IT age: beyond the myth

OECD Observer

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The next 40 years are likely to see more people use information technology, at least if recent trends are anything to judge by.

Then again, are OECD countries really embracing the information and knowledge economy, and if so how fast? Just what are businesses and individuals using the Internet for and how much are they paying for the privilege? And do enough people have the skills they need to compete in the new technology world? These are just some of the all important questions that the IT explosion of recent years has raised, not to mention the dot.com crash that followed.

A new OECD report, Measuring the Information Economy, offers some answers, as well as some useful insights into performance in the information economy. It is a much-needed reality check on the truth about the new economy. Some of the facts may surprise you. Take Internet access. An ever increasing number of people in OECD countries are hooked up to the Internet, but less than half of them actually use it daily. And while much has been said and written about global e-commerce, businesses chiefly use the Internet for marketing, not sales.

Rare knowledge

New technology means new skills. That may seem self-evident. But exactly what computer skills will be required in coming years, not just in the information technology industry itself but also in all the other businesses that use ICT? And how many people with a particular type of expertise will be needed?

Indicators of skills required for the information economy are of increasing importance to policymakers, especially because of growing skills shortages in ICT in many industrial economies. And then there is the question of the levels required. True, when new technologies are introduced into the production process, demand for low-skilled workers generally drops and that for high-skilled workers rises. But not all ICT-related occupations are high-skilled. And in some cases new technology may simply replace middle-level managers, reducing the need for that category of high-skilled employee.

The distribution of high- and low-skill ICT-related occupations in the US and EU shows an interesting pattern. Although the share of ICT workers is growing everywhere, in 1999 more of the ICT workforce in the US appeared to be relatively more highly skilled (77%) than that of the EU (56%). But one thing is clear in both areas: the demand for highly skilled ICT workers is growing rapidly. Jobs in this sector increased at about 49% annually in Finland between 1997 and 1999, for example. But the sector still accounted for only an average 1.6% of the total EU workforce in 1999 and 2.4% of the US workforce. This makes skilled ICT workers quite a rare species.

Data are not easy to compare, as there is no internationally agreed list of ICT-related occupations, but high-skilled ICT-related jobs include computer designers and programmers and industrial robot controllers, while low-skilled include repairers and installers of electronic equipment and telephone lines.

E-commerce or just e-marketing?

The Internet has changed ways of doing business worldwide, but not necessarily in the way experts originally expected. Take electronic commerce. The vision of a stay-at-home society using keyboards to order their milk or car or even life insurance policy has simply not happened at the scale many projected.

In fact, the Internet is still chiefly used for marketing and advertising, rather than actual selling, and the Internet accounts for just a very small proportion of total sales. What is more, most of the sales that do take place online are among businesses and, far from being global, are largely domestic. Many firms may be using the Internet, but few of them are actually distributing their goods and services online or offering interactive electronic payment facilities.

A survey of US business in 2000 found that some firms offer online customer support, but do not take online orders. Others will let you order online but will not accept electronic payment. And of the firms who paid their own bills online, almost a third (29%) were not using electronic means to place their orders.

To be sure, online buying and selling is more widespread in services industries than in manufacturing, and business transactions account for the bulk of electronic commerce, with sales to households accounting for less than 30% of total Internet sales. Nonetheless, it is business-to-consumer Internet trade that has attracted most attention in recent years. This may be at least partly because household expenditure in OECD countries typically accounts for more than half of total domestic demand. And the growing interest of policymakers in issues such as consumer trust and privacy protection in the online environment has raised demand for information and indicators of consumers’ online transactions.

The level of Internet sales to households varies widely among OECD countries, however, from about 30% in Finland and Luxembourg to little more than 2% in Korea. And they can be limited to very specific sectors. Internet sales in the UK account for 0.36% of total sales, but if financial services and banking are excluded, Internet sales are just 0.1% of the total.

One interesting aspect of the figures available so far shows that for consumers, access to the Internet is not the only factor when deciding whether to shop online. Over 60% of individuals in Denmark and Finland had access to the Internet in the first quarter of 2002, although only some 18% of them actually bought goods and services over the Internet in Finland as compared to more than double (38%) in Denmark.

©OECD Observer No 235, December 2002




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