Technological Upgrading and Educational Composition of the Workforce

Abstract

In the global production system, there is a division of labour, based on a division of knowledge between lead (headquarter) firms and contract suppliers. While lead firms have, so far, largely been located in the Global North, some countries of the Global South have advanced along to progress from supplier to headquarter firms. This paper studies the manner in which the skill requirement or educational composition of the workforce changes in this process of technological advancement. The countries studied are China, India, and South Korea with the United States of America (USA) taken as the comparator country. The paper starts with the overall trajectory of technological upgrading in these countries. It then analyses the ways in which firm-level research & development (R&D), taken as the indicator and driver of firms’ technology development strategies, is related to changes in productivity and the educational composition of the workforce. The paper shows that there is a broad positive correlation between the three variables, R&D investment, labour productivity and educational composition of the workforce. It points to the need to advance this analysis to look at other workforce indicators, such as the gender composition, wages, the quality of employment and the nature of supervision. At a methodological level, the paper argues that it is necessary to look at the role of a firm within a global value chain (GVC) to understand the composition of its workforce.