Podcast 🎧: Investing in people and the economy for a digital society

11.11.2020 | Federico Plantera

In parallel with a crisis of public health, the COVID-19 pandemic has caused great damage also to the national economy of most countries. Regardless of how hard these have been hit in terms of casualties and infection rates, lockdown measures have been enforced to different degrees almost everywhere in Europe and around the world. As a consequence, an unprecedented economic crisis has disrupted jobs, incomes, value chains, requiring governments and international organizations to act fast and channel funds into domestic markets to stay afloat.

Thinking of a post-pandemic labour market and economy, where should we look at? With Linnar ViikProgramme Director of Smart Governance at eGA, we look at three areas where the intervention will certainly be much needed: Public-Private Partnerships, firms, and human capital.

 

The basis for a widespread transformation, beyond public services

Recent budget talks, both at the governmental level for next year’s public expenditure plans, and for the European Union’s recovery package to balance the effects of the COVID-19 crisis, are mobilizing huge resources to be invested in digital development. Just as an example, about 20% of the latest European stimulus – roughly €150 billion – is set to be devoted to digital spending.

These times are pushing for a shift in focus from public services digitalization to the economy as a whole. However, two preconditions seem set to determine whether such heavy spending will be effective or not. “First, it comes down to the presence of a digital agenda at the national level. How are governments set to play the key role of engaging different sectors in the process of digital transformation? This time it’s not about specific areas of the economy, or the government alone, but the whole apparatus in all its bits and pieces,” Linnar Viik says.

While this applies to triggering digital transformation in a distributed manner, at the same time, national governments need to identify which economic sector can pave the way and set an example in this sense. “The focus and starting point must be an economic sector that is driving your economy. Germany is an example of that, with industrial production – indeed, investments have been directed at fostering innovation in that area already since Industry 4.0, in 2011. But this is not a one-fits-all option, of course. To each, their own, so this can vary from country to country,” Viik explains.

Thus, having in place a digital agenda and a clear focus at the driving economy sector become strong preconditions to turn planned investments into broader returns for the society, domestically.

 

Increasing involvement in Public-Private Partnerships

One of the most appealing options to make the public and private sectors come together, in this new and trying convergence, is Public-Private Partnerships (PPP). These have been particularly in fashion in the past decade, with notable examples also in Estonia (dating basically to the beginning of our digital transformation journey).

Apart from own, national funds, EU governments have the great responsibility also to administer and distribute resources coming from the European budget. And exactly for this reason, possibly a change – or, better, an expansion – of the actors involved in PPPs can prove effective to make these funds reach those outside the usual circle of beneficiaries.

“Governments, in these frameworks, have found ideal partners in big enterprises and universities. They speak the same language in that sense, have similar targets spanning beyond one decade, and have the intellectual capacity to address relevant topics. However, these partnerships might not translate quickly into new jobs and such. So, we need to engage SMEs, as well as companies in earlier stages of corporate lifeStand-up companies we may say, yet to be created; start-ups; scale-up phase firms, looking to grow and expand their outreach,” Viik warns.

 

The importance of having a digital DNA

It all sounds great, apart from the fact that not all companies display the same readiness in taking up digital solutions. Indeed, the COVID-19 crisis has shown that while many business have faced serious struggles, other firms have managed to even increase their revenue in the same period. We’re talking about tech companies, or those in the platform and gig economy.

As outlined also in this McKinsey report from October 2020, there is a general increase in awareness over the necessity of levelling up in terms of tech adoption. “More than about the size or sector where they operate, it’s companies that have digital in their DNA that managed to mitigate lockdowns and the economic crisis. Firms with a strong digital DNA were able to move fully into a digital workflow pretty much overnight, and had to make very little effort in doing so,” Viik explains.

Those that were not digital-by-nature, we may say, in the best case struggled; in the worse, they went bankrupt. “When looking at SMEs on this topic, we see that the focus so far lied mostly on creating a good product or service, valuable for existing customers. However, that model now needs to be rethought. It’s not about gaining access to technology in itself, but developing a conscious digital strategy that considers, above all, the importance of digital skills in the people you hire,” Viik says.

 

People and skills will be more crucial than ever

Talking about skills, automatically, shifts the focus on human capital – the people-side of the equation in labour markets. And there’s no quick fix on this point, because people are not software.

“Developments in technology happen fast. You can upgrade an app in seconds or minutes, but you can’t do the same with a human being. It takes time and steps. What I’ve seen so far on a governmental level is a non-strategic approach to the upskilling of society. What does it mean? That technology almost flows into the hands of children, parents, pensioners, and also jobs. Most jobs today require some degree of digital competence, even the most unexpected ones. But that’s why governments need to develop an upskilling strategy tailored on individuality, and diversity of tasks,” Viik warns.

Active labour market policies, aimed to re-train people to the end of increasing their employability, point the way forward. Not only because they would allow a progressive shift away from a subsidy-based model – so necessary during the darkest months of crisis – but also put people back to work with new knowledge.

“Successful stories in this sense come from public-private vouchers, where companies recognize the need to upskill their labour force and give people the time to do that, following digital training courses organized by public agencies for them. This was the case in 2009 for example, in Estonia, when a massive digital skills training for blue collars took place. Then, when these people come back to their workplace, better trained, they also serve as a push for the employer to reorganize tasks around more meaningful activities that put such knowledge to good use. Post-COVID19, the momentum for upskilling people will definitely be there,” Viik concludes.

Ultimately, through funds and appropriate development programmes, governments play a crucial role in shaping the post-COVID19 economy. By making people and businesses understand that the future has to be digital, to different extents, they inform better collective and individual, business and career decisions. And increase the resilience typical of a society digital by definition.