ABSTRACT:
In the past thirty years a
huge shift has been noticed in the structure of employment. The booming
manufacturing sector, traditional employer until the seventies, slowly and
gradually gave place to what many researchers call ‘knowledge intensive
services’. In a knowledge economy environment, highly skilled workers and
skilled or unskilled migrants around the globe compete with each other for the
same jobs. Narrow, economic definitions of the labour market fail to elucidate
this shift. Broader definitions, including dimensions like professional
occupations, skilled labour and immigration, or import of labour force, are
provided in order to describe this new, global labour market.
After elaborating on this
matter, the paper focuses on answering two questions. First, which is the best
way to face skills shortages in a knowledge economy? This is important because a skill gaps
is a symptom that appears even within a global labour market. It can be
quantitative, when there is an excess demand for workers with a particular set
of skills; it may also be qualitative, when the skill requirements differ from
the skills possessed by the existing labour force. Skill gaps can be
transformed into labour shortages and skill shortages can lead to unfilled
vacancies. Training offered by employers and changes in education and the
migration policies are some of the possible answers examined in the paper.
The second question has two
branches. To what extent is the above noted shift in employment driven by small
businesses? Is the noted transformation towards a knowledge based economy
accompanied by a shift to innovative and technology-based start ups or are big
corporations still considered most effective for generating and exploiting new
forms of knowledge? Answers here vary, especially between Europe and the
Finally, upon concluding,
the paper summarises the most important lessons learned through our study, for
those who have to navigate in the rough seas of a global labour market in times
of a knowledge-dominated economy.
Keywords: Labour market, Knowledge economy, Small
business, Skill shortage, Migration
1. Introduction
In the past thirty years a
huge shift has been noticed in the European structure of employment. The
booming manufacturing sector, traditional employer until the seventies, slowly
and gradually gave place to what many researchers call ‘knowledge
intensive services’ and the supplementary ‘all other
services’. The Organisation for Economic Co-operation and Development
(OECD) defines knowledge intensive services as business, high tech and
communication services, financial services and health and education services.
All other services include retail, hospitality, transport, public
administration and other community, social and personal services.
A survey covering the
thirty years period between 1978 and 2007, using data from the UK Office for
National Statistics and building on the above OECD definitions, demonstrates
that: In 1978 employees in manufacturing slightly exceeded those employed in
knowledge intensive services by approximately 28 to 26 percent. All other
services ranked first with a 35 percent. By 2007, though, just eleven percent
of employees worked in manufacturing while an approximate 45 percent worked in
knowledge intensive services and an approximate 38 percent in all other
services (Brinkley, 2008). Furthermore, significant changes and a rapid
increase in the numbers of enterprises occupation areas, as well as
employees’ professions and specialization sectors in a typical knowledge
intensive sector, such as Information and Communications Technologies (ICT) has
been observed and measured in both EU and
Within the European Union
(EU) it became clear, early enough, that this shift to the knowledge based
economy could not be fed by its own work force alone. The Lisbon Agenda (2000)
set the ambitious objective for the EU member states to become the
world’s most competitive, knowledge-based economy by the year
As a result, lately, many
EU member states launched the first daring steps of new, point-based migration
systems that will eventually replace the existing, old fashioned work permit
schemes in order to help their businesses recruit the skills needed from abroad
and thus transform their economies into a global hub of worldwide talents. But
the shift into the knowledge economy is also associated with high level
investments in human and organisational capital, which eventually lead to
higher levels of workplace innovation. The interaction between technological
change, workplace innovation and a highly skilled workforce has had notable
impact on the nature of work over the last twenty years.
There are two main
objectives of this paper. First, to take a close look at the labour market for
highly skilled workers in the emerging knowledge economy and to find out
whether there is a global labour market for knowledge workers; and if yes, what
it looks like. This is done in the following section. These workers, who are
most likely to be in direct global competition, fall in one of the following
two broad categories: researchers or highly skilled migrants, which are
examined in more detail in section three. The second objective of the paper is
to explore how much of the above noted shift in employment is driven by the
Small- and Medium-size Enterprises. Furthermore, to detect if the noted
transformation towards a knowledge based economy is accompanied with a shift to
innovative and technology-based start ups or whether big corporations are still
considered most effective for generating and exploiting new forms of knowledge.
