The Political Economy of High Skills: Aligning Higher Education Systems and Knowledge-Based Labour Markets

A successful transition into the knowledge economy is said to depend upon higher level skills, creating an unprecedented pressure on university systems – as they massively expand across countries – to provide labour markets with the skills needed. But what are the political economy dynamics underlying the alignment between higher education systems and labour markets? The paper suggests that existing theoretical approaches are not well-suited to answer the question: on one hand, ideational and structuralist frameworks downplay persistent national differences; on the other, political economy accounts assume that national differences rest upon the very lack of higher education expansion in some countries, downplaying the cross-national trend of higher education expansion. The paper proposes a framework that accounts for national differences within the convergent trend of higher education expansion. Two crucial variables are identified to theorise the relationship between higher education systems and knowledge-based labour markets: (i) the type of knowledge economy predominant in a given country; and (ii) the extent to which universities compete with each other (e.g. for public and private funds). It is argued that the former explains what type of higher level skills will be in demand, while the latter helps us understanding why some higher education systems are more open at the outset to satisfy labour market demands compared to others, determining whether institutional change in a given national higher education system is likely to be encompassing or marginal. The argument is tested with case studies of Germany, South Korea and the UK.