Speech on European human capital development systems for the National Bank of Belgium - 18 June 2014

1. STRENGTHS AND
WEAKNESSES OF NATIONAL
SYSTEMS OF HUMAN CAPITAL
DEVELOPMENT IN EUROPE
Dr. Dirk Van Damme
Head, Innovation and Measuring
Progress Division, OECD/EDU

2. • Introduction: Conceptual and methodological
issues
• Changing economies, changing skills demands
• Higher education, productivity and growth
• Education, skills and employment
• Skills distribution, growth and social inequality
• National skill profiles
• A few conclusions
Outline
2

3. CONCEPTIONAL AND
METHODOLOGICAL ISSUES
3

4. • Human capital: a major input into the economy
– Human capital, productivity and innovation
– Human capital growth as engine for economic
growth
• But:
– Is more of it always better?
– How to explain major differences in national
human capital systems
– More interest in the distribution of human capital
and links with growth and inequality
Human capital
4

5. • From formal educational measures
– Years of formal education
– Educational qualifications (according to ISCED)
• To measures of learning outcomes
– Literacy and numeracy skills as foundation skills
– PISA: among 15y olds (end of compulsory
education)
– PIAAC: across the 16-65y old population
Measurement of human capital
5

6. Educational attainment: a very crude proxy of actual skills
Literacy scores by educational attainment
6

7. CHANGING ECONOMIES,
CHANGING SKILLS DEMANDS
7

8. • Globalisation: massive relocation of skills in the
‘global value-chain’
• Skills-biased technological change and “The
Race between Technology and Education”
(Goldin & Katz)
• Consequences: outsourcing and automation of
specific segments of skills-based tasks/jobs
– Disappearance of low-skilled jobs or hollowing
out of the middle-skilled jobs?
– Increasing risks for high-skilled jobs
Impact of economic transformation on
skills demand
8

9. 9

10. 10

11. 11
Evolution of employment in occupational groups
defined by level of skills proficiency

12. 12
Changing skills demand

13. 30
20
10
0
10
20
30
40
50
60
Austria
Italy
CzechRepublic
SlovakRepublic
Japan
Germany
England/N.Ireland(UK)
Australia
Poland
Average
Ireland
UnitedStates
Netherlands
Spain
Sweden
Estonia
Norway
Denmark
Korea
Cyprus¹²
Canada
Finland
Flanders(Belgium)
Primary education or less Tertiary education or more
Percentage workers in high-skilled and
unskilled jobs
13

14. HIGHER EDUCATION AND
ECONOMIC GROWTH
14

15. Growth in university-level qualifications (2010)
Estimates of the percentage of the 25-34 year-old and 55-64 year-old population that has
attained tertiary education
0
10
20
30
40
50
60
70
Korea
Japan
Canada
Ireland
Norway
NewZealand
UnitedKingdom
Australia
Luxembourg
Israel
Belgium
France
UnitedStates
Sweden
Netherlands
Switzerland
Finland
Spain
Chile
Estonia
OECDaverage
Denmark
Poland
Iceland
Slovenia
Greece
Germany
Hungary
Portugal
SlovakRepublic
CzechRepublic
Mexico
Austria
Italy
Turkey
Brazil
25-34 year-olds 55-64 year-olds
%

16. Annual growth rate in tertiary educational
attainment rate (1998-2008)
-1
0
1
2
3
4
5
6
7
8
Ireland
Turkey
Spain
Poland
Portugal
Luxembourg
Korea
Iceland
Italy
SlovakRepublic
NewZealand
Australia
Switzerland
OECDaverage
CzechRepublic
Hungary
Greece
Mexico
Canada
UnitedKingdom
France
Austria
Denmark
Japan
Netherlands
Belgium
UnitedStates
Finland
Overall population growth Attainment rate growth%

17. • Across countries, a higher tertiary education
attainment rate is positively associated with higher
labour productivity
• Across countries, both growth rates are also
positively correlated
• Over time, increases in tertiary education attainment
are positively associated with productivity increases
(except during recession)
• Over the past ten years more than half of GDP
growth in OECD is related to labour income growth
among tertiary-educated individuals
17
Higher education’s contribution to
productivity and growth

18. • Earnings of tertiary-educated individuals
– Are approximately 1.6 times higher than of individuals with
only upper secondary education, which implies a massive
creation of wealth
– The skills-based wage premium increases with age
(from factor 1.4 to 1.7 for 25-34 and 55-64 age groups)
• Higher education degrees yield even higher economic
returns in the current recession
– Relative unemployment risks decrease
– Relative earnings of tertiary-educated grow
– Private net present value over lifetime of 160 000 USD for a
man and 110 000 USD for a woman (2010)
18
Higher education’s contribution to productivity
and growth

