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Working Smarter: Driving Productivity Growth Through Skills - TPRP 08/06

Taking a broad view of skills

In this paper, “skills” is used as shorthand for the range of characteristics, knowledge and abilities that determine people’s capacity to add value in economic activity. There are many alternative labels, such as “embodied human capital[1]”, “competencies” or “capabilities”. The distinctive meanings of each term matter, but the important point here is that we need to take a broad view of skills.

The skills needed in a knowledge economy and in a healthy society are essentially the same

In a knowledge-based and globalising economy, distinctions between the skills needed for economic productivity and the broader benefits of education are largely false distinctions. The attributes of highly skilled and productive workers are essentially the same as those of confident, creative, culturally enriched good citizens.

Hierarchies in firms are becoming flatter, products and services are more customised, and employees at all levels need to act more autonomously. Innovation, creativity, entrepreneurship and initiative are required not only in the laboratory, design studio and boardroom but in all areas of a firm including the factory floor and the shop front. Entrepreneurs, managers, supervisors and “front-line” staff can all be involved in creating and applying new knowledge of value to firms. This includes creating or responding to new market opportunities, developing or adapting new technologies, or achieving efficiency gains in production processes.

The “soft” skills and attributes that enable good communication, problem solving, creativity, persistence and teamwork are critical aspects of the skills that matter for productivity growth.

Skill formation happens everywhere

The skills that contribute to productivity and economic growth are developed in many places. Formal education plays an important part, and is where governments have the most direct role and the most policy options. But the skill formation process begins with infancy (or sooner!), and parents, family and whanau, peers and communities play an important role. Both formal and informal on-the-job learning is critical to develop skills specific to the systems, routines and cultures of particular firms and professions.


  • [1]Human capital can be broadly defined as ‘the knowledge, skill, competencies and attributes embodied in individuals that facilitate the creation of personal, social and economic well-being” (OECD, 2001)
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