Answers to the above two questions are provided in section four, while our
conclusions and some significant lessons learned are presented in the
paper’s concluding section.
2. What Is A Global Labour Market?
Under a narrow, economic
definition labour market is described as the locus in which workers compete for
jobs and employees compete for workers. From a similar viewpoint, labour force
can be defined as the number of people employed plus the number of unemployed
looking for a job. Under this perspective it is, indeed, difficult to conceive
how labour markets could ever become really global, with workers around the
globe competing with each other for the same jobs.
This could only happen if
we broaden the definition of labour market by introducing other dimensions
rather than just the geographical locus. Such components could very well
include professional occupations, skilled labour and immigration or import of
labour force. Let us start from a realistic observation: Since the early nineties,
economic reforms in countries like
But just across the line
stand the ‘optimists’ who focus on the demand side of the global
labour market and the needs of companies for highly skilled workers. They argue
that the increased demand of skilled labour in emerging economies like
Recent research has
demonstrated that technological change, apart from leading to workplace
innovations and highly skilled workforce, was one of the leading contributors
of increasing work intensification during the last twenty years. Computers
enabled workers to take more control over their work and facilitated
decentralisation of the decision making process; new technologies also allowed
managers to more readily monitor workers’ performance. As a result,
workers have substantially increased their speed and job efficiency and, at the
same time, share their knowledge more widely (Papoutsakis 2007 and 2006; Green,
2004; Rubery and Grimshaw, 2001). As more and more workers contribute with flexible
knowledge rather than a prescribed package of skills to the innovative
workplace, their jobs and roles tend to advance rapidly; this means that
knowledge workers need to remain vigilant and updated on the latest innovation,
intelligence and trends (Lang, 2001).
Bearing this in mind, in
the following section we shall examine global development and shall further
define highly skilled workers in order to better clarify the concept of the
global labour market.
3. Skill Shortages In The
Knowledge-Dominated Economy
Labour specialists use the
term ‘skills shortage’ or ‘skills gap’ in order to
describe inadequacy within a labour market. This gap can be quantitative, when
there is an excess demand for workers with a particular set of skills; it may
also be qualitative, when the skill requirements differ from the skills
possessed by the existing labour force. Skill gaps can be transformed into
labour shortages and skill shortages can lead to unfilled vacancies. Skill and
labour shortages vary considerably across the EU. This is due to the variations
of the overall growth performance of each member state economy and is also
related to the quality of education, the immigration policies and the
geographical position of each member state. Very often, the existing education
and vocational training systems fail to adapt, in time, to meet changing
demands.
Analysing data for
knowledge workers from the European Working Conditions Survey, Rudiger and
McVerry (2007) claim that less than half of
Scientists are faced with a
number of problems when it comes to the assessment of human capital in the
knowledge economy and the definition of the ‘knowledge workers’.
The terms knowledge workers or ‘highly skilled migrants’ are both
imperfect, as definitions tent to vary significantly. Usually, knowledge
workers are defined as those occupying the top three Standard Occupational
Classifications (SOC) categories: managers and senior
officials, professionals, and associate professionals; or as graduates and
post-graduates. But, no doubt, it is problematic to consider every manager as a
knowledge worker. Knowledge workers are, thus, contrasted against the remaining
six SOC categories: administrative and secretarial, skilled traders, personal
services, sales and customer services, process, plant and machine operatives
and elementary occupations (OECD, 2006).
In a study aiming to
exploit
The OECD, in its Science and Technology Scoreboard
(2007), gives a narrower definition of human capital in the knowledge economy
as ‘human capital in science and technology’. With regard to highly
skilled knowledge workers it only focuses on ‘researchers’, defined
as “professionals engaged in the conception and creation of new
knowledge, products, processes, methods and systems and directly involved in
the management of projects” (OECD, 2006). An even more narrow definition
is the one limiting researchers to only those possessing a doctorate degree.
The situation is even worse
when it comes to the ‘highly skilled migrants’, where lack of an
internationally accepted definition is noted. Migrants are, by nature or their
status, difficult to define by occupational standards and their educational
qualifications are not compatible. The World Bank uses the broad term
‘skilled worker’ for those with some secondary or vocational
education. The OECD (2007) defines ‘highly skilled migrants’ as “having
completed education at the third level in science and technology related
subjects” or as “not formally qualified but employed in a science
and technology occupation where those qualifications are normally
required”. As it appears, the definition of a ‘highly skilled
migrant’ is much broader than that of the ‘knowledge worker’.
