Editorial: Making digital transformation work for growth and well-being

How do we – as citizens, governments and businesses – shape digital transformation so that it benefits society and leaves no one behind? This is a key question as digital technologies and data become increasingly present in our lives. From the government perspective, a key to unleashing the promise of digital transformation is to develop an integrated and coherent policy response across all areas. It also requires policies that seize the opportunities and maximise the benefits while addressing the challenges and minimising the costs.

Now is the time to act. We are at the beginning of the digital age where computing and data are ubiquitous. Designing and implementing an integrated policy framework fit for the digital age is a complex challenge, but one that we must all embrace given the many potential benefits. Digital technologies and data spur innovation, generate efficiencies, and improve many goods and services. They enable more trade and investment, and facilitate technology transfer. They help push out the productivity frontier, leading to more growth and economic opportunities. It is essential to realise this potential and ensure that it is broadly shared.

Addressing the seeming digital productivity paradox is important in this regard because productivity gains are essential for improved standards of living. As digital transformation has progressed, aggregate productivity growth has slowed, raising questions about the ability of digital technologies to raise productivity growth. But the aggregate productivity slowdown masks a widening performance gap between more and less productive firms, with the gap especially strong in information and communication technology services sectors (see Chapter 3). Frontier firms continue to increase productivity and benefit from digital transformation, but laggard firms do not always have the capabilities and incentives to adopt state-of-the-art technologies and best practices. It is essential to allow frontier firms to grow, while at the same time help laggards catch up or easily exit, if necessary.

It is also important to promote the diffusion of digital technologies and related knowledge – which remains well below its potential – to boost productivity growth (see Chapter 3). While most firms across the OECD now have access to broadband networks, more advanced, productivity-enhancing digital tools and applications – such as cloud computing or big data analytics – have diffused to far fewer firms. Moreover, significant cross-country differences, even among the most advanced economies, raise important questions about why some countries are more successful at adopting digital technologies than others.

Effective use of digital technologies often involves experimentation, as it takes time to reorganise production processes, introduce new business models, and find or provide workers and management with new skills. Digital transformation also requires complementary investments in skills, organisational change, process innovation, as well as new systems and business models (see Chapter 4). The growing scale and complexity of these complementary investments make digital transformation particularly difficult for non-frontier firms, such as small and medium-sized enterprises in less digital-intensive sectors.

On the jobs front, we know that digital transformation leads to some job losses and some job gains (see Chapter 5). To date, however, employment rates are at record high levels in many countries and over the past decade four out of ten new jobs were created in digital-intensive sectors. But it is important to ensure that all workers benefit more equally from digital transformation and are empowered with the right mix of skills as well as provided with social protection. Over the past two decades, real median wage growth in most OECD countries has decoupled from labour productivity growth, suggesting that productivity gains no longer automatically translate into wage gains for all workers.

Beyond their economic and social impacts on productivity and the world of work, the use of digital technologies has also improved people’s lives and broader well-being in a relatively short time. Digital technologies, such as the smartphone, enable more people to access government services, promote civic engagement and allow more people to connect than ever before. They also increase consumer choice and convenience.

But the societal effects of digital transformation are complicated because overall impacts are often not clear-cut (see Chapter 6). For example, digital technologies provide opportunities to enhance access to information, interpersonal communications and a host of services (a free and interconnected Internet), advance science and improve healthcare (e.g. tele-medicine), and enrich education (e.g. massive open online courses). On the other hand, they can bring challenges related to work-life imbalances; foster the segregation of people into relatively isolated, like-minded groups; diminish privacy and lead to screen addiction, depression and cyberbullying, including among children (see Chapter 6).

To ensure that digital transformation supports and growth and well-being, it is important to and reduce any inequalities that may be exacerbated by technological progress. While each country has its own social preferences and specific context, there are some policy actions that can be taken that are relevant for all countries, particularly investing in education and skills, among others (see Chapters 3, Chapter 5 and 6).

Shaping an inclusive digital economy and society is not easy, but it is vital. The OECD Going Digital project makes the case for a flexible, forward-looking and integrated approach to policy making in the digital era. Such an approach is crucial because digital transformation affects different aspects of the economy and society in complex and interrelated ways, making trade-offs between public policy objectives difficult to navigate. Moreover, the borders between policy areas are becoming blurred, making stronger co-operation and collaboration across policy silos essential, including for policy development and implementation.

The Going Digital Integrated Policy Framework helps governments develop well-suited and resilient digital policies. It also ensures a coherent and cohesive whole-of-government approach to fully realise the potential of digital transformation and address its challenges. The framework includes seven policy dimensions to: 1) enhance access; 2) increase effective use; 3) unleash innovation; 4) ensure good jobs for all; 5) promote social prosperity; 6) strengthen trust; and 7) foster market openness (see illustration below).

Going Digital Integrated Policy Framework
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Source: OECD (forthcoming[5]), “Going Digital: An integrated policy framework to make the transformation work for growth and well-being”.

Each of these integrated policy dimensions brings together multiple policy areas that do not stand in isolation, but are interrelated. This configuration underscores that leveraging the benefits and addressing the challenges of digital transformation requires identifying policy areas that are jointly affected and that need to be co-ordinated. It also highlights that all policy dimensions are needed to make digital transformation work for prosperity. Recommendations emerging in these policy dimensions need to be considered by policy makers when putting the framework into practice, including for the development of a digital transformation strategy.

Governments and stakeholders must work together to shape a digital future that harnesses the immense opportunities of digital transformation to improve the lives of all people. This requires a balancing act that will not be the same for all countries, as cultural and other factors will influence the most suitable policy environment. The OECD Going Digital Integrated Policy Framework and this report are designed to help countries strike this balance, make better policies in the digital era and ensure that no one is left behind.

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Wonki Min

Vice-Minister, Ministry of Science and Information Communication Technology, Korea

Chair, OECD Committee on Digital Economy Policy

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