European Union

Linda Wanklin

Cecilia Ivardi

Cecilia Ivardi and Linda Wanklin

In Political Economy, we have historically examined the policies through which countries acquire skills as a national effort. Traditionally, skill provision has been considered a matter occurring within well-defined national borders. Scholars have investigated how economic elites secure the necessary skills and workforce for industries that foster economic growth (see research on growth regimes, Hassel and Palier 2021). However, we argue that this approach is no longer possible. Production increasingly spans multiple countries and value chains grow more intricate. Therefore, skill provision has evolved into a transnational endeavor that transcends national borders. We show that the strategies for sourcing skills now foster international networks.

 

International pressures on national skill needs

Rising political-economic pressures have a transnational nature. First, the geography of production is changing. Previously, companies often outsourced only lower value-added processes to low-income countries. However, consumer demand is stagnating in saturated advanced economies and only increasing in middle-income economies and BRICS countries. Companies now find it more profitable to “produce where they sell”, meaning producing goods directly in the markets where demand is growing instead of outsourcing parts of the production (Herrigel et al. 2015; Fort 2017; Tintelnot et al. 2018). Second, advanced economies face demographic decline. They have a shrinking labor force, which is a particularly serious problem for the mid-skilled jobs that often used to be filled through vocational education and training (VET).

These pressures have implications for countries trying to secure adequate skills for their industries. On the one hand, companies that now produce abroad require a skilled workforce that can conduct operations abroad. On the other hand, at home, countries must grapple with the need for labor migration to fill in the shortages in their labor markets and focus on attracting the influx of workers that they need.

 

Transnational skill formation

We conduct a case study of Germany since the financial crisis. Germany has traditionally been seen as a nationally anchored “skills machine” (Culpepper and Finegold 2001). Its economic model is based on exports and reliant on the skills provided by the national skill formation system (Baccaro et al. 2022). Thanks to the widespread availability of specialized mid-skilled labor trained in the VET system, the German export-led growth model has achieved unparalleled competitiveness.

However, the trends described above threaten the symbiosis between economic growth and the skill formation system. On the one hand, German companies have increasingly started to “produce where they sell”, meaning that they retain only high-level engineering and design in Germany while conducting most production activities in foreign locations (Herrigel et al. 2017). At the same time, VET has become less popular among youth, which, combined with demographic decline, creates an urgent problem of skills shortages particularly in the middle of the skills distribution, such as in the care, hospitality, retail, crafts, and construction sectors.

 

1.      VET transfer

We argue that a coalition of state actors and employers has devised a transnational approach to source skills for the German economy.  This strategy rests on two pillars. First, the coalition has intensified the transfers of VET to foreign contexts. They are financed through official development assistance to the VET sector (which has increased to 400 million USD/year in 2022). Skill formation transfers involve adapting domestic VET concepts, institutions, and training models to foreign contexts at the firm, sector, or system level (Li & Pilz 2023).

These transfers occur through bilateral cooperation on VET reforms, sectoral incentives to implement German training standards, and firm-level initiatives, including the modernization of training processes and the issuing of internationally recognized certificates. Transfers are managed by the ministry responsible for the economy, which funds the German Chambers of Commerce Abroad (AHKs). AHKs provide services to facilitate VET transfers tailored to the needs of German firms and – increasingly/more recently – link training abroad to the migration of mid-skilled workers to Germany. Large German multinational companies benefit from this strategy – however, they are not its frontrunners because, as is well known in Political Economy, they possess the resources needed to train workers on-the-job and do not require a coordinated infrastructure of VET transfers.

 

2.      Labor migration

The second pillar is the liberalization of labor migration. The coalition has increasingly opened the migration policy regime to mid-skilled workers, which was traditionally hard to access for anyone who was not highly skilled (e.g., in the IT and medical sectors) to access. They eased entry for mid-skilled workers through measures such as the 2012 Recognition Act, the 2016 Western Balkan Regulation, and the 2020 and 2023 Skilled Worker Immigration Acts. These reforms have linked foreign-trained workers to the German labor market, including standardized VET recognition abroad, transnational skill partnerships, and information platforms to streamline migration processes.

