DPM Tharman Shanmugaratnam's Dialogue at the McKinsey Innovation Forum

DPM Tharman Shanmugaratnam: It's becoming a more fluid workforce. The old workforce, if I describe it maybe too simply, had three layers. We had blue-collar workers doing operational jobs. White-collar workers doing administrative or marketing jobs. And a group of people at the top doing thinking, strategising and leadership jobs.

The conventional story today is about "job polarisation" - the middle layer is thinning out, while the top and bottom grow. Technology is replacing tasks and jobs in that broad middle of the workforce. But that's only one part of the story.

There's a second part to the story - the real shortage of skills, and a shortage of people to fill jobs that are still there and still being created in the middle. Even in the United States, where the story of job polarisation is well told, employers are crying out for people - skilled people who can take on good jobs.

At least for the next 15 years, I think there are plenty of opportunities for people to be skilled up to take on those good jobs. But it's not the same as in the past - the layer at the top doing strategy, the white-collar layer in the middle and the blue-collar jobs below. Because blue-collar workers are going to be skilled up to take on jobs in the middle. And the people at the top can't just do thinking and strategising. Even the McKinseys of the world are no longer just doing high-level issues; you are now focused on operational strategies.

The future jobs, some of the most rewarding jobs, are going to be those that involve thinking and doing, thinking and designing, getting into operations at the same time that you are doing research or leading strategy in an organisation. So there will be a lot more fluidity. The old class structure of the workforce is breaking down.

Nurses will be able to do a part of the jobs that doctors and surgeons used to do, aided by technology. Everyone has to think about using technology, using data, and using them to augment our own abilities. And that's everyone, at the top and the bottom in the old structure.

If you just leave it to the market though, it could end up dividing society - those with the skills to work with technology who will be paid very well, and the rest. That's already happening in some places. But if we intervene to coordinate and skill people up, and if we have more fluid organisational structures, technology can actually be a democratising force - enhancing everyone's abilities, and not having people feel their working careers are ruled so predictably, or their potential is decided when they are young.

Q: Singapore seems to be very embracing of technology changes. It is interesting because a lot of countries are not. But Singapore's Skills initiative, can you talk a little bit about what it comes with?

DPM Tharman: SkillsFuture, as we call it, is about learning throughout your life. It's responding to two things. First, the obvious fact that jobs are changing and what you prepared for when you were young doesn't stay relevant very long. But it is also responding to something else, which is about people's potential to develop through life.

Societies everywhere have been too content with educating people in the first 18 to 22 years of a person's life. We now know, both from science and through observation of how the best companies do it, that there's so much potential to develop people throughout their working lives, whichever their job or vocation.

It's a different game. There's increasing value in bite-sized learning, short-cycle learning, that responds to the market, as well as what you think you need at each stage of your working life. So it involves a lot more interaction between learning, work and personal experiences and development.

Q: What would be some of the manifestations of that? There are some potentially radical ideas about how we learn.

DPM Tharman: There are a few thrusts to this. One is to think of people not only as workers in particular industries but as citizens, and to give everyone a SkillsFuture account, government-funded, so that they have ownership of their own learning. You can use it only for learning, but you decide how you use it.

We are trying to make that not a casual or hit-and-miss approach to choosing your courses and programmes. It requires some curating, some mentoring for individuals. We are trying to develop that layer now, of people who can advise citizens on how they can shape learning to suit their own interests and abilities.

But we haven't got there yet and are now developing that intermediate layer.

The second thrust is with employers. The leading companies, including some small, progressive companies, don't need lecturing on this. They know that investing in their people is their source of competitive advantage. But I would say it's early days, because this culture of investing in your people, not for the immediate needs of the job but for the long term, it's not widespread. It is not widespread in any society, by the way. And if you look at the US, investment in training has been coming down over the years.

We've got to grow this culture. One way is through closer interaction between leading players and the rest in the industry, particularly in the same supply chain. We're also helping SMEs (small and medium-sized enterprises) by subsidising training. And again, by curating and customising training where we can, so that they find it relevant to the business.

The core of our industry transformation plans is to work with the SME sector, those that are not at the frontier of innovation - work with them to develop their people, help them to make the most of new technologies so that they can converge with the frontier.

The gaps are wide. Actually in almost every major economy, the gaps between firms are wide in terms of technology, levels of productivity and in fact wages. The major source of inequality in many economies is inequality between firms - people get paid more in some firms compared with others in the same industry. The wage inequality between firms accounts for the bulk of inequality in the US, for instance.

