This section organises the different dimensions of resilience across industries set out in Chapter 3, and summarised for reference in Table A A.1 below. While this report deliberately refrains from condensing the different aspects into a single measure of risk for each industry,1 it is nevertheless interesting to see how each industry or each dimension fares compared to the others. This aids in understanding which dimensions might be most relevant for an industry, and which industries are most vulnerable in a particular dimension. The overview table provided in Annex B, directly after this dashboard, shows the size of each industry by country, allowing policy makers to assess the relative importance of each dimension for individual economies, based on industry size (provided in terms of employment as well as value added).
Strengthening Economic Resilience Following the COVID-19 Crisis
Annex A. Industry dashboard
Table A A.1. Overview of indicators, by affected dimensions
Figure A A.1 below provides a colour-coded graphical summary, transforming the dimensions into eight indicators for each industry. The graphical representation enables a comparison across all eight dimensions and 36 industries, with darker colours indicating that a particular industry is potentially more resilient (i.e. it faces a lower risk) in a given dimension. The columns can be interpreted as comparing resilience across industries within a given dimension. Looking across the rows provides an indication of which dimension may be more relevant for each industry’s resilience, and also how resilient individual industries might be, given their vulnerability across multiple dimensions.
Figure A A.1. Industry dashboard: Indicators of industry resilience
Note: Comparison of eight indicators of industry resilience to economic impacts of COVID-19. Indicators have been normalised to lie between zero and one based on the minimum and maximum values observed in the industry sample for each indicator. Darker colours show industries that are expected to be relatively more resilient than others with respect to a particular measure. Pure white indicates the minimum (0 by construction), and pure black the maximum (1 by construction), of each indicator. Some indicators are missing because of the lack of suitable data (Customer contact for Pharmaceuticals, Scientific R&D, Public administration and Health; Cash conversion cycle and asset tangibility for Public administration, Education, Health, Social work, Arts and entertainment, and Other services).
Sources: OECD calculations based on Fana et al. (2020[1]), Espinoza and Reznikova (2020[2]), Koren and Petö (2020[3]), OECD (2018[4]), Inter-Country Input Output (ICIO) Database, http://oe.cd/icio and ORBIS.
As discussed in Chapter 3, there are substantial differences across industries in the extent to which they are allowed, and able, to continue operating through the crisis. While the classification of industries into essential and non-essential is binding for industries in which most jobs cannot be done remotely, there are a number of industries with high to medium telework potential which are fully or partially able to continue operating through lockdowns and confinement periods. Therefore, in the short term, industries can be broadly assigned into one of three categories:
Essential industries: continued operation and relatively unaffected by short- and long-term demand fluctuations. Examples: Food production, Pharmaceuticals, Utilities.
Non-essential, moderate to high telework potential: potentially vulnerable to direct and indirect (second-round) demand fluctuations but less affected by supply restrictions. Examples: Education, Media, Real estate.
Non-essential, low telework potential: highly vulnerable to short-term supply and demand restrictions and to long-term changes in demand (e.g. due to changing preferences). Examples: Hotels and food services, Arts and entertainment, Manufacturing industries.
This categorisation serves as a basis for discussion of the different mechanisms relevant to the industries within each group in the following sections.
Essential industries
In the initial phases of the pandemic, the most critical factor for business continuity was the extent to which firms were prevented from operating by the containment restrictions. As discussed in Chapter 2, while the strength of restrictions has differed across countries and over time (Figure 2.1), the industries and activities deemed to be “essential” are largely the same across countries. As these industries have largely been able to continue operations, and produce products for which demand is relatively inelastic, they are expected to be rather resilient to both direct immediate and indirect longer-term effects of the crisis. In this case, other aspects – such as whether an industry is able to engage in telework or is prone to liquidity concerns – become less relevant for business survival.
Figure A A.2 provides an overview of the eight indicators discussed above in the form of a flower graph, with longer petals representing more resilience in a given dimension. Each petal represents one of the eight indicators, and petals are colour coded by the different dimensions along which the crisis has been affecting industries (ability to produce and supply, exposure to indirect demand shocks and financial constraints). The figure shows a selection of essential industries, divided into three categories: basic infrastructure and services, health and social services, and food and basic supplies.2 Aside from being classified as essential, these industries have a number of features in common. With the exception of those grouped under health and social services, they tend to have relatively low levels of customer contact, and in most cases limited reliance on investment demand.
