STRENGTHS AND WEAKNESSES OF NATIONAL

SYSTEMS OF HUMAN CAPITAL DEVELOPMENT IN EUROPE

Dr. Dirk Van DammeHead, Innovation and Measuring

Progress Division, OECD/EDU

2

• Introduction: Conceptual and methodological issues

• Changing economies, changing skills demands

• Higher education, productivity and growth

• Education, skills and employment

• Skills distribution, growth and social inequality

• National skill profiles

• A few conclusions

Outline

3

CONCEPTIONAL AND METHODOLOGICAL ISSUES

4

• Human capital: a major input into the economy– Human capital, productivity and innovation

– Human capital growth as engine for economic growth

• But:– Is more of it always better?

– How to explain major differences in national human capital systems

– More interest in the distribution of human capital and links with growth and inequality

Human capital

5

• From formal educational measures– Years of formal education

– Educational qualifications (according to ISCED)

• To measures of learning outcomes– Literacy and numeracy skills as foundation skills

– PISA: among 15y olds (end of compulsory education)

– PIAAC: across the 16-65y old population

Measurement of human capital

6

Educational attainment: a very crude proxy of actual skillsLiteracy scores by educational attainment

7

CHANGING ECONOMIES, CHANGING SKILLS DEMANDS

8

• Globalisation: massive relocation of skills in the ‘global value-chain’

• Skills-biased technological change and “The Race between Technology and Education” (Goldin & Katz)

• Consequences: outsourcing and automation of specific segments of skills-based tasks/jobs– Disappearance of low-skilled jobs or hollowing

out of the middle-skilled jobs?

– Increasing risks for high-skilled jobs

Impact of economic transformation on skills demand

9

10

11

Evolution of employment in occupational groups defined by level of skills proficiency

12

Changing skills demand

13

Au

stri

a

Ita

ly

Cze

ch R

ep

ub

lic

Slo

va

k R

ep

ub

lic

Jap

an

Ge

rma

ny

En

gla

nd

/N.

Ire

lan

d..

.

Au

stra

lia

Po

lan

d

Av

era

ge

Ire

lan

d

Un

ite

d S

tate

s

Ne

the

rla

nd

s

Sp

ain

Sw

ed

en

Est

on

ia

No

rwa

y

De

nm

ark

Ko

rea

Cy

pru

s¹ ²

Ca

na

da

Fin

lan

d

Fla

nd

ers

(B

elg

ium

)

30

20

10

0

10

20

30

40

50

60

Primary education or less Tertiary education or more

Percentage workers in high-skilled and unskilled jobs

14

HIGHER EDUCATION AND ECONOMIC GROWTH

Growth in university-level qualifications (2010)Estimates of the percentage of the 25-34 year-old and 55-64 year-old population that has attained tertiary education

1

0

10

20

30

40

50

60

7025-34 year-olds 55-64 year-olds

%

Annual growth rate in tertiary educational attainment rate (1998-2008)

Irel

and

Turk

ey

Spai

n

Pola

nd

Port

ugal

Luxe

mbo

urg

Kore

a

Icel

and

Italy

Slov

ak R

epub

lic

New

Zea

land

Aust

ralia

Switz

erla

nd

OEC

D a

vera

ge

Czec

h Re

publ

ic

Hun

gary

Gre

ece

Mex

ico

Cana

da

Uni

ted

King

dom

Fran

ce

Aust

ria

Den

mar

k

Japa

n

Net

herla

nds

Belg

ium

Uni

ted

Stat

es

Finl

and

-1

0

1

2

3

4

5

6

7

8

Overall population growth Attainment rate growth%

• Across countries, a higher tertiary education attainment rate is positively associated with higher labour productivity

• Across countries, both growth rates are also positively correlated

• Over time, increases in tertiary education attainment are positively associated with productivity increases (except during recession)

• Over the past ten years more than half of GDP growth in OECD is related to labour income growth among tertiary-educated individuals

