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Italy should strengthen reform implementation to boost skills

MD Staff

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Recent reforms of Italy’s education system (“Buona Scuola”), labour market (“Jobs Act”) and industrial policy (“Industria 4.0”) have clear synergies and could reduce worrying imbalances between the supply and demand of skills on the Italian labour market, according to the new OECD report Getting Skills Right: Italy

Stefano Scarpetta (Director of Employment, Labour and Social Affairs at the OECD) has said, however, that there are still a number of unresolved issues over the effective implementation of the reforms. Speaking alongside the Italian labour minister Giuliano Poletti, Mr Scarpetta said: “Italy has done a great deal over recent years and the reforms are starting to bear fruit. There are still a number of issues which, if resolved, could lead to the effective implementation of important reforms such as a programme for alternating school and work, Industry 4.0 and active labour-market policies.

The results of the new OECD Skills for Jobs indicators, published alongside the report, provide a detailed snapshot of the most sought-after skills on the Italian labour market and differences between the various regions. The data shows high demand for skills related to knowledge of new technologies such as IT and electronics, software programming and use of digital technologies. Scarpetta said: “[Italy] still has work to do to develop the IT skills needed to confront labour-market challenges, now and in the future. Our data clearly shows major demand for digital skills across the country which, unless it is met, could have negative consequences for Italy’s growth and competitiveness.” Professionals with good knowledge of IT, new digital technologies, and medical and engineering technologies are highly prized in the Italian job market, with employability and salaries well above the average.

Even so, demand for these skills – and high-level skills in general – remains too weak and is confined to the needs of large Italian corporations. The rest of the Italian economy is concentrated in traditional, low-productivity sectors where there is little demand for high-level skills, with about 85% of Italian businesses being small and mainly family-run.

Italy is therefore in a state of equilibrium, with the supply and demand of skills tending to level downwards, in a vicious cycle that has clear negative repercussions on productivity, growth and use of new technologies.

The report also shows that many Italians specialise in areas with few employment opportunities, despite the demand for technical, engineering, technological and mathematical skills, which itself remains too weak. About 35% of Italian workers are in jobs that are unrelated to their training and 21% are in jobs for which they are over-qualified. Moreover, the report shows that this situation is associated with an average salary loss of around 17% compared to those who specialise in an area with clear employment opportunities whose skills are in demand from businesses.

The report sets out a number of points for consideration, including:

  • Italy needs stronger ties between the education system and the world of work at all levels. The creation of higher technical colleges (“ITS”), based on robust links with the local economy, is a welcome innovation in Italian professional training and so far has generated brilliant results, helping to develop skills that are rapidly absorbed into the Italian labour market. The new Professional Degrees also have the potential to fill the shortfall of technical skills in Italy, but to do so they must forge strong links between universities and business from the start, aiming to develop high-level professional and technical skills, rather than primarily theoretical skills as has been the case in the past.
  • The programme for alternating school and work is a step in the right direction, but many challenges remain. On one hand, businesses need to take a greater role in designing the content of work-based learning and, on the other hand, educational managers need adequate financial and teaching resources to forge links with businesses across Italy, including in poorer areas where there is less scope for engaging with business.
  • Italy needs to strengthen high-performance working practices (HPWP) such as mentoring, job rotation or flexible responsibilities. These practices are already fairly widespread in other countries but are still too rare in Italy. The skill level of Italian managers – especially in small companies – is not always adequate and needs to be improved through targeted training programmes. This would enable small businesses to grasp the importance of new technologies and be able to benefit from their productive potential.
  • Opportunities for workers to upgrade and update their skills must be improved through the more judicious use of funds for continuous training, linking their use to the real needs and challenges of the Italian labour market. Indeed, there are still many Italian workers with poor IT skills, little knowledge of foreign languages and a shortage of a wide range of core technical skills. Often, though, a considerable proportion of continuous training funds have been channelled into developing skills in areas that are merely incidental to the challenges posed by rapid technological change, globalisation and automation.
  • Active labour-market policies are a crucial challenge for Italy. In view of current institutional arrangements, Italy needs to adopt mechanisms to strengthen cooperation between the central state and the regions, by identifying clear, shared and objective parameters to ensure that unemployed persons receive the same quality of services throughout the country.

