Economic Restructuring and Human Resource Development

Maragret Black, Marcus Powell

• Publisher: Routledge
• Year: 2017
• Print ISBN: 9780754611639
• eBook ISBN: 9781351759441
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This title was first published in 2003. An analysis of education and training issues from the perspective of a planner, this book is the culmination of three years' research stemming from a concern by governments over how they can manage change and what contribution education and training policies play in this.

Chapter 1
Introduction

Over the last two decades numerous studies have investigated the relationship between human resource development and globalization. The interest stems from a concern by governments over how they can manage change and what role education and training policies can play in this process. A number of drivers are accelerating the process of globalization including: changes in investment flows, liberalization of markets, legislative reforms, the formation of new trading agreements, rapid innovations in technology and the introduction of new working practices (Bird, 2002). As a result of globalization some countries have experienced accelerated growth and rising employment levels, whilst in others technological advancement and competition results in instability and declining employment opportunities. The type of policies implemented by a government can determine whether an economy reacts positively or negatively to change. Even the type of education policies adopted by a government can influence whether a country benefits or not, from economic restructuring. Nevertheless, it is more important than ever that a country has a defined economic policy and that state institutions are committed to implementing such a policy. Equally significant is the degree of alignment between a country's development strategy and their education and training policies. There is no point in developing an elaborate human resource development strategy if appropriate state institutions within a country do not have an economic plan, or understand what future direction their economy is moving. A further related issue concerns the role played by social partners and the degree to which they participate in decisions about policy (Mitchell, 1998).

The present study is the culmination of three years research into the relationship between economic restructuring and human resource development (HRD) in the American and Caribbean region. The book draws on the academic and practical experience of the author who has lectured on this subject and undertaken consultancy work in the region. This enabled the study to recognise how debates about human resource development have changed over the past three decades, as well as their practical implications for policy. In the 1960s and 1970s policy debates surrounding education and training focused on human capital theory and how countries could identify the precise nature of their human resource requirement using complex manpower planning models. However, manpower planning became discredited because it was unable to account for unexpected change, including the impact of new technology and demographic influences, especially migration and the rising incidence of HIV/Aids. The failure of manpower planning resulted in analysts using labor market analysis as a tool for determining their country's education and training needs. The philosophy underpinning this approach is that any departure from competitive labor markets will discourage training, reduce employment and retard economic growth. However, the labor market analysis approach is not without critics, the majority of whom argue that in order to understand the process of skill formation you must take into account the political conditions necessary for skill development. Much of the work on this subject has been based on the experiences of the South East Asia tiger economies and researchers have asked what role the developmental state has played (see Ashton et al, 1996). While the developmental state model may have overcome a gap in the literature it has not helped us fully understand the process of skill formation in developing countries where external agents continue to have a significant influence. In response to this deficit other international academics have constructed the dependent state model to account for how external agents influence skill formation in the developing world (see: Arnove et al 1996; Green, 1995). All of these theories have influenced the concepts and debates used in the present study.

Economic restructuring has resulted in similar development trajectories being followed by developing and developed economies (OECD, 1996). Some developing countries are moving in the direction of the knowledge economy, characterized by the use of advanced level technology and demands for higher skilled occupations. Whilst, parts of the industrialized or developed world can be characterized by de-industrialization and unemployment, as manufacturing plants close down and relocate to different parts of the developing world (Betcherman 1998). A number of reports by international agencies have also pointed to the growing income disparities between poorer and richer nations (UN, 2000). European policies have attempted to raise the living standards of poorer members and harmonies income levels across different countries in the region, including those aspiring to join the European Union (Mitchell, 1998). The relative success of these measures can be seen by the fact that three decades ago Ireland and Greece were the poorest countries in Europe, now their economies have some of the highest growth rates in the Union. There have been a vast number of studies which attempt to analyze how education and training policies in the European Union are contributing towards productivity and growth. This research has been made possible by European Union funding under initiatives such as Socrates, Leonardo and more recently "Improving the Socio-Economic base".

As far as we know there have been limited coherent attempts to analyze and compare the process of skill formation in the American and Caribbean region where conditions are radically different to those in Europe. Like the European Union, there have been attempts to develop a regional market in the Americas through the North American Free Trade Agreement (NAFTA). It is envisaged that NAFTA will create the largest free trade area in the world 'by promoting fair competition in a free trade area, eliminating trade barriers and extending this framework so that others can benefit' (US Embassy, 2002,p3). In contrast to the European Union, NAFTA does not aim to harmonize or integrate labor markets in the region and many argue that NAFTA represents a formal confirmation of an unequal relationship between North America and other countries in the region. In many respects this statement is true since unlike the European Union there is limited free movement of labor between countries and only minimum levels of social protection for workers in the region. Perhaps the most unequal aspect of NAFTA is the fact that some countries in the region only have access to markets under certain conditions.