19. Australia
Austria
Belgium
Canada
Chile
Czech Rep
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Rep
Slovenia
Spain
Sweden
Switzerland
Turkey
UK US R² = 0.1972
10
15
20
25
30
35
40
45
50
55
10 20 30 40 50 60 70 80 90
Percentageofthe25-64year-oldpopulationthat
hasattainedtertiaryeducation(2011)
Labour productivity: GDP per hour worked, current prices, USD (2011)
19
Tertiary-level attainment rate and labour
productivity across countries

20. Australia
Austria
Belgium Canada
Czech Rep
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal Slovak Rep
Slovenia
Spain
Sweden
Switzerland
Turkey
UK
US
R² = 0.1055
0
1
2
3
4
5
6
-1 0 1 2 3 4 5
Averageannualgrowthrateintertiary-level
attainmentrate(2005-2011)
Labour productivity average annual growth rate (2005-2011)
20
Tertiary-level attainment growth rate and labour
productivity growth rate (2005-11)

21. 2000
2005
2006
2007
2008
2009
2010
2011
20
22
24
26
28
30
32
34
32 33 34 35 36 37 38 39 40
Percentageofthe25-64year-oldpopulationthathas
attainedtertiaryeducation
Labour productivity
OECD Average
21
Tertiary-level attainment rate and labour
productivity over time

22. 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
1.80%
-5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6%
LabourincomegrowthinGDPfortertiary-
educatedworkers
GDP growth (real percentage change from previous year)
OECD average
22
Close relationship between GDP growth and labour
income growth for tertiary-educated workers
correlation of .80 between
both data series

23. 40
60
80
100
120
140
160
180
200
220
240
260
280
Hungary
Slovenia
CzechRepublic
SlovakRepublic
UnitedStates
Ireland
Poland
Portugal
Germany
UnitedKingdom
Luxembourg
Netherlands
Austria
OECDaverage
Switzerland
Israel
Korea
Greece
Italy
Turkey
Finland
Japan
France
Spain
Canada
Estonia
Australia
Belgium
Denmark
Norway
Sweden
NewZealand
Below upper secondary education Tertiary educationIndex
Relative earnings
Relative earnings from employment by level of educational attainment for 25-64
year-olds, upper secondary = 100 (2010 or latest available year)
24

24. Earnings advantage of university degree
increases with age
Belgium
France
Germany
Italy
Spain
UK
OECD EU21
0
10
20
30
40
50
60
70
1012141618202224
Relativeearningadvantagebetween55-64and
25-34year-oldadultswithtertiaryA
Percentage of the 55-64 year-old population with tertiary A attainment
25

25. -1%
0%
1%
2%
3%
4%
5%
Korea
CzechRepublic
Sweden
Finland
Canada
Countryaverage
Switzerland
UnitedStates
Norway
UnitedKingdom
Austria
Germany
France
Ireland
Denmark
GDP Growth ISCED 5B/5A/6 ISCED 3/4 ISCED 0/1/2
Average GDP growth (real percentage change from
the previous year) and labour income growth in GDP,
by educational categories (2000-10)
26

26. Difference in average earnings of tertiary educated workers (with skill level
2) and more highly skilled non-tertiary educated workers (with skill level 3)
Higher skilled,
less educated workers
earn more
Less skilled, tertiary
educated workers
earn more
27

27. • Difference in average earnings of tertiary educated workers (with skill level
2) and more highly skilled non-tertiary educated workers (with skill level 4/5)
28
Higher skilled,
less educated workers
earn more
Less skilled, tertiary
educated workers
earn more
Difference in average earnings of tertiary educated workers (with skill level 2)
and more highly skilled non-tertiary educated workers (with skill level 4/5)

28. IMPACT OF EDUCATION AND
SKILLS ON EMPLOYMENT
29

29. 0
5
10
15
20
25
30
2009 2008 2010
30
Unemployment and the crisis
Unemployment rates of 25-64 year-olds, by educational attainment level (2008, 2009
and 2010)
0
5
10
15
20
25
30
0
5
10
15
20
25
30
Brazil
Norway
Netherlands
Korea
Austria
Australia
Luxembourg
NewZealand
Mexico
Switzerland
Japan
Sweden
Italy
Denmark
Chile
United…
Czech…
Belgium
Israel
Germany
Slovenia
Iceland
France
Finland
Canada
OECDaverage
Poland
Hungary
Portugal
UnitedStates
Turkey
Slovak…
Greece
Ireland
Spain
Estonia
Tertiary
education
(%)
Below upper
secondary
education (%)
Upper
secondary and
post-secondary
non-tertiary (%)
Over 35% each year for the Slovak Republic