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How to measure blockchain’s value in four steps

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To help organizations identify the value of blockchain technology and build a corresponding business case, the World Economic Forum, the International Organization for Public-Private Cooperation, has released the Blockchain Value Framework as part of the white paper, Building Value with Blockchain Technology: How to Evaluate Blockchain’s Benefits.

Co-designed with Accenture, the Blockchain Value Framework is the second in a series of white papers for organizations to better understand that blockchain technology is a tool deployed to achieve a specific purpose, not a goal in itself. This new framework provides organizations with the tools to begin measuring blockchain’s value, including key questions to consider. It is the first visual roadmap of its kind and is based on a global survey of 550 individuals across 13 industries, including automotive, banking and retail, public-sector leaders, chief executive officers and an analysis of 79 blockchain projects.

“In our last paper, we stressed that blockchain deployment is not the end goal,” said Sheila Warren, Head of Blockchain at the World Economic Forum. “We wanted to get beyond the hype. This new framework is for those business leaders that have figured out blockchain is the right solution for a specific problem, but don’t know what to do next.”

“Organizations need to make business decisions and investments with confidence and that requires proof of the value-add and an analysis of why, or why not, they should consider something new,” said David Treat, Managing Director and Global Blockchain Lead at Accenture. “Through this new framework, we aim to educate businesses and challenge them to rethink their current business models, relationships between ecosystem partners, customers and their investments in technology. The path to blockchain adoption starts here with evaluating the technical and strategic priorities and aligning them with investments in innovation.”

The framework starts with questions on blockchain’s role and desired impact. Assessing potential pain points and areas for opportunity without thinking about the technology is essential. Next is to examine the three key dimensions of blockchain’s role alongside its capabilities. The roadmap can assist organizations in moving from current-state assessment to future blockchain opportunity, and to identify where the value will be created and delivered. Cost savings, increased revenue and improved customer experience are all possible business case results.

According to the global survey conducted in conjunction with the new framework, 51% of survey respondents identified “missing out on developing new products/services” as the number one expectation if they do not invest in blockchain technology in the near future. The other two most common answers were missing out on speed/efficiency gains (23%) and missing out on cost savings (15%). The interviews highlighted the potential of the technology to simplify and optimize complete value chains through the sharing of simplified real-time data with increased efficiency. However, the paper also cautions businesses to carefully consider whether blockchain is the best solution, relative to other technologies or other digitization strategies. As noted in the Blockchain Beyond the Hype white paper, blockchain may not be a viable solution or it may not be the correct time to pursue this avenue.

In nine of the industries surveyed, the full traceability and integrity of the data were the top two potential advantages of using blockchain technology. Most of the industries surveyed could benefit from smart contracts and automation provided by blockchain. Surprisingly, few organizations selected “new business products or services” as one of the benefits. This suggests the current focus for organizations is on improving existing products and services before considering investing in new opportunities.

“We may be moving beyond the hype, but blockchain isn’t going away. Central banks are experimenting with digital currencies and supply chain networks are piloting blockchain policies. We are also seeing companies like Facebook and Starbucks entering the blockchain and cryptocurrency space. This means practical use cases of the technology will become more widespread,” Warren said. “A draft of the framework was further validated at a multilateral session of global leaders at the World Economic Forum Annual Meeting 2019 in Davos-Klosters.”

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Luxembourg has achieved high levels of growth and well-being but must do more

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Luxembourg’s economy has grown at a robust pace and has enviable levels of well-being, but public policy can do more to make growth sustainable and inclusive, according to a new report from the OECD.

The latest OECD Economic Survey of Luxembourg discusses the challenges of making housing more affordable and reviving productivity growth. The Survey projects economic expansion will continue, with growth of about 2% this year and 2.5% next, but cautions about the risks of a possible downturn.

The Survey, presented in Luxembourg City by OECD Secretary-General Angel Gurria, Luxembourg’s Finance Minister Pierre Gramegna and Housing Minister Sam Tanson, discusses the need to address financial sector risks, ageing-related pressures and use tax reform to support sustainable growth.   

“Luxembourg is in an enviable position, with growth that outpaces its neighbours and high levels of well-being for its citizens,” Mr Gurria said. “The challenge facing policymakers today is to ensure that Luxembourg remains prosperous and that this prosperity is widely shared, through reforms that enhance economic resilience, inclusiveness and sustainability.”

