In recent months we are receiving a lot of message about the goodness of digital transformation. Some people affirm that if will produce large benefits for our societies. We expect that it can increase the productivity of our economies and increase innovation providing new services for all of us. On the other hand, some people think about this process as a way to destroy many jobs affecting many families. I am going to analyze this factor with data in order to provide reasonable arguments to create an opinion about it.
First of all we can look at the following graphic, showing the production of the four main Euro economies.
The behaviors of the four economies follow a uniform growth until the crisis of 2007. The differences are obvious in the case of Germany and Spain. Germany is not very affected by the crisis but Spain is.
In this point we should analyze if this has been due to different aspect related to productivity. I am going to analyze this factor with another indicator more related to labor productivity.
As we can see, the behaviors of the four economies are uniform too, although there are some significant differences. The French production per employee is now higher than the German one. And a more important thing is that the effect of the crisis on the indicator is not visible. Crises do not affect necessarily the productivity because productivity is more related to the production process, and technology, than to the markets. However, they can affect considerably the total level of production.
When we are talking about digital transformation we are talking about a change in the production processes, and this indicator is expected to be increased changing the slope of the curves. The level of employment would depend on the markets that would define the used production capability.
There are not many global indicators related to the implementation of digital transformation in businesses. But as a first approach I am going to use the existence of presence webs owned by businesses. Although digital transformation covers all the processes of the company, the sale process can be significant.
The interest for the digital world is large in Germany, and higher in Spain than in France. Although digital transformation is something much more complex than having a website, we can deduce than Spain has a better positioning than Italy and France for the digital world. We can make a lot of hypotheses about this fact, but it is reasonable to think than Spanish companies look at digital transformation as a fast way to reduce the gap with France in labor productivity.
In order to analyze the effect on the employment we need to analyze the market from the demand side.
As we can see the access to digital services is over the 80 % in all the main economies providing a large market to new digital services. The different access in different countries is not a problem itself for any country because European Union is a shared market. In this case, it is predictable that Spanish business increase their productive capability while French ones reduce their own if they do not advance in the digital world.
Now, I am going to continue this dissertation analyzing if digital transformation is the main aspect that must consider businessmen and investors. One thing that can seem surprising is the productivity of France in front of the German one. Germany has more businesses with digital presence and even has a higher expenditure in research and development as we can see in the following graph.
The answer is that the production over the employees is not the exactly productivity of the labor factor. It depends on the other production factors, for instance, the higher level of technology the higher production per employee. And it depends on the cost of the other factors too. An access to a cheaper energy, for instance, can increase this indicator. On the other hand, the level of technology is not necessarily linked to the expenditure in R & D because technology can be acquired through purchase. In the Euro zone the technology level has not significant differences among countries, although companies with more investment in R & D can get a little advantage but large companies have usually got multinational presence.
Other interesting issue to be considered is why the crisis of 2007 produced a larger effect in Spain than in other countries. There are a lot of explanations for it but I am going to analyze the political conjuncture.
Looking at the last graph we can see than in France and Italy there is a constant level of employed people per total population. In the case of Germany, there has been historically a slight growth. However, in Spain, this piece of data is not uniform. The percentage of people employed is not structural. It depends strongly on the political conjuncture. Italy has been affected by a lot of changes of government and the presence of many unstable governments; however, it does not affect the level of employment. In the case of Spain, we need to look at this fact in deeper.
The curve was flat until the death of General Franco in 1975. Then the process of political transition started with a decrease of this indicator that can be related to a period of political instability. In 1982, the socialist party gets the government and produces a change of trend until 1990. The period of growth of this indicator is mostly during the government of the popular party from 1996 and it continues with the socialists until the crisis of 2007 and the new change of trend follows the arriving of popular party to the government again. Without considering the goodness or badness of any political option, it is noticeable that Spain is different to the other countries of the main Euro economies because the employed people fluctuates a lot with political changes, while this fact cannot be perceived in countries with many periods of unstable governments like Italy.
The goodness of certain policies can depend on the economic outlook as we can see if we look at the following graphs related to the last years.
If we look at this indicator we can see that the socialist government reduced the unemployment until the crisis of 2007, however, it did not know how to cope with the unexpected event of the crisis. This can be seen well in terms of unemployment rate. The increase of labor force can be due to immigration and it was stopped after the crisis. The lack of jobs stopped the immigration automatically.
In this case the initial reduction of the unemployment rate can be seen clearly. This graph is showing us something that we know previously, the productivity of the companies does not changed with the crisis what changed was the number of employed people.
As conclusion, people would be more worried about political transformation than digital one. In the case of Spain, Spain is well positioned to get benefits from digital transformation. What Spain needs is politicians with higher concept of a state that do not produce damages to population with their political disputes and stable political institutions that have not got a strong influence in the life of the citizens, as we can find in other countries of its environment. And it is important than people understand that the goodness of policies depend on the economic outlook and ideologies should never drive any democratic society but reasonable analysis trying to fit the changes in the environment to serve well the citizens.