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.
“Westlessness”: Munich Security Report 2020
Is the world becoming less Western? Is the West itself becoming less Western, too? What does it mean for the world if the West leaves the stage to others? What could a joint Western strategy for an era of great power competition look like?
The Munich Security Report 2020 sheds light on the phenomenon that it refers to as “Westlessness” – a widespread feeling of uneasiness and restlessness in the face of increasing uncertainty about the enduring purpose of the West. A multitude of security challenges seem to have become inseparable from what some describe as the decay of the Western project. What is more, Western societies and governments appear to have lost a common understanding of what it even means to be part of the West. Although perhaps the most important strategic challenge for the transatlantic partners, it appears uncertain whether the West can come up with a joint strategy for a new era of great-power competition.
In this context, the Munich Security Report 2020 provides an overview of major security policy challenges and features insightful data and analyses across selected geographic and thematic spotlights. In addition to its role as a conversation starter for the Munich Security Conference, the report series has also become a go-to resource for security professionals and the interested public around the world. The previous report was downloaded more than 30,000 times and received widespread coverage in German and international media.
The Munich Security Report 2020 provides an overview of major security policy challenges and features insightful data and analyses across selected geographic and thematic spotlights. In addition to its role as a trusted companion and conversation starter for the Munich Security Conference, the report series has also become a go-to resource for security professionals and the interested public around the world. The previous report was downloaded tens of thousands of times and received widespread coverage in German and international media.
The Munich Security Report 2020 analyzes current security policy developments in China, Europe, Russia and the United States, and furthermore examines regional dynamics in the Mediterranean, the Middle East and South Asia. In addition, it provides insights into the issues of space and climate security, as well as into the threats arising from new technologies and increasingly transnational right-wing extremism.
The Munich Security Report features a number of exclusive and unpublished materials. For the preparation of the report, the Munich Security Conference Foundation collaborated with renowned partner institutions, including the Armed Conflict Location & Event Data Project (ACLED), The Brookings Institution, The Chicago Council on Global Affairs, International Crisis Group, The International Institute for Strategic Studies (IISS), Mercator Institute for China Studies (MERICS), McKinsey & Company, Pew Research Center, Stockholm International Peace Research Institute (SIPRI), and the Zentrum für Osteuropa- und international Studien (ZOiS).
Uganda: Expanding Social Protection Programs to Boost Inclusive Growth
Uganda’s economy grew by 6.5 percent in FY18/19, maintaining the rebound in economic activity over the last two years, according to the latest edition of the Uganda Economic Update released by the World Bank today.
The fourteenth Uganda Economic Update report, “Strengthening Social Protection Investments to Reduce Vulnerability and Promote Inclusive Growth” shows that the economy was boosted by strong consumer spending, and sustained levels of public and private investment. Foreign investors have been particularly interested in the oil and gas, manufacturing and hospitality sectors.
Following the release of new Gross Domestic Product (GDP) estimates in October 2019, the share of the services sector has fallen from 57.7 percent to 46.2 percent, while industry has risen to 29.5 percent from 20.1 percent and agriculture to 24.2 percent from 22.3 percent. There has been a strong jump in manufacturing growth supported by recent expansions in the sector, including investments in new factories.
The outlook is favourable with the economy expected to grow at 6 percent over the next year. This requires sustaining high levels of investment in energy transmission, road construction and maintenance, industrial parks, and oil production-related infrastructure and services. Such investments also need to be executed effectively. Improving domestic revenue collection and utilizing concessional lending is important to ensure continued debt levels sustainability.
Uganda’s economy faces several risks on the macro and micro level. One in five Ugandans still live in extreme poverty and more than a third live on less than $1.90 a day with 70 percent still depending primarily on agriculture for their livelihood. This exposes them to risks of weather-related and other shocks.
Furthermore, with the expected population growth over the next 10 years, it is now estimated that average annual GDP growth rates will need to exceed 8 percent for Uganda to have a chance of reaching lower middle-income status by 2030. So, policy makers need to consider innovative ways for Uganda to reach its development goals.
Evidence shows that social protection programs can provide an answer to some of these challenges. Expanding social protection could have positive impact on growth and would provide social safety nets to reduce vulnerability to shocks, build equity, and maintain high labour productivity.
“Two out of three people who get out of poverty fall back in – that is about 1.4 people in the last household survey conducted in 2016. We need to consider the importance of investing in people, building their human capital, and providing them with the tools and assets to manage shocks and reduce their vulnerability,” said Tony Thompson, Country Manager, World Bank.