Increasing openness of the regime is visible in a four-fold increase in labor migration from non-EU countries since 2010, rising from 85,000 in 2010 to 351,000 in 2022. The ministry responsible for development cooperation has driven these efforts, among others, by changing its approach to migration. Once skeptical of the brain drain that labor migration can cause in the countries of origin, it now acknowledges the importance of funding training abroad to meet domestic labor market needs. Domestic employers’ associations, concerned about skill shortages, have encouraged labor migration to align with their needs and have obtained more autonomy in the recognition of foreign diplomas. Although the rise of right-wing populism in Germany has mobilized negative sentiments toward all migrants, this concern primarily affects refugees and asylum seekers and, to a lesser extent, labor migrants, towards which public opinion has remained more neutral – therefore, public opinion has not hindered these efforts.

 

Conclusion

Scholars interested in understanding how countries pursue economic growth must consider the way in which they source skills. In an age of globalization of production structures and skill shortages, skill formation has become a profoundly transnational effort. The approach to skills sourcing activities should be comprehensive, and not merely confined to the study of initial VET, as is common in studies of skill formation systems. Initiatives that transfer education systems and efforts to manage labor migration are seamlessly integrated into skill provision strategies and should be considered part of our research focus.

 

We encourage further research in this field and caution against perceiving the countries where labor is sourced as passive policy-takers, since these countries often recognize some benefits of migration, including reduced youth unemployment and increased remittances (Wanklin 2025). In conclusion, even institutions traditionally anchored within a national context, such as skill formation, are influenced by transnational processes and interdependencies that undermine their connections to the national political economy and their contours become increasingly transnational.

 

Cecilia Ivardi is a PhD candidate in Political Economy at the University of St.Gallen. She is involved in the research funded by the Swiss Leading House GOVPET, focused on the governance of Vocational Education and Training (VET). Her research focuses on how advanced democracies adapt to societal transformations such as the rise of the knowledge economy and examines the policy areas of education, labor markets and migration. She is particularly interested in the ideas and discourses through which national elites steer adaptation processes. To study these, she uses a mixed-methods approach that combines insights from discourse network analysis (DNA) with case studies.

Linda Wanklin is doctoral researcher at the University of St. Gallen, where she is finalising her PhD in International Affairs and Political Economy. As a researcher within the Swiss Leading House GOVPET, she is primarily interested in the governance of skill formation systems and policy transfer initiatives in the field of vocational education and training (VET), aiming to explain their rise. Her research is predominantly theoretical. In addition to her doctoral studies, Linda works as a thematic expert for the Donor Committee for dual VET in development cooperation (DC dVET). Her research interests are, among others, driven by her previous experience working in the field of international development for various organisations, including the German Development Cooperation (GIZ), the International Labour Organization (ILO), and the German Federal Ministry for Economic Cooperation and Development (BMZ).

This blog post is based on their paper that won the 2023 Award for Excellent Paper from an Emerging Scholar from the ECPR Standing Group ‘Knowledge Politics and Policies’. The award was celebrated during the 2024 ECPR General Conference. This was the seventh time this prize was awarded. Previous winners are Anke Reinhardt, Adrienn Nyircsák, Alexander Mitterle, Justyna Bandola-Gill, Emma Sabzalieva, Olivier Provini and Que Anh Dang.

 

References

Baccaro, L., Blyth, M. and Pontusson, J. (2022) Diminishing Returns: The New Politics of Growth and Stagnation, Oxford, Oxford University Press.

Culpepper, P.D. and Finegold, D. (2001). The German Skills Machine: Sustaining Comparative Advantage in a Global Economy. New York, Bergham Books.

Fort, T. C. (2017) ‘Technology and production fragmentation: Domestic versus foreign sourcing’, The Review of Economic Studies, 84, 650–687.

Hassel, A. and Palier, B. (2021). Growth and Welfare in Advanced Capitalist Economies: How Have Growth Regimes Evolved?, Oxford, Oxford University Press.

Herrigel, G. (2015) ‘Globalization and the German industrial production model’, Journal for Labour Market Research, 48, 133–149.

Herrigel, G., Voskamp, U. and Wittke, V. (2017) ‘Einleitung: Globale Qualitätsproduktion – Annäherung an ein neues Muster transnationaler Produktion’. In Herrigel, G., Voskamp, U. and Wittke, V. (eds) Globale Qualitätsproduktion Transnationale Produktionssysteme in der Automobilzulieferindustrie und im Maschinenbau, Frankfurt am Main, Campus.

Li, J. and Pilz, M. (2023) ‘International transfer of vocational education and training: A literature review’, Journal of Vocational Education & Training, 75, 185–218.

The post Growing through skills: The integration of transnational dimensions into growth regimes appeared first on Ideas on Europe.

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