Reducing financial risks should be a priority, the Survey said. With rising household indebtedness creating vulnerabilities for families and banks alike, the Survey recommends Luxembourg introduce borrower-based macroprudential instruments, such as caps on loan-to-value or debt-service-to-income ratios, as foreseen in draft legislation.

It also underlines the need to further enhance financial sector resilience and foster the transition to a low-carbon economy. The disclosure of climate-related risks by financial intermediaries, in line with the recommendations by the Task Force on Climate-related Financial Disclosures, should be pursued. Further reinforcement of financial supervision, namely by continuing to monitor credit risks on intra-group bank exposures and to enhance on-site inspections and data collection on investment funds, is also necessary.

The Survey points out the need to make the housing market more efficient and more equitable. Tax policy can be used to boost housing supply, notably by reforming recurrent taxes on immovable property to hike the cost of not using land available for construction. Increasing residential density, ensuring that municipalities penalise landowners and developers for non-use of building permits, and phasing out or reducing the tax deductibility of mortgage interest should also be considered.

To improve inclusiveness, Luxembourg can directly finance new land acquisition by public providers of social housing and better use means testing to target its provision. Linking housing allowances and social housing rents to local rents is also recommended.

Fiscal policy should support growth and economic dynamism while ensuring the sustainability of public finances. For example, continuing the move toward higher taxes and excise duties on transport fuel – especially on diesel – combined with flanking measures over the short term for the most affected poor households, will address congestion and climate change risks while creating new revenue streams.

The Survey notes that stronger productivity growth will above all require enhanced training so as to continually upgrade the skills of the workforce. In addition, modernisation of bankruptcy law would ease early restructuring and second chance opportunities and facilitate the exit of non-viable firms. Elimination of restrictions on advertising and marketing in professional services would boost competition. Also, promotion of cutting-edge technologies by public sector users would boost adoption by businesses.

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Bangladesh: Climate-Smart Growth Key to Achieving Upper-Middle Income Status

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The World Bank reaffirmed its continued support to Bangladesh to achieve the country’s vision of reaching an upper-middle income status through ensuring green growth, as the Bank’s Chief Executive Officer Kristalina Georgieva concluded a two-day visit to the country. 

As a co-chair of the Third Executive Meeting of the Global Commission on Adaptation (GCA) that took place in Dhaka on July 10, Georgieva commended Bangladesh for its leading role in adaptation and disaster preparedness, despite being among the countries most vulnerable to climate change.

“The world can learn from Bangladesh’s adaptation and strong disaster-coping mechanisms. Their approach is working when we compare recent and past natural disasters: Cyclone Bhola in 1970 killed half a million people while last May Cyclone Fani, of similar strength caused less than 10,” said Georgieva. “But climate change will make the threat of natural disasters more frequent and intense. The World Bank remains committed to help Bangladesh improve resilience and ensure climate-smart growth.”

For Bangladesh, dealing with climate change is a development priority.With active community participation, the country has improved defensive measures, including early warning systems, cyclone shelters that double up as schools, evacuation plans, coastal embankments, reforestation schemes and increased awareness and communication. The World Bank has supported these measures, which have reduced deaths in major storms.

On Wednesday, she met with the Honorable Prime Minister Sheikh Hasina and commended Bangladesh’s remarkable progress in economic development and poverty reduction. They discussed the country’s development priorities, and how the bank can support them.

Today, Georgieva visited a learning center, known as Ananda School that brings poor out-of-school children back to primary education. The World Bank is supporting the government project that enrolled about 690,000 poor and out-of-school children, half of whom are girls, in Ananda Schools, which in Bengali means “school of joy”. To cover the poorest slum children, the project has been expanded to 11 city corporations. In Cox’s Bazar area, the program is providing learning opportunities to Rohingya children and helping the dropped-out youth from the host community.

“I am most impressed with the resilience of the people of Bangladesh and their determination for a better future for their children,” added Georgieva. “This has been the driving force that made Bangladesh become a low-middle income country from being one of the poorest nations at birth only within four decades. The country also showed extreme generosity by providing shelter to about a million Rohingya population. The World Bank stands by Bangladesh in its journey to an upper-middle income status.”

The World Bank was among the first development partners to support Bangladesh following its independence. Since then, the World Bank has committed over $30 billion, mostly in grants and interest-free credits to Bangladesh, supported by the International Development Association (IDA), the World Bank’s arm for the poorest countries. Bangladesh currently has the largest IDA program totaling $12.6 billion.

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