Study suggest that US digital skills shortage will have greatest impact on manufacturers

Study suggest that US digital skills shortage will have greatest impact on manufacturers

A recent report by the Information Technology and Innovation Foundation (ITIF) which consisted of, domestic and international digital skill assessments, Assessing the State of Digital Skills in the U.S. Economy, shows that America is increasingly faltering and lagging behind global competitors.

This report is particularly worrying at a time when the global economy is becoming increasingly digitalized, with analysts at research firm IDC estimating 60% of global GDP will be digitalized (meaning largely impacted by the introduction of digital tools) by the end of 2022. The ever-increasing digitalization process means that if economies are to remain competitive and productive, they will need to have workforces equipped with the requisite digital skills to power this transformation.

Workforce digital skills can generally be assigned to one of two categories. The first category consists of the digital skills workers needed to work in tech roles in information and communications technology (ICT) industries, such as the computer science skills needed to code software or artificial intelligence (AI) systems or electrical engineering skills to design semiconductors or quantum computers as well as cybersecurity skills.

There are currently 12.4 million of these“tech-workers” in America (according to industry association CompTIA) and these workers can certainly be considered to be among the best in the world and power America’s tech leaders like Amazon, Apple, Google, Intel, Microsoft and others.

However, the picture is not so rosy concerning the second category of digital skills which is related to the American workforce’s facility with using digital tools in occupations in traditional industries (manufacturing, retail, healthcare, etc.). In manufacturing, this could be the ability of the workforce 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 or, even on a much more basic level, just the capacity to interpret spreadsheets or use databases.

The importance of such skills was underlined in a 2017 Brookings Institution report entitled Digitalization and the American Workforce, which was carried out to examine the digital content of 545 occupations (covering 90% of all U.S. jobs) from 2002 to 2016. The report used Department of Labor data to rank and classify the digital-skills intensity of U.S. jobs by assessing the extent of workers’ overall knowledge of computers and electronics and the extent of their work activity involving interaction with computer systems. The report then assembled the occupations into either “low,” “medium” or “high” levels of digital-skills intensity.

The study found that at the beginning of the study 56% of U.S. occupations assessed required only “low” levels of digital skills in 2002, whereas in 2016 that number had been halved, while conversely the number of occupations needing high levels of digital skills grew nearly five-fold (from 4.8 to 23%) and the share of occupations requiring medium-level digital skills rose from 40 to 48%. Even more strikingly, almost two-thirds of all new U.S. jobs created from 2010 to 2016 were ones requiring medium- to high-levels of digital skills, with those jobs also paying considerably more. The report exposed this pay gap in stark terms revealing that U.S. occupations requiring high levels of digital skills on average pay 2.5 times as much as jobs requiring only low levels of digital skills, while medium-level ones earned 1.5 times as much.

Although the Brookings study found that occupations in virtually all U.S. industries required higher levels of digital skills over the past two decades, this effect was much more pronounced in the manufacturing sector, where the share of jobs requiring medium to high levels of digital skill skyrocketed to 82% in 2016, up from 53%  in 2002.

Cause for Concern

These figures were also backed up by research data from ITIF’s report The Manufacturing Evolution: How AI Will Transform Manufacturing and the Workforce of the Future, which found that U.S. manufacturers are continuing to introduce dozens of new AI-focused jobs, as well as others requiring facility with digitally enabled technologies such as 3D printing, robotics, and the Internet of Things. One of the key findings of the ITIF report was the disconcerting fact that despite AI increasingly being deployed in manufacturing, manufacturers were shown to lack clarity about how to implement AI solutions as well as workers with the skills to do so. Another major worry was the fact that manufacturers’ equipment often lacks interoperability with AI and manufacturers are at a loss on how to define the AI skills they do need.

Even more worrying for the future of manufacturing in the USA, according to 2020 research from the Organization for Economic Cooperation and Development (OECD), fully one-third of working-age Americans possess at best limited digital skills with one in six unable to use email, web search, or other basic online tools. These figures are perhaps not so surprising when 23% of U.S. households still do not own a desktop or laptop computer.

Completing the bleak forecast for the industry, U.S. workers also fare increasingly poorly in international assessments of digital skills. For example, the 2021 Global Skills Report carried out by the online education provider Coursera finds that “despite the rapid rate of digital transformation, U.S. digital skills proficiency falls behind that of many countries in Europe and Asia.” The study, which measures learners on the Coursera platform from 100 countries across the business, technology, and data science domains, ranked the United States at a lowly 29th position.

These results are evidently a source of concern for all involved in manufacturing, be that individual American workers, U.S. companies and industries, and the broader American economy. For workers, it is clear that a facility with digital skills will become ever-more important for them to make productive, value-adding contributions in their occupations. In pure monetary terms it is also evident that the broader quality of a workforce’s digital skills base is a key determinant of enterprises’ and industries’ competitiveness and innovation capacity and also has a direct impact on their workers’ salaries.

As a result of these worrying statistics it is an absolute necessity for the United States to renew its commitment to digital skills education and ensure that America has the world’s leading digitally skilled workforce.

ITIF’s report offers several policy recommendations which might help to accomplish this. Firstly, the report suggests that the United States needs to start teaching computer science in all high schools (a recent ITIF study found that only one-quarter of U.S. high schools offer such classes) while also allowing computer science to count toward high school science graduation requirements.

Furthermore, America should look to double its number of science, technology, engineering and mathematics (STEM) high schools, as this would allow more students with a passion and deep ability to excel in computer sciences. The report also suggested that Congress could create an incentive program for universities that expand computer-science course offerings and produce more graduates.

Those eminently sensible suggestions might well address the skills of those newly entering the U.S. workforce but policy also needs to be enacted to ensure that individuals already in the workforce acquire needed digital skills.

This in turn may prove problematic as, compared to its OECD peers, America invests just one-sixth the OECD average in workforce training programs (and one-twelfth the level of leaders like Sweden). This is partly due to the fact that the federal government now invests less than half of what it did in such programs 30 years ago. Unfortunately, this is not just a governmental issue as U.S. corporate investment in workforce training (including for digital skills) as a share of GDP fell by 30% from 1999 to 2015.

In the drive to address these challenges, it is imperative that Congress should first increase tax credits that support employer-sponsored tuition assistance (Section 127 in the tax code). Currently the eligible amount has been fixed at $5,250 since 1996, and so the ITIF has suggested  that Congress should increase this amount to $8,500 and index the amount to the annual rate of inflation going forward. The ITIF has also proposed that Congress could go even further and establish a knowledge tax credit that allows firms to take a tax credit both on expenditures toward R&D and workforce training, expanding the rate from 14% to at least 20%.

The ITIF report concludes by noting that digitalization represents the future; if America wants to remain the world’s leading economy, it will have to significantly enhance its commitment to employing the world’s best digitally skilled workforce.