demand higher skilled labour and invest more in training and development internal innovation capacity as a key to quality-based competitiveness competitive advantage matrix countryspecific positions 3

Innovation performance 1. Inputs and preconditions of R&D number of R&D workers, R&D intensity venture capital, cooperation science and universities 2. Science and technology performance and innovation effects innovation companies, publication and patent output qualitative sources and results of competitive advantages 3. Information society ICT usage and (economic) effects in businesses advanced technology, internet in households e-government (supply-side) 4

Human resource quality 1. Qualifications, skills, competences tertiary qualifications ICT literacy 2. Participation in education and expenditure tertiary education continuing training business and public expenditure (GDP, per pupil/student) 3. Human resources for science and technology science and technology graduates quality-intensity 5

Competitive advantage - matrix A. Sources of competitive advantage DE(1) DK(2) FI(6) BE(8) SE(9) NL(10) UK(11) FR(12) AT(14) IT(15) LU(18) IE(20) SI(26) CY(27) ES(30) MT(35 CZ(40) GR(41 PL(44) HU(49) LT(52) PT(62) EE(73) LV(74) SI(81) cost-based quality-based Competitive advantage (low cost/ (unique products/ 1 prices) 3 5 processes) 7 3,6 3,5 3,5 3,3 3,3 3,2 3,1 3,0 3,0 2,8 4,0 4,0 3,9 5,9 5,7 5,7 5,7 5,7 5,5 5,3 5,2 5,1 4,9 6,2 6,2 factor-driven efficiency-driven innovation-driven 6

DE(1) SE(2) FI(4) FR(5) DK(9) UK(10) NL(11) BE(12) AT(13) LU(17) IT(21) SI(22) IE(23) ES(27) CZ(28) HU(36) EE(39) SK(41) PT(43) LT(44) PL(46) LV(49) GR(55) CY(73) MT(78) B. Sources of knowledge (level of innovation capacity) depends on external depends on Innovation capacity know ledge internal 1 (imitace, licence) 3 5 know ledge (R&D) 7 passive transfer 2,8 2,8 3,7 3,6 3,5 3,5 3,5 3,4 3,3 3,1 4,1 4,0 adoption to local needs 4,6 4,4 4,4 4,4 5,5 5,4 5,4 5,2 5,1 5,9 5,9 in-house innovation 6,3 6,2 7

C. Matrix of competitive advantage Innovation capacity: high, internal knowledge Competitive advantage: cost-based Cost-based competitive advantage CY MT GR LV PL PT EU-13 SK Quality-based competitive advantage LT HU EE ES CZ SI IT IE EU-25 EU-13 EU-12 LU DK BE NL UK AT EU-12 Low innovation capacity, transfer of knowledge FI DE SE FR High innovation capacity, internal R&D Competitive advantage: quality-based Innovation capacity: low, external knowledge 8

Innovation capacity - typology of innovators (% of total), 1998-2000 FI(32) SE(25) DE(25) LU(24) NL(22) FR(20) AT(20) BE(20) IT(18) PT(18) EE(17) SI(16) GR(13) CZ(12) LT(12) HU(10) LV(10) SI(9) ES(8) Strategic Intermittent Modifiers Adopters 0 10 20 30 40 50 60 9

Linkages and interactions - Business sector share in R&D performed in government (G) and highereducation (H) sectors, 2003 (%) 25 20 15 G H 10 5 0 NL PL FI SK SI UK BE LU CZ ES PT AT HU FR LT LV DE EE GR SE DK IT IE CY G 16,2 13,7 13,6 11,0 9,5 8,9 8,9 8,7 7,8 7,7 6,2 6,0 5,7 5,7 5,5 4,4 2,4 2,3 1,7 1,7 1,5 1,2 0,2 0,1 H 6,8 6,0 5,8 0,0 9,6 5,5 11,6 1,0 6,4 1,5 4,1 10,6 2,7 7,4 23,9 12,6 6,3 7,5 5,5 2,7 4,8 2,9 10

Sophistication of demand 2005 11

Innovation scoreboard 2005 Leading Average Losing ground Catching up 12

Years to catch-up or decline to EU-25 average performance 13

Conclusions and implications for less developed countries efficiency-driven competitiveness, cost-based dependence on external technology knowledge, adoption to local needs, limited development of internal innovation capacity lower technology level, qualitatively less intensive position in supra-national value chain, weak technology transfer, less sophistication of demand, non-specific support to innovation, weak intensity and low diversity of linkages and interactions remarkable differences between country groups in terms of sources and achievements of competitiveness, increasing role of foreign owned companies for competitiveness country-specific and focused policies necessary reflecting broader societal context 14