Q: It'll fit with this gig economy. So people will have a skills account, and if you work on your own, you're independent, you're going to be able to access that to learn.

DPM Tharman: That's right. But I'm not yet a fan of the gig economy. There are pluses and minuses to it. Some in the gig economy are those who've got no choice because they can't get a full-time job. And there's a way in which technology is now enabling corporations to rely on contract workers rather than full-time workers. It serves the interests of the company because they're really pushing risk to the contract worker. I don't think that's a great social model. In many places, it comes without social security contributions.

There's another group in the gig economy who are truly independent. They don't want to be working for someone else, and they're often people with highly specialised skills. It started with things like Hollywood. Any film, they call on the best person for each task, say this particular form of camera work, and everyone knows who he or she is. They come together for the film, then they're off. But those are people who are really empowered by their own abilities, and not that many people are like that.

So we've got to watch this carefully. It's a growing trend in many places. We've got to avoid a continuing drift - of risk being passed from companies to workers, who actually can't take much risk - the risk of instability in wages and the risk of not being prepared for retirement because of a lack of social security contributions.

Q: Going on to the corporate side, because something you've said before is the notion that there's a lot of change going on but there's sort of a leading edge of companies that are changing on the frontier, but at the core, not so much. Anything that you will be wanting to see, or you're encouraging?

DPM Tharman: No one quite knows why, but the remarkable innovations that we are seeing at the frontier of almost every industry are not actually spreading through the broader swathe of the economy. That's one of the reasons why productivity growth all over the world has slowed.

Second thing that's happened is that even in the more dynamic economies like the US, fewer companies are starting up. And fewer people are moving location to take advantage of job opportunities elsewhere. Economic dynamism seems to have slowed down in general. So I would say the first priority is to avoid regulations that hamper economic dynamism, be they regulations that hamper start-ups, or regulations that hamper scaling up from small to big.

But we also need an active role for the state in coordinating among market players. It's not about regulation, or the old style of industrial policies, which was about grooming national champions or protecting local players. Those policies haven't worked out very well anywhere in the world.

This new industrial policy is about coordinating players so as to speed up the spread of new technologies and skills in a market economy. The Government is not guessing what the next technology or product is - the industry is doing that work at the frontier - but promoting, speeding up the rate of learning, cluster by cluster, is the new competitive game. The countries that speed up learning the most will win.

We've identified 23 key clusters in the economy. For each of them, we're working on the skills of the future, the technologies of the future, helping companies enhance productivity using technology and skills, and in the Singapore context, quite important, to help them internationalise. We're bringing those four strategies together in our Industry Transformation Maps for each cluster.

Q: Back to the skills side, in terms of the providers of those skills, could they be the traditional ones?

DPM Tharman: The anchors should be the traditional players because they bring reputation, credibility and governance. Each of our universities, polytechnics and ITEs (Institutes of Technical Education) now see continuing education as part of their mandate. They will be funded and held accountable for doing so.

But we need a marketplace of private players around them. Some interesting new players, like General Assembly, are coming up to fill gaps more quickly. The needs of industries can change quickly, but they do not get reflected in the formal university or polytechnic curricula until some time later. Speed to market, in learning, is itself a priority in continuous education. So we need a whole group of nifty players in education and training.

Q: And just on "bite size".

DPM Tharman: Three months and six months seem to be the periods of time that adult learners find easy to catch on to, and not daunting. But you usually don't stop at that. Having done that three- or six-month module, you'll work for a while and then go on to another module. So you stack up modules over time. For someone with a family, someone who's got other things to do with their time, it's manageable.

It's also more democratic because the hurdles required to get into a three- or six-month course are very different from those for a two-year master's.

Q: So if you're to think out five years from now, where we'll get some very exciting innovation in the whole skills place, from other parts of the world - where would you like it to be?

DPM Tharman: When people think of education, it won't just be the school or full-time institution they went to in their youth. They'll think of part-time campuses around the island, with high-quality education providers responding to their needs at different points of their life.

Second, we would want to see a broad segment of SMEs take ownership of training. On their own, it is difficult just meeting the demands of today. But with coordination, we will have industry- based training that is relevant to them, and with significant subsidies to back them up.

But what's most important at the end of the day is how we think of our potential as individuals, each citizen. Never thinking of our potential as decided when we're young, but something we develop through life. We know that people develop a passion for learning at different points in their life. Sometimes it's by chance. But everyone will have the opportunity to develop through life.

When you take it all together, it's more eclectic, more democratic in some ways, more capable of developing the human potential in each of us through life. And that's what expands our nation's potential too.