Digitalization Is Making the World Go Round

"Time'll take care of itself so just leave time alone, so pick up the tempo just a little and take it on home."?-- From a song by Willie Nelson

Big things happen over the course of time. I see three megatrends on the horizon (I'm sure there are more), transformations that will shape business and society for years to come.

The first is re-globalization. Companies are rethinking their supply chains and global footprints to increase resiliency and reduce exposure to risk. My lead story next week is about how Mexico is benefitting big time from nearshoring.

And despite some who deny climate change, a retooling of the economy is taking place because of it.?The electric vehicle revolution now happening and the resulting EV battery belt emerging in the Midwest and Southeast is proof of that. That's my No. 2 megatrend.

And third -- the subject of this piece -- is that we are in the midst of a digital technology revolution that is transforming virtually all industry sectors with the employment of artificial intelligence, robotics, and automation.

Digitalization is the Reality

Digitalization is the infusion of digital skills into the texture of almost every job in the economy. Companies and communities that embrace digitalization will gain a competitive advantage, and they are reskilling employees to meet the challenge.

With the progression of digitalization, a "digital divide"?has emerged based solely on unequal access to desktop and laptop computers, smartphones, tablets, and the internet. This divide not only affects people on an individual level but entire communities as well.

Communities that hope to successfully compete for capital investment projects in today's world must cultivate workforces that have the requisite digital skills so that industries, enterprises, and even individuals can thrive in the digital environment.

Digitalization divides across and within communities and nations. It limits opportunities. And isn't providing opportunities what economic development is ultimately about?

Digital Literacy is Fundamental to Growth

Digital literacy should be a primary focus for all economic development organizations. Communities that place an emphasis on digital literacy -- preparing children for their future digital workplace -- will grow while those that do not will fall further behind.

Bottom line: An increasingly digitalized global economy requires ever-more digitally skilled workforces for communities to remain productive.

And yet, one-third of U.S. workers lack digital skills, with 13 percent having no digital skills and 18 percent having, at best, limited digital skills, noted a 2021 report by the?Information Technology & Innovation Foundation, a science and technology institute. One in six working-age Americans are unable to use email, web search, or other basic online tools.

“It begins with insufficient teaching of digital skills in the K-12 education system. Only a quarter of U.S. high schools have computer classes,” the report’s author, ITIF Director of Global Innovation Policy Stephen Ezell told?TechNewsWorld.

“American students aren’t taking STEM courses,” added Darrell West, vice president of government studies at?the Brookings Institution, a nonprofit public policy organization in Washington, D.C.

“They don’t like the hard sciences, and they haven’t developed their math skills,” he told?TechNewsWorld. “That just leads to a country lacking in basic digital skills.”

The report noted that more high school students in California, home of Silicon Valley, take a class in pottery than in computer science.

Here are key takeaways from ITIF's digitalization study:

• The United States ranks just 29th out of 100 countries for the digital acumen of its workforce in business, technology, and data science, according to Coursera.
• This comes against a backdrop of increasing digital skills requirements for many U.S. occupations. Brookings found that whereas only 44 percent of U.S. jobs required medium-high digital skill levels in 2002, 70 percent did by 2016.
• Digital skills are critical to higher wages: Jobs that incorporate higher levels of digital content pay more—in fact, for every 10 percent increase in ICT-task intensity, the average U.S. worker’s salary increases 4 percent.
• The United States needs to increase its number of computer science graduates and concentrate particularly on women, who represented 37 percent of U.S. computer scientists in 1995, but just 24 percent today.
• The United States needs to significantly increase its investment in workforce training, including for digital skills. As a share of GDP, the federal government now invests less than half as much in such programs as it did 30 years ago.
• With corporate investment in workforce training also falling by 30 percent as a share of GDP from 1999 to 2015, Congress should expand Section 127 tuition credits.

Corporate America Needs to Pick Up the Tempo

The lack of workforce digital skills is acute in certain industries, according to the ITIF report. Across the U.S. construction, transportation, and storage industries, half of all workers have no or only limited digital skills.

That share is over one-third across the health and social work, manufacturing, hospitality, and retail and wholesale industries, the report found. The lack of digital skills in manufacturing is particularly concerning because there is increasing demand for jobs with digital skills

“In the corporate world, there’s been a broad under-investment in workforce skills generally,” Ezell told?TechNewsWorld. “That translates, as well, as under-investment in digital skills.”

“If you look at private sector investment in workforce training, it has fallen 30 percent as a share of U.S. GDP over the past 20 years,” he added.

Despite the corporate underinvestment, from 2002 to 2010, the share of occupations with a high digitalization level doubled, from 9 percent to 18 percent In 2020, this rose further, to 26 percent. That means more than one-quarter of jobs now require substantial digital skills. What’s more, over three-quarters of jobs now have either a high or medium level of digitalization.

The Benefits of Digitalization

As the digitalization of work expands, so do the benefits. Digital technologies not only raise workers’ productivity but also their wages. The average earnings for jobs with a high digitalization level reached about $79,000 in 2020, compared to $54,000 for jobs with a medium level of digitalization and $35,000 for jobs with a low level, according to Brookings.

Yet the fact remains that digitalization and its benefits remain unevenly distributed across people and places. Significant divides in skill and pay levels persist not just between groups of people, but between whole communities and regions of the country.

The uneven quality of the local school systems preparing people and places for the digital economy makes expanding digital adoption among disconnected groups and communities an essential priority.

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BBA offers objective findings to communities and companies. We help communities build a better investment environment and companies find the better communities to invest in. For more information, contact me, Dean Barber, at?[email protected]?Need a speaker??I can be there for you.