Innovation Systems: Education & Workforce Development

The single biggest determining factor of the success and future prosperity of a place is how well its population is educated (Barro, 2001; Clarke et al, 2013). That is because the more educated and skilled a workforce is, the more able it is to generate new ideas and technologies, bring them to the market and adapt and absorb new technologies. Thus the more educated a place is, the more capabilities it has to innovate, create new and higher-paid jobs and grow economic prosperity (Barro, 2001; Clarke et al, 2013).

As the global economy has shifted to knowledge-based industries, the jobs that pay the best go to those with the highest levels of education and skill.  Analysis of the geography of innovation has also shown us that innovation tends to be clustered in locations that offer diverse employment opportunities and are home to higher-skilled employees (Henry-Nickie & Sun, 2019).

Links to growth

The more educated and skilled a workforce is, the more able it is to generate new ideas and technologies, and adapt to and absorb innovations throughout the economy and society (Cortright, 2017; OECD, 2015). The UK’s City Observatory found that almost two-thirds of the variation in per capita income was directly related to the educational attainment of the population (Cortright, 2017). In particular, the OECD (2015) note that there are several ways that education and workforce development drive innovation and growth, including:

  • Skilled people generate knowledge and innovations;
  • Have more skills and capabilities to adopt and absorb innovations; 
  • Skills to attract other inputs into the innovation process including capital and partnerships;
  • better business acumen to commercialize innovations and establish and grow a firm; and  
  • The more skilled a user/consumer is of a product, the more able they are to provide valuable feedback and innovation on top of the initial innovation.

Education and training

Education and training are becoming ever more critical. Education equips young people with the knowledge, skills and dispositions they need to seek purposeful and meaningful employment. Education and skills training is essential to ensure that people can fully participate in an increasingly dynamic and complex world and contribute to innovations that improve society. In addition, the more educated a society is, the more able it is to be entrepreneurial and have the skills to establish high-growth, high performing firms (Bosma et al. 2011).

Higher education also unlocks opportunities for individuals that support workers to access more diverse employment across many occupations as opposed to being locked into a single sector and role.  At the same time, today’s employers want workers with multi-dimensional skill portfolios, including those with management,  STEM (science, technology, engineering and mathematics) and tech-specific skills (Henry-Nickie & Sun, 2019). 

Creating opportunity employment pipelines requires changes to not only schooling systems but also a ‘learning’ environment to ensure the attainment of education outcomes (Henry-Nickie & Sun, 2019).  In particular, Ra et al. (2019) suggest that  a learning society should prioritise three critical areas of education:

  1. widen the scope of learning opportunities beyond schools and throughout all stages of life, 
  2. prioritise learning in existing and new systems, and 
  3. integrate learning opportunities across stakeholders and sectors.

Skills for success

Firms want the most talented and brightest workers because they know their skill and expertise underpins the business’ competitive advantage and ability to generate profits. Building a competitive advantage is highly dependent on innovation, and innovative solutions are increasingly complex and based on scientific discovery and extensive R&D.  Accordingly, higher-skilled people are better able to generate new knowledge and support the growth and good management of the firm. 

Research shows high skilled workforces have a much greater impact on innovation but also job creation (What Works Centre for Local Economic Growth, 2019; Cortright, 2017; Delgado & Mills, 2018; Mc Andrew, 1995; Moretti, 2012). For example, the What Works Centre for Local Economic Growth, (2019) notes that in the UK “skilled jobs or jobs in high-tech industries generate larger multipliers” with an additional 1.9 – 2.5  jobs created in the non-tradable sector. In comparison, Moretti estimates that a technology job in the US can generate 4.9 other jobs.

Softer skills are also vital for innovation performance. These skills that relate to business acumen, entrepreneurialism and new ways of working, and are just as essential as formal education and training (Commonwealth of Australia, 2015; Lin et al., 2013). Differences in managerial quality explain as much as one-third of cross-country differences in productivity and firm profitability and survival rates are also associated with good management practices (Grover, 2019).

Structural change

The rise of technology is now having a real impact on the business models, supply chains and changing customer demands and behaviour, and are putting significant pressure on workforces and firms (PwC, 2015).  Megatrends such as automation, artificial intelligence, robotics, new business structures and globalisation are changing the nature of jobs and the skills employers require. As the impact of technology on the production of goods and services grows, it is estimated that around 44 per cent of Australian jobs will be affected (Hajkowicz et al., 2016). 

In fact, 75 per cent of the fastest-growing occupations are dependent on STEM skills (Commonwealth of Australia, 2015 and PwC, 2015). The Department of Jobs and Small Business (2019) research also shows that between “November 2013 and November 2018, employment in STEM occupations grew by 16.5 per cent, which is 1.6 times higher than the growth rate in non-STEM jobs”. As a result, there will be fewer and fewer jobs that do not require higher technical qualifications (Hajkowicz et al., 2016). 

Not only is this trend picking up speed, but Australia’s education and skill outcomes also are not keeping pace with many Asian economies that are investing heavily in their higher- workforce skills (Department of Jobs and Small Business, 2019; Hajkowicz et al., 2016; PwC, 2015).  A 2014 Australian Industry Group survey of workforce development needs, reported that almost 44 per cent of employers continue to experience difficulties recruiting STEM qualified technicians and trade workers. With the main barriers cited as a lack of relevant qualifications (36 per cent) and a lack of employable skills and work experience (34 per cent) (Commonwealth of Australia, 2015).

To remain competitive, to ensure access to high-quality education and lifelong training to ensure economic reliance and competitiveness into the future (Hajkowicz et al., 2016).  Innovation policy must not only address education gaps and skill shortages; but also promote STEM capabilities and softer skills such as entrepreneurial and management skills. 

Finally, rising demand for high skills combined with “a shrinking shelf life” of specific skills means that today’s workforce need to be encouraged and able to access continuous learning. Moreover, new modes of learning delivery and trends in the workplace demand self-directed learning for which learnability will be crucial (Ye, 2020).