01 Feb 2006

Employment and Competitiveness: The Key Role of Education

Daniel Gros

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More than half way into the decade, it is clear that the EU will fall short of reaching its ambitious goal to make the EU the ‘most competitive economy’ by 2010. This contribution looks at an aspect that is often forgotten: namely the link between skills and employment, a central element in the Lisbon goal. It shows that the key problem of Europe in terms of employment is not so much the structure of its labour markets, but the insufficient skill levels of its population. The paper finds that investing more in improving the skills of the EU’s population would have, inter alia, a direct impact on the employment rate. Some progress is happening on this front as a result of a general increase in the investment in schooling that has taken place over the last decades. However, this ongoing ‘automatic’ improvement in skill levels is proceeding very slowly. There has been virtually no acceleration since 2000 and almost none of the more specific benchmarks set in the context of the Lisbon agenda is likely to be reached by the end of this decade.