A large heterogeneity and diversity exists amongst different nation states in the American and Caribbean region. This diversity stems from a combination of the local indigenous cultures, the legacy of past sovereign powers, divergent economic policies and the process of state formation. However, all countries in the region continue to be influenced by the world's super power, namely the United States of America, even though the impact and influence of the USA varies from country to country. For example, the degree of integration between the Canadian and the US economies can be seen by the fact that the USA receive 80% of Canada's exports, not to mention that an estimated 25% of Canada investment comes from the USA (Micro-Economic Policy Analysis Branch, 1996). At a political level the USA has been criticized for intervening in the domestic affairs of different countries around the region (Furtado, 1998). All of these influences have a direct or indirect impact on human resource development and the purpose of this book is to comment on their effect and to analyze the degree to which policies in individual countries have supported or facilitated economic restructuring.

Despite the fact that different theoretical perspectives are used to interpret events in the developing and developed world, education and training policies should share similar end goals. Education must provide school leavers with basic foundation skills, enabling them to engage in subsequent learning and development. There is also a view that education should be more closely linked to employability. Whilst training must meet the productive needs of employers and be as close as possible to the workplace, enabling efficient and effective skill development to occur. Education and training can also be used as a means to promote social cohesion and citizenship, although in a global economy education and training are increasingly viewed as tools for supporting productivity and efficiency. Another function of education and training is to help upgrade the skills of those workers who have been displaced as a result of economic restructuring, as well as younger people who find it difficult to enter the labor market for the first time. The state's role in these processes is to provide the appropriate policy frameworks and to ensure a close alignment between education and economic policies. When economies enter the knowledge era advanced level technical skills are required to support higher value added production, and effective soft skills are also needed for those working in the service economy. If a country enters the knowledge era there are arguments for the state to reduce its role as a 'direct provider of education', especially at the post secondary level where the private returns to the individual and the enterprise are greater than the public ones. Under such circumstances there are justifications for using markets forces to determine the amount and type of training provided. Similarly, in a knowledge economy, where investment levels in education and training are assumed to be high, enterprises and individuals should start contributing towards the cost of provision. However, this is not to deny that the state's role in supporting education and training in a knowledge economy should be reduced, but instead to argue that the state needs to redefine its role and activities (Betcherman, 1998). For example, in order for a training market to operate effectively, the state must ensure individuals and organisations have information about what education and training opportunities are available. Secondly, the state must provide financial incentives to ensure education and training policies are geared towards local labor market needs. Unless the correct incentives are introduced investments in the wrong type of provision could distort the labor market. Thirdly, the state should broker relationships between different stakeholders who are affected by education and training policies. If commitment is not obtained amongst major stakeholders than it is unlikely that a policy will ever be successfully implemented (Powell, 1999). Finally, the state must also ensure that national standards exist for education and training competencies or qualifications. This ensures that employers can measure the quality of potential employees and learners can understand the value of their qualifications, all of which facilitates labor market mobility. However, in a developing country, where the public benefits of education outweigh the private ones at nearly all levels, and the training market fails to operate according to classical economic theory, there are political and economic justifications for strong state involvement in all types of education and training. Nevertheless, even in a developed economy there are also justifications for continued state intervention, especially amongst the unemployed where private investment levels in training are far below the public good and where there is a strategic need to support skill development in specific areas.

