29.10.2018

Reform of skills systems needed in Asia

Policies promoting the digital economy and transformation of manufacturing must incorporate the social and ecological interests, including those of workers and trade unions.

Boy Lüthje, in conversation with Artanti Wardhani, Jakarta 2018. Photo by FES Indonesia.

Skills development, including upskilling, reskilling and lifelong learning, has become a major issue as the Fourth Industrial Revolution looms larger, especially in terms of a socially just transition.

Skills development was central to the FES-organized Work 4.0 conference in Jakarta this past October. Questions regarding the impact of technology-driven change on labour markets and employment conditions and how we can skill and empower the workforce in the throes of ongoing changes in the labour market are chief among the concerns. During the conference, Artanti Wardhani, from FES Indonesia, raised a few specific questions with Boy Lüthje, professor and Volkswagen Endowed Chair for Industrial Relations and Social Development at Sun Yat-Sen University’s School of Government in Guangzhou, China, on the need to reform skills systems to establish strong standards of decent work in the digital economy throughout the region.

What progressive economic policies are needed to avoid a clash between the restructuring of global and regional value chains in the course of the Fourth Industrial Revolution and economically, socially and ecologically sustainable manufacturing innovation?

When talking about the Fourth Industrial Revolution, I am not really sure whether we are in the middle of any industrial revolution right now. There are many promises; for instance, the German concept of Industry 4.0. To me, this is a vision of what can be technologically possible in the future. But nobody knows how this really plays out. And the reality, of course, is the technological development in this field is shaped by social forces of all kinds: companies and capitalists, governments, workers, trade unions, NGOs, social organizations, social movements. All have some influence on how the digital revolution will really look like. Therefore, I think it is necessary that industrial policies promoting the digital economy and transformation of manufacturing must include the social and ecological interests of all stakeholders from the beginning, and they must include workers and trade unions.

How far will the shrinking comparative advantage of low wages effect countries in Asia?

I am not sure whether the digital revolution really will reduce the comparative advantage of low wages. The digital economy, or digital technology, is mainly used to reorganize low-wage work, both in manufacturing and in the services sector. So, there is an ongoing competition based on low wages and low manufacturing costs, which, at this point, is mostly being reorganized through the digital economy rather than disappearing. And for that, the questions of labour standards, decent work, labour rights, the individual economy (both on the side of production and on the side of distribution and services) remain of greatest importance.

Has there been any adequate policies to address the issue of quality of work in the digital economy?

I think most of the programmes in developing countries in Asia basically lack perspective on the problem of labour and work. Such programmes should include any systematic policy or strategy to upscale the respective country's workforce. It is very important for workers to develop basic professional skills and knowledge so that they can respond or adapt to changing requirements in the labour market and changing technology at the workplace.

"There are very real and practical steps and also narratives to explain why industrial policies in the digital economy cannot work without workers. The main question is how to create just conditions for wage workers in the digital economy."

We can learn about skills development from developed industrial countries—for instance, Germany. In the dual model of vocational training, apprentices are trained at the workplace and in public schools.  This is a very important and basic lesson because when the company has to pay for the training, then it is seen as a long-term investment, and the company must develop some kind of commitment to quality work.

What can we learn from the training system in Germany to guarantee an efficient, fair and affordable system to upskill and reskill workers?

Good training is about good politics. First, the employers must financially be committed to the training so they can regard it as a long-term investment. The second thing, the apprentices must earn decent wages paid by the company. Third, in the German system, the wages for the apprentices are under the collective bargaining agreement between the trade union and the employers. Fourth, the apprentices are represented through the Works Council, which has a special section for young workers and apprentices. The fifth point is about the standards for the skills: The trade union and the employers have a strong joint mechanism to determine the standards. They jointly develop certification criteria, curriculums and exams. Of course, the German system cannot simply be exported, but some of these basic principles or mechanisms should be considered as important aspects of reforming the skills system in developing economies.

What utopian but convincing narrative is needed to achieve a "good society" through the Fourth Industrial Revolution?

There are very real and practical steps and also narratives to explain why industrial policies in the digital economy cannot work without workers. The main question is how to create just conditions for wage workers in the digital economy. And the very basic question is whether workers get a fair wage for their work.

Competition in the digital economy today continues to be played out on the comparative advantage of low wages. So, the basic thing is to protect the worker. It can mean stronger labour rights and changes in the labour contract law that would include the digital economy and all the irregular work in it. Even more important, there should be collective bargaining.

We can think of how we can integrate questions of upskilling, reskilling and the wage system—all these questions that are related to the quality of work—into collective bargaining. This is not a utopia. There are a lot of practical steps that we can do, and I am sure if we look at the situation of other countries, we can find great practical steps, too.

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For more information about the work by FES in Asia on digital transformation and change strategies towards a sustainable economy of tomorrow, visit the FES in Asia regional website and contact the director of the FES Indonesia office.

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