Internet and Jobs: Creative Destruction or Destructive Creation?

2 September 2014 - A Workshop on Other in Istanbul, Turkey

Brief substantive summary of the workshop and presentation of the main issues that were raised during the discussions

The Internet is viewed as a source of employment growth in the ICT sector and in creating new opportunities in the overall economy. However, it is also clear that the Internet is imposing a significant reorganization on businesses, affecting labour demand and therefore employment.

The net effects of the Internet on jobs are still poorly understood. For this reason, all the panellists agreed on the great importance of this workshop for this year IGF, because it concerns with the wellbeing of millions of people and jobs are today high on the agenda of the majority of governments in the world.

The workshop pointed out that in the current situation of economic turbulence, the destructive creation of the Internet is at the moment prevailing and a backlash against IT is emerging in some –countries (laws anti Amazon, Uber, Google; renewed scrutiny about the quality of ICT jobs in the Amazon facilities). Unemployment represents a significant challenge in OECD countries. In particular, the level of youth unemployment is alarming for its strong impact on youth lifetime carrier.

Technological change has always had disruptive effects on employment, at least at the early stage of its diffusion. Agriculture is a case in point. In the USA 150 year ago, 33% of the population was involved in agricultural work. Today it is only 1-2%. This happened with major social disruptions such as the process of urbanization. However, the effects of the digital revolution seem to be much more disruptive than those of previous technologies because these changes are happening at a faster speed and on a broader scale than in the past. The nature of these processes has to do with the fundamentals of the digital economy: high fixed cost, low marginal costs, strong networks effects not only on the supply side but also on the demand side. This implies a highly concentrated industry where the winner takes all the market. The effects of this economy are: job market polarization (high demand for low skills and high skills) with the middle skill jobs disappearing; the middle class is shrinking and the income inequality is increasing like never before not only in the USA but even more in Europe. Productivity growth is decoupling from income and employment growth. Furthermore, the more rapid change in knowledge and technology brought by the diffusion of digital technology is shortening the learning curve of people, creating less room for old people.

These views were to some extent balanced by the perspectives offered by the speakers from the developing world, such as Uganda and Colombia , where outsourcing through ICT or e-government services are seen as a way to use technology to fight poverty and make the government more transparent , improving the governance processes.

The workshop addressed also the effects on the demand side of the diffusion of digital technologies: the impact of cost efficiencies on price reductions and the creation of totally new products (the bounty of the digital economy). Furthermore, the workshop discussed the ability of Internet to create new jobs and innovation and to support entrepreneurship. What made successful digital clusters such as the Silicon Valley, it is now available also on line: education (through the MOCCs), recruiting people, access to capital, access to research.

Conclusions drawn from the workshop and possible follow up actions

Overall, there was strong agreement on the importance of discussing and thinking outside the box the relationship between Internet and jobs. Each stakeholder should play an important role in this process.

The major conclusions that came out of the workshop were:


• ICT remains the bright spot in a gloomy economy. Internet has an enormous potential as platform for new jobs creation, for industry innovation and entrepreneurship.
• Role of Small enterprises: according to the OECD studies, all the net job acquisitions come from small enterprises. Therefore, Internet is playing a particular role in this context.
• ICT & development: use ICTs to fight poverty is still an open challenge.
• ICT & education: the changes in the job market previously described require new skills that allow working alongside with the smart new machines. For this reason government should help this job market transition with an unprecedented effort in reforming and investing in education systems. Against this backdrop, ICTs can offer tremendous upside potential for improvements in education, allowing for increasing significantly scale and customization of actions. The Massive Open Online Courses (MOCC) is a case in point.
• ICT skills are important, although cannot be seen as a panacea to solve the job crisis
• Measurement issues : how to capture in the statistics the bounty of the digital economy; how statistics reflect the increasing role the shared economy, increased consumer surplus , services at zero price (Wikipedia, what ‘sup) that do not go into the GDP but improve customers wellbeing?
• Active adjustment labor policies and taxation: there is a strong need for government active adjustment labor policies that require significant resources. Therefore, the issue of taxation in the digital economy becomes particularly relevant. Many large companies in the digital economy avoid the country of origin taxation through ad hoc mechanisms. Therefore, addressing base erosion and profit shifting should become a key priority of governments around the globe.
• Future jobs : the Largest opportunities should come from:
o Managing today’s grand challenges : climate change, aging population, development in a broader sense
o Increasing the leisure time reducing the size of the work week. There has been a great job growth in the leisure time related activities.
• Take responsibility: the disruptive nature of Internet on the job market should be recognized and assessed carefully. Therefore, the Internet economy companies should recommend and finance governmental actions to reduce the effects of these processes. The private sector should also do something directly in the most disadvantaged areas of the world (cities and/or countries). Particular attention should be devoted to the effects of technology on older workers. Overall, it is necessary to keep in mind that these processes are just at the beginning, are not going away and can become worst. 

Estimation of the overall number of participants present at the workshop

40

Estimation of the overall number of women present at the workshop

about half of the participants were women

Extent to that the workshop discuss gender equality and/or women’s empowerment

it was not seen as related to the workshop’s theme and was not raised

A brief summary of the discussions in case that the workshop addressed issues related to gender equality and/or women’s empowerment

No information provided

Reported by

Lorenzo Pupillo