Approach used in the Present Study

The present study aims to analyse HRD issues from the practical and analytical perspective of a planner. Our study begins by asking one simple question, namely-to what extent have education and training systems in the American and Caribbean region supported economic restructuring? The term HRD is given a wide definition, referring to the type of formal provision that occurs in a country's education and training system, as well types of informal provision that occur in the workplace. A lose methodological framework was constructed to analyse this relationship in the countries of Mexico, the USA, Chile, Canada, Jamaica, Barbados and St. Lucia. The decision to select particular countries was taken because the author has worked or undertaken research in these countries and this facilitated access to local research networks. Our framework developed an evolutionary approach to unravel, explain and account for the complex relationship between economic restructuring and human resource development. The first stage of this framework consisted of identifying the significant development characteristics present in each country. By specific characteristics we refer to those historical, geographical, political and economic influences viewed as the important drivers of change in each individual country. As a result of analysing important contextual issues we were able to understand what factors shaped development in each country and correspondingly what are the implications for skills demanded prior to economic restructuring. Whilst recognising that economic restructuring is a continual process the present study wanted to distinguish between two periods in history, the period prior to the mid 1980s and the period after the mid 1980s. For the purpose of our study these two periods can be categorised as two distinct stages in history since before the mid 1980s economic systems around the globe were characterised by nationalised industries, state regulated economies and standard forms of employment. Whereas after the mid 1980s the impact of oil prices, combined with public deficits and the expansion of global competition, resulted in significant changes in economic systems, including movements towards privatization of state owned assets, de-regulation of markets, increases in nonstandard forms of employment and shifts towards knowledge based activities. Although, the distinction between the two periods could be viewed as simplistic, it provides us with a useful means to start answering our initial question of to what extent have countries education and training systems supported economic restructuring, or have they merely responded to it.

After identifying each country's important characteristics, the second part of our framework analyses how these contextual factors influenced skill development prior to economic restructuring. Amongst the issues tackled were: what factors influenced the initial process of skill formation, who was involved in such developments and how did they it relate to the needs of a country's productive system? The next part of our framework turns to the process of economic restructuring, with a view to identifying the major drivers of change in each country's economy, including how they impact on the labor market and what are the implications for the skills demanded. The drivers of change are similar in each country, ranging from changes in investment flows, the closure of manufacturing industries, the emergence of new industries, the formation of new trade agreements, to the increased penetration of information, communication technologies (ICT). The effect of these factors will vary from country to country, according to how the process of change is managed and what policies are in place to facilitate this restructuring. Nevertheless, there are a number of common actions that governments must take to ensure that they respond appropriately to the skill needs of all citizens. First, as labor markets shift in favour of higher skilled occupations, governments need to support training and development on a continual basis, especially for those working in service and knowledge based industries. Second, under economic restructuring fewer opportunities will exist for those with minimum qualifications, and for this reason governments must ensure that all people are provided with basic skills and incentives to participate in life-long learning. Third, training has to be provided for workers who have been displaced and young people who find it difficult to access the labor market for the first time. Fourth, a country's education system must ensure school leavers have basic foundational and employability skills. Fifth, there must be a close alignment between HRD and economic policies. All of these issues have been tackled in our study, including the degree to which skill development is approached in a coherent, strategic and pro-active manner.

Outline of the Book

Mexico is the first case study to be analyzed and in contrast to the majority of other countries in our study Mexico has a turbulent past, including a revolution at the beginning the 20th century and the formation of a new constitution at the beginning of the 21st century. This constitution aimed to achieve greater social justice, economic quality, popular participation and economic nationalism, all of which shaped the country's development for the next 60 years. Industrialization in Mexico was also facilitated by a declining trade relationship with Europe following the 1930s depression. Together these factors helped Mexico achieve some of the highest growth rates in the world and the period between the 1950s and 1970s became known as the miracle years (Barry, 1992). Mexico's initial human development strategy complemented the country's early industrialization strategy. For example, at the basic education level, the state ensured that all children and young people were entitled to free education. Moreover, the state established a system of Vocational Training Institutes (VTIs) to meet the precise skill needs of domestic industries that produced for the local market. When the Mexican economy started to restructure, following the debt crisis of the 1980s, a number of new challenges faced the country's education and training system. No longer was it a simple case of meeting the skill needs of a large number of Mexican companies producing for the domestic market. Instead the country's training system had to respond to the skill requirements of workers who have been displaced as a result of economic restructuring. Similarly, as the Mexican economy became open to global competition, the VTIs had to respond to new demands, especially those relating to the needs of foreign investors and companies involved in exporting. To make matters worse the country's education system was expected to meet greater demands using less resources (Malpica et at, 1995). The state responded to these pressures by introducing a number of reforms, including a decentralization of educational provision and an attempt to move training closer to the workplace. This chapter analyses the rationale for such reforms, including their possible benefits and limitations. Finally, we interpret the relationship between these HRD reforms and economic restructuring, especially with regard to the peculiar characteristics of the Mexican state.

