José Manuel Salazar-Xirinachs

Distinguished Ministers and government Officials,
Esteemed Business Leaders,
Ladies and gentlemen,
Good morning.

My thanks to the KW Group for your invitation to the ILO to address this important meeting. It is a pleasure to be in this beautiful country.

Mr. Guy Ryder, Director-General of the ILO, sends his regards, and his regrets for not being able to be with you today.

The theme of my address to you today is “21st Century Skills and the Age of Responsibility”.

The main message I would like to convey to you this morning is that addressing the challenges of youth unemployment, skills mismatch and developing what we could call 21st Century skills, requires not only innovative public policies but also a new business mindset to engage much more proactively in education and training than in the past.

And this is all the more relevant in an environment in which businesses face special and inescapable responsibilities towards people, workers and society, in your own operations, along your supply chains and in the communities where you operate.

Skills development, job creation and business responsibilities are issues at the core of the ILO mission in pursuit of decent work and social justice. The ILO works on a whole range of issues around skills development and its links to productivity, trade and employment.(Note 1) In the 2007 International Labour Conference, governments, employers and workers also agreed in a tripartite way on an approach to private sector development where both enabling environment elements and responsible and sustainable enterprise practices figure prominently.(Note 2)

I. 21st Century Skills

So what are 21st Century skills?

We cannot talk about skills and education today in the same terms of 20 or 30 years ago. Just as the shift from agrarian to industrial economies required specific new skills in factory floor workers, supervisors and managers and changed the way people lived, thought, worked and learned, the on-going shift from industrial to information-based knowledge economies is also changing the ways we live, think, work and learn.

It is true that agrarian economies still exist, although in reducing numbers. It is also true that industrial activities persist, but they are being transformed and replaced by computer-based technologies and workplaces. The reality is that the growth of knowledge societies and innovations in business models are bringing enormous transformations in work environments and in the skill demands for many jobs. Work environments are technology-rich and a whole new set of occupations has emerged based on the production, analysis, distribution, and consumption of information.

The University of Melbourne is leading a project on Assessment and Teaching of 21st Century Skills.(Note 3) Working with more than 250 researchers across 60 institutions worldwide this project categorized 21st Century skills into four broad categories:

1. Ways of thinking: that includes creativity, innovation, critical thinking, problem-solving, decision-making and learning.
2. Ways of working: that refers to communication, collaboration and teamwork.
3. Tools for working: most of them based on new information and communications technologies and information age literacy, including capabilities to learn and work through digital social networks.
4. Skills for living in the world: such as sense of global and local citizenship, life and career development; and personal and social responsibility.

Each of these categories of skills enables individuals to function in the modern world of work and contribute to modern age social and intellectual capital. The best jobs are those associated with these types of skills, whether in services, industry and even agriculture.

Digital literacy and numeracy have become essential in a growing number of jobs in both developed and developing countries.

The challenge of skills mismatch, an issue of worldwide concern these days, has its origins in a number of factors.(Note 4) One of them is the inability or slowness of education and training institutions and systems to adapt to these new realities.

II. The education and skills challenge

All education and training systems around the world face both a quantity and a quality challenge, in different proportions depending on country specifics.

The quality challenge is closely linked to the fact that there are major disconnects between the world of education and the world of work. According to a World Bank report (Note 5) there are at least five disconnects in East Asia’s higher education systems that are affecting educational outcomes, growth and productivity:

• A gap between higher education institutions and employers
• A weak research and technology nexus between higher education institutions and Companies
• A separation between teaching and research institutions and functions
• A disconnect among higher education institutions themselves and between them and training providers, and
• A separation between higher education institutions and earlier education institutions (primary schools)

These disconnects are pervasive throughout low- and middle-income East Asia, but their intensity varies across income and technology cluster groups, tending to be most severe in low-income/lower-technology cluster countries.

III. The role of the private sector

Addressing these disconnects is a matter for public policy, but not exclusively. It is also very much a matter of private sector engagement and responsibility.(Note 6)

The business sector has traditionally depended on governments to educate and train their future employees. However, these traditional separations must change: first, because, traditional education and training systems by themselves can no longer deliver the skilled graduates companies need.

But also, as the Director of the Wharton Center for Human Resources, Professor Peter Cappelli has argued, because it is unrealistic for companies to expect prospective workers to be completely job ready, without previous on-the-job training.(Note 7) In addition, for a successful hiring process, wages and working conditions also have to be attractive and continuing learning opportunities have to be made available.

