OECD Insights Human Capital How what you know shapes your life (eBook)

1. Introduction: Investing for Change

By way of introduction...

The Paris suburb of Villiers-le-Bel is an uninspiring place on a cold, winter afternoon. Blocks of look-alike apartments line up in long rows. A discount store stands deserted on a street corner. Groups of young men hang around the community centre.

Just a few months earlier, youths like these had taken to the streets of Paris’s suburbs. Thousands of cars were burned in night after night of rioting that featured on the front pages of newspapers around the world. Some in France dismissed it as nothing more than mindless violence. Others saw it as a cry of anger from immigrant communities who believe they have suffered decades of social exclusion and economic marginalisation.

The riots are just a memory on this dreary afternoon at the community centre as the men sit about in thick padded jackets listening to rap music on a stereo. Upstairs, four local unemployed women are meeting with an employment advisor. Some of the women were born in France; others are immigrants; all come from different ethnic backgrounds. They talk about what they need to put in their résumés and how to approach employers, and then discuss – sometimes heatedly – the problems they face in finding jobs.

Some of the women argue that because their area relies on just one railway line, employers are reluctant to hire them for fear that transport delays and strikes will keep them from getting to work. Others believe the barriers are more insidious, a reflection of prejudice and discrimination. All agree that lack of education can be a major obstacle to finding a job.

Linda, who grew up in France in a traditionally minded North African family, regrets that her education was cut short. “I was a model student at school”, she explains, but she was pulled out before she could finish her schooling. “My father believed that women shouldn’t work and that they should stay at home until they got married. In our education, our culture, our religion, a woman just has to accept things as they are.”

Linda was married in her late teens, but her marriage didn’t last, leaving her to bring up her children on her own. That’s forced her family to reconsider its beliefs. “My father finally accepted my divorce. Now he understands my situation, he has changed his approach. Now he pushes me to find work.” But for Linda, that’s not easy: “No CV, no professional experience, never a trainee”. She has turned to France’s employment services for help with training and is hopeful that they can help her, but she knows it won’t be easy. “There are no guarantees”, she says.

To get on, to get a better job and to improve their incomes, the women know they need to have an education. That’s hardly a revolutionary idea. Parents the world over and in all social classes nag their children to study hard and get good grades in the hope that some day they’ll reap the rewards of all that work.

Behind that advice lies an interesting concept; namely, that the years we spend in education generate a form of capital that has the potential to produce a long-term return, just like forms of capital that we may be more familiar with, such as money in a bank or a piece of land. This idea has become highly influential among policy makers, and it has spread beyond just education. Good health, too, can be regarded as a form of capital that has the potential to pay returns to individuals in the form of increased lifetime earnings.

Indeed, even the relationships and shared values in societies can be seen as a form of capital that make it easier for people to work together and achieve economic success. Arguably, the absence of such capital explains some of the problems that affect places like Villiers-le-Bel.

This book is about these forms of capital.

This chapter begins by briefly sketching out some key worldwide trends – changing demographics, globalisation and the rise of the knowledge economy – that are fuelling interest in these approaches to capital. It then looks at how those trends are being reflected in people’s daily lives, and the challenges they pose. Finally, it introduces the work of the Organisation for Economic Co-operation and Development (OECD) in studying and analysing the impact of global change and how societies and governments can respond.

What challenges face our societies?

By the time you read these words, the Japanese village of Ogama may no longer exist. Concerned by their remoteness from medical facilities and daily amenities like shops, the village’s dwindling and increasingly elderly population have decided to sell their land to a recycling plant. When they move to a bigger town, the villagers will bring the bones of their ancestors and their village shrine with them.

Ogama’s disappearance is due in part to the decline of Japan’s rural economy. It also results from a bigger issue in Japan and elsewhere in the developed world: societies are ageing. There are two main reasons: we’re living longer and we’re having fewer children. In years to come, this trend will have a real impact on developed countries. A few figures:

• At the turn of the millennium, about 15% of people in the OECD area were aged over 65; by 2030, that number is forecast to hit 25%.
• In the last half of the 20th century, the size of the working-age population of OECD countries rose by 76%; in the first half of this century, it’s projected to grow by just 4%.
• Population changes will hit countries’ potential for growth: Europe is currently reckoned to have a potential annual growth rate of 2.3%; by 2050 that is forecast to fall to 0.5%.

The result of all this is that the elderly will soon be depending for their welfare on falling numbers of active workers. In response, it’s likely that more of us will have to go on working well past current retirement ages because there just won’t be enough younger people to do the work. (Indeed, in Japan, as in some other countries the entire population, not just the workforce, is shrinking.)

To go on working we’ll need to continue updating our skills throughout our working lives. Why? Because the skills we need in the workplace are evolving, and the pace of that evolution is speeding up. Behind those developments are two major factors: the march of globalisation and the rise of the knowledge economy.

Going global

Globalisation is a complex and controversial phenomenon that takes in a wide range of social, political, cultural and economic trends, but at its heart is a simple reality: national borders no longer matter as much as they used to. Signs of globalisation can be seen everywhere – from the rapid worldwide spread of technology to the increasing tendency of students and academics to go overseas to study and work.

Economically, globalisation means that national economies are increasingly plugged into each other and into the world economy. A succession of international deals has opened up trade and investment between countries; multinational firms now think nothing of shifting production around the world; and manufactured goods and some services cross borders effortlessly.

Proponents of globalisation argue that it has brought economic growth and vastly expanded opportunities for trade. But it has also to some extent put manufacturing and low-skilled and some-skilled jobs in developed countries under increasing pressure from places like China and India, where salary levels are much lower.

The knowledge economy

There’s similar pressure from the emergence of the so-called knowledge economy. In developed economies, the value of knowledge and information in all their forms is becoming ever more apparent, a trend that is being facilitated by the rapid spread of high-speed information technology. The upshot is that brains, not brawn, are...