Global Competitiveness:part 4

Fifth pillar: Higher education and training

        Quality higher education and training is crucial for

economies that want to move up the value chain

beyond simple production processes and products.

In particular, today’s globalizing economy requires countries

to nurture pools of well-educated workers who are able

to adapt rapidly to their changing environment and the

evolving needs of the production system. 

This pillar measures secondary and tertiary enrollment rates as well

as the quality of education as evaluated by the business

community.

 The extent of staff training is also taken into

consideration because of the importance of vocational

and continuous on-the-job training—which is neglected

in many economies—for ensuring a constant upgrading

of workers’ skills.

Sixth pillar: Goods market efficiency

Countries with efficient goods markets are well positioned

to produce the right mix of products and services given

their particular supply-and-demand conditions, as well

as to ensure that these goods can be most effectively

traded in the economy.

 Healthy market competition,

both domestic and foreign, is important in driving market

efficiency and thus business productivity, by ensuring

that the most efficient firms, 

producing goods demanded by the market, are those that thrive.

 The best possible environment for the exchange of goods requires a minimum

of impediments to business activity through government

intervention.

 For example, competitiveness is

hindered by distortionary or burdensome taxes and by

restrictive and discriminatory rules on foreign direct

investment (FDI)—limiting foreign ownership—as well

as on international trade.

 The recent economic crisis has

highlighted the degree of interdependence of economies

worldwide and the degree to which growth depends on

open markets.

 Protectionist measures are counterproductive

as they reduce aggregate economic activity.

Market efficiency also depends on demand conditions

such as customer orientation and buyer sophistication

For cultural or historical reasons, customers may be 7

more demanding in some countries than in others. 

This can create an important competitive advantage, as it

forces companies to be more innovative and customer

oriented and thus imposes the discipline necessary for

efficiency to be achieved in the market.

Seventh pillar: Labor market efficiency

The efficiency and flexibility of the labor market are critical

for ensuring that workers are allocated to their most

efficient use in the economy and provided with incentives

to give their best effort in their jobs.

 Labor markets must

therefore have the flexibility to shift workers from one

economic activity to another rapidly and at low cost, and

to allow for wage fluctuations without much social disruption.

The importance of the latter has been dramatically

highlighted by the difficulties countries with particularly

rigid labor markets—such as Spain—have encountered

in recovering from the recent major economic

downturn.

Efficient labor markets must also ensure a clear relationship

between worker incentives and their efforts, as

well as equity in the business environment between

women and men.

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