17

Higher education’s contribution to productivity and growth

• Earnings of tertiary-educated individuals– Are approximately 1.6 times higher than of individuals with

only upper secondary education, which implies a massive creation of wealth

– The skills-based wage premium increases with age (from factor 1.4 to 1.7 for 25-34 and 55-64 age groups)

• Higher education degrees yield even higher economic returns in the current recession– Relative unemployment risks decrease

– Relative earnings of tertiary-educated grow

– Private net present value over lifetime of 160 000 USD for a man and 110 000 USD for a woman (2010)

18

Higher education’s contribution to productivity and growth

10 20 30 40 50 60 70 80 9010

15

20

25

30

35

40

45

50

55

Australia

Austria

Belgium

Canada

Chile

Czech Rep

Denmark

Estonia

Finland

FranceGermany

Greece

Hungary

Iceland

Ireland

Israel

Italy

Japan

Korea

Luxembourg

Mexico

Netherlands

New ZealandNorway

Poland

PortugalSlovak Rep

Slovenia

Spain

SwedenSwitzerland

Turkey

UKUS

R² = 0.197228181009878

Labour productivity: GDP per hour worked, current prices, USD (2011)

Pe

rce

nta

ge

of t

he

25

-64

ye

ar-

old

po

pu

latio

n th

at

ha

s a

ttain

ed

tert

iary

ed

uca

tion

(2

01

1)

19

Tertiary-level attainment rate and labour productivity across countries

-1 0 1 2 3 4 50

1

2

3

4

5

6

Australia

Austria

Belgium Canada

Czech Rep

Denmark

Estonia

Finland

France

Germany

GreeceHungary

Iceland

Ireland

Israel

Italy

Japan

Korea

Luxembourg

Mexico

Netherlands

New Zealand

Norway

Poland

Portugal Slovak Rep

Slovenia

Spain

Sweden

Switzerland

Turkey

UK

US

R² = 0.00397202624568826

R² = 0.105542049171614

Labour productivity average annual growth rate (2005-2011)

Ave

rag

e a

nn

ua

l gro

wth

ra

te in

tert

iary

-leve

l at-

tain

me

nt r

ate

(2

00

5-2

01

1)

20

Tertiary-level attainment growth rate and labour productivity growth rate (2005-11)

32 33 34 35 36 37 38 39 4020

22

24

26

28

30

32

34

2000

20052006

20072008

20092010

2011OECD Average

Labour productivity

Pe

rce

nta

ge

of t

he

25

-64

ye

ar-

old

po

pu

latio

n th

at h

as

at-

tain

ed

tert

iary

ed

uca

tion

21

Tertiary-level attainment rate and labour productivity over time

-6% -4% -2% 0% 2% 4% 6%0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

2000

2001

2002

2003

2004

2005

20062007

2008

2009

2010

OECD average

GDP growth (real percentage change from previous year)

La

bo

ur

inco

me

gro

wth

in G

DP

for

tert

iary

-ed

-u

cate

d w

ork

ers

22

Close relationship between GDP growth and labour income growth for tertiary-educated workers

correlation of .80 between both data series

24

Hu

ng

ary

Slo

ven

iaC

zech

Re

pu

blic

Slo

vak

Re

pu

blic

Un

ited

Sta

tes

Ire

lan

dP

ola

nd

Po

rtu

ga

lG

erm

an

yU

nite

d K

ing

do

mL

uxe

mb

ou

rgN

eth

erla

nd

sA

ust

riaO

EC

D a

vera

ge

Sw

itze

rlan

dIs

rae

lK

ore

aG

ree

ceIta

lyT

urk

ey

Fin

lan

dJa

pa

nF

ran

ceS

pa

inC

an

ad

aE

sto

nia

Au

stra

liaB

elg

ium

De

nm

ark

No

rwa

yS

we

de

nN

ew

Ze

ala

nd

40

60

80

100

120

140

160

180

200

220

240

260

280 Below upper secondary education Tertiary educationIndex

Relative earningsRelative earnings from employment by level of educational attainment for 25-64 year-olds, upper secondary = 100 (2010 or latest available year)

