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25.10.06

Germany and Italy fail to invest in their future

Thanks to the The Intangible Economy I stumbled across a very interesting study released by the Lisbon Council.

The author of the study, Peer Ederer, director of the Human Capital Project,

predicts major challenges for key European countries — such as Germany and Italy — that do too little to invest in and develop their human capital. If current trends are not reversed, the study says citizens of Sweden and Ireland (which invest heavily in their human capital) could enjoy a living standard up to twice as high as citizens of Germany and Italy — a trend which would turn the traditional economic hierarchy of Europe on its head.

Austria is ranked fifth overall (doing well on human capital endowment, doing ok on human capital productivity/utilization, not so well on human capital demography).

A more detailed overview of the survey can be found in The Economist’s Charlemagne column.

Quotes from the report that reveal huge differences regarding this topic within the EU:

- The birth rate for France is comparatively high at 1.89 births per woman. In 2030, France’s population will have grown by 8.1%. In that year there will be 753,000 twenty year olds preparing to enter the workforce, and 807,000 sixty year olds preparing to leave it. The picture for Italy is drastically different. In 2030, there will be only 551,000 twenty year olds and 936,000 sixty year olds — a gap of almost 400,000 young people missing in the labour force.

- While employment in the “core workforce” between ages 30 and 50 is high across Europe — with the majority of countries in the 75-85% range — large differences are noticeable at the edges. Sweden keeps 60% of its 60 to 64 year olds employed, while Austria and Belgium manage only 15%. Similarly, Denmark and the UK have around 70% of their 20 to 24 year olds employed, while France and Italy manage less than 50% (the European average is around 55%).

- … This leaves immigration as the most likely solution — and on a scale that is hard to imagine today, both in terms of the supply of suitable immigrants and the openness required from the host country. By 2030, can Germans or Italians learn to live in a society where every other 20-year-old is a foreigner?

I fully support the view of both postings, that the indicators and measures should not be seen as carved out of stone, but rather an(other) attempt to highlight the importance of intellectual capital for nations. At a conference last autumn in Ferrara, representatives from the European Commission expressed their view that no new approaches should be developed, but rather one integrated methodolgy agreed upon. However, I suppose it is too early for such a step, since the existing models are obviously not fulfilling the requirements.

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