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:: 10 the future of the Knowledge Society
Some implications of human and social capital building
10 the future of the Knowledge Society    9/23/2003 9:37:34 AM

Horizontal and international issues
Knowledge Society

Some implications of human and social capital building in the knowledge society for employment and social inclusion policies.

Introduction
"Today, in the EU, we live in the knowledge society". Many, probably most, people would agree with this statement but would mean a number of different things when they say it. "Today's knowledge society needs to be and is being taken into account in the formulation of EU employment and social policies." Again, many of those involved in policy making would tend to agree, but here as well, there would be big differences as to what exactly should be done.

The knowledge society affects individuals and the way in which individuals work and live. People need particular skills to work effectively, the workplace and other structures need to be properly organised to take the greatest advantage of the knowledge society. Human and social capital building is directly affected and policy makers need to consider how to ensure optimal investment takes place. The human and social capital aspects give rise to particular considerations for employment and social inclusion policies.

The first section of the paper will briefly describe some key features of the knowledge society. Sections two and three will look respectively at certain of the human and social capital aspects of the knowledge society. The fourth section will draw on these and point to possible avenues for future social policy bringing about more and better jobs and greater social cohesion.

1. The knowledge society
The concept of a knowledge society is not new. In 1945, F.A. Hayek wrote an article on "The Use of Knowledge in Society" which dealt with the importance of knowledge.

In 1957, Peter Drucker, who for many is perhaps the guru of the knowledge society, wrote : "productive work in today's society and economy is work that applies vision and concepts – work that is based on the mind rather than the hand."

But today's knowledge society is something slightly different, something more specific. It is the result of the economic and social transformation wrought by the introduction and large scale diffusion of information and communication technologies (ICTs) based on microprocessors (computer chips). Knowledge and information have become the foundation for the organisation and development of economic and social activity. ICTs have made the knowledge society what it is because of their ability to codify information. They enable knowledge to be processed or manipulated to meet a multitude of needs and be transmitted instantly all over the world. ICTs seem more pervasive than previous technological breakthroughs, in part due to the very rapid fall in real prices and in part due to their capabilities increasing at unparalleled rates. Their diffusion is a global phenomenon with globalisation of the economy both driving but also to a large extent being driven by ICTs. Global competition has been a key element in bringing prices down and developing new applications and is intensified by these very phenomena.

The production of ICTs and associated services became an important sector in its own right in the EU in the late 1990s but of course the economic significance is the use of ICTs throughout the economy, in both manufacturing and service sectors and also in agriculture and raw materials extraction and processing. Large increases in productivity are presumed to come from private and public investments in ICTs. Studies, largely using data from the USA, suggest national economic growth was increased by the widespread introduction of ICTs. There is quite some disagreement on just how much productivity at a national level was increased. One part of the controversy involved the so-called Solow Paradox, named after Nobel prize winner Prof. Robert Solow, who did work that failed to find evidence of ICTs increasing growth. As he put it, "you can see the computer age everywhere these days, except in the productivity statistics", but many economists would settle for something around 0.5% p.a of GDP growth in the USA in the latter part of the 1990s as coming from the investments in ICTs. The most optimistic believed the widespread uptake of ICTs had led the economy, again especially the US economy but also the EU if to a lesser degree, to see a permanent increase in productivity growth. They (and the stockmarkets?) believed that the 'natural' rate of growth had been increased by the 0.5% seen in the late 1990s. Today, most would tend to see ICTs as an essential component of business and administrative processes but not necessary a guarantee of higher productivity and thus standards of living. ICTs are necessary but not sufficient for productivity improvements. As Robert Solow said, "the computer age [is] everywhere these days".

The knowledge society holds the promise of increased productivity and wealth, as well as an increased quality of life, but for this to be realised substantial changes and adjustments need to be made. Some of these have already happened but if society is to make the most of the ICTs in economic and social terms further transitions and restructuring is bound to occur. Optimal use of ICTs means different forms of organisational structures as well as rather different skills within the workforce. Work itself is changing and may see a substantially different form. Labour markets are differently segmented between workers with voluntary mobility based on updated skills and workers who run the risk of involuntary (im)mobility due to outdated skills. Human capital building and social capital development are different in the knowledge society compared with the industrial society. EU employment and social policies need to be attuned to these new challenges.

2. Building human capital in the knowledge society
Human capital can be defined as the knowledge, skills, competencies and attributes embodied in individuals that facilitate the creation of economic, social and personal well-being. Human capital is closely linked to the quality of the worker and explains why one worker is more productive with the same capital equipment than another.

Human capital can be seen as the single vital input in the knowledge-based economy. High or higher levels of output depend on it above all other factors. Firms' or countries' competitiveness is determined by their human capital. Employment policy seeks to achieve more and better jobs. Both require workers to have greater levels of skills, especially if more jobs are to coincide with higher wages.