25

Earnings advantage of university degree increases with age

10121416182022240

10

20

30

40

50

60

70

Belgium

France

Germany

Italy

Spain

UK

OECD EU21

Percentage of the 55-64 year-old population with tertiary A attainment

Re

lativ

e e

arn

ing

ad

van

tag

e b

etw

ee

n 5

5-6

4 a

nd

2

5-3

4 y

ea

r-o

ld a

du

lts w

ith te

rtia

ry A

26

Ko

rea

Cze

ch R

ep

ub

lic

Sw

ed

en

Fin

lan

d

Ca

na

da

Co

un

try

ave

rag

e

Sw

itze

rlan

d

Un

ited

Sta

tes

No

rwa

y

Un

ited

Kin

gd

om

Au

stria

Ge

rma

ny

Fra

nce

Ire

lan

d

De

nm

ark

-1%

0%

1%

2%

3%

4%

5%GDP Growth ISCED 5B/5A/6 ISCED 3/4 ISCED 0/1/2

Average GDP growth (real percentage change from the previous year) and labour income growth in GDP, by educational categories (2000-10)

27

Qualifications, not skills matter for earningsDifference in average earnings of tertiary educated workers (with skill level 2) and more highly skilled non-tertiary educated workers (with skill level 3)

Higher skilled, less educated workers

earn more

Less skilled, tertiary educated workers

earn more

28

• Difference in average earnings of tertiary educated workers (with skill level 2) and more highly skilled non-tertiary educated workers (with skill level 4/5)Higher skilled,

less educated workers earn more

Less skilled, tertiary educated workers

earn more

Difference in average earnings of tertiary educated workers (with skill level 2) and more highly skilled non-tertiary educated workers (with skill level 4/5)

Qualifications, not skills matter for earnings

29

IMPACT OF EDUCATION AND SKILLS ON EMPLOYMENT

0

5

10

15

20

25

302009 2008 2010

30

Unemployment and the crisisUnemployment rates of 25-64 year-olds, by educational attainment level (2008, 2009 and 2010)

051015202530

Brazil

Nethe

rland

s

Austri

a

Luxe

mbo

urg

Mex

ico

Japa

nIta

lyChi

le

Czech

Rep

ublic

Israe

l

Slove

nia

Franc

e

Canad

a

Polan

d

Portu

gal

Turke

y

Greec

e

Spain

051015202530

Tertiary education

(%)

Below upper secondary

education (%)

Upper secondary and post-secondary non-tertiary (%)

Over 35% each year for the Slovak Republic

31

Youth unemployment and skills are linked

0 10 20 30 40 50 60240

250

260

270

280

290

300

310

Australia

Austria

Belgium

Canada

Czech Republic

Denmark

Estonia

Finland

FranceGermany

Germany

Italy

Japan

KoreaNetherlands

Norway

Poland

Japan

Spain

Sweden

United Kingdom

United States

Average

Youth unemployment rate 15-24 year-olds (2012)

Lite

racy

pro

ficie

ncy

16-2

4 ye

ar-o

lds (

PIAA

C) (2

011)

32

65 70 75 80 85 90 n

10

20

30

40

50

60

70

80

90

100

Sweden

Austria

France

New Zealand

Luxembourg

Netherlands

Switzerland

Germany

Employment rates for 25-34 year-olds with upper secondary VET qualifications

Perc

enta

ge o

f 25-

34 y

ear-

olds

that

hav

e att

aine

d an

upp

er s

econ

dary

VET

qua

lifica

tion

as h

ighe

st le

vel o

f edu

catio

nCountries where expenditure in VET programmes is above the OECD averageCountries where expenditure in VET programmes is below the OECD average

