Information and communication technologies (ICT) are profoundly changing the skill profile of jobs. Skill development policies need to be overhauled to reduce the risk of increased unemployment and growing inequality. To thrive in the digital economy, ICT skills will not be enough and other complementary skills will be needed, ranging from good literacy and numeracy skills through to the right socio-emotional skills to work collaboratively and flexibly. 56% of the adult population have no ICT skills or have only the skills necessary to fulfil the simplest set of tasks in a technology-rich environment. Young people, however, are much more ICT proficient than older generations. Skills policies should seek to: strengthen initial learning; anticipate and respond better to changing skill needs; increase the use of workers’ skills; and improve incentives for further learning.

Measuring R&D – in a way that makes the data internationally comparable – is not an easy task; that’s why the OECD Frascati Manual was first developed in 1963. Nowadays, this international standard is the basis of R&D statistics in OECD countries and beyond. It also underpins the definition of R&D used in accounting standards and in the UN System of National Accounts. The Frascati definition of R&D is widely used for policy purposes, too. The OECD National Experts on Science and Technology Indicators (NESTI) recently oversaw the 6th revision of the Frascati Manual – improving its clarity and enhancing its relevance through greater compatibility with other statistics and new statistical guidance on R&D tax incentives and globalisation.

This report examines the effects of investments in Information and Communication Technologies (ICTs) on i) total labour demand; ii) labour demand by skill level; and iii) labour demand by industry in selected OECD countries over the period 1990-2012. ICT investments are estimated to have raised total labour demand in most countries over the period 1990-2007 but to have reduced it after 2007. In the latter period, the decrease in total labour demand has been accompanied by polarisation in favour of high and low skills and against medium skills. Yet, the effects on both total labour demand and polarisation are estimated to disappear in the long run. These changes have occurred through a process of labour reallocation across industries, away from manufacturing and towards some services, including care, culture and recreation.

Job displacement (involuntary job loss due to firm closure or downsizing) affects many workers over their lifetime. Displaced workers may face long periods of unemployment and, even when they find new jobs, tend to be paid less and have fewer benefits than in their prior jobs. Helping them get back into good jobs quickly should be a key goal of labour market policy. This report is part of a series of nine reports looking at how this challenge is being tackled in a number of OECD countries. It shows that the United States has a relatively high rate of job displacement and that only one in two affected workers find a new job within one year. Older displaced workers and those with a low level of education fare worst. Contrary to most other OECD countries, displaced workers have long been a target group for policy intervention, and a number of system features, like rapid response services, are promising. But the success of US policies is limited because overall funding for the workforce development system is insufficient and because only trade-related job displacement comes with generous entitlement for training and better benefits.

Demographic shifts, globalisation and new technologies are changing the nature of work and careers. Digitalisation is seen as a key influence on the future of work over the next decades. Ever-increasing computing power, Big Data, the penetration of the Internet, Artificial Intelligence (AI), the Internet-of-Things and online platforms are among developments radically changing prospects for the type of jobs that will be needed in the future and how, where and by whom they will be done. This has sparked a debate about the risk of greater job insecurity, growing inequality and even mass “technological” unemployment.