Within the broad group of essential industries, some sub-industries have suffered more than others. For example, while transportation is considered an essential industry, firms that rely heavily on travel (as opposed to goods freight or storage) have seen strong negative effects from the reduction in personal mobility.3 At the same time, where firms provide both essential and non-essential products, the reduction in demand for the latter due to reduced personal mobility can significantly affect revenues and profits, even if the sector is allowed to remain open. For example, while pharmacies remained open to provide medical supplies during lockdowns, incidental sales of non-essential goods such as cosmetics fell, as potential customers were confined to their homes.4
Figure A A.2. Relative resilience across multiple indicators: Essential industries
Note: Agriculture has a score of around 0.9 on the essentiality index, but is still grouped in the set of essential industries here. Indicators have been normalised to lie between zero and one, based on the minimum and maximum values observed in the industry sample for each indicator. Higher values (longer “petals”) represent that an industry is expected to be relatively more resilient with respect to a particular measure. Labels are absent when data is not available for a specific industry. The Customer contact indicator is unavailable for Pharmaceuticals and for Public administration and defence. Financial indicators are not available for Health services, Care and social work, and Public administration and defence.
Sources: OECD calculations based on Fana et al. (2020[1]), Espinoza and Reznikova (2020[2]), Koren and Petö (2020[3]), OECD (2018[4]), Inter-Country Input Output (ICIO) Database, http://oe.cd/icio and ORBIS.
Non-essential, high telework potential
A second set of industries are those where in-person activity has been largely restricted, but where a substantial portion of activity can continue through remote work. These industries are largely in the knowledge-intensive services sectors, including IT services, Real estate, and Legal and accounting services, where digital tools and remote technologies tend to be relatively well established (Figure A A.3). Education is another sector where telework is feasible for a large proportion of activity, despite the fact that it previously relied heavily on face-to-face contact.
Figure A A.3. Adoption of digital and remote technologies
Note: Persons employed using an Internet-enabled portable device, as a percentage of all persons employed. Average across the following countries, 2019: the Czech Republic, Denmark, Estonia, France, Germany, Greece, Hungary, Ireland, Latvia, Lithuania, the Netherlands, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden and Turkey.
Source: OECD (2021[5]), "ICT Access and Use by Businesses", OECD Telecommunications and Internet Statistics (database), https://doi.org/10.1787/9d2cb97b-en (accessed on 9 June 2020).
In teleworkable5 industries, a large proportion of activity can be continued in the face of containment policies through the use of digital technologies and telework. In these industries, support could be directed to assisting firms to adopt, and adapt to, new ways of working remotely, as discussed in (OECD, 2020[6]) and (OECD, 2019[7]).
However, even if activity continues, substantial losses in productivity and output can be expected in these sectors. In the short term, firms may face a significant drop in revenues in industries where core activities traditionally rely on face-to-face contact or physical presence (e.g. real estate viewings or onsite maintenance). Moreover, output in knowledge-intensive service industries (e.g. IT services, Legal and accounting) tends to be relatively strongly correlated with business cycle fluctuations, with a large share of output contributing to exports and fixed capital formation, and (with the exception of real estate) relying heavily on intangible assets. As such, while teleworkable industries may be less affected than others by the direct effects of the crisis, ongoing economic weakness and financial constraints can still be expected to take a toll. However, digitalisation and the shift towards automation have the potential to boost some of the digital-intensive industries, or producers of digital products, over the long-term (as discussed in Chapter 5).
Figure A A.4. Relative resilience across multiple indicators: High vs. moderate telework potential industries
Note: Higher values (longer petals) represent that an industry is expected to be relatively more resilient with respect to a particular measure. Indicators have been normalised to lie between zero (the minimum value across industries) and one (the maximum value across industries). Labels are absent when data is not available for a specific industry. The Customer contact indicator is unavailable for Scientific R&D. Financial indicators are not available for Education.
Sources: OECD calculations based on Fana et al. (2020[1]), Espinoza and Reznikova (2020[2]), Koren and Petö (2020[3]), OECD (2018[4]), Inter-Country Input Output (ICIO) Database, http://oe.cd/icio and ORBIS.
Non-essential, low telework potential
The remaining industries, being neither essential nor teleworkable, were heavily affected by the initial impacts of the crisis. They can be placed into one of two groups: they either rely heavily on face-to-face contact with customers (personal services industries such as Arts and entertainment, Hotels and food services, [Wholesale and] Retail trade, Other services), or their production requires physical on-site presence (e.g. Manufacturing industries, Mining, Construction, Wholesale [and retail] trade).