%

%

OECD

average

OECD average

33

Employment rate by educational attainment, 2005-11, 25-34 year-olds

2005 2006 2007 2008 2009 2010 201150

55

60

65

70

75

80

85

90

95

100

Belgium below upper sec Belgium upper secondary Belgium tertiaryOECD av below secondary OECD av upper secondary OECD av tertiaryEU21 av below upper secondary EU21 av upper secondary EU21 av tertiary

25-34 year-olds

34

Employment rate by educational attainment, 2005-11, 45-54 year-olds

2005 2006 2007 2008 2009 2010 201150

55

60

65

70

75

80

85

90

95

100

Belgium below upper sec Belgium upper secondary Belgium tertiaryOECD av below secondary OECD av upper secondary OECD av tertiaryEU21 av below upper secondary EU21 av upper secondary EU21 av tertiary

45-54 year-olds

35

Employment rate gap for 25-34 y-olds with less than upper sec, 2005-11

2005 2006 2007 2008 2009 2010 2011 n

5

10

15

20

25

30

Belgium difference in employment rates upper sec minus below secondaryOECD difference in employment rates upper sec minus below secondaryEU21 difference in employment rates upper sec minus below secondary

25-34 year-olds

36

Inactivity among very young youthPercentage of 15-19 year-old NEET (2011)

Uni

ted

King

dom

Nor

way

Spai

n

Italy

OEC

D a

vera

ge

Port

ugal

Aust

ria

Irel

and

Switz

erla

nd

Kore

a

Den

mar

k

Net

herla

nds

Swed

en

Gre

ece

Fran

ce

Belg

ium

Esto

nia

Icel

and

Finl

and

Slov

ak R

epub

lic

Ger

man

y

Czec

h Re

publ

ic

Hun

gary

Pola

nd

Luxe

mbo

urg

0

2

4

6

8

10

12

14

16

18

20

Not in education and unemployed Not in education and not in the labour force

Not in education (Total)

%

37

SKILLS DISTRIBUTION, GROWTH AND SOCIAL

INEQUALITY

38

ItalySpain

FranceIrelandPoland

Northern Ireland (UK)Austria

United StatesGermanyDenmark

England/N. Ireland (UK)Korea

England (UK)AverageCanada

Slovak RepublicCzech Republic

Russian Federation³Flanders (Belgium)

EstoniaNorwaySweden

AustraliaNetherlands

FinlandJapan

240 250 260 270 280 290 300

25th

Mean and .95 confidence interval

for mean75th 95th 5th

Score

Skills of adultsLiteracy

7 points are roughly equal to one year of education

39

ItalySpain

FranceIrelandPoland

Northern Ireland (UK)Austria

United StatesGermanyDenmark

England/N. Ireland (UK)Korea

England (UK)AverageCanada

Slovak RepublicCzech Republic

Russian Federation³Flanders (Belgium)

EstoniaNorwaySweden

AustraliaNetherlands

FinlandJapan

100 150 200 250 300 350 400

25th

Mean and .95 confidence interval

for mean75th 95th 5th

Score

Skills of adultsLiteracy

40

220 230 240 250 260 270 280 290 300Score

Ave

rag

e 1

6-6

5 ye

ar-o

lds

Average 16-2

4 year-olds

Korea

Germany

Norway

Average 55-6

5 year-olds

Spain

Finland

France

US

UK

Literacy skills in younger and older generations

41

Unequal distribution of skills unrelated to social/income inequality

55 60 65 70 750.20

0.25

0.30

0.35

0.40

Australia

Austria

Canada

Czech Rep Denmark

Estonia

Finland

GermanyIreland

ItalyJapan

Korea

Netherlands

Norway

Poland

Slovak Rep

Spain

Sweden

United States

Flanders

UK

Score-point difference between the 75th and 25th percentiles on the nu-meracy scale

