The Hard Work of Reskilling the Workforce

In the face of automation, upskilling alone won’t create good jobs and equality — a multi-pronged overhaul of work is needed

By Irving Wladawsky-Berger

For years, businesses have struggled to find the skilled workers they need to keep up with fast changing technologies and markets. The need is even greater today.

Wide-scale upskilling — as well as educational and policy reforms — are urgently needed to address the inadequacies of our current economic structures, in particular, the growing mismatch between people’s current skills and those needed for future jobs.

That’s the conclusion of several recent studies and initiatives examining the future of work and labor markets. Upskilling for Share Prosperity, a report published in January by the World Economic Forum (WEF) in collaboration with PwC noted that: “Millions of people are already being left behind because of volatile market conditions, the effects of COVID-19, or because they work in industries that are being replaced by new sectors …

There is an enormous opportunity to reconfigure the world of work at this critical juncture and embark on an upskilling revolution that will give people across the world the ability to participate fully in the future of work, whatever that might be.”

Another study, by an MIT task force on the Work of the Future, addressed whether our rapidly advancing technologies will not only raise economic output and the wealth of nations, but enable people to attain higher living standards and better working conditions. MIT’s final report, issued in November 2020, also found “a labor market in which the fruits are so unequally distributed, so skewed toward the top, that the majority of workers have tasted only a tiny morsel of a vast harvest.” However, it argued that with better policies in place, more people could enjoy good careers even as new technologies transform the very nature of work.

Those policies and practices need to start now. According to a recent WEF Jobs Report, companies estimate that to meet their expected needs

by 2024, around 40% of workers will require up to six months of retraining, and almost all business leaders expect their employees to pick up new skills on the job.

At the same time, lower-skilled jobs are increasingly threatened by automation and stagnating wages, and many workers cannot get good jobs because they lack the required skills.

The WEF report includes a quantitative analysis of the impact of upskilling on GDP and economic growth across geographies, countries, and industry sectors. Beyond GDP, it highlights the importance to society of providing workers with well-paying, reasonably secure, motivating jobs. Several ‘calls to action’ for wide-scale upskilling are described along with a roadmap for government, business, and education providers. Let me summarize each of these sections.

The Economic Case

Upskilling investments throughout the decade have the potential to increase global productivity by 3% on average, and boost global GDP by $6.5 trillion by 2030.

The GDP impact is expected to follow a typical S-shaped growth pattern, with slower growth early in the decade due to the lag between the initial upskilling initiatives and their impact on workforce productivity, followed by faster growth in the middle years as more initiatives roll out. Growth tapers off in the later years due to the diminishing returns of additional investments.

The economic impact of upskilling is larger in regions and countries where growth is potentially held back by serious skill gaps. The potential increase to GDP by 2030 is 6.1% in Asia-Pacific — which includes the large populations of China — whose growth potential is 7.5%- and India, where it is 6.7%. The upskilling potential is 7.7% in Latin America, and 7.8% in Sub-Saharan Africa, where agriculture and natural resources still represent significant portion of their economies. On the other hand, the economic impact of upskilling is significantly smaller in the developed economies of Western Europe and North America at only 2.5% and 3.6% respectively.

The potential for GPD growth by industry sector depends on many factors, including technology, international trade, global supply chains and industrial dynamics. “Industries that are transforming because of technology will see boosts when the talent pool to fill these more highly skilled jobs becomes available.” Business services and manufacturing, the two largest sectors encompassing a vast array of jobs, will see almost 40% of the total additional GDP through upskilling. Sectors that have suffered from low productivity and wage growth, like health and social care, could reap significant benefits.

Sectors with fewer jobs that require more skills, like agriculture and construction, will see the least benefits.

Upskilling could lead to the net creation of 5.3 million new jobs by 2030. The WEF expects that by 2025 the percentage of jobs that will be automated or no longer relevant will decline from 15% to 9% of the global workforce, while currently emerging professions will grow from 8% to 14%. Upskilling can usher an economy where new technologies will complement, rather than replace, human labor and improve the overall quality of jobs.

Upskilling as a Transformational Force

The very nature of work is being transformed. “The benefits to society of upskilling at scale will be visible in the well-being of the generations who will be able to participate in the economy and find meaning in the work they do throughout their lives.” Given the seismic forces of innovation, automation, and globalization, nations around the world are challenged to create better pathways for all their workers to adapt and thrive. These challenges include:

• Fostering a learning mindset. “Upskilling can be more transformational when it leads to developing attitudes and aspirations that will equip people with the skills to continually adapt to and take part in the changing world of work, resulting in healthier societies, supported by healthier economies. … Developing such wide skill sets requires a learning or growth mindset: the ability to keep developing skills over time. This is different from a narrow view of upskilling that presupposes people have a basic set of skills to learn a task quickly.

A learning mindset requires training — ideally from a young age, perhaps even starting in elementary education.”

• Helping those that are left behind. “The disparity between the rich and poor has been growing for decades. Today, the world’s richest 1% has more than twice as much wealth as 6.9 billion people … Though upskilling alone will certainly not solve all wealth and social inequalities, if upskilling initiatives become widespread and inclusive, more workers can raise their own productivity, leading to better job options. These, in turn, help reduce wage inequalities, in particular those created by skill- biased technological change.”

The benefits of upskilling are greater in developing economies, where many are held back by their socio-economic circumstances. Consequently,

in developing countries upskilling must be complemented by providing basic economic necessities, including clean water, food security, health services, and access to the internet.

• Good jobs in the upskilling narrative. “The economic challenge of the future will not be producing enough: It will be providing enough good jobs,” wrote former Harvard President and Treasury Secretary Larry Summers in a 2014 WSJ article.

But, what is a good job? “A good job or ‘decent work,’ as it is known in the international development community, encompasses a broad concept,” noted the WEF report. “Any definition presupposes a set of values about what matters — sustainability for some, productivity or security for others.

PwC defines ‘good jobs’ as work that is safe, paid fairly, reasonably secure, reasonably motivating, and leverages the human skills of the worker, thus delivering higher levels of productivity.”

A Call to Action

The WEF report identifies key areas where urgent action is needed by government, business, education providers and other stakeholders:

● Government: “Adopt an agile approach to driving national upskilling initiatives, working with business, non-profits and the education sector;”

● Business: “Anchor upskilling and workforce investment as a core business principle and make time- bound pledges to act;”

● Education providers: “Embrace the future of work as a source of reinvention to normalize lifelong learning for all;”

● Stakeholders: “Build a strong and interconnected ecosystem committed to a comprehensive upskilling agenda and give people the opportunity to participate.”