30. Youth unemployment and skills are linked
Australia
Austria
Belgium
Canada
Czech Republic
Denmark
Estonia
Finland
France
Germany
Germany
Italy
Japan
Korea
Netherlands
Norway
Poland
Japan
Spain
Sweden
United Kingdom
United States
Average
255
260
265
270
275
280
285
290
295
300
305
0 10 20 30 40 50 60
Literacyproficiency16-24year-olds(PIAAC)(2011)
Youth unemployment rate 15-24 year-olds (2012)
31

31. Hungary
Poland
Sweden
Austria
FranceEstonia
Turkey
New Zealand
Finland
Czech Republic
Luxembourg
Netherlands
Slovak Republic
Switzerland
Germany
n
10
20
30
40
50
60
70
80
90
100
65 70 75 80 85 90
Percentageof25-34year-oldsthathaveattainedanuppersecondary
VETqualificationashighestlevelofeducation
Employment rates for 25-34 year-olds with upper secondary VET qualifications
Countries where expenditure in VET programmes is above the OECD average
Countries where expenditure in VET programmes is below the OECD average
%
%
OECDaverage
OECD average
32

32. Employment rate by educational attainment,
2005-11, 25-34 year-olds
50
55
60
65
70
75
80
85
90
95
100
2005 2006 2007 2008 2009 2010 2011
Belgium below upper sec Belgium upper secondary Belgium tertiary
OECD av below secondary OECD av upper secondary OECD av tertiary
EU21 av below upper secondary EU21 av upper secondary EU21 av tertiary
25-34 year-olds
33

33. Employment rate by educational attainment,
2005-11, 45-54 year-olds
50
55
60
65
70
75
80
85
90
95
100
2005 2006 2007 2008 2009 2010 2011
Belgium below upper sec Belgium upper secondary Belgium tertiary
OECD av below secondary OECD av upper secondary OECD av tertiary
EU21 av below upper secondary EU21 av upper secondary EU21 av tertiary
45-54 year-olds
34

34. Employment rate gap for 25-34 y-olds with
less than upper sec, 2005-11
n
5
10
15
20
25
30
2005 2006 2007 2008 2009 2010 2011
Belgium difference in employment rates upper sec minus below secondary
OECD difference in employment rates upper sec minus below secondary
EU21 difference in employment rates upper sec minus below secondary
25-34 year-olds
35

35. 36
Inactivity among very young youth
Percentage of 15-19 year-old NEET (2011)
0
2
4
6
8
10
12
14
16
18
20
UnitedKingdom
Norway
Spain
Italy
OECDaverage
Portugal
Austria
Ireland
Switzerland
Korea
Denmark
Netherlands
Sweden
Greece
France
Belgium
Estonia
Iceland
Finland
SlovakRepublic
Germany
CzechRepublic
Hungary
Poland
Luxembourg
%
Not in education and unemployed
Not in education and not in the labour force
Not in education (Total)

36. SKILLS DISTRIBUTION,
GROWTH AND SOCIAL
INEQUALITY
37

37. 240 250 260 270 280 290 300
Italy
Spain
France
Ireland
Poland
Northern Ireland (UK)
Austria
United States
Germany
Denmark
England/N. Ireland (UK)
Korea
England (UK)
Average
Canada
Slovak Republic
Czech Republic
Russian Federation³
Flanders (Belgium)
Estonia
Norway
Sweden
Australia
Netherlands
Finland
Japan
25th
Mean and .95
confidence interval
for mean
75th 95th5th
Score
Skills of adults
Literacy
7 points are roughly equal to one year
of education
38

38. 100 150 200 250 300 350 400
Italy
Spain
France
Ireland
Poland
Northern Ireland (UK)
Austria
United States
Germany
Denmark
England/N. Ireland (UK)
Korea
England (UK)
Average
Canada
Slovak Republic
Czech Republic
Russian Federation³
Flanders (Belgium)
Estonia
Norway
Sweden
Australia
Netherlands
Finland
Japan
25th
Mean and .95
confidence interval
for mean
75th 95th5th
Score
Skills of adults
Literacy
39

39. 220 230 240 250 260 270 280 290 300
Score
Average16-65year-olds
Average16-24year-olds
Korea
Germany
Norway
Average55-65year-olds
Spain
Finland
France
US
UK
Literacy skills in younger
and older generations
40