Our subsequent chapter turns to the process of human resource development in the USA and analyzes whether a pluralist or a national approach, or a combination of the two, are most effective for meeting the challenges posed by globalization and economic restructuring. The initial education system in the USA not only played an important role in supporting industrialized, it also facilitated nation building through assimilating different cultures and by promoting values associated with the American creed. But under the American constitution there is no national framework for education and correspondingly no form of central control. Instead each state has its own laws regulating education and each finances provision though local taxation, state aid and federal funds (Huntington, 1981). The further incorporation of the USA into the global economy, combined with recent structural internal economic changes, resulted in demands for new types of skills and we investigate the nature and extent of such demands, as well as how the country has responded to them. The type of structural changes occurring in the American economy have been hotly debated, with optimists arguing that the USA has some of the lowest unemployment rates on record, not to mention the shift in production towards high value added goods, and the pessimists who point to the country's growing income inequalities and the fact that jobs are becoming more insecure. Our study recognizes both points of view and argues that the shift in economic activities in the US economy has not only been towards high added value goods, but also towards primary and resource products (Porter, 1990). The USA has responded to these competing demands in a number of ways, although many of the demands associated with economic change require a federal or national level response, all of which are against the value systems on which the American political system was built. For example, as a result of global competition the demands for skills amongst American school and college graduates has increased, although employers find it difficult to measure and compare the quality of graduates due to the heterogeneity of education providers, both between different states and within individual states. Thus, what is needed is the establishment of national standards or competencies to ensure comparability between educational providers, thereby enabling employers and learners to understand the relative value of different qualifications. However, the introduction of national standards by the federal government would conflict with the values associated with decentralization, choice and individualism. These and other important HRD issues are debated in this chapter, and we argue that the government has attempted to make the education system more responsive to structural change by developing a loose national framework for meeting new skill needs, while at the same-time maintaining the benefits of a decentralized system of provision.

Our fourth chapter focuses on skill formation in Latin American, using Chile as the third case study. On many indicators Chile is the economic success story of Latin America, with growth rates comparable to the East Asian tigers. Progress in human resource development has also been impressive over the past two decades, with rising literacy levels and an expansion in the numbers benefiting from workplace training. It is against this background that the present chapter asks whether Chile has the potential to become the South American puma and what contribution human resource development can play in facilitating this transformation. During the early 1970s the economic system in Chile was based on the principals of socialist planning. However, when Pincohet came to power in 1973, a number of major economic and political reforms were introduced, to make Chile one of the most liberalized economies in Latin America (Gill et al, 2000). Under this transformation many of the older manufacturing industries closed and a significant number of state owned industries were privatized, all of which caused unemployment levels to rise. This changing environment placed a number of new demands on existing industries, including the need to become more competitive and orientated towards external markets. In response to this restructuring the state reformed the way in which training was delivered and rather than being involved in the direct provision of training, it attempted to develop a training market to encourage competition amongst private providers. The rationale underpinning this reform was that the market would be more responsive to employers changing needs (Ducci, 1997). A number of reforms were also introduced into the country's formal education system, including a decentralization of responsibility and the introduction of tuition fees for certain courses. Additional strategies were implemented to support skill development amongst displaced workers and young people who found it difficult to access the labor market. When analyzing these market-orientated reforms we investigate the degree to which they helped Chile meet the skill needs of individuals and organizations, as well as facilitating economic restructuring. When interpreting these events, our chapter analyses how state elites, institutions connected to the state and global agencies affected the process of change. The chapter argues that although many of the reforms to the country's education and training system can be accounted for by Chile's structural position in the global economy and its continued dependence on copper, it is also important to understand the behavior of state elites and how they are partly responsible for the continual state of perpetual dependence. The chapter concludes by commenting that only when political modernization occurs and resources are diverted to social and infrastructure projects, as opposed to supporting military expenditure, will the country be in a position to achieve puma status.

Our penultimate case study analyses education and training issues in Canada and addresses whether a provincial or federal approach is most appropriate for addressing the country's human ...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• Acknowledgements
• 1 Introduction
• 2 Economic Restructuring and Human Resource Development: A Discussion of Events in Mexico
• 3 A Pluralist and a National Approach to Globalization? Economic Restructuring and HRD in the United States of America
• 4 The Feline that wants to become a Puma – Human Resource Development and Economic Transformation in Chile
• 5 Human Resource Development and Structural Change in Canada – A Provincial or a Federal Approach?
• 6 Education and Training Systems in the Caribbean: Imposed, Voluntary and Indigenous Routes?
• 7 Conclusion
• Bibliography
• Index