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The US Digital Skills Shortage Is Worse Than We All Thought

Jan. 21, 2022
Manufacturing will bear the brunt of it, along with overall U.S. competitiveness.

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 year-end 2022. But this growing digitalization means that if economies are to remain competitive and productive, they’ll need workforces broadly equipped with the requisite digital skills to power this transformation.

Unfortunately, as the Information Technology and Innovation Foundation (ITIF) writes in its report, Assessing the State of Digital Skills in the U.S. Economy, domestic and international digital skill assessments show America increasingly faltering and lagging global competitors.

Digital Skills Requirements Skyrocket

Workforce digital skills can be broadly construed across two categories. First are the digital skills workers need to work in tech roles in information and communications technology (ICT) industries, such as computer science skills needed to code software or artificial intelligence (AI) systems; electrical engineering skills to design semiconductors or quantum computers; and cybersecurity skills.

America’s 12.4 million such “tech-workers” (according to industry association CompTIA) certainly excel here and power America’s tech leaders like Amazon, Apple, Google, Intel, Microsoft and others.

Where concern lies regards the American workforce’s facility with using digital tools in occupations in traditional industries (manufacturing, retail, healthcare, etc.). In manufacturing, this could pertain to workers’ ability, for instance, 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 on a more basic level just interpret spreadsheets or use databases.

The importance of such skills was highlighted in an exceptional 2017 Brookings Institution report titled Digitalization and the American Workforce, which examined the digital content of 545 occupations (covering 90% of all U.S. jobs) from 2002 to 2016. The report ranked the digital-skills intensity of U.S. jobs using Department of Labor data assessing the extent of workers’ overall knowledge of computers and electronics and the extent of their work activity involving interaction with computer systems, tiering U.S. occupations into either “low,” “medium” or “high” levels of digital-skills intensity.

The study found that whereas 56% of U.S. occupations assessed required only “low” levels of digital skills in 2002, by 2016 that share had halved, while the number of occupations requiring high levels of digital skills grew nearly five-fold (from 4.8 to 23%) and the share of occupations requiring medium-level digital skills increased from 40 to 48%. Moreover, almost two-thirds of 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. In fact, U.S. occupations requiring high levels of digital skills on average pay 2.5 as much as jobs requiring only low levels of digital skills, while medium-level ones earned 1.5 as much.

Most Pronounced in Manufacturing

The Brookings study found occupations in virtually all U.S. industries requiring higher levels of digital skills over the past two decades, with the effect nowhere more pronounced than in manufacturing, where the share of jobs requiring medium to high levels of digital skill jumped to 82% in 2016, up from 53%  in 2002.

That concords with research 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 introducing 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. Some key findings of the report include: Despite AI increasingly being deployed in manufacturing, manufacturers lack clarity about how to implement AI solutions and workers will the skills do so. Also, manufacturers’ equipment lacks interoperability with AI and manufacturers are at a loss on how to define the AI skills they do need.

Here is where the concern lies. 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. One in six cannot use email, web search, or other basic online tools. Perhaps such a pedestrian performance shouldn’t be surprising when 23% of U.S. households still do not own a desktop or laptop computer.

Falling Behind Other Countries

Moreover, U.S. workers also fare increasingly worryingly in international assessments of digital skills. For instance, the 2021 Global Skills Report issued by 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 29th.

These results pose concern for individual American workers, U.S. companies and industries, and the broader American economy. For workers, a facility with digital skills will become ever-more important for them to make productive, value-adding contributions in their occupations. At the economy level, the broader quality of a workforce’s digital skills base becomes a key determinant of enterprises’ and industries’ competitiveness and innovation capacity.

Accordingly, the United States needs to redouble its commitment to digital skills education and ensuring that America boasts of the world’s leading digitally skilled workforce, a challenge which will have to be met by a broad range of stakeholders, from individuals themselves, to education systems across the K-12, community college, and university levels, businesses, nonprofits, and  government agencies.

Action Steps

ITIF’s report offers several policy recommendations. First, 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 allowing computer science to count toward high school science graduation requirements.

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

But that addresses the skills of those newly entering the U.S. workforce; policy also needs to be deeply concerned with ensuring individuals already in the workforce acquire needed digital skills, and here U.S. workforce retraining programs need to be dramatically upgraded.

Workforce Training Is Sorely Underfunded

In fact, compared to OECD peers, America invests just one-sixth the OECD average in workforce training programs (and one-twelfth the level of leaders like Sweden). In part, that’s because the federal government now invests less than half of what it did in such programs 30 years ago, as a share of GDP. Unfortunately, the U.S. government isn’t alone, as U.S. corporate investment in workforce training (including for digital skills) as a share of GDP fell by 30% from 1999 to 2015.

To address these challenges, Congress should first increase tax credits that support employer-sponsored tuition assistance (Section 127 in the tax code). Congress hasn’t increased the eligible amount ($5,250) since 1996, and so Congress should increase this to $8,500 and index the amount to the annual rate of inflation going forward. Congress could go even further by establishing 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%.

In conclusion, digitalization represents the future; if America wants to remain the world’s leading economy, it’s going to have to significantly enhance its commitment to fielding the world’s best digitally skilled workforce.

Stephen Ezell is vice president, global innovation policy at the Information Technology and Innovation Foundation.

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