Therefore, there is a very strong case for much greater involvement of business in education and training. Companies cannot just wait at the end of the education and training pipeline for graduates with the right skills. Too many graduates have gaps in hard or soft skills which are too deep for corporate training programmes to bridge at this stage.

And it is not appropriate to simply think about shifting operations around the globe to tap qualified talent, because these disconnects are common throughout the world, and in fact in other regions even more serious than in Asia.

What is needed is a new business mindset for engaging in education and training and for developing the industry’s workforce. Harvard Professor Michael Porter has called this new mindset the shared value approach.(Note 8)

Companies with such an approach take a broader view of their industries’ workforce needs, build public-private partnerships, engage pro-actively with education and training providers in order to align curricula with the skills needed for employment, and make efforts to combine formal education and training with on the job apprenticeship opportunities.

Let me mention some examples.

• The Godrej Group is a major Indian conglomerate with a 15 to 20% annual growth target that faces widespread skill shortages. In response the Godrej Group set a goal of training one million urban and rural youth in employable skills by 2020. Each company in the conglomerate has developed a portfolio of modular training programs. The results have been impressive with two-thirds of graduates finding placements in consumer goods and agriculture-related subsidiaries. With such program the Godrej Group has become a major partner of the government in training India’s underemployed youth.
• The programs of CISCO are well known, with more than 10.000 networking academies in 165 countries that have by now graduated nearly 5 million network administrators.
• In China, Neusoft founded three technology institutes that have educated 27.000 students.
• SAP, the enterprise software company, is partnering with local universities and education providers to build certification programmes in countries like Kenya and Brazil.

Some of these efforts target unconventional sources of talent like persons with disabilities and the long term unemployed.(Note 9)

Employer engagement in education can take many forms and modalities: apprenticeship training; internships and other work experience placements; job shadowing; career talks and networking; workplace visits; business mentoring; enterprise competitions; curriculum enrichment.(Note 10)

IV. ILO work on Skills Development, in particular related to Trade and Global Value Chains (GVCs)

The work of the ILO focuses on the school-to-work transition, on improving the infrastructure of opportunities for young people to have access to jobs; on the modernization of vocational training institutions; on skills anticipation and forecasting at sectoral and national levels, and on quality employment services including career guidance. And all of this with a strong commitment to respect for labour rights.

We have practical guides on: anticipating skills for green jobs; scenarios and forecasts of future skills needs; approaches to skills anticipation and matching at sector level. We led the preparation of the G20 Skills Strategy in 2010 for strong, sustained and balanced growth.

Different countries have established different institutions to promote skills development. Sectoral bodies, such as Industry Skills Councils, are often a key element of these systems, under different names and forms. The participation of employers and trade unions can facilitate a strategic approach to workforce development within a sector.

Let me tell you about one concrete tool developed by the ILO of particular interest to trade. We call it STED – Skills for Trade and Economic Diversification. This tool is designed to provide strategic guidance to support growth and jobs in sectors that have the potential to increase exports, contribute to economic diversification and to integration into Global Value Chains.

The STED methodology helps to identify sectors with export growth potential, then identify current and emerging skills gaps in those sectors, and, in consultation with sector stakeholders, define practical ways in which these gaps can be addressed. It is designed to operate through a social partnership framework with a strong involvement of employers. This demand-led approach to skills development leads to more and better jobs in more productive enterprises.

STED pilots were conducted in Ukraine, Kyrgyzstan, Bangladesh and Macedonia from 2010 to 2012, in such sectors as food processing, pharmaceuticals, tourism and hospitality, garment manufacture and metals. Further STED implementations are planned in Egypt, as part of the Aid-for-Trade for Arab States Initiative, as well as in Tajikistan, Viet Nam, Cambodia and Myanmar.

V. Apprenticeships: A magic bullet for youth unemployment

A common maxim in economic development and policy discussions is that there are no magic bullets. While this is true, I often insist in saying that in addressing the challenge of youth unemployment the closest thing to a magic bullet are apprenticeships!

The case for apprenticeships is very strong for economies, companies and of course for young apprentices:

First, apprenticeships work for society: Countries with more apprenticeships have lower youth unemployment. Apprenticeships also contribute to growth, productivity and competitiveness.

