World Youth Skills Day celebrated each year on 15 July recognizes the importance and potential of youth as catalysts of change, and commits to providing them with the skills and opportunities to enhance their productivity and drive innovation that helps develop a sustainable economy and a prosperous nation.
Rapid technological advancements and shifting labor market dynamics requires an agile workforce equipped with adaptable skill sets. This will necessitate policy- and decision-makers to introduce and implement strategies and plans designed to empower young nationals in the workforce with relevant skills and training that equip them to become more productive, grow professionally in their chosen fields, and contribute to the national economy.
Additionally, governments will have to prioritize skill development opportunities for young people who are currently not in education, employment or training through technological and vocational education and training (TVET) institutions, and centers that offer skills development programs. This will enable fresh graduates to hone their latent abilities and innovative skills so as to become more effective and productive components of the labor market.
But, in order to craft effective national policies that improve productivity, encourage innovation, and create an innovative young workforce, the relevant authorities will need to first understand what drives productivity gains, recognize the challenges that hinder productivity growth, and adopt factors that enhance productivity performance in the labor force to drive sustainable economic growth.
Improving productivity and encouraging innovation are two critical elements in the economic growth of a country. The intertwined relationship that exists between the two components — increased productivity creating resources to support innovation, which then drives further productivity gains — develops a virtuous cycle that fuels economic growth and competitiveness, as well as serves as a major contributor to higher living standards in an economy.
Positive relationship between labor productivity, innovation, and the economic well-being of citizens emphasizes the need for governments to design policies and processes that enhance output and encourage innovation in the labor force. This is especially pertinent in countries such as Kuwait with its relatively small national cadre and overwhelming reliance in the labor market on an expatriate workforce.
However, in the 2022 edition of the annual Global Innovation Index published by the United Nations specialized agency, World Intellectual Property Organization, Kuwait ranked 62nd out of 132 nations in terms of the capacity of the workforce for creating and implementing innovation. Additionally, an analysis of a recent data survey conducted with over 250 business leaders of small, medium and large firms in Kuwait, revealed the weak productivity in the economy.
Poor ranking on the global innovation index along with findings from the productivity study should be a serious cause of concern for the authorities. An innovative and productive labor force is pivotal to Kuwait’s plans to chart a new course towards a more sustainable model of development. The policy-oriented study on productivity, funded by the Kuwait Foundation for Advancement of Science (KFAS) and the Kuwait Institute for Scientific Research (KISR), also revealed several other structural and economic anomalies that need urgent addressing.
The survey, which was designed by the Techno-Economics Division at KISR and conducted in 2020, was critically analyzed by a team of researchers at KISR. A significant incongruity revealed by the study was that while wages have been growing at an annual average rate of 4.1 percent, the corresponding growth rate of labor productivity has been only around half, at 2.1 percent. Economic theory underlines that productivity needs to grow at rates equivalent to those of wage growth, or higher, to ensure sustainable economic growth.
The study findings that this is not happening in Kuwait points to major structural weaknesses in the labor market, including the high wages paid to nationals in the public sector. In addition, annual wage increments, that are far higher than yearly inflation rates, exacerbate wage disparities in the market. If wages are not linked to labor productivity, then less resources are available to reinvest in promoting dynamic growth, which then negatively impacts future employment growth.
Pointing out that productivity is critical to the long-term sustainability and prosperity of the economy and the welfare of its citizens, the study calls for implementing well designed and pertinent policy programs that enhance productivity, foster research and development (R&D), leverage innovative technologies, and encourage the adoption and diffusion of innovation throughout the economy, to ensure the country’s sustainable development and prosperity.
The new policy actions should also entail major revamping of existing labor market skills through carefully designed upskilling programs that promote productivity, and are adaptable for a future workplace of interconnected and smart automation. Concomitantly, there is a need to scrap the current seniority-based pay system with a more dynamic model that is based on productivity and creativity merits.
Labor productivity, as defined by the International Labor Organization (ILO), is the total volume of output — measured in terms of Gross Domestic Product (GDP) produced, per unit of labor — measured by the number of employed persons or hours worked, during a given time reference period. The productivity indicator provides a broad picture about the efficiency and quality of human capital in the production process of an economy.
