The economic and health crisis triggered by COVID-19, has revealed the inadequacies of existing infrastructure and policies, ranging from social protection systems to healthcare. As existing support measures begin to expire in several countries, it is paramount to set in place the structural reform that can support economies as they transition onto the path of recovery.
This report is structured around six sections, with the first four analysing current trends by broad thematic areas that are the key building blogs of an economy: Enabling Environment, Human Capital, Markets and Innovation Ecosystem. Furthermore, it looks at priorities for economies across three timeframes: Those of the last decade, those that are critical for economic revival, as revealed by the crisis and those that could help societies develop productive, shared prosperity-enhancing and environmentally compatible economic systems. As such, it lays the foundation for a new direction to support policy makers and other leaders to define how to “build back better”.
The data from the Executive Opinion Survey suggests that business leaders see significant deterioration in important features of institutional quality over the past decade, such as decline in judicial independence, efficiency of legal frameworks and transparency.
High public debt has negative effects in future growth, potential debt sustainability challenges and financial instability.
Another area of concern during the last twelve years was high levels of debt in countries, as a result of their response to the 2008 global financial crisis and slow growth. High public debt has negative effects in future growth, potential debt sustainability challenges and financial instability. Although internet users globally have doubled, the digital divide between users and non-users is still on the rise. With only 53.6% of the global population having access to the internet, availability and use in the past decade remain far from universal.
In the phase of revival, governments must build out the digital delivery of public services to be able to disburse emergency funding to distressed companies and households as well as involve a shift to measuring economic success beyond GDP. They must also prepare support measures for highly-indebted low-income countries and plan for public debt deleveraging. Finally, governments will have to incentivise companies to move towards digital business models and invest in ICT development and digital skills.
Institutional environment in the transformation phase, will need fundamental reforms to achieve overall institutional quality, transparency, legal certainty and judicial independence in order to regain their lost credibility and the trust of their citizens. Infrastructure development in the future will need rapid shifts in energy mix towards renewable energy sources, which will involve changes to urban planning, broadening access to green public spaces, upgrading public transport and the protection of biodiversity and natural habitats.
The post COVID economy calls for countries to focus on shifting to more progressive taxation, rethinking how corporations, wealth and labor are taxed.
Finally, upgrading infrastructure should embed the broaden of access to electricity and ICT of countries and companies. The post COVID economy, which is marked by significantly higher public debt levels and exacerbated historical inequalities, calls for countries to focus on shifting to more progressive taxation, rethinking how corporations, wealth and labor are taxed. This will require both national reforms and setting an international cooperative framework.
Human capital-related priorities
Over the past decade, human capital development across advanced economies has stagnated, although a number of developing economies have made investments in basic upgrading of education and training systems. Across developed and developing economies, talent gaps remain large, local education systems are increasingly outdated and there are limits to international mobility. As a result, the ability to find skilled employees has declined across advanced economies by 7% relative to 2016, while improving across developing economies by 3%.
The lack of adequate digital skills not only hinders the widespread of ICT, but it also makes it difficult for workers to transition to new roles.
Another priority of the past decade was the shortfall of digital and other skills needed for the jobs of tomorrow. These shortages are expected to be higher because of the significant additional disruption and stagnation in the labor market due to the COVID-19 recession. The lack of adequate digital skills not only hinders the widespread of ICT, but it also makes it difficult for workers to transition to new roles.
Reskilling and upskilling: much-needed
Polarised wages between workers of different professions, gradual erosion of meritocracy in labor markets, decline in the assessment of professional management and lower evaluations of the ability of firms to develop diverse talent, as well as to allocate current workforce with relevant reskilling and upskilling into emerging professions, are all challenging priorities of the last decade.
One very notable priority of the past 12 years, is the persistent under-investment in the capacity of the Health System, which has become more dramatically apparent during the COVID-19 pandemic. The gap between the demand and supply of health personnel remains large with the World Health Organisation estimating a shortfall of 78000 professionals by 2030 in the Health System of the developed countries.
To ensure that future generations of young people enter the labor market with job-ready skills, focused efforts to renew training systems are required.
Additionally, individual efforts to undertake an investment in midcareer reskilling and upskilling can be motivated by government programmes, as well as by employers’ commitments to training, fair wage practices and merit-based management practices. Also, to ensure that future generations of young people enter the labor market with job-ready skills, focused efforts to renew training systems are required in the secondary education with an emphasis on the skills needed for emerging jobs.
A short-term revival of the economy
With a significant rise in unemployment in the COVID-19 context, the labour market will benefit from new policies, which support workers’ income and health needs in the short term, but also power their re-allocation to new jobs and professions in the short- to medium-term.
Job creation measures, such as funding small and medium-sized enterprises and new entrepreneurial clusters, as well as creating new, quality-focused apprenticeships collectively focused on the professions of the future, could further ease the transition to the new labour market.
The events of the past year have further revealed that health systems remain under-funded and under-staffed. In the short to medium term, investments will need to be focused on expanding personnel and capacity to manage the potential of COVID-19 resurgence as well as to deploy a future vaccine.
Empowering human capital
To create a wholesale transformation towards the jobs of tomorrow, economies must fundamentally upgrade technical and vocational training and university education, innovate and refresh teaching methods, so that students will be able to develop their creativity and critical thinking skills and to also prepare them to be socially just citizens.
Recent trends have seen a polarisation of wages, the disconnect of pay and productivity, as well as erosion of wages and this calls for new regulations.
With the rapid expansion of digitalisation and the adoption of new technologies in all sectors, new formats of work, such as work online work platforms call for new forms of regulation and work standards in the digital economy. Recent trends have seen a polarisation of wages, the disconnect of pay and productivity, as well as erosion of wages and this calls for new regulations, which will improve quality, wages and standards of work, secure workers’ wellbeing and benefit firms and the economy as well.
The capacity of the Health Systems will need to be strengthened by broad public investments. This will increase employment in the area of healthcare, create preparedness for new health emergencies. Finally the use of technology can support efforts to scale health and care and innovation in associated business models, thus creating possibilities for higher wage and higher quality work for health and care industry professionals.