Digitalization During the COVID-19 Crisis: Implications for Productivity and Labor Markets in Advanced Economies

Staff Discussion Notes, March 13, 2023

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Canonical URL: Digitalization During the COVID-19 Crisis: Implications for Productivity and Labor Markets in Advanced Economies

Authors: Florence Jaumotte, Longji Li, Andrea Medici, Myrto Oikonomou, Carlo Pizzinelli, Ippei Shibata, Jiaming Soh, Marina Mendes Tavares
Published: March 13, 2023
Series: Staff Discussion Notes
DOI: https://doi.org/10.5089/9798400232596.006

Authors: Florence Jaumotte, Longji Li, Andrea Medici, Myrto Oikonomou, Carlo Pizzinelli, Ippei Shibata, Jiaming Soh, Marina Mendes Tavares
Publication date: March 13, 2023
Main theme: Assessment of how pandemic-induced digitalization affected productivity and labor markets in advanced economies, including whether it produced structural shifts in the economy or labor demand.

The pandemic accelerated digitalization and triggered a partial catch-up by less digitalized entities in advanced economies.
Higher digitalization levels shielded substantially productivity and hours worked during the crisis.
The extent to which pandemic-induced digitalization led to structural change in the economy is less clear.
Less digitalized sectors have rebounded more strongly, albeit after stronger declines.
Workers in digital occupations were more shielded from the crisis, but there does not appear to be a structural change in the composition of labor demand.
Shifts in labor supply are more likely to be permanent, driven by the increase in working from home.

Digitalization provided protection for productivity during the COVID-19 crisis.
The note emphasizes longer-term productivity implications but finds uncertainty about whether digitalization has induced structural economic change.

Digital occupations: workers in digital occupations were more insulated from the crisis.
Non-digital sectors: less digitalized sectors experienced stronger declines during the crisis but showed stronger rebounds afterward.
Labor demand composition: no apparent structural change in the composition of labor demand as a result of pandemic-induced digitalization.
Labor supply: increases in working from home are identified as a driver of likely permanent shifts in labor supply.

Monitor whether pandemic-accelerated digital adoption leads to persistent structural changes over time.
Address potential labor market inequalities between digital and non-digital workers, given differential shielding during the crisis.
Consider labor market and social policies that account for more permanent shifts in working from home and their implications for supply, productivity, and worker welfare.

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