Institut Arbeit und Technik

Wissenschaftszentrum Nordrhein-Westfalen Wuppertal Institut für Klima, Umwelt, Energie Kulturwissenschaftliches Institut Institut Arbeit und Technik Gerhard Bosch The Changing Nature of Work:Comparative Perspectives THE FUTURE OF WORK: An International Symposium ESRC Future of Work Programme London, 23-24 June 2003 Prof. Dr. Gerhard Bosch Institut Arbeit und Technik, Munscheidstr. 14, D - 45886 Gelsenkirchen Tel: +49 209/1707147, Fax: +49 209/1707124, email: bosch@iatge.de Institut Arbeit und Technik Gerhard Bosch

The Changing Nature of Work: Comparative Perspectives Structure of the Presentation 1 2 3 4 Changes in the labour market Myth in the discussion on education and work Removing barriers lifelong learning Conclusions Gerhard Bosch

1. Changes in the labour market 1.1 1st Trend: Investments in intangibles are becoming more important than investments in tangibles Old technologies require more investments in tangibles (railroadification). The new more knowledge-based technologies require more investment in intangibles. The relation between the stock of investments in tangibles and intangibles changed from 2 to 1 in the 20's to 1 to 1 in the 90's. Fig. 1 Figure 1: US Capital Stocks Billions of Dollars 6075 1929 (structures and equipment, inventories, material resources) tangible 3251 non-tangible (education and training, health and safety mobility, R&D) 8120 1948 5940 17490 1973 17349 28525 1990 32819 Source: Abramovitz, M., David, P. 1996: Employment and Growth in the Knowledge-based Economy. OECD Gerhard Bosch

1. Changes in the labour market 1.2 2nd Trend: Education is getting more and more the entry ticket into the labour market Fig. 2 The higher the skill level the higher the employment rate. Low education means more and more exclusion from the labour market. Employment rate of men and women (25 - 54 years) Figure 2: by educational attainment in the EU 15, 1997 79 LOW 48 86,3 Men MIDDLE 68,3 Women 91,2 HIGH 81,1 Source: European Commission, Employment rates report Luxemburg 1998 Gerhard Bosch

1. Changes in the labour market 1.3 3rd Trend: Working hours differ increasingly by educational attainment The higher the skill level the longer the working hours. Fig. 3 „Brain operating hours" are becoming more important than machine operating hours. Skill shortages have been reduced by increase in working hours. Low skilled work is less and less utilised. Figure 3: Actual weekly working hours in West Germany Change 1984 1997 1984 - 1997 35,9 - 12,5% Un- and semiskilled 31,4 39,2 Basic vocational qualification - 4,8% 37,3 43,2 Intermediate vocational training (Masters etc) + 3,5% 44,7 43,4 + 3,0% Higher tertiary education 44,7 39,4 Total - 4,3% 37,7 Source: Socio-Economic panel, own calculations Gerhard Bosch

1. Changes in the labour market 1.4 Positive Returns to Human Capital Investments • Individual returns: increase of wages (6,5% per additional year of schooling in EU) • Macroeconomic returns: (a) increase of aggregate productivity (5% on impact/ a further 5% in the long run in EU) • (b) faster technological change • Social cohesion: reduction of inequality and social distance improves economic performance Caution: Most data refer to quantity of formal schooling. Quality indicators of learning and informal learning also shows positive effects. Source: EU 2003, Human capital in a global and knowledge based economy, Luxembourg Gerhard Bosch

1. Changes in the labour market 1.5 The Human-Capital-Paradox • Higher individual returns in countries with deregulated labour markets (returns on additional year of schooling in Scandinavia 4% and in UK 12%) • Neoclassical explanation: more effective pay scales which reflect productivity differences more closely in deregulated markets • Alternative explanations: underinvestment in training in deregulated economies, more polarised skill structures and skill shortages • Human-capital-paradox: in spite of high monetary incentives for investments due to high income inequality low investment of low skilled Fig. 4 Explanation of the paradox: • high investment risk because of high dispersion of returns • long working hours of low skilled • low incomes and saving rates • tayloristic work organization • lack of formal pathways for low skilled • high social distance Gerhard Bosch

