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Stop focusing just on startups: Digitalization of U.S. workforce impacts every industry, report finds

Brookings Institution report finds broad technological shifts in the workplace, akin to another ‘Industrial Revolution,’ and cities should take note


When Mark Muro, a senior fellow and researcher at the Brookings Institution, began studying how digitization and technology are changing our economy, he expected to find the high-tech industry leading this shift. He didn’t expect to find technological change is a much broader wave reshaping the entire U.S. economy.

“I came in thinking this would lead to much more emphasis on coding, and clearly there’s a need for coding,” he says. “But there’s also a whole lot more jobs using everyday software packages and enterprise software. That’s the leading edge of change right now.”

Digitization and the American Workforce, released today by the Brookings Institutions’s Metropolitan Policy Program, found evidence of a broad-based shift. Co-authored by Muro, Sifan Liu, Jacob Whiton, and Siddharth Kulkarni, the report found that between 2002 and 2016, the number of jobs with high digitalization scores tripled, from 4.8 to 23 percent of the workforce, while the number of jobs that has low digital scores plummeted, dropping from 55.7 to 29.5 percent. It’s no news technology is changing society, but the scope of the shift suggests education and local economic development initiatives aren’t keeping pace.

Brookings Institution

More importantly, that shift towards jobs with a high degree of digital skills is accelerating. A third of all jobs created since 2010—4 million of 13 million—fell into this category. Nearly every occupation studied, 517 of 545, was subject to increased digitization, and the increase in digitalization was most stark among some previously low-digital jobs, such as social and human service assistants. Obtaining these technical skills create a pay differential—a mean salary of $72,896 for high-digital jobs, and $30,393 in low-digital occupations—that can’t be explained solely by educational differences.

The results suggest that while cities are right to focus on tech hubs and innovation centers, without expanding their efforts to re-skill, retrain, and re-educate a wider swath of the population, they’re only doing part of the job of adapting to the digital changes sweeping the economy. While regions and cities should focus on expanding the high-skill IT talent pipeline, the report concludes, the also greatly need to expand basic digital literacy, especially among underrepresented groups.

“We’re living through something akin to the Industrial Revolution right now,” says Muro. “Digital adoption and computerization is on a very short list of one of the biggest drivers of change and economic outcomes of our time. There’s a dwindling number of occupations where you can get by without these skills. Tech both empowers, and also polarizes.”

The meta-analysis tracked changes in 545 occupations since 2001, which covered 90 percent of the U.S. workforce. To capture the scope of this shift, Muro and his colleagues analyzed the Occupation Information Network (O*NET) database, a project funded by Department of Labor’s Employment and Training Administration, and rated the digitization level of different jobs on a 100-point scale based on each role’s required computer knowledge and computer interaction.

The impact on cities is reflected clearly in job growth and median wages. The “digital rich are getting richer,” with job growth between 2002-2016 disproportionately going to cities with high mean digital education scores. A metropolitan areas’ current wage level and recent wage growth were found to be highly correlated with mean digitalization score, contributing to the continued polarization of cities’ economic fortunes.

“No longer are the incomes of college-educated tech and other workers converging across cities,” the report notes. “They are diverging, as workers in digitally oriented metropolitan areas reap the benefits of working there while others do not.”

Muro points to some cities that are doing a good job of focusing on inclusive technological education and training, such as Pittsburgh, Charlotte, and Washington, D.C., the later through the efforts of programs such as Byte Back. But so far, Muro feels the effort isn’t equal to the challenge depicted in the report.

It’s a social inclusion issue, he says. While the focus mayors and local leaders place on tech incubators isn’t misplaced, efforts to build a 21st century tech economy should be focused on a much wider pool of jobs, skills, and training programs. The classic viewpoint is to focus on technological change and innovation within a narrow focus on software startups, says Muro. But the focus should really be on how the software and IT industries are changing all industries, and the rapid pace of that change.

The bulk of the action, in fact, are in other industries, such as retail, healthcare, office administration, and mechanics. Not everyone needs to go to coding bootcamp; but they all should be fluent in basic, everyday tech and the enterprise software that’s running the bulk of American offices. A constellation of tech boot camps, reskilling programs, and training programs, and a renewed focus on high school education and utilizing community colleges, all focused on social inclusion and improving basic digital literary, need to be adopted. The construction of an inclusive labor market, the report says, won’t build itself.

Cities should be expanding training and apprenticeship programs, subsidizing slots at private digital boot camps and coding schools, fund learning accelerators, and supporting organizations (such as Black Girls Code) as well as hackathons that encourage and support diversity in tech. Organizations such as LaunchCode, a St. Louis non-profit that find tech-focused apprenticeships with local businesses and focuses on populations under-represented in the tech world, were cited as great examples.

“We need a broad skilling up of the United States,” he says. “The cost of not doing this is social exclusion.”