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Developed Economies Not Ready for an ICT-Driven Recovery

Some interesting but disturbing messages are emanating from Europe and America. With countries slowly coming out of the economic crisis and employment picking up again, it has become clear that the new jobs becoming available are driven by companies operating in the digital economy; very few of the ‘old jobs’ will become available. Many people in western countries are unprepared for this change and many new skills that are required are simply not available in sufficient numbers to counter the downfall in employment that has occurred over the last five years.

The early signs of this development were already visible a couple of years ago when the economic crisis hit Spain and much of its young hi-tech talent was recruited by companies in Germany, as there was already a skills shortage here for jobs in companies which wanted to move into the digital economy.

Countries such as Ireland are now finally recovering. Before the economic crisis Ireland was able to transform itself by embracing the digital economy, but the crisis put a stop to that and Ireland failed to maintain its position as the Celtic Tiger, being unable to provide enough highly skilled hi-tech people to satisfy demand from hi-tech companies that had established themselves there over a decade ago and are now recovering and recruiting again.

Other European countries are experiencing a similar situation, with many struggling with high unemployment, but many also ill-prepared for the demand in hi-tech jobs.

At the same time, countries such as India and China are pumping out engineers at a great rate, and because of their sheer numbers they are better prepared to take up the slack in hi-tech skills. While the quality of their work may still be below western standards, only a small percentage that makes up their top quality of these graduates will already amount to large numbers. For many years, peoplesuch as Rupert Murdoch and other business leaders have urged politicians to take education more seriously and stressed its importance in this transforming world; however, the response in western countries has been lacklustre.

This mismatch could be a major problem for western economies which now desperately need to speed up their recovery, and could create a great competitive disadvantage for those economies that are slow in making the economic transformation.

According to the OECD, there are some two million job vacancies throughout Europe. Research from the European Union indicates that, despite the recession, almost 40% of companies reported difficulty finding workers with the right skills, compared with 37% in 2008 and 35% in 2005. Neelie Kroes, Vice-President of the European Commission, has warned that by 2015 some 900,000 ICT job vacancies may be unfulfilled in the European Union.

Interestingly, while too small to make any economic difference on the European scale, countries such as Estonia and Latvia are both excellent national ICT exceptions. With affordable nationwide high-speed ICT infrastructure and a highly developed ICT market, they are attracting large-scale investment, particularly from Russia.

However the country that invented the Internet, America, is falling dangerously behind in offering a high-speed, affordable broadband service to businesses and consumers, and this is now increasingly seen by the Obama administration as an economic disadvantage. It warned in a recent report that, “To create jobs and grow wages at home, and to compete in the global information economy, the delivery of a fast, affordable, and reliable broadband service to all corners of the United States must be a national imperative”.

Based on the mining boom, Australia’s economic success is suffering from a two-tiered situation where, similar to Europe and America, jobs are being lost in traditional industries such as construction, finance, and manufacturing. At the same time there is little political focus on the development of the digital economy. Even delayed, Australia will understand this in years to come and will also be totally unprepared for the economic transformation that will be forced upon this country.

With evidence now starting to confirm that the development of a digital economy is the only way forward, and consequently the development of ICT skills and ICT infrastructure, it will be interesting to see if the developed economies are flexible enough to rapidly increase their ICT skills and training.

By Paul Budde, Managing Director of Paul Budde Communication

Paul is also a contributor of the Paul Budde Communication blog located here.

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