Human capital, technology and skills
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The preceding chapter analysed how workers in the transition countries have reacted to the changes in product and labour markets. This chapter looks at how enterprises have adapted the composition of their workforces to changes in market demand and in production and to the introduction of new technologies. The availability of workers with the appropriate skills as well as the adaptability of employees are likely to influence the types of jobs that firms will create through fresh investment. Moreover, during the transition process rapid technological change has taken place in industrialised market economies. One aspect of this has been the rising demand for skilled labour at the expense of unskilled workers despite increases in the relative wages of skilled workers. Such changes appear to be strongly associated with the introduction of computer-intensive technologies. Therefore, the adjustments that firms in transition countries must make have to be seen in a wider context of structural change.
This chapter uses data from a survey of foreign investors and a survey of domestic enterprises to gauge how employers perceive the quality of workers in transition and the size of the gap between the skills available and those needed. It also looks at the extent to which firms have adopted new technologies and have made new use of skills, as well as the incentives to acquire skills.
The evidence from both surveys suggests that transition economies lag behind advanced industrialised countries in terms of the quality of their workforce. This result qualifies the view that the region has abundant human capital resources, despite the considerable achievements in formal education. It seems that the educational systems and the experience of workers in the period before transition did not prepare them adequately for the requirements of the market economy. Furthermore, this chapter finds that there are significant quality gaps even for workers with higher levels of education and that these gaps are generally greater in the Commonwealth of Independent States (CIS) than in central and eastern Europe and the Baltic states (CEE).
The survey of domestic enterprises, moreover, finds a general lack of restructuring in terms of technology upgrades involving computers and information technologies (IT) in the less advanced reformers. However, there is some evidence of restructuring and use of new technologies in advanced countries, such as Hungary. The lack of restructuring has been accompanied by little change in the composition of employment across skill or educational categories over the period of the survey (1997-2000). This evidence as well as other data indicate that adjustments in the composition of the workforce are far from complete, particularly in less advanced transition economies. One negative consequence is that many skilled workers are performing jobs that do not reflect their levels of education. Over time, there will be a gradual loss of skills, leading to an even greater gap in quality.
The implications for public policy are twofold. First, governments and firms need to pay increased attention to training, including improved systems of vocational training, as well as providing better incentives for firms to make on-the-job training available in order to reduce such quality gaps. Second, the creation of new jobs ultimately will depend on improved conditions for investment (see Chapter 5 regarding the recent increase in levels of employment in CEE). Only where such conditions exist can countries hope to capitalise on the relative abundance of well-educated workers that remains a legacy from the planned economy.
The next section introduces the major factors that are likely to drive the demand for different types of workers during the course of transition. Section 6.2 turns to the results of the survey of foreign investors, while Section 6.3 analyses the survey of domestic firms in three selected countries (Hungary, Romania and Russia). Section 6.4 looks in more detail at skill gaps and training needs and the implications for public policy, while Section 6.5 provides some conclusions.
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