Productivity growth slowed in many OECD countries even before the crisis, which amplified the phenomenon. The slowdown in knowledge-based capital accumulation and decline in business start-ups over this period also raises concerns of a structural slowing in productivity growth. The economic forces shaping productivity developments can be better understood by focusing on three types of firms: the globally most productive (i.e. global frontier firms), the most advanced firms nationally and laggard firms. • Productivity growth at the global frontier has remained relatively robust in the 21st century, despite the slowdown in average productivity growth. For example, labour productivity at the global frontier increased at an average annual rate of 3½ per cent in the manufacturing sector over the 2000s, compared to an average growth in labour productivity of just ½ per cent for nonfrontier firms, and this gap is even more pronounced in the services sector. However, firms at the global frontier have become older, which may foreshadow a slowdown in the arrival of radical innovations and productivity growth. • The rising gap in productivity growth between the global frontier and other firms raises questions about: i) the ability of the most advanced firms nationally to adopt new technologies and knowledge developed at the global frontier; ii) diffusion of existing technologies and knowledge from national frontier firms to laggards; and iii) the rise of tacit knowledge as a source of competitive advantage for global frontier firms. The aggregate gains from the diffusion of global frontier technologies and knowledge will be magnified by policies that facilitate the reallocation of scarce resources to the most productive firms. • The most advanced national firms in some economies have productivity levels close to the global frontier, but their impact on aggregate productivity is muted, to the extent that they are undersized. • Relatively high rates of skill mismatch imply rigidities in labour market matching and constrains the growth of innovative firms and influences wage inequality. Tackling skill mismatch is particularly important in light of the projected slowdown in human capital accumulation and evidence that mismatch has increased over time (EC, 2013a). Moreover, addressing policies to reduce skill mismatch can help improve equality by incentivising firms to pay for better-matched skills. • It is important that young firms either grow rapidly or exit but not linger and become small-old firms. Three policy areas appear to be of key importance to sustain productivity growth: i) foster innovation at the global frontier and facilitate the diffusion of new technologies to firms at the national frontier; ii) create a market environment where the most productive firms are allowed to thrive, thereby facilitating the more widespread penetration of available technologies; and iii) reduce resource misallocation, particularly skill mismatches. Reviving diffusion and improving resource allocation has the potential to not only sustain and accelerate productivity growth but also to make this growth more inclusive, by allowing more firms and workers to reap the benefits of the knowledge economy.

The digital economy now permeates countless aspects of the world economy, impacting sectors as varied as banking, retail, energy, transportation, education, publishing, media or health. Information and Communication Technologies (ICTs) are transforming the ways social interactions and personal relationships are conducted, with fixed, mobile and broadcast networks converging, and devices and objects increasingly connected to form the Internet of Things. How can OECD countries and partner economies maximise the potential of the digital economy as a driver for innovation and inclusive growth? what are the evolutions in the digital economy that policy makers need to consider and the emerging challenges they need to address?

This report provides policy makers with insights and tools to mitigate the challenges of ageing societies and make the most of the opportunities they present. Three considerations underpin the assessment. First, ageing societies are not “a problem” as such. Longevity is the result of socioeconomic development and can provide opportunities for growth, such as through technological development. Second, ageing societies are not simply societies of “older people”. Cities, where older people live with a high quality of life, can be good places for any generation. Third, unlike other potential challenges, such as a financial crisis or natural disaster, ageing trends and their impact can be fairly predictable. Cities can thus take action now to prepare for future demographic changes. Those cities at the forefront in addressing these changes offer useful experiences for others. Policies for ageing societies are thus not only about responding to today’s needs and opportunities, but also about anticipating the future population structure, and the economic and social pathways for a smooth transition. Cities are essential partners for effective policy action in ageing societies and offer inspiring examples. Ultimately, cities are striving, in the face of increasing demographic pressures, to enhance their attractiveness to households and firms. Efforts to promote wellbeing for their residents, whether young or old, will help them not only support increasing numbers of older people as effectively and efficiently as possible, but also attract the younger people that they need to ensure continued economic and social dynamism. Ultimately, policies to meet the challenge of demographic change will be central to the construction of economically and socially resilient cities.

Migration is a feature of social and economic life across many countries, but the profile of migrant populations varies considerably. In part this is because of the variety of sources of migration. In much of Europe, for example, citizens enjoy extensive rights to free movement. In Australia, Canada and New Zealand, managed labour migration plays an important role. Other sources include family and humanitarian migration. Whatever its source, migration has important impacts on our societies, and these can be controversial. The economic impact of migration is no exception. Benefit or burden – what’s the reality? To answer this question, it can be helpful to look at migration’s impact in three areas – the labour market, the public purse and economic growth.