The lack of clear, common and internationally accepted definitions makes it
difficult to understand the concept of a global labour market and the various
ways that skill shortages are successfully addressed within it.
4. Small And Large Firms In The Knowledge
Economy
It is also true that there
is no internationally agreed standard definition of what constitutes a business
or whether a business is small, medium or large. Commonly accepted standards
vary between
David Birch, the renowned
economist and MIT business demographer, was the first who showed the importance
of small firms in creating jobs and helped give recognition and respectability
to the field of small business research. Birch paved his reputation with some
remarkable iconoclastic analyses in the mid-1970s. In his well-cited 1979 book,
The Job Generation Process, Birch
classified the
More recently, as reported
at the Advocacy’s 25th Anniversary Symposium (2001), Birch
compared today’s shift towards a knowledge-dominated economy to what
happened 200 years ago, with the Industrial Revolution in the years 1810-1820.
He believes that in the current revolution, the raw material is not steel or
rail lines, but knowledge and brainpower. And it is not just the high tech
businesses that propel most of the growth; it is the businesses that make
efficient use of knowledge, including the tools of technology. As part of this
shift, certain knowledge-based gazelles, benefiting from a wide range of new
technologies, products, processes and services have successfully transformed
into gorillas. Microsoft, Intel and Dell are some examples of companies founded
twenty five years ago and are now recognised as world class companies in their
particular sector.
Eurostat, the statistical
arm of the EU, in an effort to promote harmonization among the EU member
states, defines a small business as employing less than 50; medium as employing
between 50 and less than 250; and large as employing 250 or more employees. It
also includes a ‘micro’ firm category of between one and nine
employees. In Europe, the EU administration has also introduced the term
‘small- to medium-sized enterprise’ (SME) which is used differently
to the way the term ‘small business’ is used in the
Early studies in the EU,
indicated that probably too much was being expected from innovative and
technology-based start ups in terms of their overall contribution to employment
growth (Tether, 1999). A recent study on
Gazelles may behave
differently in the
The answers to the
questions of how much of the employment growth and the shift from employment in
traditional manufacturing to knowledge based services were driven by SMEs and
how much by large firms differ in EU. Brinkley (2009), summarising recent
Ĝ
SMEs are major providers of jobs in the knowledge based industries and
services as they provide around half of all jobs in the industrial sector and
more than half in services.
Ĝ
In 2006, SMEs accounted for 51 per cent of total employment in the
knowledge industries and about 37 per cent of all employees who worked in SMEs
worked in knowledge based industries.
Ĝ
Financial services and telecommunications are the two ‘big
firm’ sectors, within the knowledge based service industries, where
employment is heavily (between 80 and 90 per cent) concentrated in large
enterprises.
In contrast, business
services are dominated by SMEs offering an approximate 60 per cent of total
employment.
When Brinkley looks at the
number of people working in SMEs and large firms, he notices that employment
has grown for both, but the number of people working in large firms has increased
significantly faster than those working in SMEs.
There is also strong
evidence that knowledge-dominated economies tend to encourage the formation of
collaborative networks both among SMEs and between small and large firms.
Cooperation among SMEs and between small and large firms has provided a further
stimulus to employment and enterprise growth.
5. Conclusions And Lessons Learned
The foregone analysis has
demonstrated that employment within the developed world has largely shifted
from a manufacturing base to a service base including, at the higher end,
knowledge intensive services. In today’s global labour market,
occupations rely more heavily on knowledge intensity, creation and innovation
rather than on routine physical inputs or natural resources as in the past.
While there is no official definition of this new ‘knowledge
economy’ it is generally agreed that this sift is, at least partly, due
to a combination of general purpose technologies with workers’
intellectual and knowledge assets to create value within the organisation.
Nonetheless, a key
component of the knowledge-dominated economy is the effective deployment of a
highly skilled workforce, which can be either locally available or imported in
today’s global labour market conditions. The knowledge economy implies a
rising demand and premium for skilled rather than unskilled labour. It also
suggests a sharper dichotomy in today’s labour force in comparison to the
past, with significant increase of highly skilled knowledge workers as against
less skilled non-knowledge workers. Migrants also contribute in filling this
labour gap but their contribution is not yet equal. The majority of the less
skilled non-knowledge workers are found in the southern EU member states, while
most of the highly skilled knowledge workers are met in the north. Nonetheless,
there are strong indications that there will soon be a balance, with the
northern EU member states expected to be the pioneers.
