Transformation of the Workforce in the Financial Services Sector ANDREW LEVY

1. Transformation of the Workforce in the Financial Services Sector ANDREW LEVY

2. Give a man a fish, and you feed him for a day Teach him how to fish, and you feed him for a lifetime Chinese Proverb

3. Moral Training Creates Fishermen

4. The Need to Transform in South Africa • Political reality • Economic rationale

5. In terms of both the political reality and the economic rationale, transformation IS A pre-requisite for the sort of society all South Africans want.

6. The Forces for Transformation(Political) • Constitution • Preferential Procurement Framework Act • Employment Equity Act • Skills Development Act

7. The Forces for Transformation (Economic) • Where is your market growth ? • Who are your future customers ? • Where are your future skills ? • Have you got a future business ? • If not now, when ?

8. Approach to Topic • The Beanbrick Problem & jobless growth • Wages, productivity & marginal revenue Product • What does the SDA & the EEA really mean ? • When societal & economic forces collide • Size & structure of the sector the skewness problem • Where to from here ?

9. 1. The Beanbrick Problem • Does technological progress create job opportunities ? • How did blacksmiths react when they heard the first hoot of an approaching car ?

10. The Beanbrick Answer • Technological progress creates job opportunities • New technology demands more sophisticated skills • If unanticipated will result in structural unemployment, resistance to technological progress, and job displacement.

11. Jobless Growth (1) • Distinguish productivity of capital and productivity of labour • Differing industries have different capital/labour (K/L) ratios, as well as employment creation elasticities

12. Jobless Growth (2) • In our industry, technology deepens the K/L ratio in favour of capital and tends to decrease traditional employment opportunities, while demanding even more skilled labour • International competition compels us to equal the best • Overall view forward in our sector is positive growth with low to negative employment elasticity, & rising wages

13. This accentuates the avoidance of labour displacement, and structural unemployment by training & retraining • Besides, where best do we find people for our sector other than in our own sector ?

14. 2. Wages, Productivity & Marginal Revenue Product (1) • Technological progress raises wages • K/L ratio allows for increase wages

15. 2. Wages, Productivity & Marginal Revenue Product (2) • Theories of investment in human capital confirm that training increases contribution & leads to higher earnings and greater efficiency • If training increases the MRP of labour, this, ceteris paribus to offsetting by capital installations, & hence to lower employment

16. TO SUM UP SO FAR • Unless there is a concomitant increase in volumes to counter and offset technological progress in the industry, there is likely to be a net decrease in employment opportunity in the medium term, coupled with a shortage of supply of those skills demanded

17. Does this mean that it is time to leap under a bus?

18. 3. What do we really mean by AA, & what is the SDA all about ? (1) • The most important point (all too often forgotten) is that both of these are long haul strategies • Despite political pressure for change, it is going to take a decade or more before we see significant changes in national demographics

19. 3. What do we really mean by AA, & what is the SDA all about ? (2) • There is less scope for “arithmetical equity” in some sectors than others • Remember Section 42 – assessment of compliance

20. There are disparities in income & opportunity in the national labour market • Employers must achieve a diverse workforce broadly representative of our people & promote economic development and efficiency in the workforce • subject to • Macro labour supply factors • Economic realities of the employer in the sector • The future vacancy opportunity

21. Employment equity is not a numbers and ratios game • Exogenous and structural factors determine the extent to which a contribution can be made • We cannot expect most from those who have least opportunity to manoeuvre • Creative alternatives must be sought 

22. 4. When Societal Values & Economic Forces Collide? • Economic forces have no social conscience • Economic forces often are harshest for the weak • The only way we can impact upon economic forces is by legislation, which is a costly and imperfect route

23. Skills Development Act (1) • Is really less about getting your money back ? • And more about positive macro interventions in the labour market to enhance the supply side, & make the working of the market more efficient

24. Skills Development Act (2) • Both of these actions, if successful will yield positive benefit for the economy as a whole • In the medium term, this is the only way in which the problem of structural unemployment can be tackled with any chance of success

25. The only time men and women will strive for an egalitarian society is not when legislation compels it, but when they perceive it to be a desirable end in itself, or in their own self-interest

26. 5. The Size & Structure of the Sector (1) • The most notable factor which is discernable in the sector is the hyper-skewness of size distribution of employers and employees • The most notable factor which is discernable in the sector is that the greater majority of the employees are employed by the large and super large employers

27. 5. The Size & Structure of the Sector (2) • It is fair to ask – is this a homogeneous and comparable whole ? • The answer must be no !! • The issue of skills development and transformation cannot be approached on the basis of a uniform policy and plan • Most of all, we need to give attention to the small employer!

28. Problem 1 The central problem is to provide services to the small employer, on the basis that this will give the employer a real incentive to upgrade staff skills Problem 2 There is a clearly demarcated occupational stratification of skills demanded – you need a few rocket scientists and a large number of clerks

29. Problem 3 Logistics, communication and delivery in the sector are seriously hampered by the wide geographical distribution of employers Problem 4 There is a clear labour market gender bias to the industry’s labour supply. Macro issues of female participation rates are important here

30. Issues arising from the size of undertakings (1) • Training costs do not only comprehend the cost of the trainer/training and the employment cost of the trainee • The smaller the organisation, the greater the relative cost of the training

31. Issues arising from the size of undertakings (2) • The relative cost of any given training is therefore likely to be both actually and proportionately greater for the small employer • Hence the smaller the employer, the less the propensity to train

32. Further inherent difficulties of skew size distribution • Large geographic distribution in the sector means that : • communications are problematic • logistical support is costly and difficult • labour market efficiency is impaired • training delivery by traditional methods is hindered

33. Skills gap identified is multi-tiered • Specific financial and accounting skills, usually involving university degree-level study and requisite experience • Literacy, computer and IT skills • Management and leadership skills • Work-readiness skills

34. Remember, we all benefit from increases in capacity of the national manpower pool – particularly in the light of loss of skills through migration

35. So where are we ? • The industry is composed of two materially different components • Separate consideration is needed for each • There is less scope for the larger players to make significant shifts – they are well on the road already • Attention to the small firms is more urgent • For them, we will need to think outside the box.

36. What is to be done ? (1) • Establish simple, learner controlled on-line CBT – course on core skills available free to any member of the industry • Open a web based industry ‘university’ for those who want to upgrade their own skills • Attend on a macro industry basis to identified skills shortages e.g. establish scholarships/bursaries and finance bridging programme, start a student support service

37. What is to be done ? (2) • Publish booklet for small employers on ‘Why I should train and how I can do it?’ • Provide a similar booklet for employees ‘how to get ahead through training in the industry’ • Consider establishing a recruitment and placement service for the industry, at a nominal user fee • Calculate the true cost of training for the small employer and rebate 100% plus