Phillip Brown - Cardiff University & Hugh Lauder - University of Bath Seminar: The World Bank, Washington, 23/9/2010 Learning Isn’t Earning: How the Global Auction for Jobs is Breaking the Promise of Education

 Technological Evolution  Knowledge Economy;  The Age of Human Capital - Education, Jobs and Rewards;  Comparative Advantage: ◦ Developed Economies = Quality (Brain) ◦ Developing Economies = Price (Body)

‘In the past, material forces were dominant in national growth, prestige, and power; now products of the mind take precedence. Nations can transfer most of their material production thousands of miles away, centring their attention on research and development and product design at home. The result is a new and productive partnership between “head” nations, which design products, and “body” nations, which manufacture them’ R.Rosecrance, The Rise of the Virtual State, 1999.

High Skilled ‘Magnet’ Economy Higher Skills Raising Quality Standards Innovation and R&D Foreign Talent Efficiency & Justice  ‘Learning = Earning’

Thomas Friedman’s ‘The World is Flat’? The World is Uneven, Fragmented & Uncertain Question Promise of Education, Jobs & Rewards (Knowledge Economy) Global Auction = Dual Auction: Forward/Progressive (High Skills, High Wages) Reverse/Dutch (High Skills, Low Wages) Challenges/Opportunities?

 Examine Views of Transnational Companies;  Examine Views of Senior Policy-Makers, including China & India.

 Seven Countries - Britain, China, Germany, India, Singapore, South Korea, and the United States;  Core Sectors – Automotive, Financial Services and ITC/Telecoms;  Company Interviews: 125 company interviews = 105 outside of UK;  Policy Interviews: 65 policy interviews = 43 outside UK.

Enrolments in Tertiary Education doubled within a decade from 72 to 136 million ( ); China overtaken US with over 20 million in HE (2006). Now 27 million enrolled in HE; Over 60 percent of engineering doctorates were awarded to foreign students in both American and Britain.

‘We have an “inside out”, not outside in model which is very clever. It gives us more flexibility over what to do where ’ Senior Indian Manager, EU Electronics, Mumbai ‘ What is really different here is research, we generate ideas for the frontline to use…These are the areas that we find that talent is delivering to an even higher standard than expected. We’re not doing those menial call centre type jobs. It’s global work and that’s where we think we’ve been able to add a lot more value than what was initially expected and that will continue.’ Senior Indian manager, US Bank, Mumbai

Knowledge Work  Working Knowledge Simplify  Codify  Standardise  Digitalise ‘Standardisation in terms of IT has become huge…not only standards for a single customer but across countries…technology is the ultimate equaliser…it will drive globalisation, drive change…I hope that people don’t get reduced to the state of drones…but I think increasingly employment will shrink.’ Chief Information Office, Financial Services.

 Developers (creators)  Demonstrators (executioners)  Drones (digital routine)

 Segmentation of High Skilled Labour;  Performance Not Simply Skills; ‘It’s more important to get great talent, since the differential value created by the most talented knowledge workers is enormous.’ McKinsey Consultants.

Global Skill Webs  Competitive advantage through people  ‘leverage’ global supply of skills, knowledge, talent., etc.; Value is created through webs of skills/capability that cut across traditional relationships between employees, suppliers, companies, universities, etc. within the global economy. Internationalisation/De-nationalisation of HR Strategies; TNCs will use different strategies but common ‘pressure points’  Knowledge arbitrage.

There are two bases for this analysis. The first is qualitative research that has enabled us to identify the generative mechanisms for the global auction and the creation of an emerging division of labour for knowledge workers. Generative mechanisms do not always produce expected data patterns but rather ‘tendencies’ because other factors, for example national differences in education and the labour market (theoretically understood) may intervene to alter the data patterns. What is the empirical basis of your analysis?

The GAJ is affecting the value of education, understood in economic terms, by intensifying the positional competition for fewer ‘good’ knowledge jobs. However, there is an opportunity trap, (Brown, 2006) if young people do not commit to education they have little or no chance of gaining ‘good jobs’. But for many their credential will not yield the returns that might have once been expected. Why and how is the Global Auction for jobs affecting the value of education?

It is a problem for rich countries. Whether the GAJ will have more effect in the USA and the UK will depend on business strategies relating to cost cutting and outsourcing. However, our data suggest that all MNCs have to engage in this form of the competition to a greater or lesser extent because of the drive to cut costs –especially in a recession. Is this a problem only for rich countries? Among rich countries, is it especially a problem for the US and the UK? What are other rich countries doing about the problem?

 There are some developing countries that have clearly gained from the GAJ –India and China for example but there are pockets of gain elsewhere. There are at least three conditions that need to be satisfied for a developing country to gain from the GAJ: (i) they have the relevant language skills (ii) they have other skills in demand (iii) their costs are lower than competing countries.  As countries like China seek to upskill and raise wages so there may be temporary room for workers in other developing countries. Why should developing countries worry about GAJ? Or does GAJ present an opportunity for them?

 They have to be hooked into the global economy. This involves, at the least, infrastructure capability with respect to the internet, an education system that can produce workers to a level where they can be internationally competitive –at the right price, and the social capital networks to find and establish the business. When we look at the recently developed/developing economies, India, China, South Korea, then they all had strong intellectual and business connections with the USA and to a lesser extent the UK.

 This is the hardest question, especially at a time of economic crisis. Given the lessons from the recently developed/developing countries, then the idea that education is enough or that investment in human capital is enough will not do it. It’s about establishing intellectual and business communities that have a global reach as well as having state investment in the infrastructure. This can be done in several ways. Singapore provides one model but others may include the investment in research students at overseas universities. This investment needs to be undertaken through cohorts so that they have a sense of a group and national allegiance. If this is allied to internships in MNCs, then social capital connections, as well as best practice may eventuate.

We have noted the position of Hanushek and Wossman (2008). And while the common sense idea that quality is important and helpful, the framework within which it is cast is problematic. There are glimpses of insight about the significance of those with engineering degrees being more significant in terms of economic growth but how an economy is structured is important to sustained economic growth: we need to look at industrial and occupational structures and note that openness to markets needs to be seen in terms of stages of development.

The Global Auction: The Broken Promises of Education, Jobs and Incomes Oxford University Press:New York. August, P.Brown, H.Lauder and D.Ashton.