As the supply of skilled
workers, local or migrants, increases and as employers demand higher levels of
knowledge and innovation output in an increasingly global and competitive
market, we might expect to see an increased demand of human capital across the
global labour market. This will also make available to the skilled migrants,
various components of job quality including skill utilisation, autonomy,
perceptions of job security, support and opportunities for advancement,
currently available only to the local workforce.
Finally, as the ubiquity of
new technology allows knowledge workers to work alone or in overseas
collaboration around the clock, they must be adaptable and able to apply their
skills flexibly to new situations. At the same time, employing organisations
should take measures so that this interaction among technological change,
workplace innovation and the highly skilled workforce may create friendlier and
healthier working environments for their employees.
6. References
Advocacy’s 25th
Anniversary Symposium (2001), “Small Business and the Knowledge-Based
Economy”, US Small Business Administration, November 2001
Birch, D.L. (1979),
“The Job Generation Process”, MIT Programme on Neighborhood and Regional Change,
Brinkley,
Brinkley, I. (2009)
“Knowledge Economy and the
Commission President José
Manuel Barroso (2007) “Making Europe more attractive to highly skilled
migrants and increasing the protection of lawfully residing and working
migrants”, Press release, IP/07/1575, Brussels, 23 October 2007
EU Report (2004) From the
High Level Group chaired by Wim Kok, “Facing the Challenge: The Lisbon
strategy for growth and employment”, November 2004
Freeman, R. (2006)
“The Great Doubling: The Challenge of the New Global Labour
Market”,
Green, F. (2004) “Why
has work effort become more intense?”, Industrial Relations, Volume 43,
Issue 4, pp. 709-741
Kostoglou, V. and
Paparrizos, K. (2003) “Occupation Areas, Specialization sectors, and professions in ICT: An overall analysis and selection methodology”,
Proceedings of the 9th
Pan-Hellenic Conference of the Greek Computer Society, pp. 310-321
Kostoglou, V. and Paloukis,
S (2007) “Graduates’ employment in European Union”,
Proceedings of the 5th International Conference “New Horizons
in Industry, Business and Education” (NHIBE 2007), pp. 103-107
Lang, J.C. (2001)
“Managing in knowledge-based competition”, Journal of
Organisational Change Management, Volume 14, Issue 6, pp. 539-553
OECD (2002) International Mobility of the Highly Skilled
OECD (2006) Science, Technology and Industry Outlook
2006
OECD (2007) Science and Technology Scoreboard
Owens, G. (2004)
“Where are the Big Gorillas? High Technology Entrepreneurship in the
Papoutsakis, H. (2006)
“How Far Can Information Systems Support Inter-firm
Collaboration?”, Journal of Knowledge Management Practice, Vol. 7, Nr. 3,
September 2006
Papoutsakis, H. (2007)
“Sharing Knowledge in the Organization: a Retrospective Analysis and an
Empirical Study”, Electronic Journal of Knowledge Management, Vol. 5,
Issue 2, May 2007 (Special Issue ICICKM 2006) pp. 231-243.
Parker, S., Storey, D. and
van Witteloostuijn, A. (2005) “What happen to Gazelles: The Importance of
Dynamic Management Strategies”,
Rubery, J. and Grimshaw, D.
(2001) “ICTs and employment: The problem of job quality”,
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Rudiger, K. and McVerry, A.
(2007) “Exploiting Europe’s Knowledge Potential: ‘Good
work’ or ‘could do better’ – Knowledge work and
knowledge workers in
Stan, E. and Garnsey, E.
(2006) “Entrepreneurship and the Knowledge Economy,
Tether, B. (1999) “Small
Firms and Employment Creation in
Wooldridge, A. (2006)
“The battle for brainpower”, Survey: Talent, The Economist, October
5th, 2006
Meet the Author:
Prof. Haris Papoutsakis (
Prof.
Haris Papoutsakis, Electrical
Engineering Department, School of Applied Technology, Technological Education Institute (TEI) of
Crete,
Contact: Prof. Haris Papoutsakis, 9,