Global Responsible Tax: What can be done to ensure that people are skilled correctly for the future of work in the Global South?

Context

KPMG International hosted a roundtable discussion in June 2024 to explore the different approaches to navigating demographic dynamics in relation to tax and work. Highlighted as a key issue in an initial scoping roundtable hosted in late 2023, this deep dive conversation, focusing on the Global South, looked to discuss the unique set of intersecting challenges including a potential crisis of unemployment in the Global South brought on by a burgeoning youth population and the ways in which policy mechanisms can help or hinder.

Questions included: what can we learn from the interactions of different tax policies and systemic incentives? How might targeted tax incentives be structured to encourage businesses to invest in youth employment, skill development, and apprenticeship programs? And could the design and practice of any of these tax approaches foster economic growth, without discouraging entrepreneurship and innovation?

The conversation was held under the Chatham House Rule (which means nothing can be attributed to attendees) and was attended by seven expert participants (see below for a list of attendees). The write-up below summarizes the personal views of participants and does not necessarily reflect the view of any particular organization, including KPMG.

Executive Summary:

• There is an urgent need to create jobs for a burgeoning youth population in the Global South, but probably even more important to train young people for jobs.

• Poor quality education, skills gaps, the impacts of climate change, rapid technology development, gender disparities and poor public sector infrastructure are all compounding the problem.

• Key ideas concerning job creation included:

  • Improving public sector infrastructure and educational systems to improve access to opportunities

  • Structuring policies and regulations around virtual immigration

  • Shifting the tax base away from labor taxes

• Ensuring that people are skilled correctly for the future of work in the Global South is crucial.

• Suggested approaches to improving skills included:

  • Expanding apprenticeship schemes

  • Improving access to digital tools

  • Making policies inclusive of the informal economy

  • Crafting the regulation of technology to allow education to keep pace

  • Designing collaborative, local economic and place-based approaches.

Setting out the problem
Youth population growth, policies not focused on youth, poor quality education, skills gaps, the impact of technology, poor public sector infrastructure and limited state capacity, jobless growth, climate change and gender disparities.

Participants discussed the issues being experienced in India and the urgent need to create at least 90 million new nonfarm jobs by 2030 to absorb the 60 million new workers entering the workforce.1 They highlighted that if an additional 55 million women were to join the labor force, the job creation imperative would be even greater. Similarly, participants noted Africa's population is expected to double by 2050,2 necessitating millions of new jobs, with Nigeria already facing challenges in providing sufficient employment for its 230 million population.

Participants suggested that a lack of youth-focused policies is leaving younger generations at a disadvantage. They highlighted the issue of structural jobless growth in India, emphasizing the need for policies that address the unique challenges faced by youth, particularly in relation to capital-intensive growth and mechanization.

It was also noted that compromised education systems in many developing countries are failing to keep pace with changes in the job market. They highlighted that STEM (science, technology, engineering and mathematics) programs are not effectively preparing students for modern job requirements, leading to a significant skill mismatch.

Participants discussed the evident skills gap, noting that educational and training programs do not cater to actual job market needs. They highlighted that the rapid pace of technological change is exacerbating this gap. It was noted that once people are established in the workplace it is easier to access workplace training and develop workplace experience, but young people just starting out can be disadvantaged as their education has not prepared them for the modern working practices. For young people the issue is often not so much a lack of jobs but a lack of skills.

Participants highlighted that inadequate infrastructure, including poor access to transportation, healthcare and the internet is limiting economic development and job creation.

This discussion also focused on how the impacts of climate change and technological advancements are influencing traditional job sectors and requiring new skills and adaptability. They noted a growing precarity in the labor market due to these combined forces.

Participants highlighted the persistent gender disparities in education, employment, and opportunities. They noted that cultural, economic and systemic barriers are preventing equal participation, and the digital divide is further excluding women and girls from the workforce.

How can jobs be created and what sort of jobs should they be?
Sector determination for job creation, keeping pace with technology, improving public sector infrastructure, virtual immigration, shifting the tax base away from labor taxes

Participants suggested that public-private partnerships and government incentives could help steer development in key industries such as IT, services, and electric vehicles.

Participants highlighted the importance of continuous upskilling and reskilling programs to ensure the workforce can adapt to changing technological demands. They noted that collaboration between the government, private sector, and educational institutions is crucial to staying ahead of technological trends. The discussion referenced the IMF's article "Rethinking the World of Work" to underline the need for innovative approaches to workforce development and need for investments in reforming and updating human capital to appropriately educate and train young people so that they are more employable.3

Virtual immigration was also discussed, being used to bridgeB the lack of jobs in parts of the Global South with the lack of labour in the Global North.ut questions remain about how to best avoid this approach leaving the Global South as a low cost service provider for the North.

Participants suggested adjusting the tax base to reduce the burden on labor, which could encourage job creation. They highlighted the potential for tax incentives to businesses that invest in training and development.

What can be done to ensure that people are skilled correctly for the future of work in the Global South?
Apprenticeships, access to digital tools, making policies inclusive of the informal economy, regulation of technology, collaboration, local economic and place-based approaches.

Participants discussed the high success rates of apprenticeship programs internationally. Evidence suggests that apprenticeships substantially facilitate a smoother transition into the world of work, and how they improve employability outcomes for Global South labor markets.4 The group highlighted the need for regulatory frameworks to ensure apprentices are not exploited and receive valuable training and adequate wages.

Participants emphasized the importance of providing access to digital tools and bridging the digital divide, particularly for women and girls;it was noted that in some cultures, if the family can only afford one phone or computer, preferential access will be given to the boys in the family. They noted that ensuring affordable and widespread access to technology would enable more people to participate in the digital economy.

The necessity of acknowledging and integrating the informal economy, which employs a significant portion of the population in developing countries, was emphasized. Participants also discussed the need to regulate technology carefully to protect workers and establish fair labor practices whilst ensuring it does not stifle innovation.

Participants emphasized the importance of collaboration between government, private sector, and public sector to bridge the skills gap. They suggested that joint efforts could align educational curricula with market demands and provide comprehensive training programs.

Participants discussed tailoring strategies to local economic conditions and focusing on place-based approaches to address specific regional needs. They noted that understanding the nuances of local economies would help in designing effective job creation and skill development programs.

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Contributors to the discussion included:

1. Troopti Desai, Executive - Group Tax, MTN

2. Sabina Dewan, President and Executive Director, JustJobs Network, New Delhi

3. Susan Himmelweit, Professor of Economics, Open University

4. Neal Lawson, Partner, Jericho

5. Chris Morgan, Head of Global Responsible Tax Programme at KPMG International

6. Dr. Saon Ray, Professor (Visiting), The Indian Council for Research on International Economic Relations (ICRIER)

7. Grant Wardell-Johnson, Global Tax Policy Leader and Chair of the Global Tax Policy Leadership Group, KPMG International

Footnotes

1. McKinsey & Company, 2021. India’s turning point: An economic agenda to spur growth and jobs.

2. Statista, 2023. Forecast of the total population of Africa from 2020 to 2050, by country (in millions).

3. IMF (International Monetary Fund), 2020. Rethinking the world of work. Finance & Development, December 2020. [online]

4. JustJobs Network, 2023. Reimagining employability for the 21st century: 10 million apprentices in 10 years. [online]