Executive summary

OECD countries face two intertwined policy challenges: a long-term decline in productivity has occurred over the last two decades, while the gains in economic growth have increasingly accrued to those already at the top of the distribution of income and wealth. The impacts of this phenomenon are felt most at the local level, where economic welfare and well-being outcomes re-inforce each other. In response, skills have emerged as a key policy solution. Promoting the increased use of skills can help employers move towards higher value-added employment and maximize business performance. More productive jobs tend to be of higher quality and have higher wages, thereby improving social and economic outcomes at the local level.

Policy makers have largely focussed on boosting the supply of skills, namely the number of people with vocational or academic qualifications. Relatively little policy attention has been paid to the use of skills in the workforce and the alignment between the competences of workers with the needs of the business. This is despite evidence from the OECD indicating that surveyed workers report not maximising in their use of literacy and numeracy skills in the workplace.

Promoting increased skills utilisation requires a new response at the local level. Part of the response falls within the traditional purview of public policy, including programmes to boost innovation and vocational education and training. Another critical factor involves working more directly with employers to look at issues related to work organisation, job design and human resource development practices. This requires a move away from policy silos, which can build up at the local level, to bring together employment services, training policies, economic development organisations as well as innovation programmes.

This joint OECD-ILO report provides a comparative analysis of programme examples focusing on improving skills use in the workplace across eight countries. The case studies provide insights into the practical ways in which employers interact with government services and policies at the local level. The following key lessons and recommendations emerge from this report:

Key lessons and recommendations

Skills utilisation should be identified as a priority across policies in addition to being the focus of targeted local interventions

Issues related to skills use are not systematically identified as a policy priority. Policy makers at the local, regional and national levels should articulate skills use as a strategic policy priority and consider what types of incentives are required to better engage employers in examining how they could more effectively use the skills of their employees. The case studies from Singapore, Vietnam, and Peru highlight the ability to use financing models (e.g. grants and tax credits) to incentivise the increased use of skills in the workplace.

Leadership by employers and high levels of employer and worker engagement is required

For change to occur in workplaces, employers must have significant buy-in and investment in the benefits of prioritising and developing human resources. While public interventions can help to incentivise actions by employers, workforce development must be a functional part of an enterprise’s business model in order to be sustainable in the medium- to long-term.

The most successful changes that occur at the enterprise level are often industry-led, particularly by employer groups or chambers of commerce. Workers and their representatives are also valuable partners in efforts to raise labour productivity and skills utilisation in the workplace. The case study from Australia in this publication highlights the importance of leadership from employer representative bodies to ensure that workforce development activities are systematically embedded across an entire industry rather than a single employer.

Specialised, technical expertise is needed to get employer buy-in and affect change

Better skills use requires a number of intertwined local- and business-level considerations that are often outside the traditional portfolio of public policies, therefore it can be helpful to work with an anchor institution or brokers at the local level that have specialised technical expertise to offer to employers on work organisation, job design, human resource development practices. Such organisations include vocational education and training institutions, sector councils, human resources consulting firms and other business associations. Unions are also natural partners in improving the quality of employment at the local level. The case studies from the United Kingdom and the United States demonstrate the importance of have specialised technical expertise to affect workplace and management changes.

Initiatives should be strategically targeted to SMEs in order to maximise effectiveness and efficiency

Public programmes should be strategic in their efforts to effect change at the workplace level, but trade-offs may exist between effectiveness and efficiency. Public procurement can be used to help firms think over the long-term, requiring a certain level of working conditions and a certain commitment to training. SMEs, particularly those in low-wage sectors, have the most to gain from the shift to higher value-added production but they also often lack the capacity to fully engage in the holistic work required to achieve this goal. The specific needs of SMEs may require specialised targeted supports to ensure that they can benefit from setting up partnerships for the sharing of innovations and new technologies. The case study from Korea demonstrates the potential of using supply chain management practices to support SMEs in developing workforce innovation programmes.

Multi-faceted interventions are needed – both at the level of workplaces and local economies

The degree to which skills are used effectively is a function of a wide variety of factors both internal and external to the workplace. Consequently, successful interventions must consider bundles of management practices as well as the links between product market strategies and skills. Integrated approaches that consider training, employment and economic development priorities can also help to improve the business case for investing in the skills and potential of workers. For local employment services, this may include changing performance management systems to look at both the quality and quantity of job matches. For training providers, this means working more closely with employers to move away from just boosting the supply of skills. For economic development agencies, this means also focusing on the quality of jobs when attracting inward investments. Lastly for innovation policies, this means not just focusing on large R&D opportunities but also incremental innovations that can be achieved in the workplace.