When I visited Peru for the first time last month for a business development trip, I met with the heads of some leading private education institutions. At the end of my visit, I decided to book a cultural tour of Lima. During the tour, I asked our guide Marcos where he learned English as I found him very articulate, knowledgeable and with a good sense of humor. To my pleasant surprise and astonishment, he told me that he learned it by himself, mainly online. He then started practicing with visiting tourists until he became more comfortable leading tours himself.
South Korea, Singapore, and Chile are good examples of nations that have seen the benefits of investing in human capital early, smartly, and for all.
Between 10 and 20 percent of government budgets goes to education in most emerging economies. At the same time, global youth unemployment rates have soared in recent years, reaching about 13 percent, on average, and leaving millions of young people on the margins. Out of the roughly 6 million people who join the labor force globally every month, one million are in Sub-Saharan Africa and another million are in India. Most have little training and are often unemployable.
Meanwhile, CEOs and hiring managers are having difficulty filling entry level positions because they cannot find people equipped with the skills they want. I would like to shed light on three interesting phenomena happening in parallel, which may partly explain this crisis:
- First and foremost, automation and the new technologies. While the speed and magnitude of their adoption varies, there is consensus that these mega transformations are irreversible, tsunami-like forces that people, communities, and nations need to recognize and adapt to as “the new normal.” According to a report from McKinsey, about 60 percent of occupations have at least 30 percent of their activities automatable. This means new sets of skills need to be acquired.
- Secondly, the economy wants to talk the language of “skills” not “degrees”. Knowledge is a commodity nowadays. What people learn and unlearn and how often they do it is becoming a strong differentiator. According to the WEF’s Future of Jobs Report, the top 10 skills in demand for the future are about being able to problem solve complex situations, being creative, thinking critically, having the ability to coordinate and interact with others, to name just a few. Interestingly, none of the top 10 skills include hard skills or domain specific knowledge, which are considered a given.
- Thirdly, connectivity and globalization are creating new marketplaces for talent in services. A ‘branded’ animation company in a developed country nowadays competes with young skilled designers in Manila or in Kiev who are offering services at a fraction of the price of what it used to be. According to figures from Upwork, a freelancer global web platform, the top 10 countries based on freelance earnings in 2014 include places like the Philippines, India, Bangladesh, Romania, Ukraine, Russia, and Pakistan, alongside the U.S., UK, and Canada.
Going forward, IFC’s primary focus will continue to be to partner with private players that produce skilled labor for the new economy – and in big numbers. Good examples include AdvTech, which is scaling up the successful business model for higher education and vocational training it has developed in South Africa and exporting it to the rest of Africa; Coursera, the highly-innovative, globally-oriented online education platform; and Luminus, a leading technical vocational education and training provider in Jordan, which has an impressive record of aligning skills with industry needs.
The fuel that the global economy needs the most is talent. Talent equipped with 21 st century skills, talent that is entrepreneurial, talent that is ready for tomorrow’s economy. Talent like what I saw from Marcos, my Peruvian tour guide. We need more of that.
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