Second, apprenticeships are a good value proposition for companies: Companies benefit from having their staff trained according to practical requirements; they increase productivity. Apprenticeship systems are a smart source of recruitment. Apprentices develop the firm-specific skill sets required and absorb the culture of the firm. Of course, depending on the modality, apprenticeships require investment, they are not cost- free. But cost-benefit analysis is quite positive: case studies indicate that the employer’s investment was on average paid back in less than 3 years. Other benefits include lower labour turnover and higher innovation in workplaces.(Note 11)

Third, apprenticeships of course benefit young people.

Because of all these demonstrated benefits, a number of recent initiatives have been developed to introduce or scale up apprenticeship programmes:

• The Business 20 and the Labour 20 groups have launched a major campaign to improve the image of apprenticeships, move away from the stigma of vocational training, and upgrade and scale-up apprenticeship programmes.
• The European Commission has supported the launch of a European Alliance on Apprenticeships.
• The World Economic Forum has been developing an initiative, Youth Ten, to promote good apprenticeship and internship practices in companies.
• The International Organization of Employers, with the support of the ILO, has recently launched the Global Apprenticeship Network or GAN. The GAN is a coalition of companies around three powerful action-oriented principles:

1. Strengthen the commitment and visibility of the company’s workforce engaged in apprenticeships and internships as part of the company’s human capital development strategy.
2. Share the best practices in the areas of apprenticeships, internships, mentoring and on-the-job training.
3. Encourage a network of committed companies, at the global and local levels, to support effective knowledge sharing action programmes and partnerships and to scale up international cooperation to this effect.

(I would like to invite companies present here with interest on apprenticeships, or who want to share their practices, to visit the GAN website at www.global-apprenticeships.org and get in contact with the GAN Director.)

VI. Concluding remarks: The Age of responsibility

Let me finish by saying that we live in an age that some have called the age of responsibility and sustainability. I am not just talking about CSR here. The challenge includes CSR but is much larger.

Responsibility and sustainability principles have become indispensable if not imperative for public policy, business and consumer behaviour due to both to planetary limits and to the increasing global convergence on human rights values, including labour rights. The ILO’s Fundamental Principles and Rights at Work and the UN Principles on Business and Human Rights are game changers in this respect.

In terms of the global trading system, one of the major trends is the very large and increasing proportion of global trade that occurs in Global Value Chains. The sustainability and responsibility principles pose major issues of governance and standards in companies’ own operations and along their supply chains to secure good working conditions and industrial relations, among other objectives.

The responsibility of companies to invest in skills and talent and engaging in education and training in innovative ways to meet the requirements of the 21st Century workforce is but one example of this much broader responsibility and sustainability agenda.

Thank you for your attention.

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1 See ILO (2008), Conclusions on skills for improved productivity, employment growth and development, International Labour Conference, Geneva.

2 See ILO (2007), Conclusions concerning the Promotion of Sustainable Enterprises, International Labour Conference, Geneva.
See also G. Buckley, J.M. Salazar-Xirinachs and M. Henriques (2009), The promotion of sustainable enterprises, ILO Publications.

3 See http://atc21s.org/.

4 See ILO (2013), Global Employment Trends, Geneva; also World Economic Forum (2014), Matching Skills and Labour Market Needs: Building Social Partnerships for Better Skills and Better Jobs, Global Agenda Council on Youth Employment, Davos-Klosters, Switzerland, January.

5 World Bank, Putting Higher Education to Work: Skills and Research for Growth in East Asia, 2011.

6 See ILO (2008), Conclusions on skills for improved productivity, employment growth and development, (op.cit.). Also: World Economic Forum, Education and Skills 2.0: New Targets and Innovative Approaches, 2014.

7 P. Cappelli (2012), Why Good People Can’t Get Jobs: The Skills Gap and What Companies Can Do About It, Wharton Digital Press, Philadelphia.

8 Shared Value Initiative, The New Role of Business in Global Education, A Report by FSG (www.sharedvalue.org)

9 CVS Pharmacies in the US, for instance, has developed a training programme to move welfare recipients off of public welfare and into entry-level jobs in retail pharmacies. More than 80.000 workers have been hired in this programme in the last 20 years.

10 A. Mann and J. Dawkins (2014), Employer Engagement in Education, CfBT Education Trust.

11 Business Europe, 2012, Creating Opportunities for Youth: How to improve the Quality and Image of Apprenticeships.
See also, Hasluck C., T. Hogarth et al., 2008, The Net Benefit to Employer Investment in Training, Institute for Employment Research, University of Warwick.