Digital and ‘soft’ skills needed to boost productivity

Future productivity will depend on the capability of people and continual change in the economy. These factors will help us embrace the digital economy and allow Australia to take advantage of the significant opportunities presented for future prosperity.

These are conclusions from the Department of Industry’s Office of the Chief Economist, whose latest Industry Insights publication focussed on future productivity.

As well as discussing what contributes to productivity and to explain the challenges the Australian economy is facing as it makes the transition to the digital economy, the report helps to address an observation made at one of AIS’s 2018 skills forums.

‘Soft skills’ need more clarification to determine what they are and if they are the same in different contexts.

What drives productivity growth?

Like other advanced economies, Australia’s productivity growth has been low in recent years. The report presents several points of view on the reasons for this but errs towards the explanation that, as history suggests, high productivity growth proceeds in waves. At the moment low growth is being caused by a slower pace of change in the economy, which is measured by factors like job turnover, labour mobility and technology diffusion.

Another influence on growth could be that economies worldwide are in the last phase of the third revolution industrial revolution and the early phase of the fourth (see figure 1).

Figure 1

It takes time for new technologies to spread through the economy; being an early adopter can be costly. As digital technologies become cheaper, better, and diffused in production processes, productivity is expected to grow. However, the report suggests small and medium-sized enterprises (SMEs) in Australia may have difficulties imitating the success of larger businesses that have the resources to adopt new technology and processes. Over one fifth of SMEs say that lack of access to skilled labour is a barrier to growth. Another hurdle cited in the report is lack of managerial capability to help a business absorb, adapt and reap the full benefits of new technologies.

What does this mean for skills?

The Industry Insights report makes clear that soft skills in the digital economy must include strong communication and business skills, with leadership and management fitting into this category. The final chapter, contributed by the Foundation for Young Australians (FYA), talks about the ‘new basics’, the title of its 2016 study, which found that since 2013 demand for employees with digital literacy has increased by 212 per cent, critical thinking skills by 158 per cent and creativity by 65 per cent. Further, employees with capabilities in critical thinking and problem-solving were likely to receive up to $8,000 more per year in wages.

In 2017, FYA investigated how jobs will be changing. Their New Work Smarts report suggests that, on average, workers will spend 30 per cent more time every week learning skills on the job; 100 per cent more time at work solving problems, over 40 per cent more time on critical thinking, and over 70 per cent more time using STEM (science, technology, engineering and mathematics) skills. Workers will use written and verbal communication and interpersonal skills for 29 hours each week (up 14 per cent); and have to activate an entrepreneurial mindset because the workplace will have less management (down 26 per cent), less organisational coordination (down 16 per cent) and less teaching (down 10 per cent).

The FYA research also demonstrates the need to cultivate the technical skills required in the digital economy as well as building people’s adaptability to apply skills in a wide range of contexts. Learning, it concludes, needs to be distributed across an entire lifetime, with buy-in from students, parents, educators, industry and government. It argues a society-wide commitment will be needed to embrace the fourth industrial revolution and effect the next upward cycle of productivity.