Analysis of Business EnvironmentQuestion one: Discuss the evidence for the link between the acquisition of skills and the performance of the economyThe issue of how skills levels contribute to economic development or productivity in a country has been a very contentious one. Most people believe or argue that skills acquisition is the baseline of economic development. The UK government has also been on the fore front in stressing the purpose of training and skills development as an avenue towards increasing productivity performance across the entire economic sectors, (Bowen et al. 2003, pp. 376).
This first part of this paper explores inwardly the impacts of skills on a country’s productivity. The association between skills and productivity levels is a positive one. The treasury has since the year 2001 placed a lot of focus on the employee’s skills alongside competition, innovation, investment, and enterprise as the chief driver’s of a country’s economy. Skills contributes directly to productivity, by increasing a nation’s or a company’s stock of human capital. Indirectly, skills contribute to the economy through the spill-over method. That is, those who acquire skills motivate others to acquire skills, thus leading to the overall increase in productivity.
Human capital is probably the most important, yet ignored, method of building competitive edge for companies today. Every other organization is trying to outdo one another in terms of talent and innovation. This signifies that human capital forms the utmost important assets to the firm, and that at no any one time should they be overlooked. (Bowen et al. 2003, pp. 380) explores the evidence that accrues as a result of training and skills both to individual companies, as well as to the entire economy that undergo training.
He further investigates the relationship between acquisition of skills and the overall business performance. He highlights the magnitude levels that skills contribute to business performance. Other factors such as human resource training and practices are also considered to impact the performance trend (Davis 2007, pp. 56). He therefore concludes that organizations should have the willingness to part with part of their budget for human resource training programs. Organizations, according to (Davis, 2007, pp. 56) should offer tuition reimbursement programs aimed at boosting their employee’s morale in joining training.
The employment of intermediate skills levels in the UK industries contributes to the country’s a fifth of the productivity gap between France and Germany. France and Germany workers productivity gap between their counterparts in Britain is 20% and 13% respectively. Skills too, play a crucial part in the remaining gap. For instance, capital investment is dependent on labor force skills for its proper use; and innovative is an indication of labor force skills. Again, this is an indication that the improving skills level is likely to influence in the positive direction, UKs productivity levels.
(Aggarwal 2010, pp. 61-70) analyzes the input of skills to productivity and discusses the skills relationship between economic strategies and skill formation of countries. Political force and economics according to (Aggarwal 2010, pp. 61-70) and technological advancements have contributed widely to accelerating globalization. Globalization implies the integration of societies and economies caused by new economic relationships, new technologies, and the international and national policies of multiple actors. A point worth noting is that all these factors discussed by (Aggarwal 2010, pp.
61-70) relates to skills development. Technological advancements and economic growth, results from high skills levels apparent in our modern societies. Productivity growth can reduce poverty and raise income in a virtuous cycle. It reduces production cost and raises returns on investment causing an increase in business productivity. Consumption and employment grow, prices reduce, and people’s poverty levels reduce.