40. 41
Unequal distribution of skills unrelated to
social/income inequality
Australia
Austria
Canada
Czech Rep Denmark
Estonia
Finland
GermanyIreland
Italy
Japan
Korea
Netherlands
Norway
Poland
Slovak Rep
Spain
Sweden
United States
Flanders
UK
0.20
0.25
0.30
0.35
0.40
55 60 65 70 75
Gini coefficient
Score-point difference between the 75th and 25th percentiles on the numeracy
scale

41. Australia
Austria
Canada
Czech Rep
Denmark
Estonia
Finland
Germany Ireland
Italy
Japan
Korea
Netherlands
Norway
Poland
Slovak Rep
Spain
Sweden
United States
Flanders
UK
0.20
0.25
0.30
0.35
0.40
35 40 45 50 55 60 65 70 75
Gini coefficient
Percentage of adults scoring below Level 2 on the numeracy scale
Low foundation skills and social
inequality are related
42

42. A wide skills distribution relates positively to
economic growth
Australia
Austria Canada
Czech Rep
Denmark
Estonia
Finland
Germany
Ireland
Italy
Japan
Korea
Netherlands
Norway
Poland
Slovak Rep
Spain
Sweden
United States
Flanders UK
15000
20000
25000
30000
35000
40000
45000
50000
55 60 65 70 75
GDP per capita
Score-point difference between the 75th and 25th percentiles on the numeracy scale
43

43. A higher skills advantage of tertiary educated
relates positively to economic growth
Australia
Austria
Canada
Czech Rep
Denmark
Estonia
Finland
Germany
Ireland
Italy
Japan
Korea
Netherlands
Norway
Poland
Slovak Rep
Spain
Sweden
United States
FlandersUK
15000
20000
25000
30000
35000
40000
45000
50000
40 45 50 55 60 65 70 75 80 85
GDP per capita
Score-point difference in numeracy proficiency between tertiary-educated adults
and those without upper secondary education
44

44. NATIONAL SKILLS
PROFILES
45

45. • Learning outcomes at 15 (PISA):
– Slightly above average performance, but strongly
improving
– High impact of socio-economic background
• Educational attainment (EAG)
– Very high secondary attainment, but low (and very
selective) tertiary participation and attainment rate
– Strong vocational education sector
– High youth employment
• Adult skills (PIAAC):
– In literacy below, in numeracy above average
Germany
46

46. • Learning outcomes at 15 (PISA):
– Average performance, stable, with high social
segregation
• Educational attainment (EAG)
– High and increasing tertiary participation and
attainment rates
• Adult skills (PIAAC):
– Around average for literacy, below average for
numeracy
– No progress from older to younger generations
United Kingdom
47

47. • Learning outcomes at 15 (PISA):
– Average performance and declining
– Huge inequalities and still aggravating
• Educational attainment (EAG)
– Attainment rates have caught up with rest of
Europe, but at higher levels still below
• Adult skills (PIAAC):
– Significantly lower than other countries
– Younger generations much higher than older, but
still below average
France
48

48. • Learning outcomes at 15 (PISA):
– Average performance and slowly further declining
– Few high-performers and many low-performers
• Educational attainment (EAG)
– Low but increasing educational attainment, even
very (too?) strongly increasing at tertiary level
– High graduate unemployment
• Adult skills (PIAAC):
– Very low proficiency in literacy and numeracy, for
all age groups
Spain
49

49. • Learning outcomes at 15 (PISA):
– Below average performance, but improving at
both ends of distribution
• Educational attainment (EAG)
– Very low attainment rates at secondary and
tertiary level, slowly improving
• Adult skills (PIAAC):
– Significantly below average for both literacy and
numeracy skills
Italy
50

50. • Learning outcomes at 15 (PISA):
– FL among sub-top performers; FR below average
– Huge impact of socio-economic background
• Educational attainment (EAG)
– High attainment rates both for secondary and
tertiary levels, but expansion in tertiary
participation/attainment has come to standstill
• Adult skills (PIAAC):
– High literacy and numeracy skills but with still
high % of low-skilled adults
Belgium / Flanders
51

51. A FEW CONCLUSIONS
52

52. • No definite theory on which human capital
systems contribute best to knowledge-
economies and inclusive societies
• More academic skills or more vocational skills?
• Towards a more effective and more equitable
distribution of educational investments over the
lifetime?
• The long-term costs of low educational
attainment and low skills are far higher than the
cost of risks of over-schooling
A few questions and conclusions
53

53. Thank you !
dirk.vandamme@oecd.org
www.oecd.org/edu/ceri
twitter @VanDammeEDU
54