The 2019 World Development Report (WDR) has made a strong case for governments, especially those of poor countries, to explore more tax avenues for investment in human capital. Published by the World Bank, WDR is devoted annually to a pertinent global development and economic challenge that needs attention by policymakers.
This year’s publication, titled ‘The Changing Nature of Work’, focuses on how the nature of work is changing because of advances in technology, which is bound to disrupt existing systems of working. This changing nature of work has the tendency to negatively impact some categories of workers, with possible consequences of unemployment.
According to the WDR 2019, the possible impact of technology on work calls for a new social contract between people and their governments: with the onus on governments to lead the transition and guard against rising inequality. WDR 2019 recommends significant investments in human capital throughout a person’s lifecycle, if governments are to curb rising inequality due to the technological divide.
“If workers are to stay competitive against machines they need to train or retool existing skills. This calls for a social protection system that includes a minimum basic level of protection for workers and citizens,” says WDR 2019.
It also recommends improved private sector policies to encourage start-up activity and competition to help poor countries become competitive in the digital age. “Governments also need to ensure that firms pay their fair share of taxes, in part to fund this new social contract”, it adds.
In Ghana corporate tax evasion remains a headache for governments. Perhaps due to our weak tax regime, some companies hardly pay taxes; while the few that pay underdeclare their tax obligations. What’s more, only workers in the formal sector pay taxes regularly – because not much has been done to rope-in the informal sector. In a country where most of the people already feel over-taxed, it remains to be seen what the Ghana government’s response to this report will be.
According to the Report, investing in human capital should be the priority of every government in a bid to make the most of this evolving economic opportunity. Three types of skills are increasingly important in labour markets: advanced cognitive skills such as complex problem-solving; socio behavioural skills such as teamwork; and skill combinations that are predictive of adaptability, such as reasoning and self-efficacy. Building these skills requires strong human capital foundations and lifelong learning, says the WDR.
It notes that the foundations of human capital created in early childhood, have become more important for future economic development. The World Bank’s new human capital index highlights the link between investments in health and education and the productivity of future workers. Yet governments in developing countries do not give priority to early childhood development, placing little emphasis on human capital outcomes of basic schooling.
The WDR 2019 found that in some developing countries, many workers remain in low-productivity employment, often in the informal sector, with little access to technology. The lack of skills in technology limits their chances of getting quality private sector jobs. This leaves talented youth with few opportunities for wage-employment. Linked to this is the fact that better adult learning opportunities enable those who have left school to re-skill according to changing labour market demands.
Besides, WDR 2019 recommends that investments in infrastructure are also needed, especially investments in affordable access to the Internet for people in developing countries who remain unconnected. Equally important are more investments in the road, port, and municipal infrastructure on which firms, governments, and individuals rely on to exploit technologies to their full potential.
WDR 2019 notes that the demand for less advanced skills that can be replaced by technology is declining. At the same time, the demand for advanced cognitive skills, socio-behavioural skills, and skill combinations associated with greater adaptability is rising. Not only is this trend evident in developed countries, it is also emerging in some developing countries.
For instance, in Bolivia the share of employment in high-skill occupations increased by 8 percentage points from 2000 to 2014. In Ethiopia, this increase was 13 percentage points. These changes are evident not only through new jobs replacing old jobs, but also through the changing skills profiles of existing jobs.
Sadly, in many developing countries numerous workers remain in low-productivity jobs because of inability to use technology. The Report notes that informality has remained high over the last two decades, despite improvements in the business regulatory environment. Indeed, the share of informal workers is as high as 90 percent in some emerging economies.
Overall, about two-thirds of the labor force in these economies is informal. In sub-Saharan Africa, informality remained on average at around 75 percent of total employment from 2000 to 2016. The Report notes that addressing informality and the absence of social protection for workers continues to be the most pressing concern for emerging economies.
WDR forecasts that migrating to the next wave of jobs requires a social protection intervention. The Report indicates that eight out of 10 people in developing countries like Ghana receive no social assistance, and six out of 10 work informally without insurance. This calls for new ways of protecting people, especially the vulnerable.
The report recommends that a societal minimum that provides some form of independent employment is one option. This model, which would include mandated and voluntary social insurance, has the potential of reaching many more people. Social protection can be strengthened by expanding overall coverage that prioritises the neediest people in society.