Educational levels in West Germany and the USA, 1989 Figure 4: 45 High school 16 30 College, Associate Degree Vocational training 69 17 Bachelor's degree 7 USA 8 Master or higher Germany 8 Source: Freeman, R.B., Schettkat, R. (1998): Low Wages Services: interpreting the US-German difference. Paper to the LOWER Conference Groningen. The Netherlands. Nov. 19-21 Gerhard Bosch

2. Myths in the discussion on education and work The half-life of skills and knowledge is declining 2.1 1st Myth: • Most of the general skills (languages, mathematics)last a whole life, if they are used. This is also true for the social skills. • Basic vocational training have a long half-life. • Specific vocational skills have a decreasing half-life. Conclusion: • General skills have to be learned early. • Broad vocational skills in initial vocational training. • More further training to fresh up and extend specific vocational training. Gerhard Bosch

2. Myths in the discussion on education and work One should be prepared to change occupation several times in a work life. 2.2 2nd Myth: • Might be true if occupations are very specific and are mainly based on-the-job training • Broad occupations make it possible to cope with structural change (further training is required) • Multiple occupation changes waste resource. This is as if somebody who has thrown 35 with the dices has to start again at 1 Conclusion: Develop broad occupations Gerhard Bosch

2. Myths in the discussion on education and work Technological development is progressing so fast that training based on fixed curricula and certificates are no longer viable. 2.3 3rd Myth: • Some early adopters and computer kids may learn only by doing or on-the-job • If their are no general standards for curricula and certificates there will be de-facto standards of Microsoft, SAP, Cisco etc. Skills are not transferable Conclusion: Because of fast changes learning has to be changed: • Traditional classroom teaching has to be combined with learning in real projects • Curricula have to be opened for changes Gerhard Bosch

2. Myths in the discussion on education and work Training must be increasingly oriented along the needs of the companies. 2.4 4th Myth: • Many companies, especially SME‘s, are planning on a short-term basis and do not know their needs in the future • Asking them about their need is like „A blind person is asking another blind person about the way" • Not all companies are innovators: their needs may be formed by old technologies and traditional forms of work organisation • Many future companies are not yet in existence Conclusion: We need a pro-active supply side-approach of identifying future needs and translating these needs into curricula Gerhard Bosch

3. Removing barriers lifelong learning 3.1 Market failure : Internalise training-incentives in markets Incentives could be: A. In the product market: Prevailing wage laws Innovation policy Minimum training requirements for bids Licensing (such as for doctors, pilots or electricians) Quality standards for products and services (as in the German construction industry) B. In the labour market: Safety or liability regulations Employment protection which establishes long term relations between employer and employee create incentives for training (job tenure is increasing in most countries) Avoiding free rider problem by introducing a levy (as in the Danish apprenticeship system) Health and safety regulations Fig. 5 Fig. 6 Ex. Gas Gerhard Bosch

Business Enterprise Expenditure on R&D in selected OECD-countries (1981 - 1998) Gross domestic expenditure on R&D as a percentage of gross value added in the economy Figure 5: 4 Sweden Finland Switzerland 3 Japan USA Germany 2 France UK Canada Netherlands 1 Italy 0 * 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 * estimation Source: OECD: Main Science and Technology Indicators (1998/1). - National Calculations and Estimates Gerhard Bosch

Apprenticeship Training Rates and Prevailing Wage Laws by State Legal Policy * Figure 6: * Apprentices as a percent of journeymen. 4,3% 3,8% 2,8% 2,1% Repeal States States States that Repeal States before repeal retaining law never had law after repeal Source: P. Philips: The US: A tale of two cities. In: G. Bosch / P. Philips: Building chaos (Eds.): an international comparison of deregulation in the construction industry. London: Routledge, 2003 Gerhard Bosch

