Video: Creating jobs for tomorrow’s workforce

People have geared up for jobs that no longer exist, either due to technology or because they have moved elsewhere in the global economy, says economist Michael Spence in this World Economic Forum video.

Spence argues that there is a creative challenge ahead to prepare people for the world they live in, and that sustainable growth must be key to rebalancing the labour markets.

Watch the full video above or read selected quotes below.

On Growth and Jobs

We can’t underestimate the challenge of adapting to a rapidly changing world. In 1950, developing countries were around 20% of the global economy and the majority of people in those countries were poor, with per capita incomes under 500 dollars. Only 15% of the world’s population lived in high income countries; while the rest of the world was not really connected to the global economy.

In the last 50 or 60 years we have seen miraculous change: the reduction of poverty, and the growth of connectedness, incomes and opportunities in the developing world. We now find ourselves in a different world and are slow to adapt. 85% of the world’s population lives in the developing world, and we need to grow the global economy to three times the size it currently is, without destroying the planet on the way.

Rapid economic growth puts enormous pressure on the environment, on ecosystems, on the water supply, on almost everything you can think of. We need international collaboration from business and non-governmental organizations to do all we can to make growth sustainable.

On changing the economic model

No matter where we live we tend to operate on what has worked in the past rather than being alert to how we can change. If you look at most developing countries that entered the middle income levels growth rates – with middle incomes between US$ 3,000 to US$ 10,000 – the economic model has to change at that point if you’re going to succeed and sustain the growth. Most countries don’t make the change. They stick with the old model and slow down or stop altogether. Lessons have been learned in a painful way in the developing world, and now advanced economies must take heed.

China is within shooting distance of being the largest economy in absolute terms in world. We need China to succeed in its own reforms and become a constructive architect in moulding the global economic environment, so that smaller more vulnerable countries are also included. Developing countries are having a growing impact. There is huge capacity in India – in terms of human capital, education and potential – if government can build new infrastructure and get out of the way of business.

In Latin America you have two major economies that are growing in a stable, sensible way: Mexico and Brazil. Brazil has an inclusiveness agenda that is impressive and important, and is busy closing the gaps between income and inequality with a new set of education focused policies.

In Europe we have an impasse, and economies need to reconverge in terms of productivity in relation to incomes. This is starting to happen in Greece, Spain and Portugal but more reforms are needed, especially in Italy and France. In Germany there has been some flexible, structural reform, and a better distribution of income than in the US where income increases have been going to the upper 25%. The German economy is becoming competitive again, but across Europe there remains a long-term challenge of low growth, employment and opportunity.

On the role of government

We are yet to catch up with a world of rapid change. If you spend four years preparing for an expected world and then it shifts, it leaves a gap and that is part of what we are now wrestling. But we can do better to fill the gaps, and government in partnership with education and business can help. The idea that government acts while everyone else sits on the sidelines is the wrong model. It doesn’t match the successful cases of real reform in countries I’ve encountered.

Nobody has a crystal ball to see what demand and the labour markets will look like in 15 years, but we do know that the pursuit of sustainable and inclusive growth will be a defining feature of global economic policymaking in 2014 and beyond. After that we’ll have to stick our heads up and see how much of the problem we’ve solved, and whether the labour markets are coming back into some kind of sustainable equilibrium.

Author: Michael Spence is William R. Berkley Professor of Economics and Business, NYU Stern School of Business

Image: People walk at the financial district of Pudong in Shanghai January 17, 2012. REUTERS/Carlos Barria