The Great Skill Recession

The world has an unemployment problem. Most modern jobs require technological skills, and technology is supplanting increasing numbers of jobs. How this gap, first raised as a possibility by John Maynard Keynes in 1930, is addressed will shape the economic future of the United States, China, India and other nations, explains Nayan Chanda, YaleGlobal editor, in his column for Businessworld. Reasons for the gap are many: Some workers, young or old, resist learning new skills; some employers assume that an aging population won’t adapt to new procedures; and many workers refuse to accept work considered beneath their training. Chanda describes two efforts to counter the skills gap: In India, companies are partnering with government to run training programs for workers to learn specialized skills, and in the United States, companies assist high schools in establishing six-year programs, including some higher education classes, that specifically prepare students for technology positions. Adults repeatedly remind young students that they are stepping into a job market with global competition. – YaleGlobal

The Great Skill Recession

Gearing education toward industry sectors can help plug the growing gap between skills and jobs
Nayan Chanda
Monday, December 2, 2013

Five years after the Great Recession hit the world, the number of unemployed worldwide is growing. Not because the job market is shrinking, but because the gap between job requirements and available skills is widening. The “technological unemployment” that some eight decades ago John Maynard Keynes considered a possibility seems to be turning into reality. The scale of the problem may be different in the US, China or India, but how the technology gap is bridged will shape the economic future of these countries.

In a prophetic essay, “Economic Possibilities for Our Grandchildren” written in the dark days of the Great Depression, Keynes wrote, “We are being afflicted with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come-namely, technological unemployment.” But he considered the gap created by labour saving machines to be “only a temporary phase of maladjustment.” He accurately projected the rising standard of living and prosperity that would flow from technological advances — a forecast that may be too optimistic for today’s world.

After years of stimulus spending — something Keynes would approve — the US is starting to dig out of deep recession. But the rate of unemployment still stands stubbornly close to 8 per cent, while millions of unemployed workers have given up looking for jobs, taking them out of the official statistics of the jobless. Yet, the US Labor Department shows 3 million jobs requiring special skills that remain unfilled. 

Problems of a similar nature, although far less acute, are afflicting China where unemployment is on the rise. A recent household survey pegs China’s unemployment rate at 4.4 per cent, but if one includes those who gave up job searches, the rate rises to 9.2 per cent As the country’s graying population leave the job market or find themselves unfit for jobs in the modern sector, factory jobs do not appeal to university graduates. The New York Times quotes a recent graduate: “I want a job for which I was trained, or else my education will be wasted. I don’t want to work in a factory.”

India’s unemployment problem is very different from China’s. Of its 430 million working age people, only 30 million are employed in the organised sector; the rest is in the informal sector, mostly in hardscrabble agriculture. Every year, 15 million join the workforce but with little education or skills. The result is that, shows a survey by Manpower agency, nearly 70 per cent Indian employers had difficulty recruiting workers. The quality of education provided by colleges and the management and vocational schools is so poor that the majority are unemployable. (Of the 1.5 million engineering students in India, over 70 per cent are unemployed). Shortage of skilled workers has crimped economic growth while leaving the pool of the jobless to grow and fester. To fill that gap, major companies such as Infosys, Wipro and TCS set up their own schools, but they are a drop in the bucket. 

In 2009, India set up National Skills Development Corporation to support establishment of training centers in cooperation with industry, with the ambitious goal of training 150 million people by 2022. So far, it has set up 71 institutes with industry partners and have trained 370,000 workers. 

The US has taken a novel approach of combining high school and college education by gearing it toward industry sectors, and set up Pathways in Technology Early College High School (P-Tech) in Chicago and New York. Here, students enter a six-year programme that combines school and college curricula with electromechanical engineering or health technology. Recently, President Barack Obama visited a P-Tech in Brooklyn set up in collaboration with IBM. He warned them about the global nature of job market as “billions of people from Beijing to Bangalore to Moscow... are competing with you directly... working every day, to out-educate and outcompete us.” The great skills race has begun.  


The author is editor-in-chief of YaleGlobal Online, published by the MacMillan Center, Yale University.
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