By DAVID MYTON

Whatever the future holds, investment in human capital is “a no-regrets policy” that prepares people for the challenges ahead, says the World Bank in its latest examination of the changing nature of work.

Three types of skills, it says, are increasingly important in today’s labour markets:

• Advanced cognitive skills such as complex problem-solving
• Socio-behavioural skills such as teamwork, and
• Skill combinations “that are predictive of adaptability” such as reasoning and self-efficacy.

“Building these skills requires strong human capital foundations and lifelong learning,” it adds.

The best way to “seize the benefits of technological change” is the creation of formal jobs.

“In many developing countries, most workers remain in low-productivity employment, often in the informal sector with little access to technology.

“Lack of quality private sector jobs leaves talented young people with few pathways to wage employment,” the report says.

Investments in infrastructure are also needed, including in helping to provide affordable access to the Internet for people in developing countries who remain unconnected.

“Equally important are more investments in the road, port, and municipal infrastructure on which firms, governments, and individuals rely to exploit technologies to their full potential,” it adds

 

The need for social protection

Adjusting to the next wave of jobs also requires social protection, it says, “with eight in 10 people in developing countries receiving no social assistance, and six in 10 working informally without insurance”.

“Even in advanced economies, the payroll-based insurance model is increasingly challenged by working arrangements outside standard employment contracts.”

For societies to benefit from new technology they would need “a new social contract centered on larger investments in human capital and progressively provided universal social protection”.

The report notes that technology is “blurring the boundaries of the firm, as evident in the rise of platform marketplaces”.

“Using digital technologies, entrepreneurs are creating global platform–based businesses that differ from the traditional production process in which inputs are provided at one end and output delivered at the other.

“Platform companies often generate value by creating a network effect that connects customers, producers, and providers, while facilitating interactions in a multisided model.”

 

Technology reshaping skills needed for work

Technology is reshaping the skills needed for work, with a decline in the need for “less advanced skills”.

“At the same time, the demand for advanced cognitive skills, socio-behavioral skills, and skill combinations associated with greater adaptability is rising.

“Already evident in developed countries, this pattern is starting to emerge in some developing countries as well.”

It also observes a shift in employment from manufacturing to services.

Technology such as social media affects the perception of rising inequality in many countries, the report notes

“People have always aspired toward a higher quality of life and participation in the economic growth they see around them.

“Increased exposure through social media and other digital communications to different, often divergent lifestyles and opportunities only heightens this feeling.”

 

Aspirations linked to opportunities

Where aspirations are linked to opportunities, it adds, the conditions are ripe for inclusive, sustainable economic growth.

“But if there is inequality of opportunity or a mismatch between available jobs and skills, frustration can lead to migration or societal fragmentation.”

The growing role of technology in life and business means that all types of jobs -including low-skill ones – require more advanced cognitive skills, the report says.

The most significant investments that people, firms, and governments can make are “in enhancing human capital” particularly given the rise of jobs requiring socio-behavioural and interpersonal skills.

“Human capital is important because there is now a higher premium on adaptability,” it says.

Firms with a higher share of educated workers do better at innovating, and “individuals with stronger human capital reap higher economic returns from new technologies”.

“By contrast, when technological disruptions are met with inadequate human capital, the existing social order may be undermined.”

 

Read the report in full

World Bank 2019 – World Development Report 2019: The Changing Nature of Work. Washington, DC.