Despite the potential that social protection initiatives offer, the Senior Citizens Grant (SCG) and the Northern Uganda Social Action Fund (NUSAF) – the two main social protection programs reach only 3 percent of the population compared to 6 percent in Kenya. The Government of Uganda spent 0.14 percent of GDP (FY17/18) on the two programs, less than Kenya and Rwanda at 0.4 percent and 0.3 percent of GDP, respectively.
The coverage and spending on these types of initiatives in Uganda is not optimal, based on regional and global comparisons. There is therefore a strong case to be made to expand these programs, and to consider how to reach different vulnerable groups. Simulations show, for example, that programs covering the poorest 50 percent of households with infants under 2, would cost an estimated 0.23 percent of GDP, whereas similar programs covering the poorest 50 percent of all households with children under 5 would cost 0.50 percent of GDP.
The Update makes several recommendations, including the need to expand direct income support investments in human capital and to help mitigate shocks and scale up existing disaster risk financing pilot programs to better prepare for climate-related shocks, such as drought, and mitigate other shocks.
Given that there are competing fiscal demands on government resources, there is need to prioritize social protection expansion. One way of doing this, as recommended in the Update, is to focus on the poor and vulnerable in the neediest geographical areas, with various options outlined in the report to guide expansion to these areas, based on levels of vulnerability and human capital.
Ireland: Prepare now for rising fiscal pressures, external risks
Ireland needs to prepare itself to meet rising pressures on public finances from an ageing population and significant external risks such as new EU-UK trade barriers post Brexit. Another important development could be future changes to the international tax rules, according to a new OECD report.
The latest OECD Economic Survey of Ireland projects Irish GDP growth at 6.2% in 2019, then at still solid rates of 3.6% in 2020 and 3.3% in 2021. Yet the risks to these forecasts are significant and Ireland’s high public debt and fragilities in the banking system could exacerbate any economic shock. The coming years will also be marked by rising health and pension costs, as the population ages, and a possible end to several years of tax windfalls.
The Survey recommends taking concrete steps to improve public spending efficiency and find new sources of revenue. It is also vital to maintain Ireland’s attractiveness as an investment hub for multinationals, for example through addressing skills shortages in the workforce, lowering barriers to competition such as complex licensing procedures, and ensuring good transport infrastructure and affordable housing in Dublin. Improving skills and the use of new technologies could also help to narrow the productivity gap between Irish and foreign firms.
“Ireland’s open economy has helped it emerge stronger from the crisis, yet the country is very exposed to external factors. Fiscal prudence will be vital with health and pension costs set to rise just as the economy faces disruption from Brexit and a potential drop in corporate tax receipts,” said OECD Chief Economist Laurence Boone. “This is a crucial time for Ireland and the focus for the incoming government should be to keep the economy on a solid track.”
Ireland has enjoyed windfall tax receipts as an investment hub for multinationals, but a planned overhaul of global tax rules is expected to lower related tax receipts by changing how and where corporate tax is paid. In recent years, Ireland has partly used one-off tax receipts to fund cost overruns in health and welfare. Future windfalls should go towards paying off debt or into the country’s strategic ‘rainy day’ investment fund, and cost overruns should be reined in through better budget planning.
Health spending per person is already high in Ireland. Ageing will push it higher, while reducing revenues from labour taxes. Simulations suggest that public health and pension costs could rise by 1.5% of GDP annually by 2030 and by 6.5% of GDP by 2060. Basic pension benefits have risen much faster than inflation in recent years; indexing future increases to consumer prices would produce budgetary savings.
New revenue sources could focus on property and consumption taxes, which are less distortive for economic activity than income tax. Property values should be regularly reassessed for calculating local property taxes – today’s are based on 2013 values – and VAT should be streamlined from five rates to three. Low-income households should be cushioned from any adverse impacts. Separately, efforts to increase housing supply should continue as a way to curb soaring property prices.
Ireland stands particularly exposed to Brexit risks. The United Kingdom is an important trading partner, particularly in agriculture and food, and a vital land bridge for the majority of Irish exports that are bound for Europe. Exports of machinery, equipment, chemicals and tourism to the UK have stagnated or fallen since the 2016 UK referendum on EU membership, and any re-imposition of customs and border controls would hurt flows of goods to EU destinations.
Such risks make it even more important that Ireland reap as much benefit as it can from the digital economy. Irish businesses have tended to embrace new technologies well, the special digital chapter shows, but the impact on firm-level productivity growth has been modest.
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