Horizontal and international issues
Some implications of human and social capital building in the knowledge
society for employment and social inclusion policies.
"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
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
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
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
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
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
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.
Visit also the conference about 'the future of the European Knowledge
Society' and the sections with books,
articles and links.