The global economy is now experiencing the Fourth Industrial Revolution. The first Industrial Revolution, from about 1760 onwards, was based on mechanical production and saw such revolutionary innovations as steam powered industrial production and railway-based transport. The second Industrial Revolution, from around the 1860 onwards, saw the widespread application of electricity, and the use of the assembly line and mass production in industry. The third Industrial Revolution, from about the 1960 onwards, saw increasingly automated production, and the widespread use of electronics and computers. The fourth industrial revolution is based on developments such as artificial intelligence, big date, robotics, biotechnologies and neuro-technologies. Just as the nature of economic production and jobs were transformed by the technological advances of the first, second and third Industrial Revolutions, the scope and content of economic production and jobs will be transformed by the fourth Industrial Revolution.

Revolutionary changes in technology have a three-fold impact on jobs. First, some jobs are lost as machines replace human beings. For instance, equipment such as tractors now perform many agricultural tasks that previously required manual labor in agriculture. Second, many jobs continue but need new skills for their full execution. As an example, university academics today routinely use computers and software relevant for their academic disciplines. Earlier generations of academics used pen and paper, and blackboards, for the same tasks. The productivity of jobs increases with the application of technology. Third, new jobs are created. Many jobs linked with modern internet-based services did not exist until late in the computer era. Among these, the transformation of jobs require new skills is usually the most common feature of economies. This is followed by the creation new jobs and then the loss of certain old jobs with obsolete skills.

Human capital production and accumulation needs to be continuously transformed to meet the changes in skill needs. The demand for advanced cognitive and socio-emotional skills is increasing, while that for less advanced skills that can be readily automated is decreasing. This requires adaptation in curricula, teaching and learning, and assessment, across education systems. Further, disruptive change is predicted to transform the skills needed in future careers multiple times. Education and training systems need to support children, youth and adults to make these changes.

Technological development is skills based and thus investing more in human capital has higher returns, and now more than ever before in history. From about the mid-1980s the rates of return to higher education have been rising. This process has accelerated with the advent of the fourth industrial revolution. Investment in human capital is a necessity for productive engagement with the global knowlage economy.

Traditional education systems are increasingly struggling to produce the new skills needed. The focus of education systems has been mainly on intelligence or initial cognitive ability and cognitive skills. However, these are not adequate in the era of the fourth industrial revolution. The focus of education systems needs to be broadened beyond intelligence as an education input and beyond cognitive skills as an education outcome. Fortunately, research and policy are advancing in these areas.

Personality traits determine academic performance and skill formation. The big five personality traits: openness to experience, conscientiousness or perseverance, extraversion. agreeableness, and emotional stability, matter for success in school, university and in the labor market. For instance, research shows that conscientiousness matters as much as intelligence for employment outcomes. Further, openness to experience is very important for innovation.

Socio-emotional skills are analogous to personality traits, but with emphasis on malleability. These skills are important determinant of economic outcomes. They have an indirect effect, through cognitive skills, on job performance. They also have a direct effect on earnings, for example through openness and conscientiousness. Both cognitive and socio emotional skills contribute to productivity. What you know matters for creativity and cognitive skills are important. but socio-emotional skills too as shown in repeated labor market studies.

The education system can promote socio-emotional skills. There are several key dimensions of a high performing education system. First, good quality early children education is vital. The foundations of personality and learning are laid in the early years. Second, school systems need to be transformed to promote both cognitive learning and socio-emotional skills. This requires frsh approaches to curricula, teaching-learning, and assessment. Third, it is important to have well-timed and effective vocational training and technical education. Fourth, a high quality and widely accessible higher education system is needed. Fifthly and finally, these elements of education need to construct an efficient and productive life-long learning system.

Economic policies can promote the creative use of all forms of human capital. A pro market economic environment is needed as it produces a variety and diversity of opportunities. A market-friendly environment also creates space and freedom and rewards for innovation. Policies that stifle markets, conversely, hamper the productive use of skills. A vital component of a pro-market economic environment is openness to international trade, with free cross border flows of goods and ideas. This, in turn, provides exposure to new thinking and the creation of new opportunities.

The broader ethical framework of society needs to be favorable to innovation and development.Democracy is of central importance for economic prosperity. Democracy promotes innovation while authoritarianism suffocates innovation. Also, ethical teams are more productive than unethical groups. The social capital provided by shared values, norms and codes of good conduct are necessary to underpin a well-functioning economy based on productive and innovative human capital.