2. Public finance squeeze limiting resources for training public finance complementing private resources for training effective incentive schemes necessary for the disadvantaged and excluded groups ageing population/fiscal imbalances bringing pressure on redistribution of expenditure priorities strong political commitment necessary 15

Age pyramids for EU25 population in 2004 and 2050 16

Employment rates in the EU in 2003 and in the projections 55-64 years (%, p.b.) 90,0 33,1 69,1 68,9 66,7 66,2 65,7 64,9 64,7 63,9 62,5 61,7 60,2 58,9 58,9 58,7 58,0 55,2 54,6 52,9 52,9 52,6 51,9 51,2 49,5 48,7 44,4 41,8 76,6 80,0 70,0 60,0 50,0 40,0 30,0 20,0 10,0 0,0 2003 2050 Change SE CY IE DK LT DE FI PT UK ES EE EU15 CZ EU25 LV AT NL IT EL FR SI EU10 SK HU PL BE LU MT 17 35,0 30,0 25,0 20,0 15,0 10,0 5,0 0,0

Overall classification of public sustainability risks (EC baseline scenario) -3,4-2,2-1,1-0,9-0,3-0,2 0,3 0,8 1,3 1,8 1,8 2,9 3,0 3,0 3,1 3,2 4,0 4,4 4,9 5,5 7,3 8,5 9,5 9,8 10,5 12,0 8,0 4,0 0,0-4,0 high risk medium risk low risk EE DK SE FI MT* PL AT LV NL BE LT IE EL SK IT ES FR DE UK CZ SI CY LU HU PT 18

3. New division of labour bringing challenges for adjustment capacity Skills levels are going up globally, but much more rapidly in fast growing emerging markets. Trade, FDI, and R&D with the emerging markets have the potential to cover a whole range of products, including skills-intensive products, not just in low value added segments of goods and services. Emerging markets share of total FDI will continue to increase while the composition of trade and FDI will see emerging markets attracting a higher share of FDI in high value added manufacture, services, and R&D. Advances in technology, particularly ICT, the relative rise of the service sector and change of business models have ensured that cross border flows are increasingly composed of services, R&D, financial capital and human capital, and not just physical goods. 19

Europe attractiveness in global economy 20

Europe attractiveness West and East 21

Technology and services lead the way 22

Decision criteria 23

R&D investment location factors 24

Human capital mobility migration flows to Europe limited, but rising political concerns higher share of less skilled, socially excluded, unemployed immigrants less adaptable Percentage of the resident population with tertiary education 30 25 20 15 10 5 0 EU average Australia Canada United States OECD average Immigrants from other OECD countries Emigrants to other OECD countries Immigrants from the rest of the world Foreign-born persons with tertiary education 25

Community action for free movement of labour A directive on mutual recognition of qualifications (September 2005): it consolidates, simplifies and modernises 15 existing directives, must be implemented by October 2007. A proposal for the establishment of the European Qualifications Framework for lifelong learning (EQF): as a translation device and neutral reference point for comparing qualifications across different education and training systems (September 2006). European Blue Card: a work permit would grant the holder permanent access to the entire EU labour market, favouring skilled young migrants with proficiency in the relevant languages and good job prospects. Students graduating with a Masters degree or equivalent from European universities or good universities abroad could be made 26 automatically eligible.

Conclusions and implications successful catch-up in knowledge-based economy requires development of local knowledge base able to substitute for weakening cost-based advantage emerging markets are increasingly able to compete in knowledge-based segments, improving their skill levels markedly and attracting higher shares of global FDI in R&D the share of less skilled occupations in Europe has been decreasing, a remarkable inter-industry turnover has been projected requiring an adequate adaptability of labour force rate of technology progress is fastening bringing about new and life-long changing skill requirements both to workforce and education and training systems instead of sectoral or specific job protection individuals must be equipped to adapt through providing social bridges skills (including the soft) and retraining less regulation in labour markets necessary for improving their flexibility, (horizontal) support to business innovation activities contributing to investment in human resource development 27