Bad practice: Conclusion: The British gas industry • Post-privatisation, a severely fragmented industry total businesses 43.900 total employees 97.000 • No rational employer would wish training. • Ageing work force more installers over 50 years than under 35 years. • 1999 only 128 entrants into training. Fig. 7 • state took over training 1999 => 128 new entrants, 2002=> 2500 new entrants, 2004=> 4500 new entrants Employer financed training was replaced by state financed training Gerhard Bosch

Gas: the skills problem Figure 7: • 1999: 128 entrants! • Ageing workforce - more installers over 50 than under 35 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+ Gerhard Bosch

3. Removing barriers lifelong learning 3.2 Underinvestment in Training in SME’s In most countries SME‘s invest less in training than big companies. • Money is one but not the major obstacle • Less need for training (high percentage of technology appliers) • Higher risks of investments due to higher manpower turnover • Low internal planning capacity • No economies of scale in training • Intransparency of training market • Supply not tailor-made for SME’s • High specialisation/ internal learning too narrow REASONS: Gerhard Bosch

3. Removing barriers lifelong learning 3.3 Creating incentives for training in SME’s 1 Networks • Reduction of planning costs • Economies of scale • Tailor-made-supply • Enlargement of learning possibilities • Networks can develop other activities (manpower pool, joint bidding etc.) Positive effects: Problem: • Organisation of the network 2 External help structure Consultants for temporary support in developing or providing training 3 Combination of (1) and (2) Both can be financed by contributions, levies or public money Gerhard Bosch

3. Removing barriers lifelong learning 3.4 Best practice: Small firm development account in UK • Pilot Program in Leicestershire & Lincolnshire carried out by the ”Centre for Entreprises” launched in 2002 • A mechanism to stimulate business led workforce development in small companies (5 – 50 employees) • Training advisor of the Centre and ”Training Champion” appointed by the firm develop ”Training and Development Plan” • Company receives £ 500 after signing the plan / Centre pays up £ 150 per employee for external training • 280 Training Champions attended workshops • 230 approved training plan • Average 20 employees per business • Average 11 employees per plan RESULTS: Gerhard Bosch

3. Removing barriers lifelong learning 3.5 Pathways for individuals and companies Major problem: Intransparency of training market makes the fit between training and work organisation for companies difficult (high transaction costs) • Generally or broadly recognised certificates • Certification and quality assurance of providers Possible solutions Conclusion:Both solutions have to be linked. Gerhard Bosch

Training Pathways in the German IT-Industry Figure 8: Strategic Professionals Master of Engineering Certified IT Business Engineer Certified IT Technical Engineer Operational Professionals Certified IT Marketing Manager Certified IT Systems Manager Certified IT Business Manager Certified IT Business Consultant Bachelor of Engineering Specialists 29 Specialist profiles for 6 IT sections: Software Developer, Solutions Developer, Administrator, Co-ordinator, Technician, Advisor Vocational Training IT System Electrician IT System integration Specialist IT System Support Officer IT System Officer Source: http://kib-net.de, 2003 Gerhard Bosch

3. Removing barriers lifelong learning 3.6 Learning forms: Shortcomings of traditional classroom vocational learning • For low skilled: too abstract/difficult to motivate if there is no concrete output • For middle and high skilled: lack of tacit knowledge • For companies: classroom teaching plus on-the job-training afterwards too expensive • For innovation in the economy: too slow Gerhard Bosch

Basic learning forms in vocational training Figure 9: Orders Complex Products Customer- Small Products Orientation Project- Orientation Product- Orientation Class Room- Increasing Orientation Work Orientation Gerhard Bosch

