Enhancing the skills of a country’s workforce lifts the export performance of its enterprises and better prepares them to meet foreign competition in the domestic market, according to economists from the International Labour Organization (ILO) and the World Trade Organization (WTO).

A joint ILO-WTO study, Investing in Skills for Inclusive Trade , shows that boosting core work, technical and management skills can help countries and businesses meet the challenges of an ever more competitive global economy by reducing costs, improving quality of products. The authors point to evidence that countries with responsive skills development systems tend to be more successful in putting skills to use in tradable activities and thereby improving that country’s competitive position in the global economy.

“While trade has helped lift hundreds of millions of people out of poverty and been a crucially important tool for growth, development and job creation there are those who have been left behind. Improving the capacity of our workers and managers to respond to these changes is clearly is the best way to foster more inclusive trade,” said WTO Director-General Roberto Azevêdo.

“Providing the right skills is essential to reap the benefits of trade in increased productivity and better jobs, and to ensure that trade contributes to inclusive development. In a fast changing world of work it is more important than ever that skills development responds to current and emerging skills needs, enhancing outcomes for workers and firms both now and in the future,” said ILO Director-General Guy Ryder.

The need for improving skills is present in both developed and developing countries as they seek to adapt to and find opportunities in a global economy which is going through a profound transformation, driven by political changes and the forces of trade integration and technological progress.

The authors point to four main mechanisms through which trade affects the relative demand for skills:

  • Trade raises demand for products in which countries have a comparative advantage. In countries with a comparative advantage in skill-intensive sectors, trade thus increases the demand for skilled workers.
  • International trade leads to the expansion of the most productive firms, which tend to employ relatively more skilled workers.
  • As the costs of offshoring fall, the least complex stages of production tend to relocate from high income to low-income economies.
  • Lower trade costs may be a catalyst for changes in production technology, including automation, which increase productivity and favour high-skilled labour in exporting and import-competing firms in both developed and developing countries.

Addressing the need for developing a more competitive workforce is a long-term process, according to the study. In countries at all stages of development, continuing education and training, both at universities and in the form of technical and vocational education and training (TVET), and on-the-job training, can help workers and manager cope with the big changes in demand for skills which are in varying degrees triggered by globalization.

The authors find evidence of a range of policy approaches which have helped countries in responding effectively to these challenges, including:

  • Policy coherence: Enhancing skills and improving national competitiveness requires a range of policies and it is vital that they be coherent.
  • Social dialogue between government and the social partners: This is central to making skills systems responsive to the needs of industry, including those industries producing tradable goods and services.
  • Broad access to education, skills development and lifelong learning: Low-skilled workers, workers who lack transferable skills, workers whose learning skills are weak, and workers whose skills are at risk of obsolescence benefit less from trade and are vulnerable to technological change or to a trade-connected employment shock.
  • Targeted training for displaced workers and/or workers at risk of displacement: Reskilling may be required to allow workers to move to a different occupation or a significantly different job, whether because their original job became unnecessary or because change offers a good opportunity.
  • Investing in training for employed workers: Training for workers at all skill levels is a necessary part of implementing effective strategies, in order to underpin the capabilities needed in markets for tradable products and services.
  • Core work skills: Strong core work skills, such as team working and problem-solving, complement technical skills and are a vital underpinning for employability, and for business performance.
  • Skills needs analysis and anticipation: Forward-looking skills needs analysis and skills anticipation are needed to inform policy coherence and social dialogue, and to inform decision-making by all relevant partners.

Source: Media Release


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