Technology is bringing structural changes to our economies that may leave many citizens behind. We must make people’s well-being a policy priority.
(This article has been translated into French.)
As the digital revolution continues to transform our world, we are more interconnected, have greater access to information and work, and are constantly surrounded by new innovations and tools. The pace of this change is astounding: it took over 45 years for electricity to be used by 25 percent of the US population, but only 4 years for the same percentage to acquire smartphones. Almost half of the world’s population is now connected to networks, compared with just 4 percent 20 years ago.
These changes have reduced transaction costs, putting more goods and services at our disposal, often immediately. They offer us same-day delivery and convenient ride-sharing, but they also have extremely important implications for the way we work. Digital technology and job platforms are providing greater flexibility and more efficient job-matching, promoting greater inclusion of groups often excluded from the labour market, such as women, people with disabilities, migrants or new parents. The OECD’s Going Digital project addresses the effects and potential of the digital transformation across all public policy areas.
Although technology benefits our societies, we must be wary of letting its effects play out unrestrained, especially given the current high levels of inequality around the world. To ensure technology delivers for all, people’s well-being must be placed at the centre of public policy.
What risks are we facing?
According to OECD figures, the average income of the richest 10 percent of the population is about nine times that of the poorest 10 percent, up from seven times 25 years ago. Launched in 2012, the OECD’s Inclusive Growth initiative has been leading the effort to both identify the main challenges posed by technological progress and promote credible solutions that avoid exacerbating inequalities in the digital world.
One of the main challenges is automation. The OECD predicts that 14 percent of jobs in OECD countries are at a high risk of being automated. An additional 32 percent will see a considerable change in the way they are carried out. Jobs will not disappear but will be replaced with new ones requiring different, higher-level skill sets. This is where the discriminatory effects of technological progress begin to take shape: the OECD’s Automation, Skills Use, and Training paper shows that automation threatens low-skill and routine jobs more than high-skill ones. Among workers with a lower secondary degree, 40 percent are in jobs with a high risk of automation, compared with only 5 percent among workers with a tertiary degree. Additionally, women are more likely to be employed in industries that are at higher risk of automation like retail, residential care, and food and drink services. Disadvantaged groups could therefore be disproportionately affected.
The way firms operate is also changing. The big players in the platform economy are concentrated, accruing the benefits of technology to a select few countries and firms. For example, just 250 firms — located mainly in the US, UK, Germany, China and Japan — generate 70 percent of global R&D and patents and 44 percent of trademarks. These countries also hold the most AI patents. Furthermore, of the top 15 market capitalization leaders in the platform economy in 2017, nine were American; the rest were Chinese. These front-runners are able to scale up without needing to increase labour, physical capital and other costs, because their fixed and marginal costs are extremely low.
Traditionally, the benefits and knowledge gained from technological innovation could diffuse throughout the economy, providing greater efficiency to more economic actors. However, as digital platforms get larger, they amass ever greater networks, accruing richer user-generated data to fuel their own growth. This concentration of capital in the form of data allows the large players to offer higher wages, attract better skills, increase access to capital and technology, and operate globally, giving them a competitive advantage over companies that have not gained the same momentum. Additionally, these benefits accrue not only to a privileged minority of firms but to a privileged male minority of firms. According to the OECD’s recent report Bridging the Digital Gender Divide, a distinct socio-cultural gender bias exists in start-up financing: 90 percent of innovative start-ups seeking venture capital investments were founded by men. Furthermore, women-owned start-ups receive 23 percent less funding and are 30 percent less likely to be acquired or to issue an IPO.
These structural changes in our economies may leave many people, regions and industries behind. These “winner takes most” dynamics also have implications for competition policy and lead to cross-border friction when regulatory frameworks are different from country to country; strong international cooperation is required to ensure fair competition rules.
A way forward
For too long, the focus of governments, international organizations and conventional economic thinking has been material well-being and measuring aggregate outcomes, such as GDP per capita. This fails to provide an accurate picture of how people are doing. We need better measurement tools to understand the dynamics of the digital world. With the right policies, the digital future can be harnessed to promote inclusive growth. A multi-faceted approach is needed.
First, workers need to be well-rounded, with technical, professional and socio-emotional skills. The OECD’s new Framework for Policy Action on Inclusive Growth highlights that a focus on the early years of education has a powerful effect in overcoming socio-economic differences. We must promote greater access to quality and affordable early childhood education that develops not only basic skills basic skills like numeracy, and traditional and digital literacy, but also socio-emotional skills like problem-solving, teamwork, self-confidence and self-esteem. These latter skills are the uniquely human ones that bring value to digital-intensive fields. Because the future of work will only continue to change, workers must upskill and reskill throughout their careers. An OECD survey in 2013 found that less than 20 percent of low-skilled workers in OECD countries had received training in the past year that was relevant to their positions, compared with an average of 40 percent for all workers.
Second, we must adapt social protection policies to the modern worker. Among workers in OECD countries, 1 in 6 is already self-employed and 1 in 8 has a temporary contract. But only 6 out of 28 EU countries insure the self-employed in the same way as they insure regular employees. Social protection and training systems must be portable — following the worker, not the job.
Third, governments must encourage better diffusion of technology and innovation from leading firms to laggard ones. This distribution can be achieved by providing incentives to make investments in R&D, new digital equipment and organizational know-how. Such support can help lagging firms to catch up with industry leaders and ensure that the knowledge and data created by technological progress allow all players to develop.
Fourth, as digitization advances more quickly than many rules and regulations, governments must periodically review their regulatory frameworks to ensure they remain relevant.
Technological progress has undoubtedly benefited our societies and economies. But to ensure we maximize the benefits for everyone, we must not allow the pace of technology to carry us away and merely adapt to where it is taking us. Instead, we must ensure that we control technology so that it serves us as humans; we must foster a human-centred digital revolution.
This article is part of the Preparing citizens for the future of work special feature.
Do you have something to say about the article you just read? Be part of the Policy Options discussion, and send in your own submission. Here is a link on how to do it. | Souhaitez-vous réagir à cet article ? Joignez-vous aux débats d’Options politiques et soumettez-nous votre texte en suivant ces directives.