Due to technological, demographic and market changes, the EU labour market experiences serious shocks. The reality in which we find ourselves calls for supply of different skills and competences. To what extent is the EU education sector ready to prepare the current and future workforce for a changing reality? How do European companies manage to address skills gaps? And what should be done to address a chronical mismatch between demanded and supplied skills?

Looking into tomorrow, but working on it today? Uncertain future in the labour market: the skills development challenge

“Where do you see yourself in ten years?” We all have answered this question at some point in our life, likely during a job interview. Typically, the answer entails a professional role to be fulfilled somewhere up the career ladder showing a proper thought through career strategy. While in the past many people had an education and job for life, this is changing rapidly. The labour market experiences serious shocks, whilst working towards a future with jobs that still need to be invented. Last year, the OECD (2019) estimated that 14% of existing jobs could disappear as a result of automation in 15-20 years, and another 32% are likely to change radically as individual tasks are automated. For example in the Netherlands the estimate for the same period is that 35-60% of jobs are bound to change or disappear (OECD). The massive technological developments have brought possibilities and prosperity, although not for all. Demographic changes (i.e. aging population, falling fertility rates, migration), an increase in specialisation and globalisation are starting to create a divide between low-skilled and high-skilled jobs. People in middle-skilled occupations and particularly in rural areas feel that their jobs are disappearing.

All sectors show a clear increase in the use of new, particularly digital, technologies that are transforming industries. Furthermore, the content of our work is changing, and complexity is increasing, as more and diverse skills are required. To deliver results more tasks are performed through multidisciplinary approaches, which make social skills increasingly important also in more technology-focused professions. More importantly, a multidisciplinary approach is needed to successfully address societal challenges of sustainability, food, health, inclusion and security. This forecast makes it difficult to picture yourself in ten years, as it is likely you will need to be capable to use technologies that do not yet exist and acquire skills that are still upcoming and not commonly taught.

Skills development in companies

Companies and sectors have the same difficulty in picturing themselves in a decade. Especially those that initially were not used to work with complex data and technologies, now require personnel to master the art of data. These new skills are essential for companies to stay competitive and to think ahead, whilst managing the workforce. Not an easy task considering that 16.3% of adults lack even the most basic ICT skills (OECD average).

In a recent study for the Flemish government, Technopolis Group found that the human resource challenges of SMEs seem very similar to classical innovation challenges. Both require a long-term strategic vision, investments with uncertainty, an approach which entails leaving the comfort zone and (in many cases) strong collaboration. In addition, a study for EASME on SME skills highlighted that the level of company maturity also affects the capacity to manage talent. For example, SMEs with a lower level of maturity will lack internal organisation, financial management and human capital to reflect on their organisation in the light of technological developments and societal challenges. A similar mismatch can be observed within matured SMEs, where the organisational structure lacks flexibility to accommodate required changes in HR management.  Without proper understanding of what the new reality brings for a company it will be difficult to take appropriate steps in terms of internal and/or external skill development.

In-house development?

Based on our studies, companies have few options when it comes to dealing with the challenges of skill gaps. Internally, companies can invest in upskilling current employees or recruit new talent. Externally, companies can catch up through temporary secondment or use their network, meaning structural collaboration or even outsourcing. While internal skill development seems the obvious option, companies without strategic talent management often are forced to resort to external options. A study by CEDEFOP (2015) suggests companies to put more emphasis on apprenticeships to get talent in the organisation, to structurally incorporate learning into the workplace and to re-examine their approach to the labour market. Regarding the last point, the study mentions the shift of hiring people for their potential rather than acquired experience/skills, and to fit their job offers to the target group (wages, working hours, job quality, precarious contracts, etc.).

Readiness of the education sector

The speed of technological change and increasing complexity of jobs have outpaced the capacity of higher education institutions to provide relevant training. Traditional education providers, such as universities and schools, are to some extent detached from market realities. Curricula falls behind industrial and technological developments, while the educational environment is not adequate for developing the so-called 21st century skills (e.g. digital literacy, communication, creativity, critical thinking, career management). In addition, most higher education courses do not offer a combination of scientific/technical, social/soft and business/managerial knowledge and skills. As a result, a typical university graduate with a science degree will not be equipped to turn a scientific innovation into a market product. The problem in the education sector also concerns teachers/trainers who recognize that their own knowledge and skills need a boost to bridge the gap between education and future workplace of students.

Towards a solution: an ecosystem approach

Most certainly, a closer connection between enterprises and education providers is needed. This would contribute to increased awareness of trainers on skills needs, new technologies and realities in industries, thereby improving quality of trainings and helping students to identify suitable and emerging job profiles. The European Commission and national governments have been launching relevant initiatives that connect industries and education institutions. However, the limited scale of such initiatives has not led to the transformation of the education and training systems. The effective way of building partnerships between education, industrial and policy actors is to stimulate the development of ecosystems – regional support structures that through collaboration can improve matching efficiencies in the labour market. Typically, such ecosystems produce many positive effects for the region, but this will be the topic of another article.

New types of trainings

Ecosystem development, undoubtedly, will take time, therefore the big question remains – how to address the skills gaps immediately? Tailored and innovative vocational education and work-based trainings should assist companies, employees and those who wish to upskill/reskill. In light of limited time and financial resources for training, the modular, blended (online and face-to-face) courses that target specific industries and geographies should be offered. Flexible timing of training, practical content of courses and explanation in plain language are a must. A recent study of Technopolis Group and our partners on digital skills in SMEs (2019) revealed that there is a broad variety of potentially relevant trainings and initiatives to (partially) finance trainings. However, it is difficult to identify and assess the value of specific trainings due to a lack of quality labels and access to information on available funding schemes.

Lifelong learning mindset 

To deal with pressing changes in the labour market and at workplace, it is not sufficient to transform the education system or human resource strategies in companies. A change should start with each of us. Our societies should accept that lifelong learning is a new norm and a condition for retaining an existing job. Although some, often highly educated, people take steps in this direction we do not see real ‘learning societies’. The question “Where do you see yourself in ten years?” should become less relevant in a dynamically changing world. But let us ask ourselves “What do I need to learn now to be an effective employee tomorrow?”.

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