Gini coefficient

42

35 40 45 50 55 60 65 70 750.20

0.25

0.30

0.35

0.40

Australia

Austria

Canada

Czech RepDenmark

Estonia

Finland

Germany Ireland

ItalyJapan

Korea

Netherlands

Norway

Poland

Slovak Rep

Spain

Sweden

United States

Flanders

UK

Percentage of adults scoring below Level 2 on the numeracy scale

Gini coefficient

Low foundation skills and social inequality are related

43

A wide skills distribution relates positively to economic growth

55 60 65 70 7515000

20000

25000

30000

35000

40000

45000

50000

AustraliaAustria Canada

Czech Rep

Denmark

Estonia

Finland

GermanyIreland

Italy

Japan

Korea

Netherlands

Norway

Poland

Slovak Rep

Spain

Sweden

United States

Flanders UK

Score-point difference between the 75th and 25th percentiles on the numeracy scale

GDP per capita

44

A higher skills advantage of tertiary educated relates positively to economic growth

40 45 50 55 60 65 70 75 80 8515000

20000

25000

30000

35000

40000

45000

50000

AustraliaAustria

Canada

Czech Rep

Denmark

Estonia

Finland

Germany

Ireland

Italy

Japan

Korea

Netherlands

Norway

Poland

Slovak Rep

Spain

Sweden

United States

FlandersUK

Score-point difference in numeracy proficiency between tertiary-educated adults and those without upper secondary education

GDP per capita

45

NATIONAL SKILLS PROFILES

46

• Learning outcomes at 15 (PISA):– Slightly above average performance, but strongly

improving

– High impact of socio-economic background

• Educational attainment (EAG)– Very high secondary attainment, but low (and very

selective) tertiary participation and attainment rate

– Strong vocational education sector

– High youth employment

• Adult skills (PIAAC):– In literacy below, in numeracy above average

Germany

47

• Learning outcomes at 15 (PISA):– Average performance, stable, with high social

segregation

• Educational attainment (EAG)– High and increasing tertiary participation and

attainment rates

• Adult skills (PIAAC):– Around average for literacy, below average for

numeracy

– No progress from older to younger generations

United Kingdom

48

• Learning outcomes at 15 (PISA):– Average performance and declining

– Huge inequalities and still aggravating

• Educational attainment (EAG)– Attainment rates have caught up with rest of

Europe, but at higher levels still below

• Adult skills (PIAAC):– Significantly lower than other countries

– Younger generations much higher than older, but still below average

France

49

• Learning outcomes at 15 (PISA):– Average performance and slowly further declining

– Few high-performers and many low-performers

• Educational attainment (EAG)– Low but increasing educational attainment, even

very (too?) strongly increasing at tertiary level

– High graduate unemployment

• Adult skills (PIAAC):– Very low proficiency in literacy and numeracy, for

all age groups

Spain

50

• Learning outcomes at 15 (PISA):– Below average performance, but improving at

both ends of distribution

• Educational attainment (EAG)– Very low attainment rates at secondary and

tertiary level, slowly improving

• Adult skills (PIAAC):– Significantly below average for both literacy and

numeracy skills

Italy

51

• Learning outcomes at 15 (PISA):– FL among sub-top performers; FR below average

– Huge impact of socio-economic background

• Educational attainment (EAG)– High attainment rates both for secondary and

tertiary levels, but expansion in tertiary participation/attainment has come to standstill

• Adult skills (PIAAC):– High literacy and numeracy skills but with still

high % of low-skilled adults

Belgium / Flanders

52

A FEW CONCLUSIONS

53

• No definite theory on which human capital systems contribute best to knowledge-economies and inclusive societies

• More academic skills or more vocational skills?

• Towards a more effective and more equitable distribution of educational investments over the lifetime?

• The long-term costs of low educational attainment and low skills are far higher than the cost of risks of over-schooling

A few questions and conclusions

Thank you !

dirk.vandamme@oecd.orgwww.oecd.org/edu/ceri

twitter @VanDammeEDU

54