OECD Observer
Digital disruption

Goethe said, “He who lives must be prepared for changes.” The fourth industrial revolution will certainly bring about significant changes that we will have to be prepared for. Japanese estimates suggest that the use of big data and analytics in some divisions of Japanese manufacturers could lower maintenance costs by almost JP¥5 trillion (€41 billion). Other estimates suggest that new technologies could boost value-added in Germany’s mechanical, electrical and automotive sectors, among others, by an additional €78 billion by 2025. 

However, new technologies are being diffused rather slowly, according to The Next Production Revolution: Implications for Governments and Business. Take the example of Germany, where a 2015 survey of 4,500 businesses found that only 4% had implemented digitalised and networked production processes or had plans to do so. Smaller firms are lagging behind, as only 36% of surveyed companies with 50 to 249 employees in Europe use industrial robots, compared to 74% of companies with 1,000 or more employees. Global connections via trade, the international mobility of skilled labour, and connections and knowledge exchange within national economies are some of the factors that shape the diffusion process of new technologies.

The effects of productivity-enhancing technology on employees are more mixed as it causes job losses in some cases and job gains in others. Even sectors such as commercial hauliers, which represent three million employees in the EU, could see marked labour market shocks if the need for drivers is eliminated by technology, according to the report. Although the overall employment and economic effects of new technologies bring many benefits, the disruption caused by technological change should not be underestimated.

Policymakers have a key role to play in helping create the right conditions for the adoption of new technologies and knowledge, particularly among smaller businesses. It includes encouraging life-long skills development, greater interaction between industry and education, and improving conditions for business creation, for instance. Such adjustment processes are needed to prepare for the radical (and unforeseen) changes that digital disruption means.

OECD (2017), The Next Production Revolution: Implications for Governments and Business, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264271036-en

©OECD Observer No 310 Q2 2017