The widespread dissemination of ICTs means that an ability to work with them is becoming an increasing necessity. The knowledge society needs a substantial number of people with the knowhow and skills to build and develop the hardware and software which comprise the ICTs. In the EU this currently represents around 6 million people, just under 4% of total employment. A shortage of workers with the skills to make and improve the ICTs themselves will obviously slow down their most effective diffusion although the EU or another region can and does import a substantial part of technology.

The real significance of ICTs for human capital is not linked with the workers working in the ICT producing sector but that of an ever-increasing number of workers in the whole economy. Over 50% of all workers in the EU now use a computer for their job and there are fewer and fewer jobs where at least basic digital skills are not required. Digital skills are almost as essential as basic literacy to be employed today.

The knowledge society not only requires a facility to use ICTs but to adapt to new developments. Lifelong learning is essential. It is of course important that schools and universities provide a sound basis for everyone but the companies providing employment increasingly need to devote an important part of their resources to ensure that employees are able to work with recent technological or organisational developments. This investment is today just as necessary as physical equipment. The increased rate of structural change and the greater tendency to change employment several times during the working life adds complications. Companies may be reluctant to invest in human capital if the human capital in question leaves for another job shortly afterwards. Just as formal education is seen as a social benefit, which in most countries the state sees as its role to provide, training for employment might also need to be seen as a public good. Public/private partnerships might be an ideal vehicle to fund training.

As far as training in relation to ICT introduction is concerned, special attention has to be devoted to the "complementary measures": survey findings show that workers benefit, in terms of higher job quality, from measures such as training on new roles/tasks, significant organisational changes, appropriate technical training and from being consulted.

The knowledge society itself provides some of the tools to facilitate continuous or lifelong learning; e-Learning, be it on-line or with CD Roms, can be a major component of upskilling or adaptation to new tasks, technologies or techniques at work and in the wider society.

3. Social capital and the knowledge society
The social capital of a society is the networks or other arrangements which enable individuals, groups or communities to share norms, values and a mutual understanding and thus cooperate within or between these groups.

Perhaps the concept best known within the social capital aspects of the knowledge society is the "digital divide". The digital divide is the gap between those able to benefit from digital technologies (essentially ICTs) and those who are not. The concept is used both at an international/global level and within a country or region. It is used to distinguish advanced, richer countries where the internet and associated tools are exploited from those poorer, developing countries where it is not (it is reported than almost 1 billion people have never used a telephone), and within countries or regions to point to individuals or groups that do not benefit or are indeed made worse off by the knowledge society. e-Inclusion is one name for policy measures designed to ensure that those who are potentially or actually socially excluded are brought and fixed firmly into the knowledge society. The ICTs themselves can be an opportunity to include disadvantaged people but can also exacerbate divisions in society. The housebound can escape some of their isolation through e-mail giving low cost access to millions but the blind may be even more cut off from an increasingly visual society.

The knowledge society, whilst wealthier because more productive, puts more stress and pressure on people. Working hours are not necessarily longer but do seem more intensive. Those who can cope, thrive; those who can't, don't. If more equality of outcomes is desired, the knowledge society may need more and not less government intervention. Better safety nets probably have to coincide with the widespread use of the internet. As a series of American government reports put it, action is needed to prevent "falling through the net". These reports concentrated on the access of people to telephones, computers and the internet. These are indeed basic tools of the knowledge society but social exclusion is much more than simply lack of access. One can not oblige all people to use, let alone own, a computer. One can provide public internet access points which, in theory, allow all to use computers but there will still be a big digital divide as the technology-shy, minorities, many elderly people and the less educated don't use and/or won't use them.

Governments are increasingly putting their services on the internet. e-Government is being actively promoted by the Commission in the eEurope 2005 Action Plan. Efficiency is certainly increased for governments and many citizens find it quicker and easier to deal with government departments over the internet but many of the socially disadvantaged who most need government assistance are the very ones who cannot do so. Many governments have committed themselves to maintaining traditional means of contact but will 'they' pay for the costs of dual systems? And even if they do, will those wanting face to face meetings be further pushed to the margins of the knowledge society? Could the very systems put in place by governments to fight social exclusion create their own excluded groups?

The knowledge society is characterised by change. Not only do the old structures associated with the industrial economy need to be transformed but the newer structures also rapidly become outdated. The knowledge economy needs to be more flexible as it reacts to faster technological development. But a more flexible economy may also be a less secure economy. Workers simply fearing the need to retrain or, more worrying, the need to find a new employer, may well trust their current employers less. Social capital is at risk in an over-flexible economy. Social dialogue either directly between employers and workers (capital and labour) or in a tripartite arrangement involving the public authorities can help counteract some of the lack of trust. Sectoral social dialogues have the advantage of being closer to the issues needing discussion but in the knowledge society national and/or interprofessional social dialogue may be more effective or appropriate as the distinctions between sectors blur and sectors change so rapidly.

