Meeting the Twin Challenge in Times of Labor Shortage: How Modern Societies Promote Future Skills for the Digital and Green Transitions

ABSTRACT The twin transition to a digital and green economy has placed skill formation at the center of efforts to sustain competitiveness. Reforming skill formation systems poses enduring dilemmas on how to balance concerns about economic efficiency with social inclusion while securing employer commitment. The context of significant uncertainty brought on by the twin transition—placed at all levels, from individuals to firms to the state—amplifies the challenge of building effective skills ecosystems. We argue that the central question is no longer about whether governments should intervene but instead about how to govern skill formation under profound uncertainty. The task is to design institutions that are flexible enough to adapt to shifting technological and ecological demands while stable enough to sustain political coalitions and social inclusion. We argue that effective skills ecosystems for the twin transition must combine political stability with the capacity to embrace—rather than reduce—economic uncertainty.