According to the ILO index on global productivity in 2021, Kuwait with a GDP per hour worked of $37, had a lower productivity than neighboring Gulf Cooperation Council states, with the exception of Oman which had a productivity measure of $31. The GCC topper in productivity was found to be Qatar with $53 per hour, followed by Saudi Arabia at $48, the UAE at $43, and Bahrain with $40 in productivity.
Productivity measurements are often criticized for failing to adequately capture changes in technical advances, and tend to be skewed, as in the case of GCC states where the dominance of hydrocarbon revenues in GDP, and their relatively small populations distort productivity figures. Nevertheless, the index is a reference guide that highlights the productivity gains that can be achieved, especially in comparison to top scoring countries such as Luxembourg, which topped the 2021 index with a productivity of $137 per hour.
Ratios and comparisons aside, the need for job training and upskilling youth is increasingly evident in Kuwait, especially now, as the world of work rapidly adopts new technologies and smart automation that transform jobs and industries. The dearth of job-oriented skill sets in the national cadre have long been a festering cause of concern to employers, as well as to policymakers in Kuwait.
Among the causes for the deficiency in relevant job capabilities is an education system that largely delivers theoretical knowledge, while failing to equip graduates with practical skills needed for current and future needs of a changing labor market. The Public Authority for Applied Education and Training has been making valiant efforts since the 1980s to provide post-school technology and vocational training through generic and specialized skills development programs.
Despite these efforts, the capabilities that youth acquire are often not in tandem with the requirements of a rapidly evolving world of work. It is imperative for youth to be prepared with the skills that employers are looking for today, as well as be adaptive to acquiring skill sets for potential new jobs in a future labor market.Another option would be for public sector employers to provide in-house or external job training programs that allow new young recruits to acquire the specific skills they need to succeed in their line of work.
However, the low priority accorded to productivity in the public sector by concerned officials, and insufficient funds to invest in appropriate job training and upskilling programs, as well as indifference among many employed nationals to gain new skills, have all contributed to a public sector that is known for its low productivity and high inefficiency.
Attempts at enticing the private sector to hire more nationals have met with the lukewarm response from businesses. Employers in the private sector are reluctant to hire young citizens, let alone train and upskill them, as many of them lack the skills required for the jobs assigned to them. Moreover, young nationals often have no interest in acquiring new capabilities through on-site training programs. Businesses also complain that many nationals tend to quit jobs at the slightest pretext without any regard for time and expenses incurred to train them.
These systemic shortcomings have a negative impact on the country and its economic development, including a relatively high-level of unemployment among young nationals, even as there is a shortage of skilled workers in key sectors, such as in healthcare, engineering, science, information, communication and technological fields. In addition, the lack of a skilled national workforce also leads to a decline in the country’s competitiveness in attracting foreign investments.
The government can help address these deficiencies, starting with reforming the education system and realigning its focus on providing more practical knowledge, as well as invest in job training and upskilling programs through TVET institutions and centers that empower youngsters who are currently not in school, employed or in training, to gain requisite skill sets.
The authorities can also engage more proactively with the private sector by offering firms that hire, train and retain nationals, financial incentives and preferential treatment in public tenders, as well as tax breaks, subsidies or other forms of assistance. Promoting entrepreneurship among young capable Kuwaitis by providing financial support, resources and training, will also help stem rising unemployment.
Additionally, the government can initiate a national skills development strategy that identifies the skills that are currently in-demand, as well as potential jobs in the future labor market, and develop plans to ensure youth gain the required skills. The strategy should also provide for measuring labor market productivity on a regular basis so that it can track and tweak progress, and identify areas where further improvements are needed in future, as well as reward individuals based on their merits in productivity and innovation.
Moreover, the new skills strategy should also provide provisions to train and support businesses by offering incentives to adopt new technologies, systems and practices that enhance the firm’s overall productivity and innovation capabilities. This could include coordinating with local and international specialized agencies that provide knowledge, resources, tools and training in best practices and processes to develop productivity.
As Nobel Laureate economist Paul Krugman once noted, “Productivity isn’t everything, but in the long run it is almost everything”.
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