ICTs have an impact on social relations. If on one hand they can ease communication between people, on the other hand in the US it has been observed that the more time people spend using the Internet the more they lose contact with their social environment (up to 15 percent of people spending more than 10 hours/week on the Internet report a decrease in social activities). Policies have to take this aspect into consideration, to tap the opportunities for higher cohesion and social networks.

In this context, other aspects of ICTs, e.g. telework / e-work, have also to be addressed, as they can positively affect the quality of life and jobs. Though the risks of e-work are not to be underestimated, the benefits are evident and there is a consistent number of "potential teleworkes" (26% of EU workers would be interested in trying telework).

4. Possible employment and social policy developments
The institutional framework of EU labour markets is already being reshaped in order to combine employability and adaptability with the basic conditions of security and citizenship. Labour market services are more focused on active employment policies, social protection systems on activating social inclusion policies and industrial relations and the social dialogue on negotiating new trade-offs between flexibility and security. The reshaping should continue and be reinforced to ensure the knowledge society improves the situation for everyone.

The analysis of some of the human and social capital aspects of the knowledge society suggests a number of potential policy initiatives within employment and social policy. Human capital has long been an important factor but the knowledge-based economy is ever more dependent on it. Policies to increase the quantity and the quality of employment must give a high priority to ensuring that the human capital is of the highest grade. In concrete terms, human capital building, producing the most productive human capital, requires a workforce that is mentally flexible and receptive to new technologies and to the corresponding organizational changes. Such capital building requires Life Long Learning. The foundations laid in school are of course important but learning and training should be a continuous process in the knowledge society. Firms, and indeed the social partners, should be encouraged to organise and fund Lifelong Learning but to the extent that it is a public good the public authorities should consider financing part of the activities. The market alone, unable to capture the benefits, will not lead to optimal amounts invested. The European Employment Strategy could envisage more explicit links with educational initiatives to ensure a better coherence and emphasis for Lifelong Learning.

The EU structural funds and especially the European Social Fund (ESF) currently finance a substantial number of actions and projects to enhance human capital. Indeed, the entire ESF can be considered as investing in human (and social) capital. Given its importance in the knowledge society, future structural initiatives, both via the Regional or Cohesion Funds or via other instruments such as loans from the European Investbank Bank, could be even more focussed and linked with human capital formation e.g. financing school building and eLearning infrastructures. The R&D Framework Programme could also look with particular attention to human and social capital building projects.

The ESF already sees the knowledge society as one of its horizontal themes. It currently focuses on providing people with appropriate work skills as well as developing their social interaction skills thereby improving their self confidence and adaptability in the job market place. This is vital in the knowledge society, a society where adaptability and receptiveness to new ways of doing things and new technologies is of key importance. The ESF targets those people currently excluded or at risk of exclusion from employment. These groups will alter as the knowledge based economy expands and future ESF programmes would be well advised to adapt to these changes. Digital skills will remain a key skill to obtain, retain and improve the quality of employment but the ability to work with more autonomy and more diverse tasks have become even more vital. These skills also need to be taught. Innovation is a key aspect of the knowledge society, all workers need to be innovative, ESF programmes could place increased stress on this, targeting not only the labour market but also the education system.

Social inclusion remains important in the knowledge society, perhaps even more so with the faster pace of change and increased risks of being left behind or left out. eInclusion policies should be pursued to reinforce social capital. Last year's Council resolution entitled "eInclusion – Exploiting the opportunities of the Information Society for social inclusion" called on the Commission "to take fully into account […] e-Inclusion with a view to further developments of the social inclusion strategy…" and "to monitor and analyse progress in the effective coordination of eInclusion policies within the framework of the employment and social inclusion strategies, and to report on it in the Joint Employment Report and in the synthesis report on combatting social exclusion and poverty".

One role of the social partners to increase dialogue to overcome the risk of increased mistrust has already been alluded to. The Commission could explicitly promote this aspect of social dialogue. The changing structure of work organisation with more flexibility, including distance/teleworking, will change the way trade unions can and do represent workers. The same technology which can lead to much more dispersed workforces can also enable trade unions to keep in closer, more personal, touch with members or potential members. Virtual trade unions have already been set up in Australia. The Commission could encourage unions to make the fullest use of ICTs to ensure more effective representation and strengthened dialogue.

The above specific policy initiatives within the European Employment Strategy, ESF programmes, social inclusion process and social dialogue all aim to build human and social capital. These and other policies are necessary to ensure that the knowledge society does bring more and better jobs and greater social cohesion in the EU.



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