July 1, 2011

In the years ahead, skills shortages and the resulting constraints to economic growth will become central issues of global economic activity. With its proposed concept to address the looming skills shortage, the German government has started to get to grips with the bottleneck. More information on the opportunities awaiting in the combination of entrepreneurial spirit and government action can be found here.

During the unveiling of Germany’s new concept for addressing the looming skills shortage, Labour Minister von der Leyen pointed out that this could only be seen as a start. More lifelong learning – especially for ageing workers and women – and increased immigration of skilled labour are some of the cornerstones set to help overcome the impending shortage. But this can really only mean a start: in 2010, more than one-third of companies all over the world experienced difficulties in finding enough qualified staff to fill job vacancies – especially skilled workers are in short supply.

Many companies are reacting with more intensive learning and training programmes and with more flexible working arrangements. They have also intensified relations with dedicated suppliers of education and training.

National governments are also taking action – India in particular. In India, more than two-thirds of all companies already face a skills shortage. A country with a very young population needs a greater supply of educational opportunities. To cope with these challenges the Indian government has started to collaborate more closely with the business community. The National Skill Development Corporation was established in 2009 as a not-for-profit public-private partnership (PPP). The objective of this institutionalised collaboration is to initiate, coordinate and foster initiatives of private business to help deliver a reform of vocational education and training. The apex of this endeavour so far is a contract signed with an education company in mid-April. In this contract the education company was mandated to educate and train 15 million Indians over the next 12 years to hone their skills for the labour market. For the education company, this means income of over EUR 2 billion – for the Indian government and Indian business, an increase of international competitiveness.

Not only in India have governments begun to collaborate more intensively with education and training companies to re-skill and up-skill workers. Big and small, internationally and regionally operating companies are offering educational services from basic schooling to (continuous and also academic) vocational training. Education entrepreneurs are designing curricula, developing technologies and introducing new learning methods to support learners and instructors in their related endeavours. They are optimising learning processes in times of looming skills shortages via: innovative approaches to collaboration, a clear allocation of responsibilities and targeted deployment of resources with a focus on performance.

One thing is certain: the economic growth of countries and the wealth of nations are largely dependent on education – and Germany’s potential growth is at risk. Recent studies indicate that in 2025 the German economy will lack around 6.5 million skilled workers – over half of them with university-level education. There is no dearth of partial solutions: more family-oriented, work/life-balanced and flexible working arrangements, an easing of immigration laws, and longer working lives are all up for debate or have already been partially implemented.

Yet, the structural change in value creation calls for more than just isolated tactical solutions. The strategic omissions for decades in matters of lifelong learning and funding in all educational segments cannot be redressed by single measures. What Germany now needs for its future wealth is to foster and integrate the initiative of education entrepreneurs and private individuals – as was set out in the coalition agreement of the country’s current CDU/CSU/FDP government. After all, Germany can build on its longstanding tradition of close, successful cooperation between state and business. The dual system of vocational training and German education companies – be they public or private by statute – are in strong demand outside Germany. The slogan “Training – made in Germany” is even being used to do marketing for German education services abroad.

Nonetheless, while the export of education services is being fostered, the growth potential of the education industry in Germany is largely overlooked. How many people realise that, in terms of gross value added by all economic activities, education as an “industry” is Germany’s fifth or eighth largest? (The rank depends on which data and sources are integrated in the value added.) In other words: after real estate, business services, manufacturing, the wholesale and retail trade, and health (services), the education sector generates a sizeable share of gross value added in Germany. We won’t even mention the relevance education and learning have for societal progress via the fostering of capabilities and social capital. But the growth opportunities that education holds do not seem to be fully recognised. The growth of the German education sector appears to be rather modest when compared to the growth dynamic in other countries. In Korea, the sector grew by nearly three-quarters (74%) from 2000 to 2006, and in Poland by more than half (57%). In Germany, by contrast, the sector grew by less than 10% (9.7%) of gross value added, falling short of the EU-15 average (17.5%).

Consequently, there are unrealised growth opportunities when it comes to education and learning as a sector. The looming skills shortage obliges us to use them. More intense and structured collaboration between public and private actors, more long-term-oriented investments with new/modified financial instruments, less red tape and more transparent and dedicated (financial-)support mechanisms are the orders of the day to be able to provide more individuals with better learning opportunities.