Skills Formation Theories: Consensus From the Literature

Friday, July 20, 2012
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It is generally accepted that a key source of global competitiveness is the skills of a nation’s workforce. Thus, the education and training offered through national skills formation systems has a very critical role to play in determining competitiveness. Education practitioners, economists, sociologists, and political scientists have all recognized the importance of education and training to economic development in various theories of skills formation.

There is no single theory which adequately explains the complexities of the linkage between skills formation and economic development. However, several commonalities amongst these theories emerge:

• High skills production systems are associated with competitiveness and strong economies; but low skills alternatives may be necessary given constraints to higher level skills formation;
• Sufficiently high levels of general education are required by the workforce for higher skill production;
• Effective institutions that prevent market failure related underinvestment in skills, provide adequate regulation, and coordinate stakeholders are key elements of effective skills formation systems;
• There is no one ideal national education and training system architecture that can satisfy the needs of all production systems; The optimal form is shaped by social, historical, and cultural, and organizational factors, as well as level of economic development;
• Without sufficient systemic incentives or in the presence of labor market constraints both individuals and firms underinvest in education and training.

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