3. Removing barriers lifelong learning 3.7 Work Organisation (1): Exclusion of the low skilled from learning Tayloristic model of firms • Complex organisation and simple jobs. • complexity of the organisation is grounded in the radical split between "thinking" and "doing" • The organisational memory is based on formal procedures, strong hierarchies and a professional elite at the top of the firm. • The low skilled are excluded from formal and informal learning New model of flexible firm • Flexibility by the reintegration of tasks and teamwork • reduction in organisational complexity: coordination and communication at lower levels of the organisation • This organisation is based on continuous learning Gerhard Bosch

3. Removing barriers lifelong learning 3.8 Work Organisation (2): Crucial role of work organisation • Productivity increases only if knowledge is actually used • Motivation to learn often comes from work experience • Important for low skilled: Changes in work organization (job enrichment/enlargement, rotation) make it possible to learn step by step • Research of the European Foundation shows that traditional forms of work organization still dominate in EU • Some countries are far ahead in introducing post-tayloristic forms of work organization (S, DK, FIN, NL) • Even in modernized companies the peripheral workers are often excluded from learning PROBLEMS: Gerhard Bosch

3. Removing barriers lifelong learning 3.9 Work Organisation (3): CONCLUSIONS • The state and the social partners should promote decentralized forms of work organization • Promotion of training for peripheral workers • Good example: France increased the training levy for temporary and agency workers from 1,5 to 2% of the gross wage bill Figure 10: Employees who have received training over the past 12 months (by contract) 35 34 31 23 All employees Indefinite contracts Fixed-term contracts Temporary agency contracts Source: European Foundation: Third European survey on working conditions 2000 Gerhard Bosch

3. Removing barriers lifelong learning 3.10 Lack of Time and Money: SOLUTIONS • Entitlements for sabbaticals as in Sweden • Grants for further education as in Sweden • Saving accounts for life-long learning with subsidies of the state, own contributions and contributions of companies (Problems: embeddedness, taxation, property rights, bankruptcy, use: training vs. early retirement) Gerhard Bosch

3. Removing barriers lifelong learning 3.11 Role of social partners (1) Social partners can promote training by agreements on • standardized curricula and certificates (pathways) • saving accounts for training • on special programs to ”promote training for less skilled” • work organization • pay scales with incentives for learning Advantage compared to programs run by the state or the employers: • better links between theory and practice • compromise between short term business needs and promotion of employability • easier implementation on industry level PROBLEM: Unions are marginalised in some countries. Gerhard Bosch

3. Removing barriers lifelong learning The Collective Agreement on training in the engineering industry in Baden Württemberg 2001 Role of social partners (2): Key elements (1): • The social partners agree that lifelong learning is the key for future competitiveness of the companies and the employability of the employees. • Each employee has the right to a regular talk with the employer on his/her individual training needs. • Employees in parental leave also have the right to such a talk. • If there are training needs, an individual training plan will be agreed upon. • In case there is no agreement the employers and the works council or in companies with more than 300 employees a commission (parity of seats) should try to reach an agreement. • If they do not reach an agreement a representative of the new "Agency to promote further training" will become a member of the commission with the right to vote. • The employer pays the training. Gerhard Bosch

3. Removing barriers lifelong learning The Collective Agreement on training in the engineering industry in Baden Württemberg 2001 Role of social partners (3): Key elements (2): • After successful training the employees can claim to use the new skills. • The social partners build up an "Agency to promote further training". The agency should • consult companies, • develop training programmes for un- and semiskilled workers, • observe the structural change in the industry and propose training programmes. • Each employee with 5 years tenure is entitled to 3 years unpaid leave for training. The IG Metall did not succeed in getting a paid training leave for older workers to adapt their skills to structural change. Gerhard Bosch

4. CONCLUSIONS • Barriers to lifelong learning are found not only in the education and training system but also in other sub-systems of the society (work-organization, labour and product markets, industrial relations, innovation policy). • Removing barriers to learning is a crosscutting task which requires cooperation of actors from different subsystems and cannot be left only to education and training specialists. • The major challenge is to develop consistent policies in these different fields. • Expansion of lifelong learning may increase inequality and segmentation of labour markets. Gerhard Bosch

Institut Arbeit und Technik