For instance, placing community health workers on government’s payroll is a step in the right direction. A universal basic income is another possibility – but it is untested and fiscally prohibitive for emerging economies. Further, enhanced social assistance and insurance systems could reduce the burden of risk management on labour regulation. For societies to benefit from the potential that technology offers, they would need a new social contract centred on larger investments in human capital and progressively provided universal social protection.
Another alternative is what the WDR called ‘Social inclusion’. Achieving social inclusion, it notes, requires fiscal space, and many developing countries lack the finances because of inadequate tax bases, large informal sectors, and inefficient administration. Some economic analysts have also been critical of the IMF’s over-bearing role in imposing conditionalities on poor countries.
For instance, in 2014 the past government turned to the IMF for “policy credibility”, based on which a net ban on employment into the public sector was imposed. This caused a backlog in the employment of essential workers like nurses and teachers. Kudos,m however, to the current government for once more weaning Ghana off IMF control to provide fiscal space. Since 2019 when Ghana went out of the IMF control, thousands of nurses and teachers who hitherto could not be employed have gained employment.
Taxes on luxuries
As stated earlier, WDR 2019 is urging governments to improve the collection of property taxes in urban municipalities or an increase of excise taxes on sugar, tobacco and other lifestyle commodities. WDR 219 forecasts that this could have direct health benefits for the economy. Levying indirect taxes, reforming subsidies, and reducing tax avoidance by global corporations – especially among the new platform companies – are other possible sources of financing.
Any analysis of technology and its impact on employment cannot be far-reaching without mentioning the role of Technical and Vocational Education and Training (TVET). This is why the Ghana government’s decision to fund and retool TVET institutions deserves commendation. That decision is prudent in as much as it is in tandem with the recommendations of WDR 2019.
All over the world, TVET has proved to be a catalyst for industrial development as well as for social progress. Without skilled technical manpower produced by the Polytechnics (now Technical Universities) and other TVET institutions, national development would virtually grind to a standstill (Budu-Smith, 2005, in Ansah & Ernest, 2013).
Basically, the purpose of technical and vocational education is to equip young men and women with the technical and professional skills needed for socio-economic development of the country (Ansah & Ernest, 2013). The emphasis is on equipping people either for employment by the private sector or for self-employment.
According to a Government White Paper on Education in 2004, TVET provides a mix of knowledge, career-focused and skills-based education that is needed to run the productive sectors of the economy. It is particularly meant to provide avenues of skills development for the youth who complete Junior and Senior High School and are desirous of acquiring technical skills for self- employment.
Nsiah-Gyabaah (2009) has argued that there has never been any argument over the link between technical education and development, since education helps to build national capacity to apply science and technology for social and economic problems. He further explained that education is not only a fundamental human right, it is also necessary for socio-economic development of any country. It is also a means to the fulfilment of an individual and the transfer of values from one generation to the next.
Technical and Vocational Education and Training, in particular, is a fundamental element in the development equation, because it allows individuals and societies to unlock their potentials, expand their horizons and adapt to changes in the dynamic world (ibid).
The government also recognises the strengthening of TVET as a means of developing the technical and skilled human resource base, which Ghana needs as a key strategy for rapid economic growth. In line with this realisation, one of the basic philosophies and s of Ghana’s development paradigm is to reform the Technical and Vocational Education system so as to make it more responsive to the national goals and aspirations.
Indeed, an improved TVET system will promote manufacturing, construction technology, agro-based industry and commerce. These require a policy framework and a radical shift in the design and delivery of the TVET curriculum at all levels (Afeti et al 2003 in Ansah and Ernest, 2013). Perhaps, this was what motivated the recent introduction of the Competency Based Training (CBT) in recent TVET education.
Arguably, the new policy direction on TVET education is modelled on the notion that it is the trained technical manpower, as in the advanced countries, which has spurred industrialisation and economic development. WDR 2019 is thus a reminder for policymakers that they must pay attention to technology and TVET for accelerated development.
Ansah, S.K. and Ernest, K. (2013). Technical and Vocational Education and Training in Ghana: A Tool for Skill Acquisition and Industrial Development. Journal of Education and Practice. Vol.4, No.16.
Nsiah-Gyabaah, K. (2009) The Missing Ingredients in Technical and Vocational Education in Meeting the Needs of Society and Promoting Socio-Economic Development in Ghana; Journal of Polytechnics in Ghana; Volume 3, No. 3
World Development Report (2019). “The Changing Nature of Work.” World Bank Group.
(***The writer is a Communications and Development Management Specialist, and a Social Justice Advocate. All views expressed in this article are my personal views and do not represent those of any organisation.
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