Employers need to be at the heart of any attempt by Europe to meet the skills challenge posed by India, China and Indonesia, British work and pensions secretary David Blunkett has said.
Blunkett, speaking at a "skills summit" debating the future of the European Social Model, said an employer-led approach was needed if Europe was to compete in a flexible global economy.
Giving people the opportunity to improve their skills in the workplace was vital, he argued, not only to improve their own lives, but to ensure Europe was able to face the twin challenges of demography and globalisation.
For people locked in a cycle of low achievement, low aspiration and worklessness, skills could help break this cycle and encourage ambitions to be passed down through future generations, he stressed.
"Skills are at the heart of a thriving economy. We have already seen two million more people move into jobs since 1997, with opportunities created for many including young people who were previously written off," he said.
"We cannot reach our employment aspirations of 80 per cent without the skills necessary to achieve that," he added.
"What we need is to provide active inclusion. The Social Model, which historically was developed in a different era, requires urgent reform and modernisation, but it's a matter not of asking the rest of Europe to adopt our framework, but to adapt the existing framework within Europe to face the external challenges," he continued.
"It is also a matter of recognising that the best security we can offer to people is to adapt to change and take on the challenge of the world of tomorrow, rather than pretend that we can remove fear by retrenching into a bygone era.
"If we are to help people overcome their fear of change, it is necessary to ensure that they are equipped to be able to deal with the rapid changes that are taking place around us, both economically and socially, and this is the role of Government in the 21st century," he added.
Social policy needed to be linked with economic productivity and success, he argued.
"If we are to have a flexible economy and to help people through the transitions (which include moving from one job to another and overcoming the fear of change within industry and commerce), then we need a welfare system that actually is itself modernised for the 21st century. In this way, re-skilling and reforming the welfare state go hand in hand," Blunkett said.
Economies that had a flexible workforce and the capacity to adapt were more likely to succeed than those that did not, he warned.
"Our task is to ensure that the working population has the skills and productivity needed to stay competitive.
"Broadening the labour market by including the currently excluded, and thereby expanding the economically active population, is crucial to increasing productivity and maintaining prosperity," he said.
Key challenges including the issue of an ageing workforce and bringing in other traditionally excluded groups.
"This will help Europe meet the challenge posed by a shrinking working age population and rising dependent population, with the increased demands that will place on our pensions and services in the future," he said.