These two groups tend to differ in terms of their medium-term demand impacts. Service sectors which have greater customer contact have been subject to more prolonged restrictions on activity in most countries, and will continue to be more affected by changes in preferences for reduced physical interaction while the virus is still circulating (and possibly even beyond that time). In contrast, manufacturing industries – particularly heavy manufacturing – may be less affected after the initial period of containment measures, as hygiene and distancing measures can be implemented to some degree at most production facilities. Nevertheless, manufacturing is sensitive to falling demand and likely to suffer from a broader economic downturn.
Figure A A.5. Relative resilience across multiple indicators: Low telework potential industries
Note: Indicators have been normalised to lie between zero and one. Higher values (longer petals) represent that an industry is expected to be relatively more resilient with respect to a particular measure. Labels are suppressed when data is not available for a specific industry. Financial indicators are not available for Arts and entertainment or Other (non-business) services.
Sources: OECD calculations based on Fana et al. (2020[1]), Espinoza and Reznikova (2020[2]), Koren and Petö (2020[3]), OECD (2018[4]), Inter-Country Input Output (ICIO) Database, http://oe.cd/icio and ORBIS.
In manufacturing, strategies to protect both workers and customers are critical to businesses reopening and recovery. Besides direct financial support to weather the initial shutdown period, government responses could include education and regulation to support physical distancing in the workplace and reduce potential contagion from customers. They could also include financial and business support to promote greater use of technology and online tools in order to minimise the need for onsite presence.
The financial system and governments both play an important role in supporting firms through the initial shocks as they deal with both a dramatic decrease in revenues, and additional costs of adjusting their business operations and technology to meet new physical distancing and hygiene requirements. At a firm level, factors such as current profitability and financial position, firm size and age, and asset tangibility will affect firms’ ability to borrow. Meanwhile, the capacity of governments and the financial system to accommodate credit requirements will determine firm and industry ability to weather the crisis, and affect the longer-term recovery.
References
[8] Demmou, L. et al. (2021), “Insolvency and debt overhang following the COVID-19 outbreak: Assessment of risks and policy responses”, OECD Economics Department Working Papers, No. 1651, OECD Publishing, Paris, https://doi.org/10.1787/747a8226-en.
[2] Espinoza, R. and L. Reznikova (2020), “Who can log in? The importance of skills for the feasibility of teleworking arrangements across OECD countries”, OECD Social, Employment and Migration Working Papers, No. 242, OECD Publishing, Paris, https://doi.org/10.1787/3f115a10-en.
[1] Fana, M. et al. (2020), “The COVID confinement measures and EU labour markets”, JRC Technical Report, Publications Office of the European Union, Luxembourg, https://doi.org/10.2760/079230.
[3] Koren, M. and R. Petö (2020), “Business disruptions from social distancing”, Covid Economics - Vetted and Real-Time Papers 2, pp. 13-31, https://cepr.org/sites/default/files/news/CovidEconomics2.pdf.
[5] OECD (2021), “ICT Access and Use by Businesses”, OECD Telecommunications and Internet Statistics (database), https://doi.org/10.1787/9d2cb97b-en (accessed on 8 June 2021).
[6] OECD (2020), Coronavirus (COVID-19): SME policy responses, OECD Publishing, Paris, https://dx.doi.org/10.1787/04440101-en.
[7] OECD (2019), Unpacking E-commerce: Business models, trends and policies, OECD Publishing, Paris, https://www.oecd.org/going-digital.
[4] OECD (2018), Inter-Country Input-Output (ICIO) Database, http://oe.cd/icio.
Notes
← 1. A single measure of risk would involve a judgement of which dimensions are most relevant for each industry. In addition, the relevance of each risk dimension depends on a range of country-level or other country-specific factors, such as those discussed in the topical chapters.
← 2. Industries are classified as “essential” if they have a value above 0.8 on the essential industry indicator. Note that the “essential industries” petal is, by construction, at a high to maximum level. For brevity, not all industries are shown. The heatmap in Figure A A.1 provides a summary across the full set of industries and indicators.
← 3. For example, in the aviation industry, while revenue passenger kilometres fell by more than 90% in April 2020, relative to the previous year, freight was relatively less affected, with a year-on-year fall of around 30% for April 2020 (Demmou et al., 2021[8]).
← 4. https://www.tvnz.co.nz/one-news/new-zealand/pharmacies-brink-collapse-covid-19-lockdown-continues.
← 5. “Teleworkable” and “teleworkability” are terms used throughout the report to describe jobs and tasks that are able to be done through telework. Originating mainly in the COVID-19 crisis, given extensive literature and research arising from the rapid global uptake of telework, the terms are now of demonstrated accepted and common use in many official documents. As such, they are used within this context in this document.