WHAT ARE DIGITAL SKILLS AND WHY DO THEY MATTER?The globalization of the digital economy profoundly impacts every industry. For instance, while certainly the digitalization of the global economy has brought entirely new industries and enterprises to the fore—web search, social media, artificial intelligence (AI), cloud, etc.—at least 75 percent of the value of data flows over the Internet actually accrues to traditional industries such as agriculture, manufacturing, finance, hospitality, and transportation.3 This dynamic explains why the vast majority of the economic benefits from information and communication technologies (ICTs)—likely more than 80 percent for developed nations and 90 percent for developing ones—stem from greater adoption of ICTs within an economy, far more than the benefits generated by ICT production.4 In other words, the value that gets created in the global economy is increasingly created digitally: In fact, some estimate that as much as half of all value that will be created across the global economy over the next decade will be done so digitally.5 That’s why one estimate predicts that 97 million new digital jobs will be created globally in the first half of this decade.6 Similarly, a separate report finds, “If America could train just five million workers for digital jobs in the next five years, it would drive an estimated $250 billion more in U.S. GDP growth.”7 Therefore, if individual workers are going to be able to contribute value in such an economy, they’ll need sufficient digital skills to be able to do so.
Digital skills can be broadly construed across two different categories. First are the digital skills needed to work directly in ICT or digital industries, including computer science skills needed to code software, AI, and other computer systems; electrical engineering skills to design semiconductors, high-performance computers, and quantum computers; cybersecurity skills; and competencies to manage data centers and telecommunications networks. It’s these digital skills that have given rise to an Internet/digital tech sector that contributed $2.1 trillion of the U.S. economy in 2018, or about 10 percent of GDP.8
According to the U.S. Bureau of Labor Statistics’ Occupational Employment and Wage Statistics survey, the number of U.S. workers in the most-relevant category—Computer and Mathematical workers—increased by 40 percent over the past two decades, from 3.3 million workers in May 2010 to 4.6 million workers by May 2020. Baselining to 2005, over the past 15 years, job growth among information technology (IT) workers has increased almost 60 percent faster than for overall jobs in the U.S. economy. (See figure 1.)
Figure 1: Indexed job growth in U.S. IT and overall workforce, 2000–2020 (2005 baseline = 1)9
The Computing Technology Industry Association (CompTIA) took a slightly different approach in its annual “Cyberstates” report by developing a count of technology professionals employed across the economy, including in the technology sector (e.g., software developers, network architects, database administrators); professionals employed by IT firms though not working in IT roles directly (e.g., sales, marketing, customer service professionals); and self-employed workers in the ICT-enabled “gig” economy (e.g., Uber drivers).10 By this measure, CompTIA generated a count of 12.4 million “tech workers” in the U.S. economy, with 66 percent, or 8.2 million, of those workers directly employed in core ICT roles.
ICT jobs represent some of the fastest-growing across the economy. Burning Glass Technologies, a Boston-based labor market analytics firm, found that, from 2012 to 2017, demand for data analysts increased by 372 percent, with a subset within that job grouping (data-visualization specialists) rocketing up by 2,574 percent.11 And that trend continues, with many ICT occupations expected to grow at four to five times the national rate over the course of this decade, led by anticipated growth in jobs in cybersecurity, data science, and software development.12 (See figure 2.)
Figure 2: Anticipated fastest-growing ICT jobs in U.S. economy over coming decade13
A second category of digital skills pertains to individuals’ facility with using digital tools in traditional work environments, such as the ability to work with basic Microsoft Office programs such as word processors, spreadsheets, email, or networking software; the ability to use databases or customer relationship management (CRM) tools; the ability to engage in social media or use video conferencing tools; to use mobile applications supporting point-of-service operations; to interpret the output of AI-based systems; or to use automated reality/virtual reality (AR/VR) tools to repair an automobile or jet engine. Indeed, it’s this broader capacity of a nation’s workforce that constitutes the transmission mechanism for digitalization to manifest its transformative impact across traditional industries from agriculture and finance to manufacturing and medicine. As the Brookings Institution’s Mark Muro and his colleagues framed it in their excellent report “Digitalization and the American Workforce”:
A sizable portion of the nation’s middle-skill employment now requires dexterity with basic information technology tools, standard health monitoring technology, computer numerical control equipment, basic enterprise management software, customer relationship management software like Salesforce or SAP, or spreadsheet programs like Microsoft Excel.14
Nations need to support the development of digital skills across both ends of this spectrum. Economists have long recognized that ICTs constitute a general purpose technology that turbocharges the productive, innovation, and business-model-generation capacity of virtually all downstream industries that utilize it.15 Indeed, ICT represents “super capital” that has a much larger impact on productivity growth than do other forms of capital.16 For instance, ICT capital has a three to seven times greater impact on firm productivity than does non-ICT capital. ICT workers also contribute three to five times more productivity than non-ICT workers do.17 This dynamic explains why the digital economy has contributed to 86 percent of U.S. labor productivity growth in recent years, despite accounting for only 8.2 percent of U.S. GDP.18
The greater productivity of ICT-industry workers, or workers who possess greater levels of digital skills, explains why such workers are often able to command higher wages. For instance, the Organization for Economic Cooperation and Development (OECD) has found that a 10 percent increase in the ICT-task intensity of jobs (at the country mean) correlates to an average 2.5 percent increase in hourly wages across OECD economies, with the United States experiencing the highest effect at 4.08 percent. (See figure 3.)
Figure 3: Returns on ICT tasks—percentage change in hourly wages for a 10 percent increase in ICT task intensity of jobs (at the country mean), 2012 or 201519
The finding that jobs involving high digital-task intensity and greater levels of digital skills earn more has been corroborated repeatedly. Brookings’ 2017 “Digitalization and the American Workforce” report examines the digital content of 545 occupations covering 90 percent of the U.S. workforce in all industries from 2001 to 2016. The report leverages the Occupation Information Network (O*Net) database, which surveys workers on their knowledge, skills, tools and technology, education and training, and work activities required to perform their jobs.20 Here, two of O*Net’s three technology-related variables are relevant: “Knowledge: Computer and electronics” (which measures the overall knowledge of computers and electronics required by a job) and “Work activity–interacting with computers” (which quantifies the centrality of computers to the overall work activity of the occupation).21 Brookings used this to develop occupational digitalization scores for 545 occupations across 23 highest-level industries, segmenting occupations into 3 tiers of digitalization: low, medium, and high.
Not surprisingly, Brookings found that the mean annual wage for workers in highly digital occupations reached $72,896 in 2016, with workers in middle-level digital jobs earning $48,274, and those in the least digitally intense positions earning $30,933. (See figure 4.) Importantly, Brookings found that digitalization scores have significant and positive effects on real annual wages even when controlling for education level, and that the wage premium for computer skills nearly doubled between 2002 and 2016. To wit, in 2002, a one-point increase in digitalization score predicted a $166.20 (in 2016 dollars) increase in real annual average wages for occupations with the same education requirements; by 2016, this wage premium had almost doubled to $292.80.22
For the full report: https://itif.org/publications/2021/11/29/assessing-state-digital-skills-us-economy