3 ways governments can solve the global skills crisis

The global skills market is broken. In many countries, inadequate information within skills ecosystems leaves individuals, companies, and governments without the visibility and transparency needed to make optimal decisions and forecast accurately. Coordination failures among ecosystem stakeholders create problematic mismatches, for instance, educational institutions training people in skills that don’t fit current industry needs. Present bias leads to a focus on short-term pressures, which often results in de-prioritization of skill building, and market externalities create hesitation among employers to invest in skilling.

To better understand these challenges, we researched 80 global skills ecosystems and 10 government-based interventions, and interviewed skilling experts. We found that the root cause of these market challenges is a lack of orchestration. This, we believe, is where governments are uniquely positioned to address skills market challenges – by taking on a more strategic role as ecosystem orchestrator.

Governments need to act now. Fifty percent of today’s global workforce needs to upskill or reskill to stay relevant; by 2030, the World Economic Forum projects this figure to be at 90%. Failure to address this issue could result in a staggering global GDP loss of up to $15 trillion by 2030.

We propose three strategies for governments to tackle skills market challenges and create a thriving national skills ecosystem.

Governments can address skills market information asymmetry and coordination challenges by bringing all stakeholders – jobseekers, employers and other enablers like training and employment service providers and financiers – to one platform. This platform would enable individuals to find jobs, skilling programmes and funding options, and employers to find the right talent. It would allow ecosystem enablers like training providers to market their programmes and receive accreditation, and financiers to list skilling financing options like grants and scholarships.

By incorporating AI into the platform, governments can enhance platform offerings, including:

By establishing a robust technology backbone and interoperable technology design, governments can encourage developers to create products for the platform, rather than building all the services themselves.

The French government has created Mon Compte Formation – a digital platform for vocational training and skills development. It allows jobseekers and employees to access their personal training account, sign up for courses from a catalogue of training providers, and receive career guidance. The platform aggregates available funding sources to help individuals finance their skilling costs.

Governments need to incentivize a mindset shift among individuals, employers and academia toward lifelong learning.

Individuals tend only to invest in skilling until their 20s; however, lifelong learning and skill-building is essential for career longevity, employability and quality of life. To help individuals embrace the lifelong learning mindset, governments can make policy provisions for paid educational leave, offer lifelong learning credits to spend on skilling programmes, and set up individual learning accounts to track their acquired skill credentials.

In Germany, residents in 14 out of 16 federal states can access five days of paid annual upskilling leave for accredited training. “Upskilling cheques”, varying by state, offer financial support for training, often up to €1,000 or 50% of training expenses.

When grappling with economic uncertainty, employers often resort to quick-fix skilling programmes, sub-optimal hires and, in extreme cases, divestments or lay-offs. To encourage employers to adopt a proactive, long-term approach toward skilling, governments can provide incentives such as corporate tax exemption tied to training and development spend, one-off subsidies to sponsor large workforce skilling programmes, and recognition for companies that provide skills training in areas aligned with the national skills agenda. The Singaporean government offers a SGD10,000 credit to incentivize employers to skill their workforce via accredited training programmes.

Academic institutions play a crucial role in skilling individuals until their 20s. But their appeal to individuals for further skill-building diminishes over time because of perceived lack of industry relevance and need for significant time commitment (often requiring time off from work). To overcome these obstacles, governments can set up credit banks where employees can sign up for bite-sized learning modules, accumulate credits over time and earn a complete degree. They can also establish institutes of continuous learning that complement higher education institutions through earn-and-learn programmes, lifelong learning modules, and strong industry collaborations.

The Institutes of Technology (IoTs) in the UK are unique collaborations between higher education institutions and leading employers. IoTs are backed by £290 million of government investment and have employers participating in their governing bodies, which enables IoTs to focus on developing skills to address urgent industry needs and build a future-ready talent pipeline.

The job landscape today is significantly affected by a gap in employability skills – such as interpersonal skills, self-awareness, digital proficiency, and job-specific competencies – which are crucial not just for the school-to-work transition but also for long-term career success. A CMI survey showed that nearly 80% of UK employers believe that new graduates do not arrive fully equipped with work-ready skills. In emerging markets, where self-employment rates are as high as 30 to 50%, the demand for entrepreneurial skills is high.

Several governments are taking steps toward building employability and entrepreneurship skills at scale. Australia’s Employability Skills Training programme helps individuals develop workplace and industry-specific skills, while supporting them with career guidance and job search. The Indian government, via the Ministry of Micro, Small, and Medium Enterprises, offers programmes to develop the next generation of entrepreneurs.

Given the exponential pace of technological change and the diminishing longevity of skills, the need for a novel approach to lifelong learning is clear. Governments have a unique opportunity – and indeed an imperative – to make it happen.

Orsolya Kovács-Ondrejkovic, Shubhankar Sohoni and Anton Stepanenko also contributed to this piece.