Skills are needed to grasp digital opportunities

The GIZ authors admit that it is difficult to assess the impact of digitalisation on the labour market. Job losses are common in the formal economy, as automation makes workers redundant. On the other hand, digitalisation may well mean progress in the informal economy.

The informal economy consists of businesses that are neither officially registered nor stringently regulated. They mostly do not pay taxes and their productivity is typically low. According to GIZ insights, however, digitalisation can improve matters if employees acquire new skills, often including basic literacy. However, owners are only likely to invest in equipment and training if other risks do not look too great. The implication is that poor infrastructure (in terms of water and power supply or transport, for example) is a serious obstacle.

On the upside, according to GIZ, financial digitalisation can make accounting easier, increase sales and boost profitability. At the same time, the internet can facilitate and improve interaction with customers, clients and suppliers.

In the longer run, digitalisation can help to formalise a business as it becomes more productive. Access to e-government services can simplify administrative processes. The scope for improving occupational health or providing social-protection services (including health insurance) increases too.

The research paper cites Kenya where the cashless payment system M-Pesa has triggered considerable progress. It has made financial transactions much easier, with the result of informal markets becoming more transparent. Access to loans and other financial services have improved too. The GIZ similarly appreciates Mexico’s Tabletas Concanaco programme. It has the dual aim of making informal enterprises more productive and taxing them. The companies are equipped with software and free internet access. Ultimately, the revenues of the companies concerned and the government increase.

The greatest challenge, according to the GIZ authors, is poor skills, so technical and vocational education and training (TVET) is essential. Opportunities for acquiring relevant knowledge vary from place to place, but tend to be better in urban areas.

To some extent, informal business can benefit from TVET courses run by non-governmental organisations or private-sector training centres, the GIZ states. Online learning can prove useful too. The authors report that some universities, libraries and other public institutions are involved in relevant internet platforms and courses, with target groups including school dropouts, persons with disabilities, returning migrants and other disadvantaged people. Different target groups, the experts point out, often need different TVET courses. Gender, age and prior education of participants are relevant too.

Mobile learning, which relies on mobile-phone technology, is said to have an immense potential for reaching out to a great diversity of people as it is easy to use and cost efficient. The authors emphasise that mobile learning has delivered good results in agriculture.

The GIZ paper highlights different kinds of skill requirements. Literacy and numeracy are basic, but non-routine tasks generally require cognitive skills of an increasingly higher order. Moreover, it is often important to know how to interact competently with others. Handling data, coping with computer snags and protecting privacy matter too.

TVET initiatives help to promote entrepreneurial skills, the authors add. They advise organisations that offer TVET courses to pay attention to digital opportunities in the informal sector and to network among one another internationally. Countries with fragmented TVET systems and underperforming education sectors in general would benefit in particular, the authors state.

Link
GIZ, 2020: Digital transformation in the informal economy.
https://www.govet.international/dokumente/pdf/giz2020-0256en-digital-transformation-informal-economy.pdf

Rishikesh Thapa recently earned his master’s degree in International Relations and Cultural Diplomacy from the Hochschule Furtwangen University.
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