1

KNOWLEDGE ECONOMY CHALLENGES FOR LIFEONG

LEARNING

Anna Kaderabkova, Centre for Economic Studies, Prague

www.cesvsem.cz

10. 11. 2006, Prague

2

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

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• 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 – country-specific positions

1. Innovation-driven demand for skills in enterprises

4

Innovation performance1. 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)

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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

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6,26,2

5,95,75,75,75,7

5,55,3

5,25,1

4,94,04,0

3,93,6

3,53,5

3,33,3

3,23,1

3,03,0

2,8

1 3 5 7

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(35CZ(40)GR(41PL(44)HU(49)LT(52)PT(62)EE(73)LV(74)SI(81)

factor-driven efficiency-driven innovation-driven

cost-based(low cost/ prices)

quality-based (unique products/

processes)

Competitive advantage

A. Sources of competitive advantage

Competitive advantage - matrix

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B. Sources of knowledge (level of innovation capacity)

6,36,2

5,95,9

5,55,45,4

5,25,1

4,64,44,44,4

4,14,0

3,73,6

3,53,53,5

3,43,3

3,12,82,8

1 3 5 7

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)

passive transfer

adoption to local needs

in-houseinnovation

depends on externalknow ledge (imitace, licence)

depends oninternal

know ledge (R&D)

Innovation capacity

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C. Matrix of competitive advantage

DEDK

IT

IE

LU

ES

AT

BE NLUK

EU-12

FI

FR

SE

PT

GRCZ

SI

MT

CY

LVSK

EELTPL HU

EU-25 High innovation capacity,

internal R&D

Co

mp

eti

tiv

e a

dv

an

tag

e:

co

st-

ba

se

d

Quality-based competitive advantage

Innovation capacity: high, internal knowledge

Low innovation capacity, transfer of knowledge

Cost-based competitive advantage

Co

mp

etitiv

e a

dv

an

tag

e: q

ua

lity-b

as

ed

Innovation capacity: low, external knowledge

EU-13

EU-13

EU-12

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Innovation capacity - typology of innovators (% of total), 1998-2000

0 10 20 30 40 50 60

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

Modif iers

Adopters

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Linkages and interactions - Business sector share in R&D performed in government (G) and higher-education (H) sectors, 2003 (%)

0

5

10

15

20

25

G

H

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

NL PL FI SK SI UK BE LU CZ ES PT AT HU FR LT LV DE EE GR SE DK IT IE CY

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Sophistication of demand 2005

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Innovation scoreboard 2005

Leading

Average

Losing ground Catching up

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

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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

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• 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

2. Public finance squeeze limiting resources for training

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Age pyramids for EU25 population in 2004 and 2050

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Employment rates in the EU in 2003 and in the projections – 55-64 years (%, p.b.)

76

,6

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

33

,1

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

90,0

SE

CY

IE

DK

LT

DE

FI

PT

UK

ES

EE

EU15

C

Z

EU25

L

V A

T

NL

IT E

L F

R S

I

EU10 SK

HU

PL

B

E L

U M

T 0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0 2003

2050

Change

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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

-4,0

0,0

4,0

8,0

12,0

EE

DK

SE

FI

MT*

PL

AT

LV

NL

BE

LT

IE E

L

SK

IT

ES

FR

DE

UK

CZ

SI

CY

LU

HU

PT

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• 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.

3. New division of labour bringing challenges for adjustment capacity

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Europe attractiveness in global economy

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Europe attractiveness – West and East

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Technology and services lead the way

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Decision

criteria

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R&D investment location factors

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Human capital mobility• migration flows to Europe limited, but rising political concerns

• higher share of less skilled, socially excluded, unemployed immigrants – less adaptable

0

5

10

15

20

25

30

EUaverage

Australia Canada UnitedStates

OECDaverage

Per

cen

tag

e o

f th

e re

sid

ent

po

pu

lati

on

wit

h t

erti

ary

edu

cati

on

Immigrants from other OECDcountries

Emigrants to other OECDcountries

Immigrants from the rest of theworld

Foreign-born persons withtertiary education

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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 automatically eligible.

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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